Iii) Uber

Uber is an example of an organisation in the shared economy. It is a smart phone application for car service booking & on-demand ride sharing. It started in May, 2010 by 2 people (Garret Camp & Travis Kalanick); in 2015 in 50 countries & 260 cities globally; 900 staff. It tapped into dis-satisfaction with normal taxi operators, ie not being able to find a taxi when it is needed. It has been praised for challenging anti-competitive behaviour of taxi firms (Harper's Competition Review, Australia, 2014). It offers a cheaper, technologically-savvy, customer-friendly, more reliable service than a normal taxi service; it provides an extremely simple service whose implementation is technically brilliant and easy-to-use. Uber is car pooling at the push of a button. By using a computer platform that connects passengers directly with drivers so that passengers order & pay for a car using their phone with geo-locating technology connecting them to nearest available vehicle; fares fixed directly with driver. Its app provides free traffic information, driver-source information about location of people requesting cabs, the ability to securely process credit cards via smart phones and comprehensive stats and reporting on fares

Uber is not only cheaper, but provides a better service than its competitors like taxis. It claims 50,000 new drivers join every month (Samantha Hutchinson, 2014). The company is a mirror image of its founder, ie aggressive, ruthless and overly ambitious.

Uber is aiming to become a kind of global transportation service that will formally allow city dwellers to not own a car; in addition to taking people from place to place, it will transport goods and its has the potential to use driverless vehicles. Like other digital giants including Google, Facebook, Apple, Airbnb, etc, they have global ambitions; more than just a niche market. This has happened because of globalisation combining with digitalisation. Uber can be very arrogant in its approach and has found itself at loggerheads with countless cities around the world because its business model violates local laws, rules and regulations.

Uber ride sharing services are causing problems for legislators and regulators plus the traditional players in the taxi industry. The challenge is to force the Uber drivers into the regulatory system without destroying competitive tensions that Uber has brought to the taxi industry. The public who are annoyed with the delays, bad drivers and poor service have welcomed the likes of Uber using the latest available technology like apps. The only group that gets upset are the established taxi operators and their organisations

"... Disruptive technology-based services are doing what took years of inquiries, complaints and reforms haven't - tearing apart a monopolistic industry in record speed..."

Jessica Sier, (2015),

Regulations governing the taxi industry were developed before iPhones and GPS technologies were available. The regulators are struggling to catch up!!!

Is Uber a taxi company or a tech platform that enables customers to find drivers? Different regulators and judges are trying to determine the intent of the business model

NB Uber provides the same service as a taxi company with less cost (Leonid Bershidsky, 2016)

Linked with ride sharing are mobile booking and payment apps like goCatch and ingogo that are alternatives to Cabcharge which has been dominating the taxi industry since 1976 and charges a 10% fee; recently this fell to 5% in Victoria and New South Wales.

Disrupting itself

By being a disruptor, Uber has laid the foundations for its own disruption, ie

"...One of the key features of Uber's success and its own potential downfall is that it has opened the market. It has legitimised its own method of entering and creating markets but it has now paved this is the way for other organisations, who don't have to go through all the regulatory hassles, to come in and share the market..."

Sarah Kaine as quoted by David Marin-Guzman 2018a

Competition to Uber

For example, competitors to Uber include

- North America (Lyft - limited to North America)

- European (Taxify) started in late 2017 in Australia

- Indian giant (Ola) chose Australia as its first foreign market

- Chinese giant (Didi Chuxing) entered the Australian market in mid-2018 (they transport around 450 million clients through 25 million rides a day)

- Singapore (Grab) starting in 2012; it has acquired Uber's interest in Southeast Asia in exchange for a stake in Grab. The backers of Grab include Oppenheimer funds and China's Ping An Capital, Macquarie Bank, Toyota Motor Corporation, Vulcan Capital (owned by Microsoft's co-founder Paul Allen)

"...Grab, which started as a taxi booking app, has been transforming itself into a consumer-based technology group, offering services such as digital payments and food delivery..."

