UBER: The Future of Transport

Source: PYMNTS (2019)

Uber Technologies Inc. is a technology company that offers on-demand ride-sharing services facilitated by connecting drivers (independent contractors) and riders (customers) with the use of a smartphone app. In the last 10 years, Uber has emerged as the leading technology-based ride-sharing company and has revolutionized the transport culture around the world. The company operates in over 63 countries and 700 cities around the world and also boasts of 91 million monthly active customers, 3.9 million drivers, and 14 million trips completed each day (“Earn Money by Driving or Get a Ride Now | Uber Australia”, 2020). In this essay, I will analyze Uber’s growth as a tech-based ride-sharing company and how it has transformed the industry. I will also discuss its business model as an emerging model in the online transportation service market.

In the first section, this paper presents an overview of Uber’s operations while the second one presents the brand’s historical development and regulatory issues and progress.  The third section discusses the company’s business model and its internet ecology in section four while the last section discusses Uber’s revolutionary internet transformations.

1       HISTORICAL DEVELOPMENT

Uber Technologies Inc. was founded in 2009 by Travis Kalanick and Garrett Camp. On a winter evening in Paris, the duo could not find a taxi and that’s when they bore the idea of Uber (www.uber.com). The idea was to create a smartphone application that would help people connect with drivers-for-hire, people who needed rides to different destinations.  The initial company was known as Uber cab Inc. which was later renamed Uber Technologies Inc. in 2010.  The application was usable in both Android and iPhone smartphones (Arrington, 2010; Hoek, 2014) enabling estimation of driver arrival time phone through the use of a GPS. After downloading the app from respective app stores, the customers can then pay for the ride-for-hire services through a third party, Transportation Network Company (TNC) using the UberX platform The fast adoption of Uber by customers was driven by its ease of use, a wide service offering and large geographical scope.

1.1      Regulatory Issues and Progress

Uber is facing a myriad of challenges ranging from internal, legal, and global issues. In the United States, for example, some cities such as New York are keen on regulating the company while Oregon has currently banned Uber. Its expansion to other countries has been met with actual bans from different countries such as Bulgaria, Denmark, and Hungary (Shead, 2019). Uber is currently facing a major challenge complying with the Disabilities Act, for example, owing to the fact that some of its vehicles are not wheelchair friendly. (Daniels Fund Ethics Initiative, 2015) Additionally, legal challenges may exist in the taxi business with licensed taxi drivers claiming that Uber is hurting their businesses and enjoys an unfair advantage because it is not regulated as the taxi industry (Daniels Fund Ethics Initiative, 2015). The company also faces legal challenges pertaining safety of customers with accusations of rape of customers in cases that happened in Delhi, India (Wong, 2017; BBC News, 2017; Isaac, 2017), Chicago, and Boston (Daniels Fund Ethics Initiative, 2015).  The firm faces a lawsuit against the wrongful death of a 6-year old girl in San Francisco where it was alleged that the driver distracted using the UberX app when he struck and killed the girl (Rushe, 2014).

To improve its image, the company has created a “safe ride checklist” on its app which offers a pre-pickup notification encouraging riders to confirm license number plats and verifying driver’s credentials before using the vehicle. The company has also implemented a team of safety and fraud experts for authentication of its drivers as well as an incident-response team to solve rider issues (Daniels Fund Ethics Initiative, 2015).

2      UBER’S OPERATIONS

 

2.1      How it Works

Uber has a 4-step on-demand flow of operations (request, matching, ride, payment, and rating) in its hire-a-ride services as shown in figure 1 below.

2.1.1      Request

This is the first step where a customer looking for a taxi ride uses Uber’s touchpoints on the Uber app to create demand. Customers request immediate or can book sometime later. Customers can choose from an array of ride options such as dedicated rides, shared rides, economical rides, and premium rides.

