Selling Simplicity: How Uber Works

Uber Title
Uber Title Image: ShutterStock

The introduction of companies like Uber allow for a complete change of societal attitude towards their services, due to the simplicity and internet utilisation within the companies. I will be doing a critical analysis of Uber and discussing its transformative impact on society. By diving into the history and development of Uber, we will gain an insight into how these ‘game-changing’ companies have (and will continue to have) successfully transformed society within their industries.

I will start with a brief history of Uber, before discussing its business model the reasons it is such a powerful and distinctive service. I will then look into where Uber fits in to the current online world, and how the development of Uber has created the environment it currently exists in. Finally I will be doing a more critical analysis, looking into some of the main issues with Uber, and discussing exactly how Uber has had a transformative impact on society.

What is Uber?

Uber is a company which primarily offers a ‘taxi on demand’ vehicle for hire service; however it also offers many other services including food delivery and courier services. The services of Uber are used through an app, easily named the “Uber app” which has 2 main users.

  1. The Passengers
  2. The Drivers

Uber allows for people to request a ride to and from their desired locations at a lower than usual price, whilst also giving those who are willing to drive the opportunity make money at their own leisure.

Uber App in use
Uber App in use
Image: ShutterStock

The History of Uber

Uber was founded in 2009 by Garrett Camp and Travis Kalanick after they had to spend $800 on a private driver and decided there should be an easier way. The company was originally known as Ubercab, before shortening the name to Uber in 2011.  They started by providing a service in which people could offer a spare seat in their car, for people who needed to go in the same direction as the driver, in a sort of hitch hiking fashion, however it very quickly changed to a bespoke ride service. At first, they were more expensive than a taxi, as it was an on-demand service, however in 2012, Uber shifted to allow drivers to use their own cars, using less than luxury services, allowing for a much cheaper, yet still on demand service. It was during 2013 in which Uber started to grow, and was awarded the ‘Tech Company of the Year’ award by USA today (USA Today, 2013). Now the Uber services are available across over 10,000 major cities. In 2014, services such as UberPOOL (a cab sharing service) and Uber Eats (a food delivery service) were launched, expanding the company to further industries. Since then, Uber has been successfully running its already offered services, and in 2016 to 2019 proceeded to create a presence globally, merging its services with numerous similar services around the world including DiDi (China), Yandex Taxi (Eastern Europe) and Grab (South-East Asia). In 2019, Uber went public, and its ownership is primarily shared between 7 main stakeholders.

The Uber Business Model

“A business model is the answer to the questions: Who is your customer, what does the customer value,and how can you deliver value at an appropriate cost?”(Drucker, 2011)

Uber’s service changed the game by massively undercutting taxi services, whilst also allowing for a more personalised trip. Another huge part of the business model is the fact that there is a review system put in place for both the passenger and the driver, encouraging a more positive experience when using the service. By developing the business to be app-based, it gives Uber a significant advantage over its competitors through convenience, reliability and cost effectiveness for both the passengers and the drivers (Button, 2019). When looking at the success of Uber, it must be said that there was a gap in the market which appeared due to a lack of connection between passengers and drivers, as well as between what people would be willing to pay for such a service.

The Uber Online Ecology

“An ecological system has variables, relationships and dynamics. Looking at the Internet as an ecology, then in terms of variables, anyone can become an author, and contribute content to the web. This may take the form of sending emails, creating and uploading web pages, contributing to discussion groups or chat forums” (Looi, 2001)

Uber is situated as the leading company within the transport industry and the food delivery industry due to the success of Uber Eats. Uber has many competitors providing the same service in the transport industry, such as Lyft, Ola and Via, as well as competitors within the food delivery industry, in Deliveroo and Menulog. For the transport industry, the way to gain consumers is by offering a superior service to the customers, whether by convenience, reliability or pricing, whereas in the food delivery industry, the primary way to gain consumers is by joining with the superior food companies. Some of the big food chains which are available on Uber Eats include Subway and McDonald’s.

See below for a map of Uber’s Ecology

 

How has Uber transformed Transportation?

Before Uber, the taxicab service held a relative monopoly in the industry of private drivers. It was also a case of ‘finding’ a taxi, or phoning up a taxi number, in order to order a taxi, which was often unreliable. Furthermore, the total fare was often unknown until the end of the trip, and was seen as quite pricey, making taxi’s less appealing to the average person. Uber acted as a disruptive innovator by making it easier and faster to order a trip, making the fare known early, and making the fare overall cheaper. It also allowed for the drivers to pick up extremely flexible, casual hours, while using their own car, or borrowing one if necessary (Dudley, et al. 2017).

Uber satisfied the needs and wants of a much larger audience, and on average satisfied them to a much larger extent than any previous bespoke transportation service. The app based company puts the control of the service in the hands of the driver and the passenger, with the passenger giving exact pickup and drop off points, and both parties having the ability to rate each other as a passenger or a driver.