Reuters 2018

- Softbank Group Corporation (Japan)

- Russia (Yandex), etc

More recently ride-sharing electric scooters are becoming popular and are a threat to the automobile ride-sharing firms. They are a considerably cheaper ride.

Uber's model involves giving taxi drivers iPhones with the Uber app installed; the legal Uber Black posh car-service enters a market first; once Uber Black and Uber taxi take hold, then UberX is introduced

Uber's founding vision was "everybody's private driver"; its mission statement is "transportation as reliable as running water, everywhere for everyone". more recently the concept of a "perpetual ride", ie a driver would always have a customer in the car. In order to achieve its vision and mission, Uber needs to achieve price leadership and continually search for ways to deliver transportation at lowest prices, ie deliver the highest possible value to the customer at the lower price. Also, as the demand is highly elastic, ie as prices fall. the demand increases significantly, the lower prices deliver a much better value proposition to the passenger. Many cities have witnessed more than 6 price cuts in a 2 year period resulting in Uber's fares being 40 to 50% below that of the local taxis. Uber's lowers fares are backed up by income guarantees for drivers

As Uber has access to an immense historical base of supply and demand curves at different price points, it can predict how the markets will evolved

Uber's technology goes beyond smart phone application. There are intelligent systems that provide demand predictions, congestion predictions, supply matching, supplied positioning dispatch, dynamic pricing, etc. It has data from 1+ m. rides per day to draw from. Its app provides free information, ie comprehensive stats on traffic information, about location of people requesting cabs, the ability to securely process credit cards via smart phones and reporting on fares

UberPool - a single car is like a bus, ie collecting and dropping passengers who travel in the same direction, eg ride-sharing (with each driver averaging more than a single passenger per trip). This has resulted in behavioural changes with many passengers traveling the same route regularly like 5 days a week.

Uber uses 3 models, ie

i) uses professional drivers with luxury vehicles

ii) UberX uses anyone over 24 years old with a licence, no criminal record and a four door car

iii) UberPool (ride sharing with more than one passenger going in the same direction plus collecting passengers en route like a bus; results in

- more income for driver

- lower fare for passengers

- higher revenue turnover fore Uber

NB To computerise Uber Pool, with its many permutations, requires "desiccated heuristic approximation" methods that have to solve challenges around

- multiple potential drivers who are constantly entering and leaving the system

- destinations are dynamic

- vehicles have limited seating capacity

- new requests for rides at continually coming in

Positive impact of Uber, ie
- creating jobs
- raising local taxes
- reducing car ownership
- reducing drinking and driving
- reducing the need for parking
- like freeing up acres of parking space in cities
- eliminating the need for garages in homes
- freeing up disposable income by saving on vehicle operating costs like insurance, petrol, etc
- reducing congestion on the roads
- fewer cars on the road lowers pollution, ie carbon emissions
- more effective utilisation of an underutilised resource, ie private car (most private cars are idle around 95% of the time)
- application beyond just transporting people into broader logistics, ie multiple stops with multiple cargoes
- flexibility, ie

"...Uber operates in 18 cities in Australia, and reports it has 62,000 drivers active here at any time...... the flexibility makes it ideal for women, for example those caring for children..."

Tony Davis 2018

- road safety, ie

...Various studies show that in places where Uber operates there has been a marked reduction in drink driving fatalities..."

Tony Davis 2018

The taxi industry's response to Uber is a good example of how traditional firms can react to a threatening new player. The taxi industry has put pressure on governments worldwide to react negatively to Uber, ie uses current laws, rules and regulations to try and to protect its traditional position. This is doomed to fail as the public has a strong desire for a better taxi service, which currently regarded as inefficient, and the public scepticism of government regulations. The regulator's main roles are around market competition and public safety; Uber is increasing market competition and the public don't agree with the argument that it is unsafe

Uber has weathered rolling taxi strikes (New York, London, Paris, Canberra and Melbourne), violent attacks by taxi-drivers (Brisbane) and slow-moving State government regulation (partly due the powerful taxi lobbies); they are forcing governments to rethink existing taxi regulation and traditional transport structures.

