Uber: Transformative innovations in the taxi market

Uber has changed the way people go out

"uber" by stockcatalog is licensed under CC BY 2.0

In the context of the Internet era, the emergence of Uber makes ride-hailing the choice of more people. This ride-hailing model has brought a transformative impact to the transportation industry, promoted the development of coordinated consumption, and is a manifestation of the sharing economy. The first part of this essay will briefly introduce Uber, the second part will describe its history, the third part will analyze the Uber business model, the fourth part will be about Uber under the Internet ecosystem, and the fifth part will make a critical analysis of Uber through the Internet, politics and society, thus reflecting its revolutionary innovation.

What is Uber?

Uber is the world’s first transportation network company to implement one-click real-time ride-hailing services through smartphone applications. As one of the typical cases of Internet entrepreneurship, Uber is not only a ride-hailing app, it also provides passengers with a high-end and more private way to go out. Users can send requests via mobile phones and hire high-end cars and private chauffeur services. Uber has a variety of models (Uber X, Uber Black, Uber SUV, Uber LUX), and different models can take into account each user, because it can estimate the price of various models for users before ride-hailing so that users have a more flexible and efficient outing experience.

Figure 1: The video describes what Uber is. “What Is Uber? | Mashable Explains” by Mashable. Standard YouTube License.

 

The historical beginnings of Uber

One night in 2008, Uber founder Travis Kalanick and co-founder Garrett Camp were waiting for a taxi on the street, but the taxi did not come for a long time. Therefore, they decided to launch an app to solve the problem of difficult to take a taxi (Brian, 2019). Uber was founded in San Francisco, the USA in March 2009, initially named “UberCab”. It officially started service in San Francisco in June 2010. In the second half of the same year, Uber entered a period of rapid development after receiving investment from a group of super angel investors in Silicon Valley. Uber entered the Paris market in 2011, which meant that Uber’s overseas expansion began. In 2014, Uber launched UberPool (multi-person car-sharing service), which enables Uber to produce higher efficiency and lower prices for users. Uber entered the food delivery market in 2015, and Uber Eat brought another profit line to Uber. In 2019, Uber experienced ten years of development and officially listed on the New York Stock Exchange. Uber has set off a revolution worldwide, overturning the traditional taxi market and reshaping the way people go out, covering more than 80 countries and regions around the world.

 

Uber’s revolutionary business model

Currently, there is no unified definition of the business model. Zott (2011) stated that the business model is a core logic and operating mechanism that describes and regulates an enterprise to create value, deliver value and obtain value. Uber is a typical two-sided market mechanism, that is, a platform connects two user groups, and the utility of users of one group will be affected by users of another group (Evans, 2003).

On one side are passengers waiting for taxis, on the other side are taxi drivers looking for passengers, they cannot meet at the right place and time. Uber successfully solved this information asymmetry. It provides a platform for drivers and passengers to match each other. This allows both the service provider and the demander to see each other’s real-time geographic location and the estimated time of arrival.

uberFigure 2: “uber” by Mapbox is licensed under CC BY 2.0

Uber’s benefit is not only for users, but it also allows more labor, that is, idle private car owners to enter the market. This is a manifestation of the sharing economy. Uber has mobilized the enthusiasm of various participants in the society, and each private car owner can promote their idle production capacity and obtain additional income. John (2018) stated that the sharing economy had turned everyone into micro-entrepreneurs. This is an optional job and is not subject to the attendance system and labor contract.

 

Uber’s internet ecology

Internet ecology is centered on Internet technology. Industries of different scales and functions interact to form a chain circle, which supports and restricts each other, thus forming a balanced and unified whole (Mcfedries, 2003). As the pioneer of mobile ride-hailing, Uber has set a benchmark for the development of ride-hailing in other regions, but it also faces fierce competition. Uber is not the only company in the market that provides these services. Lyft, Didi, Grab, Via, Ola Cabs are all direct competitors of Uber in the ride-hailing industry, among them, Uber’s biggest competitors in the United States and China are Lyft and Didi. As a way for people to go out, Local Taxi and Public Transport are also indirect competitors of Uber, among them, public transportation has been affecting Uber’s market due to its low price. (Hitesh, 2020).

uber vs lyft

Figure 3:“uber vs lyft” by stockcatalog is licensed under CC BY 2.0

In terms of partners, Uber actively cooperates with many types of enterprises. For example, it cooperates with PayPal, Google Wallet, Apple pay, Alipay, Master card, Visa in terms of payment, Starwood and Hilton in terms of hotel, and it cooperates with automobile company Toyota in terms of car rental. In order to ensure the high quality and stability of the supply chain, Uber also attaches great importance to the selection of suppliers. Uber’s network and voice supplier are Sprint. The map supplier decides according to different countries, most use Google Maps, but they also use maps of other countries, such as TomTom in the Netherlands and Baidu map in China. The transportation software supplier is RouteMatch, and the sensor supplier is Velodyne.

