The Uber era is coming, are you still taking a traditional taxi?

Robyn Beck/AFP Getty Images. All rights reserved

The advent of the internet has not only brought about changes in daily life but has also significantly influenced the business environment. The wide availability of the Internet allows us to trade from anywhere, and it opens up huge opportunities in transport. This essay is drawn on a critical analysis of Uber and its transformative effect on the transport industry. The first section will provide a brief overview of Uber, while the second section will focus on its history. Uber’s business model and internet ecology will be introduced in section three and four. Lastly, a critical analysis of Uber’s transformative innovation and its regulation will be examined.

What is UBER?

Uber Technologies, Inc., commonly known as Uber, is an American company based in San Francisco. Uber is a technology startup that offers a ride-sharing service through apps that facilitate connections between independent contractors (drivers) and passengers (riders). The American company Uber has brought more comfortable and cheaper transportation to passengers worldwide. Uber is what John’s theory (2018) called a sharing economy, in which people share their intangible and underused assets, in cash or for free, with the help of the internet.

This is a brief introduction to Uber

A Brief History of Uber

  • Uber was first founded in 2009 by Garrett Camp and Travis Kalanick under the Uber Cab. At the time, Kemp paid 800 dollars to rent a private car and drive him and his friends on New Year’s Eve as he worked on ways to make the service more cost-efficient for ordinary people. Camp reasoned that splitting the cost by multiple people would drive the costs down, and then Uber Cab was born. (Kumari & Sharma, 2019)
  • In 2011, the company was shortened to Uber, and in 2012, Uber launched Uber X, a service that allowed people to drive their own cars and work for Uber. Since then, Uber has been at the forefront of many transport services and technologies, from self-driving cars to ride-sharing services and even helicopter services. (Kumari & Sharma, 2019)
  • In 2019, Uber has generated 22.4 billion dollars in revenue and operated 300 cities on six continents. Uber has teamed up with HeliFlight to offer a helicopter taxi service between Manhattan and John F. Kennedy International Airport.

Behind Uber’s business model

As scholar Nielsen and Lund state (2014), a business model is a sustainable way of doing business. It identifies the product or services the business plans to sell, and the target market, and any expected expenditures. Uber is an on-demand online transportation service that has revolutionized the global taxi industry. It is a digital platform that connects users who need to get from point A to point B with drivers who are ready to serve them. The “passengers” generate the demand, the “drivers” provide the supply, and “Uber” acts as a marketplace that connects them seamlessly with the support of the internet and mobile.

Adapting taxi prices to different situations is an important aspect of Uber’s business model. In the situation that there are relatively more riders than drivers, and excessive waiting time of passengers, Uber adopts a “surge pricing” algorithm to balance the relationship between supply and demand. As long as the demand for cabs is higher than the service available at the moment, the fares rise according to the “surge pricing” algorithm. Some drivers will move to the surge areas to earn additional income, while other passengers will choose to wait to get their cars. Uber can thus balance supply and demand and better manage mismatches.

“surge pricing screenshot” by Urban Mixer is licensed under CC BY-NC-SA 2.0

Another prominent advantage is Uber’s ability to offer multiple ride options. Unlike traditional taxi transportation, Uber is not limited to a specific segment of cars or specific groups of people. There’s Uber X, Uber Black for those who prefer to travel in Black cars; Uber Taxi is used by people looking for cost-effective solutions and Uber SUV is for people who want richness.

Image from Brett Helling, All rights reserved.

Moreover, Uber is now much more than just a ridesharing company. They are in the transport business as they also offer boats, food delivery, helicopters, as well as some other transportation means on-demand. Uber is expanding rapidly with new business verticals, and these new businesses that Uber is building side by side have huge potential to generate new streams of revenue into its business model.

 

Uber’s internet ecology

Internet ecology refers to an organized system in which interacting entities rely on information technology to influence and support each other. (Brown, 2014) Uber’s ecology in the sharing economy consists of its users, suppliers, owners, regulators, partners, and competitors.

Uber company is owned by stakeholders with the chief Executive Officer Dara Khosrowshahi. In 2017 and 2018, Uber built new independent directors, including Ursula Burns, Ronald Sugar, Wan Ling Martello, and John Thain. (FORM S-1  REGISTRATION STATEMENT, 2019)

Uber’s core suppliers are its drivers, who share their own cars with others, providing a new type of travel experience for riders. The ridesharing market allows users to hail a car immediately via their smartphone. In addition, Google is a key supplier of mapping technology for Uber.

Within Australia’s three-tier government system, traffic regulations are the responsibility of State and Territory governments. In 2018, Uber is legal in almost every Australian state and territory. According to the Point to Point Transport policy in NSW, it ensured the security of their services.

Uber emerges as a major competitor in the ridesharing market. (Kumari & Sharma, 2019) Companies such as Lyft, Didi Chuxing, Ola, and Grab, meanwhile the local taxi industry are its main competitors.

Screenshot of Uber’s internet ecology—Amy

Uber—a transformative innovation comes out of the internet

As a ride-sharing platform under the sharing economy, Uber has been socially transformative. It provides an innovative working platform for drivers with the support of the Internet. However, its relationship with the driver, allegedly by an “independent contractor” arrangement, has caused much controversy. Independent contractor refers to a person that is engaged under a legal contract to provide a service. (Carter, 2017) But Uber company controls every aspect of a driver: drivers cannot negotiate a price, and they also cannot develop their own business. In the journal Just-in-Place” labor: Driver organizing in the Uber workplace,  the author stated that a big innovation of the Uber platform is the creation of ‘just-in-place’ worker, but the model of ‘just-in-place’ labor would isolate drivers’ power and it was an exploitation of rights. (Wells, Attoh & Cullen, 2020) However, according to the surveys of Uber drivers in America, one of the main motivations for working with Uber was the flexibility the platform offered. There was 84 percent of drivers pointing that they lose the flexibility in a traditional company. Similarly, 93 percent of workers agreed that partnered with Uber would have more flexibility in their schedule and balance with work and family. (Berger, 2018) Thus, for most drivers, a potential motive to partner with the Uber platform is the role of autonomy and having a choice of working hours. Although Uber’s contract labor model should be improved, most drivers who gave up permanent employment and started driving with Uber were attracted by the flexibility the platform offered. Therefore,  Uber provided drivers with a transformative and flexible work platform that helped to create innovative working experiences.