The way Uber operates is to challenge the law and use customer and drivers support to pressure governments to accommodate them. Generally they use the UberBlack platform (using private hire car drivers) to enter a new market. Once established they then expand to recruit existing cab drivers. This is followed by UberX which bypasses the expensive barriers to entry in the taxi industry with drivers receiving 75% of each fare. UberX can be up to 40% cheaper than traditional taxis. Despite its unregulated status, it has conducted around 10 million journeys in Australia and has around 1 million clients (2015).

Uber is the world's most highly valued start-up company, ie US$ 86 b. (mid 2017).

On the other hand it is facing some issues, such as

- trade secret lawsuit with Alphabet's Waymo on its self-driving automobile program

- sexual harassment allegations that have resulted in dismissal of several top executives including one of the founders (Travis Kalanick)

- corporate values that justified poor behaviour like "let builders build", "always be hustling", "toe-stepping", etc

- needs to change focus from expansion to profitability, ie

"...Would mean cutting costs, phasing out subsidies and perhaps leading markets - primarily European ones -where the regulatory climate is only going to get tougher for gig economy companies......Bluebird drivers are eventually recognised as employees, not independent contractors...... fare increases..... To spend more on each driverless car push rather than on trying to win dominance in specific cities. Gaining an edge in automated driving could differentiate Uber from competitors who now have much the same technology..."

Leonid Bershidsky, 2017

Uber is a classical case of a successful start-up that fosters a testosterone-fuelled, macho, internal culture that has driven the organisation to initial spectacular success but is now beginning to haunt them.

Uber is a company that sacrificed everything for the superfast expansion, eg it doubled its gross revenue in 2016 to US $ 20 b. It stressed approaches like "always hustling", "principal confrontation", "bend the rules", etc.

"...Uber has tried to steamroll over competitors and sidestep regulators, including by devious technical means, to get where it is. Its business model and its narrative to investors who have made Uber the most highly valued start-up in the world have depended upon that ruthless expansion......focus on achievement at any price..."

Leonid Bershidsky, 2017

A report (Leonid Bershidsky, 2017) has suggested a set of standard corporate governance for start-ups that have lost their ways. It recommends

- less of a role for the founders

- employ more seasoned executives

- get more independent directors on the board

- conduct regular formal reviews

- provide feedback and compensation-setting procedures

- mandatory training for managers on governance

- robust complaint process

Also it is felt that Uber should focus on profitability rather than expansion

Since starting in 2009, it has not made a profit (Four Corners, 2019). They have "spent" billions of dollars.

Worldwide it has 3 million drivers that do 15 million daily trips

It collects much personal data from each trip

Its aim is to monitorise and monopolise the way we travel

It has been described as an illegal taxi service but sees itself as a technology company

Worldwide protests by taxi drivers

It has a policy to aggressively fight anybody who stands in its way, like regulators, industry players, competitors, etc, by whatever it takes, like 

- establishing "Threats Opts" that carries out surveillance, investigations, etc and acts like a Secret Service

- developed software like Ridley, Hell, Greyball, Surf, etc that destroys files, steals competitors' drivers, restricts regulators investigating its activities, etc. 


It uses technology to bypass regulations and has a philosophy of "easier to ask for forgiveness than permission". 

In a dispute with Google about stealing secrets on autonomous cars from Google; settled out-of-court!!!! 

In Australia, Uber has 60,000+ drivers who are regarded as contractors, not employees. Thus, they are not entitled to benefits like holidays, holiday pay, worker compensation, superannuation, etc. 

It charges drivers 25% of the revenue earned.

