Uber’s emergence has made an unprecedented innovation in the transport culture by bringing a new on-demand ride-sharing service of building an online platform to connect individual drivers and passengers. With digital technology, Uber makes its instant service accessible and safe. Based on this application, this essay will focus on Uber’s transformative effects on the transportation industry. An introduction and a brief history of Uber will initially be drawn, then this essay will look at Uber’s online business model and social ecology. In the final part, this essay will discuss how Uber technology has broken through the original transport market to redefine the riding culture.
What is Uber?
Uber Technology is a San Francisco-based company which offers a smartphone-based application for mainly bringing transport services. Uber, as a platform, enables consumers to hail a car anywhere and to track its progress towards their location online. It allows every individual to become an Uber driver by sharing their cars to give rides to passengers, which is the symbol of sharing economy. It was acknowledged as a highest augmenting private star-up as it has reduced the transaction costs that plagued passengers for a long time (Barot and Chhaniwal, 2018, p83) and has tackled the difficulties of people not being able to hail a taxi when in an inaccessible place (Chee, 2018, p261). It promotes the development of a gig economy, and also aim to become a fully electric and zero-emission platform for sustainability (Uber, 2020)
History of Uber
As narrated by Barot and Chhaniwal (2018, p83), the story of Uber began in 2008, where two founders, Travis Kalanick and Garrett Camp, were attending a web conference in Paris. After the conference when they were facing the problems of transportation, the idea of making a car-hailing on mobile phones came up in their minds they realized that it was hard to call a taxi when encountering bad weather and carrying the luggage themselves. In 2010, they divided their expenses of a car and parking place to started gauge this service on New York’s roads. Uber officially operated in San Francisco in the same year.
By 2011, Uber completed its first round of funding of $11 million (p84). Later, Uber started to extend its services to different countries. Realizing the condition and environment in various countries, Uber declared different vehicle models such as Uber-X, Uber-Black and Uber-Lux to accommodate the local regulatory framework (Petrović & Jakšić, 2020, p158)
Barot and Chhaniwal (2018, p87) also noted that it had faced some flak from the taxi industry in Europe subsequently after its success. It was argued that Uber’ wages had caused an unfair advantage and stole away their existing labour force, which disrupted the market. Uber shortly resolved this problem by explaining that it was just a smartphone application and was not comparable with the taxi industry.
However, the regulatory issue is still the biggest challenge of Uber up till now. It was debated whether Uber could be considered as a taxi service (Petrović & Jakšić, 2019, p160). For this reason, Uber has been examined by different national regulatory and is even being denied entering the market in some countries (Barot & Chhaniwal, 2018, p87).
What’s Uber’s Business Model?
“A business model describes an architecture for how a firm creates and delivers value to customers and the mechanisms employed to capture a share of that value.” (Teece, 2018, p40).
As John (2018, p65) discussed, technology drives the sharing economy; Uber’s successful business model is based on its digital technology, which is the reason why the traditional taxi industry cannot adapt to this transformative model. Unlike the taxi enterprises, Uber considers itself as a provider who offers the technology to match the demand and supply of capacity spots for locomotion (Schneider, 2017, p47). It plays a role as an intermediary between the users, where they can easily capture their scheduled transport information and services.
Considering different market and cultures in the world, this IOS-based company launched an Android system version in 2013 and has offered different prices of vehicle models (Barot & Chhaniwal, 2018, p85).
Uber provides an easy way which passengers only need to enter their current address and destination to make an order. They can then choose different types of vehicle models and will receive an estimated price. Uber enables drivers and passengers to chat, rate and comment. Namely, Uber’s interface is not only user-friendly but has also created a platform for equal communication, which enhances its services.
Uber’s successful business model also reflects in its consideration of the convenience of users’ payment. As Schneider (2017, p49) noted, passengers will only need to update their credit card information and the payment will directly pay to Uber. Uber will withhold 20%-25% of the fare charged of the drivers (Petrović & Jakšić, 2019, p159). The normalized operation of Uber makes the payment process simple and straightforward. Even though Uber adjusts it fare fee depending on the supply and demand of the service (Harris, 2017, p272), its convenience, low charge and its transparency of drivers’ information become the reasons that users being willing to use it.
Uber’s Social Ecology
Social ecology reflects how a firm’s associated enterprises influence and improve its business. Uber, as a part of the shared economy industry, expands its services rapidly around the world with merely offering a ride-sharing platform. Its growth has also followed by its competitors from all over the world.