On another level, Uber is a disruptive innovation that combines digital and peer-to-peer model to create dynamic startups, which provides convenience and connectivity for users. Uber takes advantage of consumers’ smartphone technology to connect them with independent drivers as their cabs. In fact, before Uber was established, the city transport market was dominated by local taxis, but the number of taxis was limited by the restrictions of existing drivers. (Damle, 2018) This offered an opportunity in the market to be exploited, and Uber seized the opportunities by improving a better transportation experience. For example, with the technologies of the Global Positioning System, drivers can track passengers’ location faster and take less time to pick them up. This provides a more potentially efficient way to purchase transportation. Moreover, the digital platform in transport is not only about riders, Uber has diversified the services to different new eras such as food delivery. In August 2014, Uber launched UberEATS, an online food ordering, and delivery platform.

Photo by Jaap Arriens/NurPhoto via Getty Images,all rights reserved.

Users can read menus, review and score, order food, and pay for it from participating restaurants using iOS or Android apps or through a Web browser. Fast food and delivery are not a new concept. Since the 1980s, franchises such as Domino’s pizza have been delivering food to the doorstep. What has changed, however, is the type of food available. In the Uber app, there are a variety of food types to choose from. Not only delivery food, but Uber also provides send packages uptown, order groceries, and other daily delivery services.

Worldwide, the rise of online service delivery platform has changed the way many consumers and suppliers interact and enhanced social sustainability. (Li, Mirosa, & Bremer, 2020) In this light, the convenience Uber brought to its users has changed the way they eat or buy and give them an innovative way of life.

As Uber grows, it faces challenges inherent in the regulatory process. In the new consumer-centric sharing economy, innovation is no longer focused on creating something new; instead, it is focused on facilitating engagement and improving the consumer experience. Furthermore, as Crespo (2016) pointed, innovation and regulation simply did not work together, and regulation tends to slow the growth of new entities in the industry. So rather than subjecting Uber and other similar carpooling services to outdated taxi regulations, a better approach would be to create new regulations to deal with these new, consumer-centric companies. The 2014 Vehicle Rental Innovation Amendments Act (VIAA), hailed by Uber as a “watershed moment” in regulatory progress, did not require carpooling services to adhere to the same licensing requirements that taxis are subject to. The VIAA prohibits discriminatory conduct by drivers and has established procedures for drivers who violate this requirement. However, the VIAA is just one of Uber’s regulatory agencies. As Uber continues to expand, a new regulatory framework needs to be put in place for states to follow.

 

In conclusion

Overall, Uber is an innovative consequence of the Internet. Uber has been able to develop systems that fully exploit the potential of the assets (cars), thereby resulting in benefits to the customers as well as the drivers. Not only does Uber offer drivers a transformative and flexible job, its extensive service such as food delivery, creating a platform that improves the lives of users. Furthermore, as an innovative digital service platform, the traditional taxi regulation will restrict the development of Uber, so with the expansion of Uber, each country and sates should also improve the management of Uber.

 

Word count: 1783

Reference

Berger, T., Frey, C. B., Levin, G., & Danda, S. R. (2018). Motives for joining the Uber platform. In Uber Happy? Work and Wellbeing in the “Gig Economy” (pp. 9-10).

Brown, K. C. (2014). “Internet Ecosystem: Naming and addressing, shared global services and operations, and open standards development. Retrieved from https://www.internetsociety.org/wp-content/uploads/2017/09/ISOC-Internet-Ecosystem.pdf

Carter, H. (2017, July 23). Australia: The Uber driver model – rooster or duck – employee or independent contractor? Retrieved from https://www.mondaq.com/australia/contract-of-employment/612972/the-uber-driver-model–rooster-or-duck–employee-or-independent-contractor

Crespo, Y. (2016). Uber v. Regulation: “Ride-Sharing” Creates a Legal Gray Area. Retrieved from https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1285&context=umblr

Damle, V. (2018). Disruptive Innovation: A Case Study Of Uber, 2(11). ISSN: 2456-9992

D.C. Law 20-197. Vehicle-for-Hire Innovation Amendment Act of 2014. (2015). Retrieved from https://code.dccouncil.us/dc/council/laws/20-197.html

FORM S-1 REGISTRATION STATEMENT. (2019). UBER TECHNOLOGIES, INC.

John, N. A. (2018). Sharing Economies. In The age of sharing (pp. 69). Polity

Kumari, A., & Sharma, S. (2019). Management Analysis of Uber. History of Uber Cabs, 8-9. doi:10.13140/RG.2.2.35129.93284

Nielsen, C., & Lund, M. (March 2014). An Introduction to Business Models. doi:10.2139/ssrn.2579454

Li, C., Mirosa, M., & Bremer, P. (2020). Review of Online Food Delivery Platforms and their Impacts on Sustainability. Retrieved from file:///Users/ni/Downloads/sustainability-12-05528-v2%20(1).pdf

Wells, K. J., Attoh, K., & Cullen, D. (2020). “Just-in-Place” Labor: Driver Organizing in the Uber Workplace. doi: https://doi.org/10.1177/0308518X20949266

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About Amy Xiao 5 Articles
USYD digital culture student