2.1.2      Matching

After making the request, a nearby driver is notified within the locality. The driver accepts the request and the ride is booked. However, if the driver rejects, the request moves on to the next available driver. The drivers use another mobile app to accept rides from customers. Uber applies a matching algorithm that evaluates matching factors (nearest locality, reviews, and ratings) while sending the request to a driver.

2.1.3      Ride

Once the ride has been accepted, the customer is notified of the details of the vehicle and the diver. The Uber app applied MAP API to enable the customer to have a real-time track of the location of the cab. In the new “safe ride checklist”, the customer is allowed to verify the vehicle’s registration, condition, and type as well as the driver’s appearance prior to commencing the ride.

2.1.4      Payment and Rating

Once the customer has been commuted to their destination, the app notifies them of the final ride cost, provide feedback on their experience and rate the driver. The customer can use both cash and cashless payment options.

Figure 1: An Illustration of How Uber Works

Source: GK(2019)

2.2      Uber Service Options

Uber offers its customers different service options such as UberT, Uber, X, UberPop, UberPool, UberMoti, UberBlack, UberSUV, and Uber XL. All these options are differentiated based on the type of service.  For example, UberPOOL offers the most affordable service allowing ride-sharing among strangers commuting within the same route while UberBlack includes users of luxury vehicles.  UberSUV offers passenger transport on SUV vehicles while UberXL offers transport of large groups.

3       UBER’S BUSINESS MODEL

Figure 2: Uber’s Business Model

Source: Fox (2020)

Figure 2 above shows the business model of Uber. This model can be summarized into four main components: the company (Uber), drivers, passengers, and fare. Any licensed driver in any respective country can enroll to become an Uber driver. The driver is screened and enlisted in the Uber database system. The driver is required to offer to commute effectively it the customer in exchange for payment/fare.

Any customer can become an Uber customer by downloading the Uber app from Apple Store for Apple devices or Google Play Store for Android devices. The customer then creates an account with the app after which they can use the app to request a taxi. The process is affordable for customers as all they need is a smartphone and internet connectivity. The customer’s interaction with the driver is through the transport in exchange for a fare. Part of this is considered as a booking fee which is remitted to Uber.

Uber connects the two stakeholders through the Uber drivers and customer’s apps respectively. The company also offers a payment system through which the customer remits their fare. Additionally, the company offers insurance and training to the customer where required.

3.1      Business Model Canvas

Figure 3: Uber’s Business Model Canvas

3.2      Value Proposition

3.2.1      Drivers

Uber offers the drivers different value propositions if they use their app. First, drivers are accorded flexibility as they can drive on their own terms. Second, Uber guarantees the drivers a better income due to the popularity of the brand as well as lower idle times. Third, the company offers training sessions as well as assistance in getting car loans, and finally, it offers better a trip location through advanced location systems through its app.

3.2.2     Customers

Uber offers customers different value propositions for the usage of their services. First, it offers on-demand cab booking which is convenient and efficient. Second, it offers real-time tracking of ride services and lower wait time enabling proper planning. It also offers upfront and cashless pricing which makes it efficient for customers as they do not have to carry cash. It also offers different ride options which customers can choose from based on their interest.

4       UBER’S INTERNET ECOLOGY

Uber’ positions itself as a quality and affordable ride hire company within the taxi industry. With different offerings ranging from ride sharing to luxurious rides, Uber has become a major competitor in the taxi business. Uber competes directly with other companies in the taxi business such as Lyft, Via, Ola Cabs, Didi, Snapp, Bolt, and Grab among others. Some of the indirect competitors include local transport (buses, trains) as well as local taxis.

Uber has attracted a wide range of stakeholders such as local and international regulatory institutions, customers, investors, internet service providers, and technology companies such as Apple, Amazon, Google as well as payment companies such as bank and money transfer facilities. Figure 4 below shows a representation of Uber’s internet ecology. Each of the players in the market has a different role that influences Uber’s operations. For example, Google provides Google Cloud, Google maps, and a web platform for advertisements, companies such as Facebook, Twitter, Instagram, and YouTube are used in social media engagement and advertising.

