Uber is a global leader in the o2o application of ride-hailing and a representative company that is leading the global sharing economy. It provides passengers with diversified travel options and online car-hailing drivers with a faster and simpler mode of order-taking (Hall et al, 2018). This article will provide a critical analysis of how Uber has had a transformative impact on the taxi industry, by examining how it has changed the habits of people using transportation, as well as the status of employees in this industry and their manner of working. First, Uber’s history will be briefly introduced, followed by its business model and ecology. Then, Uber’s impact on modern economy and society will be analysed. Overall, Uber will be shown to have shifted and altered the economy in a significant way.
What is Uber
Uber Technologies, Inc., is a network transportation company that is headquartered in San Francisco. When passengers enter their destination on the Uber app, its system automatically locates the address and finds nearby drivers who are available to pick them up (Uber, 2020). The company has claimed that Uber is not a service with advanced technology, but rather that it primarily undertakes the services of middlemen in the market by connecting consumers (passengers) in need with drivers who want to make a profit. Its success has mainly derived from the fact that it is a very convenient and simple application to use (Schneider, 2017).
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In March 2009, Travis Kalanick and Garrett Camp co-founded Uber and have since remained the main owners of its shares. Uber’s service was officially launched in the San Francisco area in June 2010 and it supported both Apple and Android systems (BIOGRAPHICS, 2018). At first, it was named Ubercab, and while it was in its trial phase, there were only two cooperative cars and more than 100 users on its platform. By now, Uber has gained more than 1 million drivers and its business has expanded to 311 cities in fifty-eight countries worldwide. In 2014, the company launched a lunch delivery service in Los Angeles that was carried out by drivers registered on its platform. Later, it cooperated with an increasing number of restaurants, which led it to launch an independent application called UberEATS in January 2016 (BIOGRAPHICS, 2018). Following the latter, its business hours were extended to twenty-four hours. At present, Uber’s success has afforded it the status of being the second company after Facebook to have a valuation of more than $50 billion without going public (Pepic, 2018).
Uber’s Business Model
A business model refers to the profit method that is used by an enterprise (Mikhalkina & Cabantou, 2015). Uber is one of the key participating companies in the “sharing economy”, which refers to the establishment of a series of transaction modes guaranteed by the platform through the digital platform between strangers (Calo & Rosenblat, 2017, p. 1625). Thus, Uber has created an innovative business model that uses the platform it has established to connect independent drivers with consumers (Ansari et al., 2015).
Uber’s application page is elegant and effortless to navigate. Upon opening it, users can easily determine their current location and through only a few more steps, they can complete the car-hailing service (Uber, 2020). Registering as a driver on Uber is completely free, and the corresponding commission fee will only be charged after the order is completed. Uber’s evaluation system is one of the reasons why it can implement this business model (Schneider, 2017). It allows both the driver and the passenger to evaluate each other once the service is completed, the process of which screens out the quality of platform users in a fair way. As such, if passengers and drivers accumulate low ratings, their right to use the platform will be suspended. In addition, Uber also possesses a one-button alarm system which will send the driver’s information and the real-time location of the passenger to the police when activated. This enables vulnerable groups such as women to use this application safely (Schneider, 2017).
According to Looi’s research (2001), companies rely on the existence of other companies like living creatures, and directly or indirectly affect the existence of other organisations. This phenomenon is called the corporate ecosystem. In the Internet era, companies mainly rely on the interaction and competition between information and technology. As a company with online car-hailing as its main service. Uber has also been profoundly affected by the Internet era.
Currently, companies such as Lyft, Ola, and Grab are Uber’s main competitors, as they are Internet ride-hailing platforms that provide similar services. The difference is that Lyft accepts cars purchased after 2001 as service vehicles, while Uber is more stringent and requires vehicles purchased after 2005 to cooperate on its platform. Uber’s market share in developed countries is also much higher than that of Lyft, while Grab mainly serves Southeast Asia (Kumari & Sharma, 2019).
Uber’s users are mainly people who require getting somewhere quickly, and especially white-collar workers with a certain financial ease. Anyone who has a qualified vehicle and driving history can become a supplier of Uber, meaning a cooperative driver (Hall et al, 2018).
Uber is owned by Dara Khosrowshahi, the CEO of the company, and Garrett Camp, one of its founders. They are currently the main leaders of the company, but Travis Kalanick, another founder of Uber, also holds a large stake in the company (BIOGRAPHICS, 2018).
Uber has cooperated with Toyota to develop self-driving cars, as well as the Partnership for Transportation Innovation and Opportunity (PTIO), which has allowed its user group to benefit from innovation (Uber, 2020).
Due to the different laws and government regulations of various countries, Uber has proposed a self-regulation model to adapt to different situations (Witt et al, 2015).
