Need a taxi? Why not order a Uber?

Using uber to hire taxi
"Using uber to hire taxi" #by Patrick Sisson, CC BY 2.0

Introduction

Sharing economy has become an important part of people’s lives, the idea of sharing economy is used in a huge amount of online services and industries. This ideology brought many novel online services for residence sharing, ride sharing and used item exchanging or trading. For instance, home remains vacancy at the most of time or there is still available room even when it is occupied by owner. Airbnb is able to turn the empty space in the house into a great chance for earning rent. Ride sharing is another great example for sharing economy, car loses its value when it is parked, Uber, Lyft or Didi transfer vacant seats in the car into a great chance for earning a ride sharing fee (Wallsten, 2015). Therefore, the so-called “sharing economy” can be referred as turning the unused property owned by individuals into profitable resources (Wallsten, 2015) (Schor, 2016). Uber is an outperformed ride sharing platform under the development of sharing economy trend. Before such ride sharing platform was invented, the mainstream transportations beside public transportation and owning a vehicle is hire a taxi or rent a vehicle. Both transportation methods cost more than ridesharing services for users, users sometimes have to pay for the whole vehicles after finishing a ride, while using uber, user has options to choose whether taking the whole ride by him or herself or sharing seats with other passengers. Ridesharing platform uber also made an impact on increasing employment rate and users’ income by reducing the entry barrier for the actual worker in the industry (Yaraghi& Ravi, 2017). This essay will demonstrate what is uber and how it works and develops. Moreover, the essay will also focus on illustrating what transformative effects that uber makes and how it is made by analyse the transformative effect from the aspect of politics, economy and culture.

Identity and history of uber and its transformative effect

historical icons of uber
“historical icons of uber” # by 1000logos, CC BY 2.0

Uber is a ride-sharing platform under the ideology of sharing economy, specifically, uber is an online taxi application which user can hire a taxi online at any time. Different with traditional taxi companies, uber services cover many different cities even countries around the world so that users do not need to memorize different cab companies’ numbers. Compare with traditional taxi, uber has a better flexibility and popularity (Cramer& Krueger, 2016). Uber was first found in 2009 by Garrett Camp and Travis Kalanick, Camp’s initial idea was to find a solution to reduce the cost of direct transportation but it is almost impossible to reduce the cost by hiring traditional taxi due to the actual cost that taxi companies need to pay for arrange a ride for users. Most traditional companies have ownership of all their taxi vehicles and drivers are only responsible for driving taxis. Therefore, Camp realized that sharing a ride or a cab could be an affordable direct transportation, the idea of Uber was found since then. In 2012, Uber company established a new service “UberX” on the internet, and UberX is still the most popular service on the Uber platform now (Bashir, Yousaf& Verma, 2016). It allows users to register to be a driver by using their own cars without any limitation to the luxury of vehicles. Drivers only need to accept a background check and meet the registration requirement. The found of UberX made a huge impact both economically and socially. UberX bring a lot of income opportunities, it only requires registration and driving license, users can use UberX as a part-time job, and UberX can also be a full-time job for those who want to rely on being a uber driver to make a living (Di Amato, 2016). Economically, the existence of UberX reduces the direct transportation cost and enlarges the market value of taxi industry.

Who owns Uber?

Uber company is a joint-stock company which means it is not owned by an individual, in fact there are several shareholders of uber company. According to Feiner (2019), the seven biggest shareholders of uber are listed below. The biggest shareholder of uber is Softbank, the Japanese conglomerate holding company which holds 12.8% of uber’s total share that worth 10.2 billion US dollars in total value. The second biggest shareholder is Benchmark Capital partners which is a venture capital firm that holds 8.5% of uber’s total share and the total value worth 6.8 billion US dollars. The third biggest shareholder of uber is Travis Kalanick, one of founders of Uber and he holds 6.7% of uber’s total share which worth 5.3 billion US dollars. The fourth biggest shareholder of uber is Garrett Camp, another founder of uber and he holds 4.6% of uber’s total share which worth 3.7 billion US dollars. The fifth biggest shareholder of uber is Saudi Arabia’s public investment fund, it holds 4.3% of Uber’s total share which worth 3.4 billion US dollars. The sixth biggest shareholder is Alphabet which is a multinational conglomerate holding company, it holds 4.2% of Uber’s total share that worth 3.3 billion US dollars. The last shareholder is Ryan Graves, he holds 1.9% of uber’s total share and it worth 1.5 billion US dollars (Feiner, 2019).

Uber’s business model

How uber works
“How uber works” #by Winget, CC BY 2.0

Surprisingly uber company does not identify itself as a taxicab company, instead Uber is a technology (software) company (Bashir, Yousaf& Verma, 2016). uber actually play a role as a liaison, drivers are only contractor drivers for Uber company, indeed neither driver nor vehicles are owned by uber company (Schneider, 2017). The answer for why uber is almost taking over the taxicab industry is its novel business model. Analysing the aspect of employment, uber never needs to pay for owning drivers and vehicles, all the drivers are contractor drivers. After a quick registration and background check, uber will put the qualified cars and drivers on the platform (Bashir, Yousaf& Verma, 2016), such easy and uncomplex driver registration lowers entry barriers for uber driver and offers more job opportunities (Harding, Kandlikar& Gulati, 2016). Without additional cost of hiring drivers, uber users always get a cheaper price than traditional taxicab. Uber’s another attractive feature for users is fast, once customers send an order onto the uber platform, the app will automatically analyse your pickup point and destination, then uber will send your order to uber drivers and nearby uber drivers are priority. Customers can see the distance between him/herself and driver, and he/she can set a meeting point by using the assimilated google map or so-called GPS in the uber application (Sun& Edara, 2015). Moreover, another important part in uber’s business model is pricing. Uber has three pricing strategies which are fixed airport rates, standard rate and dynamic pricing. Take an example, according to Schneider (2017) the fixed airport price from downtown Chicago to midway airport is 65 US dollars and 75 US dollars for trip to O’Hare airport. Standard rate is calculated by miles and minutes, it is similar with mill in the traditional taxi. Dynamic pricing is also known as surge pricing, it normally happens when there is a high demand on taxi.

