With the development of the Internet, the sharing economy has gradually appeared in people’s daily lives. Based on the fact that Uber is a ride-sharing platform, this article will focus on Uber’s business model and its relationship with internet ecology. Critically, we also analyse Uber’s exploitative behaviour based on its business model.
What is Uber?
Uber is not only an application that connects the rider and the contractor (driver), Uber Technologies Inc. is also an American multinational online transportation network company(Slavulj, Kanižaj & Đurđević, 2016). At the moment, Uber conducts its global business in more than 600 cities worldwide(Button, 2019). Why is Uber successful? Uber is seen as a cost-saving platform because it does not own vehicles and is operated by linking independent contractors to its customers(Button, 2019). The advent of Uber was an innovation. Additionally, Uber is a platform for the sharing economy, and as John mentioned, the sharing economy is a digital platform that expands public access to private goods (John, 2016). Uber brings closer ties with people, enabling the sharing of private resources and creating new business models with trade-offs in the regulatory regime.
How does Uber work?
- The first step is to download the Uber app.
- Secondly opens “Where to”.
- The third step is to select the model. (UberX, UberBLACK, UberSUV, etc.)
- Send the request at step 4 and the driver will come and pick you up right away! (Uber, 2020)
- In December 2008, Uber founders Travis Kalanick and Garrett Camp could not wait for a taxi at night in Paris (Uber, 2020). This led the two Uber founders to think that it would be much easier for people to get around if they invented a simple taxi-hailing program (Goswami, 2020).
- In 2009, Oscar Salazar and Conrad Whelan joined forces with the two founders to create UberCab (Goswami, 2020). Choose your mode of travel on your phone and Uber will take you to your destination!
- In 2010, UberCab was officially launched in San Francisco (Uber, 2020)! The initial cost of Uber was about 1.5 times expensive than that of a taxi, but the convenience of Uber was very popular (Hartmans & Leskin, 2019). The use of UberCab poses a threat to New York’s taxi industry, and relations with the industry are on a tight rope(Hartmans & Leskin, 2019).
Has UberCab been all smooth sailing? The answer is no.
- In 2011, UberCab changed its name to Uber due to complaints from taxi operators in San Francisco. This renaming of Uber influenced the orientation of the company, as Uber was no longer moving towards being a traditional taxi company(O’Brien, 2012).
So far, Uber has expanded its coverage into UberPool, UberEats(O’Connell, 2019), UberRush (Carson, 2017) and other fields. In the third quarter of 2020, 78 million people use Uber app per month (Statista, 2020)!
Uber’s business model and the sharing economy:
Noah Parsons proposed that the definition of a business model is what is needed to produce products, how to sell products and how customers pay for them (Parsons, 2020). Uber’s business model is a sharing economy. Sharing economy refers to the provision of idle private resources in society to those who need them (Nadler, 2014). Essentially, collaborative consumption achieves resource sharing through the short lease of idle items by the owner to the user (Tao, Yuqiao, Nawaz & Shafique, 2019). This kind of resource transfer makes people spend less money, enjoy a higher quality of life and accelerate production efficiency (Nadler, 2014). The sharing economy allows everyone to be both a producer and a consumer. However, the sharing economy relies on the Internet, which needs to reduce transaction costs and improve resource allocation efficiency (Nadler, 2014).
With the rise of mobile Internet, Uber has created an online platform based on the use of car-sharing to help people and society connect the supply and demand under the Internet (Nadler, 2014). Uber has captured the feature that the idle time of cars is more than 90% and encouraged private car drivers to download Uber APP to achieve the sharing economy of their cars (Dudley, Banister & Schwanen, 2017).
So how does Uber expand its market? First of all, Uber does not own vehicles, but it can provide 1 million rides through its partners (Singla, 2020). Uber claims that these drivers are contractors, with 80 percent of the interests of the total ticket price (Singla, 2020). Additionally, Uber safeguards the interests of the contractors and ensures their freedom and independence . These drivers will receive a subsidy of 80% of the fare once they complete the order (Schneider, 2017). Due to the independent Business behavior of Uber, the contractor becomes “his own boss” to earn fees (Schneider, 2017). Yet, the liberty enjoyed by employees is largely not protected by the labor and labor laws (Schneider, 2017)illegally. Although Uber is an online platform, it eliminates the involvement of middlemen (Button, 2020). Uber’s customers voluntarily join Uber, which, on the one hand, saves intermediary costs, and on the other hand, differs from the way of employees in the traditional automobile industry (Schneider, 2017). However, Uber does not stop here, but also expands the operating range known as boats, bicycles, helicopters, etc. (Singla, 2020). Secondly, Uber provides different services for different needs. For the Rider, Uber can choose UberBLACK, UberX, UberSUV and other ride services (Schneider, 2017). Riders present the requirements and the contractors satisfy demands through Uber’s management.
-Surge Pricing Technology：
Uber adopts variable price policy, which can be used to cope with excessive demands during peak hours (Dudley, Banister & Schwanen, 2017). The technology automatically increases the price per mile based on variable factors and is patented in the United States (Singla, 2020). So what instability does Uber base its price changes on? According to information on Uber’s website, Surge pricing would be increased according to the demands of the passengers (Uber, 2020). Price changes occur under the following circumstances as rush hours, bad weather, unusual traffic congestion and so on. When Surge pricing happens, Uber APP tells passengers about price changes through color changes (Uber, 2020). Uber’s Surge pricing encourages customers to share excess and idle capacity when scarcity increases (Schneider, 2017).