Uber — Disruptive Innovation
Creative destruction is a concept that was put forward by economist Joseph Schumpeter. The essence of the kind of change that it refers to is mainly achieved through product innovation, rather than pure price competition. More precisely, it refers to how older products are replaced when excellent new ones enter the market. As a result of this change, old products and old business models are almost completely withdrawn from the market (Schneider, 2017). In Uber’s case, this process is reflected by how it completely destroyed the original market for taxis. Compared with taxi companies that need to buy vehicles and hire employees, Uber, as an intermediary company, greatly saves costs in this area. Therefore, its price advantage is unmatched by taxis. In addition, it is faster and more convenient to use than taxis, and also tends to be more environment friendly (Schneider, 2017). According to Schneider, owing to the popularity of the Internet and smartphones, the creative destruction that has been caused by Uber has almost destroyed the entire regulated taxi industry.
In 1995, Clayton Christensen proposed the concept of disruptive innovation (Schneider, 2017), which refers to when a product or service that is based on a simple business model enters a new and undeveloped market and proceeds to weaken and
eventually replace mature competitors. The invention of Uber has changed people’s riding habits by providing a new business model for doing so via the Internet. Therefore, Smith (2018) has referred to Uber as exemplifying disruptive innovation. By providing a brand-new business model that is based on the Internet car-hailing market that was previously undeveloped, Uber has succeeded at largely replacing the existing taxi market. Moreover, Uber’s approach is innovative and possesses a unique competitive advantage over taxis because it allows users to request a vehicle at a specific time and location, which is quickly granted, rather than having them blindly waiting on the roadside for a taxi to eventually appear. This convenient, reliable and quick service makes Uber a stable foothold in the market (Smith, 2018).
Furthermore, Cramer and Krueger (2016) separately studied the utilisation rates of Uber and taxis in major cities such as San Francisco and found that when using the mileage share of passengers to define the utilisation rate, the latter in terms of Uber was 1.5 times that of taxis, while Uber’s total revenue is also much higher than that of taxis. This provides strong proof that Uber has subverted the original taxi market.
Consequently, it may be said that Uber’s transformation of the Internet economy, society, and culture, is mainly due to its creation of a new business model based on the sharing economy, which has created a precedent for Internet ride-hailing. While making full use of social idle resources, it has also had a disruptive impact on the traditional taxi industry.
Uber — Gig Economy Era
Uber provides a new type of employment model – the gig economy, which consists of an economic field composed of freelancers. Most part-time workers receive a small amount of business in their spare time and often use the Internet to quickly match supply and demand (Zwick, 2018). According to the study of Cramer and Krueger (2016), Uber is precisely such an economic model. Drivers do not have to come to work according to the legal working hours, and they can get paid by going out to take orders in their spare time. Uber also tends to provide shorter working hours than regular taxi drivers do, and can provide better service and work efficiency. This is also one of the reasons why Uber has greater total revenue than taxis, which is an advantage that emerges from the gig economy (Cramer & Krueger, 2016).
However, this economic model has also brought about certain legal disputes. With the development of the Internet, uber drivers have increasingly switched from being part-time to full-time drivers. Yet, existing large gig economy companies such as Uber only classify workers as independent contractors, and they refuse to provide employees with minimum wage guarantees and social welfare insurance (Zwick, 2018). This has led to considerable disputes. An article in The Guardian reported (2016) that an Uber driver went to the Supreme Court of the United Kingdom in order to sue the company and fight for workers’ rights. The driver claimed that Uber drivers should be treated like ordinary workers, with minimum wage guarantee and holidays.
The disadvantages of the absence of a minimum wage guarantee are obvious, which makes Uber drivers prone to economic crisis when unexpected disasters arise. Dubal and Whittaker (2020) have reported on the occurrence of such an incident during the COVID-19 pandemic, the context of which has been too dangerous for drivers to go out and take orders. This has been highly problematic because if they do not work, they will not earn any income at all. Such cases exemplify the major drawback of the gig economy and have led some, such as Whittaker (2020), to argue that the gig economy is a way for companies such as Uber to exploit workers by transferring risks, which should be “illegal” and banned.
Thus, Uber has transformed the socio-economic model of the gig economy that is based on freelancers, by using the advantages of the Internet to rapidly drive its economic development. But this has also led to the emergence of new social problems owing to legal disputes over employment relationships and employee protection, for which there are currently no clear regulations.
In summary, Uber is a highly influential Internet service, the sharing economy of which has created a new business model and platform for online car-hailing. Not only has it driven the subversive transformation of the taxi market, but it has also led to a boom within the gig economy that relies upon the Internet as its main channel. This has had a transformative impact on society, culture, and economy alike. However, Uber’s imperfect regulation system and employment relationship are still causing legal and political disputes to arise, the problems of which still need to be justly considered and resolved.
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