Iii) Uber

Uber is an example of an organisation in the shared economy. It is asmart 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

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 accessto 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

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

 

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