Is there only “downside” to this technology? No, Uber has a response. Uber has launched UberPool to ease traffic congestion. UberPool allows users to share trips and fees together (TBS Report, 2019). UberPool saves money for multiple customers by taking the same route. In doing so, Uber aims to relieve traffic congestion through Uberpool by putting more people into fewer cars, thus reducing the pressure of traffic congestion during rush hours (TBS Report, 2019). So UberPool creates the practice of “share”, which alleviates the problem of traffic congestion. Another benefit is that there are fewer cars on the road, which reduces carbon dioxide emissions and maintains eco-friendly environment.
Gathering information on the network is regarded as an information ecology, including the relationship between service providers, partners, suppliers and competitors (Looi, 2001).
Uber has operational expertise in more than 70 countries or regions around the world, making it ahead of its competitors in the market (Bhasin, 2019). Uber, with global influence, has revolutionized the way of providing services to consumers on the Internet (Schneider, 2017).
- Uber is committed to promoting apps that can easily provide consumers with comprehensive services, including UberX, UberXL, UberEats, etc. (Bhasin, 2019). Therefore, application usage promotes a faster, more convenient and more transparent information flow (Schneider, 2017). This type of demands can be met for various consumption stages.
- Uber’s main competitor is the taxi industry (Schneider, 2017). However, in San Francisco, Lyft and Sidecar have become strong competitors for Uber (Dudley, Banister & Schwanen, 2017). Similar operation patterns emerged in Southeast Asia, with Grab, Go-jek and Ola becoming the main competitors (Dudley, Banister & Schwanen, 2017). In China, Didi has become Uber’s biggest competitor (Dudley, Banister & Schwanen, 2017). Although Uber is used by most people in Australia, ride-hailing apps such as Ola and Didi have also taken over the ride-hailing industry. In Australia, 84 percent of Didi users also take Uber, which indicates that ride-sharing users are willing to choose multiple providers for travel (Masige, 2020).
This image further illustrates Uber’s ecology:
The transformative impact of Uber:
Uber’s transformative innovation is its business strategy, which promotes the effects of the sharing economy. Its business model aims to save costs. Since Uber does not own vehicles, it becomes a link between an independent contractor and its customers through Uber app (Button, 2019). Although this business model provides people with job opportunities, it brings people closer to the society. But is this so-called cost saving really good? Obviously not. Uber’s cost saving has destroyed the balance of the regulatory system, resulting in the taxi industry’s opposition to the regulatory authorities and the government against this business model (Schneider, 2017).
– Critical thinking:
Uber’s business model, which guarantees free time and independence for drivers, may be a hidden system of exploitation.
John mentioned that Uber is an unregulated exploitation system which is impossible to protect the social rights of employees (John, 2016). If Uber drivers were regular employees, Uber would no longer be defined as an Internet platform but as a taxi company. Firstly, Uber drivers do not need a license to enter the market, thus depreciating the value of the license (GlobalBusinessOutlook, 2020).
For the taxi industry, this is unfair competition. Europe’s highest court despoiled the qualification in London in 2016 to avoid unfair competition. Uber’s business model has shaped the concept of “independent business”. For legal purposes, Uber labels Driver as an independent contractors (Rosenblat, 2018). This means that Uber drivers are largely exempt from the labor and labor law protection that employees should enjoy (Rosenblat, 2018). For Uber, such contracts, ostensibly encourage employees to do their jobs as they please, instead, sidestep legal liability. Furthermore, Uber drivers do not conduct independent economic activities when using cars (Stanev, 2020). Uber’s business model establishes the connection between users and drivers through Uber’s transportation vehicles. This approach cannot be regarded as a Shared trip for drivers, because drivers are largely controlled by the platform (Stanev, 2020). Therefore, they should be regarded as an employment relationship because Uber’s business strategy deprives drivers of job security (social security). In 2017, a judge in New York suggested that Uber drivers should be treated as employees rather than independent contractors (Blystone, 2019). So doing will provide Uber employees with better job benefits and security and protect the taxi market from unfair competition.
Furthermore: AB5 and Uber:
If AB5 act gets passed, temporary contract workers would become regular employees which may have a huge impact on Uber on the strength of gig economy (Campbell, 2020). Uber is very hostile to the idea. After the implementation of AB5 Act, Uber employees would gain the maximum welfare as minimum salary, insurance, vacation, employee benefits (Campbell, 2020). This proposal is a great loss for Uber because the enterprise has to pay more capital to stabilize the contractor. These funds have increased Uber’s operating costs and ensured its employees’ access to social benefits.
Uber makes it possible for everyone to become a producer and consumer through its online platform. Uber fully enables idle vehicles to bring benefits through sharing. Although Uber does a good job of on-demand distribution, the commercial deception behind Uber’s concept of independent Business cannot be ignored. It is hoped that with the development of Uber, the world and Uber will reach an equal regulatory system and the reliability of the shared resources.
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