Figure 4: Uber’s Internet Ecosystem Map

Source: SwissUplabs (2016).

5        REVOLUTIONARY INTERNET TRANSFORMATIONS

Uber is a technology company that does not own any cars which are used for commuting Uber customers. The firm does not, as well, employ drivers, rather it acts as a liaison between customers and drivers. The drivers are considered independent contractors to the company. This seamless knitting of activities is all done through technology. Through the smartphone app, which is assimilated with Google Maps, the customer can locate a cab and request a ride (Bashir, Youfsaf & Verma, 2016).

System Business Model and Open Innovation

Uber’s internet transformation has been manifested through its Uber app where it provides diverse system models connecting the customer and Uber driver. Uber uses two different customer location services used with the app. The first one involves the allocation of customers based on their destination where the Uber driver had registered in advance. The other allocation system is where the firm allocates the customer to the nearest Uber driver, basically allocating calls to Uber drivers. However, when the Uber driver is on their way home, a call allocation requirement that coincides with the direction n towards their hone is allowed. Uber uses an online payment system where long-distance driving is not beneficial o advantageous for the drive because the distance is not accurately included in the customer fee.  The driver receives fees via a card system in different ways. For example, daily payment for early registered Uber drivers can be made 3-4 days at a time and one once a week on specific days in addition to a one-time monthly payment.  This payment varies depending on the driver’s situation such as the number of customers received, frequency of driving in a week, and average driving time. One important scenario is that the drives do not know the destination of the called customer before acceptance of the call and taking in of the customer (Yun et al, 2020). This shows a huge model of internet transformations that can happen through a smartphone application.

Figure 5; Uber’s Business Model and Open Innovation

Source: Yun (2020)

 

6        References

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 Marketing, 46(4), pp. 49-59

BBC News. (2017). Uber settles defamation lawsuit filed by Indian rape victim. https://www.bbc.com/news/world-us-canada-42291495

Fox, G. (2020). Uber Business Model: How Uber Makes Money. https://www.garyfox.co/uber-business-model/

  1. (2019). Uber Business Model | How does Uber Make Money?. ShopyGen. https://shopygen.com/uber-business-model-how-does-uber-make-money/

Isaac, M. (2017). Uber is Sued by Woman Who Was Raped by One of its Drivers in India.  The New York Times. https://www.nytimes.com/2017/06/15/technology/uber-india-rape-lawsuit.html

Rushe, D. (2014). Uber sues by family of six-year-old killed in San Francisco crash. The Guardian. https://www.theguardian.com/world/2014/jan/27/uber-sued-family-six-year-old-killed-crash-san-francisco

Shead, S. (2019). Uber’s Rocky Road to Growth in Europe: Regulators, Rivals And Riot. Forbes. https://www.forbes.com/sites/samshead/2019/05/10/ubers-rocky-road-to-growth-in-europe-regulators-rivals-and-riots/?sh=4935ee595c67

Swissuplabs. (2016). 30 Free Credit card and Payment methods icons set for your store. https://swissuplabs.com/blog/free-credit-card-and-payment-methods-icons/

Earn Money by Driving or Get a Ride Now | Uber Australia. (2020). Retrieved 20 November 2020, from https://www.uber.com/au/en/

 

Wong, J, C. (2017). This article is more than 3 years old Woman raped by Uber driver in India sues company for privacy breaches. The Guardian. https://www.theguardian.com/technology/2017/jun/15/uber-india-woman-rape-lawsuit

Yun, J, H., Zhao, X., Wu, J., Yi, J, C., Park, K, B., &Jung, W, Y. (2020). Business Model, Open Innovation, and Sustainability in Car Sharing Industry—Comparing

Three Economies. Sustainability, 12(1883), pp. 2-27

Yun, J, J. (2020). Business model and open innovation for Uber. https://www.researchgate.net/figure/Business-model-and-open-innovation-of-Uber-Source-authors-own_fig2_339630741