The video details what is uber and how uber works, Standard YouTube License.

Uber’s Internet Ecology

As the biggest online taxi company in the world, uber has had already eight million active users and 160,000 drivers by the mid of 2014, venture capitalist valued uber at approximately 40 billion US dollars (Wallsten, 2015). Although uber company has such dominating power in the taxi industry, it only plays a role as liaison between drivers and customers. To better illustrate it, uber is not the actual service provider but the uber driver is, uber driver works as an independent contractor and offers customers services directly via uber platform. Therefore, uber drivers are not a part of uber employees actually, drivers are business partner or independent contractor to uber company. Moreover, google map is considered as a partner of uber as well. Google map offers the navigation and map functions in the mobile app, these functions aim to improve users’ experiences while using uber. Another big part in uber’s internet ecology are users, they can be both drivers and customers, but they still have some other options for hiring taxi online like Lyft, Sidecar and Grab. These so-called other options formed another big part to uber’s internet ecology which is “competitors”, however although uber has several competitors, it still has the largest market in the industry because of the fast, safe and quality services, moreover it flipped people’s thinking on taxi.

Diagram of Internet ecology of Uber
“Diagram of Internet ecology of Uber” # by Qian Cheng, CC BY 2.0

Uber’s transformative effects& How it is innovative?

Uber created a brand-new online business model, and it changes the original tempo of the market (Schneider, 2017). Distinguish with traditional taxi, uber’s business model allows drivers work as an independent contractor, and there is no limitation to the working hour which means uber driver has a better working flexibility. Because of its business model, the entry barriers for becoming a uber driver is much lower than traditional taxi driver, therefore more jobs are created compare with traditional taxi industry.

Moreover, uber makes hiring taxi online faster and easier. Compare with traditional taxi company, uber has a powerful algorithm that can calculate the best route and timing for passengers. The assimilated google map in the mobile app makes both driver and passenger’s location visible and passengers can set up a meeting point at any time.

Furthermore, pricing strategy is the most attractive feature for users, and it is also a novelty in the entire industry. Uber have three pricing structures which are fixed price, standard price and surge price. Three pricing structures ensure customers always get a fair price, according to Schneider (2017), normally uber has a cheaper price than traditional taxi. The payment system of uber is quite advanced too, uber accept online payment and cash so customers have more options to pay the fare. In one word, the innovation of uber lowers taxi driver entry barriers and creates more jobs, it is a positive transformative effect in the aspect of economy. The innovation of uber also makes hiring taxi easier and faster for customers, and it is a positive transformative effect socially.

Regulations over uber, how uber triggered regulatory process?

As an innovation in the market, uber has been challenged by taxi regulation which were established decades ago. The aim of taxi regulation is to regulate pricing and safety of taxi, the market and many states or cities has made response that uber should obey the existing taxi regulation (Posen, 2015). However, the existing regulation was made for traditional taxi market and it may stifle the innovation of that uber created. Therefore, while uber is obeying the market regulation, it developed its own regulation for protecting drivers& passenger and regulating the price. In my point of view, ridesharing companies like uber should have regulations other than taxi company to prevent stifle the innovation.

Conclusion

The innovation of uber brings people a novel way to order a ride, and the transformative effects benefit people’s lives a lot. Socially, uber offers customers a faster, easier and safer way to travel. Economically, uber created more job opportunities for drivers by lowering the entry barriers, and uber made hiring taxi online more affordable. In conclusion, uber’s transformative effects had a positive influence on the taxi industry and people’s lives.

 

Reference

Wallsten, S. (2015). The competitive effects of the sharing economy: how is Uber changing taxis. Technology Policy Institute22, 1-21.

Yaraghi, N., & Ravi, S. (2017). The current and future state of the sharing economy. Available at SSRN 3041207.

Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review106(5), 177-82.

Bashir, M., Yousaf, A., & Verma, R. (2016). Disruptive business model innovation: How a tech firm is changing the traditional taxi service industry. Indian Journal of Marketing46(4), 49-59.

Di Amato, A. (2016). Uber and the sharing economy. Italian LJ2, 177.

Schneider, H. (2017). Creative destruction and the sharing economy: Uber as disruptive innovation. Edward Elgar Publishing.

Sun, C., & Edara, P. (2015). Is getting an Uber-Lyft from a sidecar different from hailing a taxi? Current dynamic ridesharing controversy. Transportation Research Record2536(1), 60-66.

Harding, S., Kandlikar, M., & Gulati, S. (2016). Taxi apps, regulation, and the market for taxi journeys. Transportation Research Part A: Policy and Practice88, 15-25.

Schor, J. (2016). Debating the sharing economy. Journal of Self-Governance and Management Economics4(3), 7-22.

Posen, H. A. (2015). Ridesharing in the sharing economy: Should regulators impose Uber regulations on Uber. Iowa L. Rev.101, 405.

Feiner, L(2019). Here’s who stands to get rich from Uber’s IPO. CNBC. Retrieved from https://www.cnbc.com/2019/04/26/uber-ipo-the-largest-shareholders.html

 

 

 

 

 

 

 

 

 

 

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About Qian Cheng 4 Articles
USYD student major in digital culture