The simplicity of the app is by far the most groundbreaking feature, and in turn the most socially transformative feature, as now ordering food, or organising a ride can happen in a matter of minutes. Economically it has also dramatically changed the way society uses the internet as well. The internet is a cheap and instant way to communicate, and by using a mobile app as the main function it allows for it to be readily accessible 24/7.

What are the biggest issues at Uber?

The strengths of Uber do come with some downfalls, as there have been questions over the treatment of drivers, as well as safety concerns when it comes to who is allowed to be a driver or a passenger.

There has been an investigation over the past few years into the way in which Uber classifies its drivers. This argument came about as many drivers felt they weren’t being fairly treated as employees by not receiving a minimum wage, paid leave or any of the benefits that come with being a part time or full time employee. A significant part of this argument came from the fact that drivers are not able to set their own rates, and thus the rates are set by the employers of the drivers, being Uber. Whilst this benefits the drivers of taxicab’s, as they are official employees, Uber claimed that the drivers were in fact independent contractors, and in Australia, the FWO found this to be the case due to the “drivers ability to control whether, when and for how long they perform work, on any given week” (Chau, 2019). In many places around America, depending on the state, drivers have been determined to be classified as employees, and thus Uber is required to give the appropriate allowances.

When looking at this from a distance, it may seem that Uber is ‘being cheap’ however Uber is offering an opportunity to those who may not have any other way. As stated earlier, drivers are able to work when, where, and for however long they wish and so in that sense we should probably take into account that Uber is really just offering people a good opportunity, not a legally binding contract.

Another major issue which has been investigated for the past few years is the inadequacy of background checks of passengers and drivers. Uber making it fast and simple to find a ride or become a driver opens the door for those with malicious intent and gives them an opportunity to commit violent crimes, including sexual abuse. Overall when looking at these issues, there is no doubt that stricter regulations and more detailed background checks must be put into place, however the positives of Uber much outweigh the negatives in terms of its transformative effect on society. This becomes especially clear when looking into the issues that existed ‘pre-Uber’. According to Liberty Vittert, a professor of the practise of data, “Uber makes up around 20% of the sexual assaults by taxi drivers” (Vittert, 2019). Whilst it is of the utmost importance that all companies have a complete 0 tolerance rule on sexual assaults, and work towards eliminating such behaviours entirely, it should not be that case that we suggest Uber’s format is increasing the odds of sexual assault, as there is simply not enough evidence to support those claims.

Conclusion

In conclusion, we can clearly see how the history of Uber has allowed it to develop onto the innovative and groundbreaking company that it is today. We can see how the companies app based service and use of online communication have allowed for it to be such a successful company within its industries, as well as seeing where Uber is placed in terms of internet ecology. Finally we were able to see how the innovations and risks taken by Uber have also had some very negative effects, which must be looked into in order for Uber to continue to have a socially transformative effect. Simplicity gave Uber the opportunity to close the gap between customer and worker, and through the success of Uber, we have witnessed a societal transformative change.

 

 

References

References

Uber. (2020). About Us. Retreived 18/11/2020) from
https://www.uber.com/au/en/about/

Aslam, Y., & Woodcock, J. (2020). A History of Uber Organizing in the UK. South Atlantic Quarterly119(2), 412-421.

Bales, R. A., & Woo, C. P. (2016). The uber million dollar question: Are uber drivers employees or independent contractors. Mercer L. Rev.68, 461.

Button, K. (2019) The “Ubernomics” of ridesourcing: the myths and the reality

Casadesus-Masanell, R., & Ricart, J. E. (2011). How to design a winning business model. Harvard business review89(1/2), 100-107.

Chau, D. (2019) Uber drivers are not employees, Fair Work Ombudsman finds, ABC News

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

DeBruyne, N. L. (2017). Uber drivers: A disputed employment relationship in light of the sharing economy. Chi.-Kent L. Rev.92, 289.

Dudley, G., Banister, D., & Schwanen, T. (2017). The rise of Uber and regulating the disruptive innovator. The political quarterly88(3), 492-499.

Fingas, J. (2019) Uber has to pay New Jersey nearly $650 million in employment taxes

Looi, C. K. (2001). Enhancing learning ecology on the Internet. Journal of Computer Assisted Learning17(1), 13-20.

Rogers, B. (2015). The social costs of Uber. U. Chi. L. Rev. Dialogue82, 85.

Smith, J. W. (2016). The Uber-all economy of the future. The Independent Review20(3), 383-390.

Steinberger, B. Z. (2017). Redefining employee in the gig economy: Shielding workers from the Uber model. Fordham J. Corp. & Fin. L.23, 577.

Vittert, L. (2019) Uber’s data revealed nearly 6,000 sexual assaults. Does that mean it’s not safe?

Wolff, M. (2013) The tech company of the year is Uber

Yurieff, K. (2017) Uber fined $8.9 million in Colorando for problematic background checks