As explained by Dudley et al. (2017, p493), even though there are only a few rivals, such as Lyft who has also offered the similar systems in America, companies such as Grab in South-East Aisa, Gett in Israel and Ola in India are also the competitors of Uber. In 2016, Uber gave up its market in China and was compelled to merge with its main rival, Didi despite putting much efforts and resources in it. This shows how the worldwide development of Uber has brought various competitors in different countries.
Who are the competitors of Uber? Video: CNBC, All rights reserved.
Uber’s partners are mainly the companies owning the payment systems such as PayPal, and Apple/Google Pay (Uber, 2020) and maps systems like Google Map (Novet, 2019). Unlike the taxi industry, which consumers cannot hail in a rural area, Uber’s model allows it to face to all the consumers who need car-hailing. Also, although Uber names their drivers as a part of their partners, theoretically, the individual drivers are the suppliers, who provide their cars to serve the passengers with regulated service. Additionally, as Uber’s official website noted, Uber’s operation is regulated by the NSW point to point regulation in NSW in Australia to constraint the users.
Infographic of Uber’ Social Ecology
How is Uber innovative? & Its transformative effects
“Talk of the sharing economy […] it was an economy that was associated with new technologies, seen as technologies of sharing……” (John, 2018, p61).
Schneider (2017, p38) describes Uber’s innovation as creative destruction which changes the original tempo of the market. From the beginning, Uber is already considered as subversive technology which overturned the original taxi industry. Its innovative business model has changed people’ ways of transportation and the reasons why people surf the internet.
For instance, as an article from Business Insider mentioned, Australians are more likely to use Uber instead of a taxi when hanging out. It seems like Uber has become one of the most popular private transport services for young Australians.
Another article from Investopedia reported that people choose Uber as it provides quick trips, as well as allowing partygoers to find available Uber online when late at night. That is, as Bunz and Meikle (2018, p49) suggested, internet and new technology established a new and different connection to us. Uber, as a saviour, makes people realize that browsing news and chatting with friends are not the only things they can do online, allowing people to enjoy the convenience of making a car-hailing online as well.
As Noble (2018, p25) noted, nowadays’ data has been left to the algorithms of machines to select the best results for users. Uber introduces this concept to create a new type of business model online, which its routes planning often rely on the system’s algorithms. As an article from The All-In-One Tool describes, collects customers data and matches the closest drivers and route for users. Instead of letting the drivers decide the route, Uber achieves helping passengers to find the best ways accurately with its digital platform.
Moreover, because of Uber’s emergence, being a driver becomes easier, which raises the gig economy. Gig economy promises worker a more flexible schedule and a self-directed workplace, allowing workers to work depending on their willingness (Ravenelle, 2019, p269). On drivers’ perspective, the taxi industry has brought the limitation such as requiring an occupational license and not allowing to pick up the passengers outside the jurisdiction that issued their license (Cramer & Krueger, 2016, p177). Therefore, Uber’ online ride-sharing service, which allows more flexibility seems to be more attractive for the potential Uber drivers (p181). People only need to sign up online without any offline application. Thus, Uber’s provide a more comfortable and efficient way of finding jobs, giving the unemployed more opportunities.
What’s more, Uber supports an anonymous rating system, which breaks the traditional model, creating another way of communication between driver and passengers. Passengers and drivers can reflect effective feedback with each other and for Uber itself and can make sure the safety by checking both of their rankings before Ubering. As Petrović and Jakšić (2019, p159) said, passengers and drivers with low ranking would not be able to use Uber application. This anonymous system demonstrates that Uber has opened up a new online way of interaction between users, as well as ensuring their privacy and security.
On the other hand, this innovative idea has also triggered some new regulatory processes. As introduced above, Uber always reckons itself as a technology platform and differentiates itself from the taxi industry. For this reason, Uber does not count as a traditional taxi service, which is unprecedented for both this industry and the governments.
As Danas (2018, p59) suggested, the existing laws may therefore be disrupted to improve Uber’s regulatory framework; and re-examination and reconsideration of the new law are required to accommodate this new model business. This determines how Uber brings the transformative effect and how it may bring a new online regulation. As a pioneer, Uber’s innovation challenges the traditional models and breaks new ground.
Nonetheless, the development of Uber may make the internet environment insecure. With such internet-based model, some cyber frauds emerge. One article from The Net Web reported that money laundering is the most popular criminals operated on the online platform. Uber has become the central targeted platform since its internet-based system allows criminals to swindle across the countries without being regulated.
In conclusion, Uber, this online ride-sharing application, brings an entirely transformative effect by creating a business model which only relies on the internet and technical skills. It provides an online platform to connect the individual drivers and the passengers, breaking the rules of the usual taxi industry. With its development, a new regulatory framework for this kind of online platforms may also be improved.
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