Figure 4: Uber’s ecosystem diagram created by the author, November 2020

 

A transformative disruptive innovation in the Internet environment

Disruptive innovation is the introduction of new technologies, products or services to promote change and gain advantages in market competition. Christensen (2017) believes that disruptive innovation refers to a process, that is, through a simple application of a product or service, and then bottom-up penetration, and finally, replace the existing competitors, most importantly, the product or service needs to be rooted in the underlying market. There has been controversy over whether Uber is disruptive innovation. Christensen believes that Uber is only a continuous innovation, but not a disruptive innovation. First, disruptive innovation needs to start in the low-end market. Second, it needs to create unprecedented new markets and transform non-customers into customers. Uber is not satisfied with both. But this view is also opposed by some people. First of all, UberX shifted from the low-end market to the upstream and disrupted the taxi market. Second, Uber has created a new source of supply, which is a manifestation of the development of new markets in the transportation field (Moazed, 2016).

As a product of the mobile Internet and social media era, Uber’s success is inseparable from the use of Internet technology. It has a strong technical team that uses big data analysis in the background to calculate user positioning information, predict demand dynamics, traffic dynamics, and price dynamics. Before Uber, users had to connect with taxi drivers, taxis connect with the government, get a license and then connect with users (Berger, 2018). This process is very complicated. Uber has changed this connection through the Internet. Uber’s revolutionary innovation lies in its Internet-based information dissemination method, which has established a platform for real reconfiguration of resources.

 

Figure 5: “Uber uses the Internet to connect directly with drivers and riders”. Image: How Uber Makes Money Now. All Rights Received.

But as an emerging Internet model, Uber also has some problems. Among them, regulations and legal issues have always been a threshold for Uber’s global expansion. Because Uber uses a new type of business model, it lacks legal regulations. And Uber cannot be summarized in the taxi industry because it does not comply with the current industry regulatory system. Therefore, Uber has a regulatory grey area in its operation. Compared with traditional taxi companies, it is a company outside the regulatory system. This has caused Uber to fight fiercely between countries and governments and regulators. For example, In Hungary, Uber was designated as an illegal platform by regulators and was expelled in 2016 (Dudley, 2017). Uber is encountering policy resistance all over the world, and the wave of opposition has continued. Today, Uber is still operating without the qualification for taxi operation and rental car operation, which is a serious political dilemma for the government.

Taxi Cabs vs Uber

Figure 6:“Taxi Cabs vs Uber” by aaronparecki is licensed under CC BY 2.0

For society, Uber is not only a ride-hailing software. Although Uber’s first demand is to make passengers get a car faster, Uber has also redefined the ride-hailing experience. It contains many other functions, logistics, medical care, and social networking are all further extensions of the Uber experience. One of the most popular is Uber Eats, which improves people’s life experience by providing meal delivery services to customers. And improving life experience is also one of the meanings of the Internet. The essence of the Internet is to reduce transaction costs and make it easier for both parties in the transaction to access, thereby generating value for society. Through the establishment of a network technology platform, Uber transforms the massive private car resources in the society into the market’s car supply to meet the same massive various needs of people. In addition, Uber provides opportunities for the unemployed, as well as options for those who wish to earn additional income. Anyone can become an Uber driver as long as they pass the screening and meet all the requirements for providing transportation services to the public. However, such low requirements will also bring some disadvantages to society. “Insecurity” is the weapon used by the global market and people to accuse Uber. For example, in some cities in Paris and India, there have been cases of rape of female passengers by Uber drivers (Amar, 2015).

 

Conclusion

As a startup company under the Internet environment, Uber is a convenient, fast and low-cost way to go out. It is a new business model that creates great value for both producers and consumers. It is also a revolutionary innovation that integrates various resources through network technology and brings changes to the economy, society and people’s life.

 

 

 

 

 

 

Reference List

Amar, T. (2015). Uber driver arrested on sexual assault charges in Paris. Theverge.

Retrieved from https://www.theverge.com/2015/3/25/8287519/uber-driver-arrested-sexual-assault-paris

 

Berger, T. (2018). Drivers of disruption? Estimating the Uber effect. European

Economic Review, 110, 197–210.

 

Brian, O. (2019). History of Uber: Timeline and Facts. TheStreet. Retrieved from

https://www.thestreet.com/technology/history-of-uber-15028611

 

Christensen, C. (2017). What is disruptive innovation? Accountancy SA, 24–26.

 

Dudley, G. (2017). The Rise of Uber and Regulating the Disruptive Innovator. Political

Quarterly, 88(3), 492–499.

 

Evans, D. (2003). The antitrust economics of multi-sided platform markets. Yale

Journal on Regulation, 20(2), 325–382.

 

John, N. A. (2018). Sharing Economies. In The age of sharing (pp. 69–97). Polity.

 

Hitesh, B. (2020). Top 7 Uber Competitors. Marketing91. Retrieved from

https://www.marketing91.com/uber-competitors/

 

Moazed, A. (2016). Why Clayton Christensen Is Wrong About Uber And Disruptive

Innovation. TechCrunch.

 

Mcfedries, P. (2003). The internet ecology. IEEE Spectrum, 40(4), 68–68

 

Schneider, H. (2017). What is Uber’s business model? In Creative Destruction and the

Sharing Economy: Uber as Disruptive Innovation (pp. 36–62).

 

Zott, C. (2011). The Business Model: Recent Developments and Future Research.

Journal of Management, 37(4), 1019–1042.

 

 

 

Sijia Li
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USYD student, Digital Culture Major