Branching into other businesses (not always successful)

With a tightening ride sharing market, Uber is branching out into other areas like

- on-demand delivery for restaurants (like Uber Eats; this is to cater for the time-poor, asset-light consumers who will replace home-cooked meals with online orders. In 2018, Uber Eats earned revenue of over US $ 2 b.; it operates in 200 cities across 30 countries and involves 100,000 restaurants; allows the development of shadow restaurants or dark kitchens; they charge a delivery fee plus take up to 35% of each food bill.

- flying cars (eVTOL, ie electronically powered, people-carrying drones with vertical take-off and landing capabilities. There is expected use increase as road congestion. This use of airspace will be cheaper and allow increased mobility)

- delivery drones

- food delivery

- flexible workforce (Uber Works)

- trucking brokerage service (Freight, ie connects loads with trucks)

- rents trailers to truckers (Powerloop)

- autonomous automobiles (like self-driving trucks - abandoned in 2018 (Heather Sommerville 2018); this will require super-accurate mapping)

- bike sharing (electric dockless bike and scooters)

- freight-hauling (Uber Freight - share-trucking, ie matching independent operators with loads; looking at autonomous trucks, ie with certain road lanes allocated to them)

- complete integrated transport model which will include ride-share bikes, buses and boats. It is estimated that the global transportation market was worth around US $ 5 t. in 2017 (Toby Davis 2018).

Uber is working with cities, like London, to become part of the urban transport solution like UberPOOL as an on demand public transport system, ie

"... Since 2016, Uber has partnered with Transport Canberra to extend the reach of its late-night bus services during Christmas and major events by discounting Uber rides to or from selected bus stops to surrounding suburbs..."

David Marin-Guzman 2018a

Status of Uber drivers

Are Uber drivers independent contractors or employees? If the latter, Uber could face millions of dollars in minimum wages and conditions. Already in United Kingdom and USA, the courts have decided that the drivers are employees.

"...in March the Australia Institute's Centre the Future Work determined that Uber X drivers were averaging $14.62 per hour before tax......this is well below the national statutory minimum wage......they are also doing without holiday and sick pay, or any long-term job security......these companies (Ola & Taxify) take a regular driver commission of 15%, compared with Uber's usual 27.5%......Economic modelling shows that the driver's ability to turn the app on and off is worth hundreds of dollars a week in quality of life..."

Tony Davis 2018

General

"...providing flexible employment while breaking up government-supported taxi monopolies. They have been overcharging and under-performing delivery with the business model that has scarcely changed since the days of hansom cabs..."

Tony Davis 2018

It is transporting people in 65 countries and more than 600 cities (Tony Davis 2018). With 3 m. contractors it is comparable in size to Walmart, McDonald's, Chinese People's Liberation Army, Indian Railways, etc.

"...is a $60 billion-class juggernaut with roughshod tactics, contempt for legislation, and a relentless hunger for market share..."

Tony Davis 2018

"...the business model is subsidising the prices customers pay in the short term, in return for a long-term monopoly with higher prices..."

Murray Goulden as quoted by Tony Davis 2018

Some of the tactics it has allegedly used include when, in 2014 in the US, Uber ordered and then cancelled thousands of rides from its competitor Lyft in an attempt to compromise its reliability. In 2017 London Transport regulators accused Uber of safety breaches and failing to report serious criminal offences or conduct sufficient background checks on drivers.

It is Uber's stated mission to provide better, safer, more efficient transport.

In 2016 Uber had a bad year, ie

- forced out of the Chinese market

- successfully sued for around US 245 m. by Alphabet (Google's parent company) for trade secret theft

- its controversial co-founder (Travis Kalanick) left the company after a series of covers ups, like #MeToo moments and a viral video of himself abusing an Uber driver

More recently (March 2018), a self-driving Uber struck and killed a pedestrian in Arizona, USA. This resulted in the suspension of all public road trials of autonomous Uber vehicles.

In 2016 and 2017, it lost US $ 7.3 b. yet it increased its footprint geographically and service-wide.




 

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