Uber: Disruptive Innovation in Taxi Industry

“uber” by stockcatalog is licensed under CC BY 2.0

Under the technology highly developed contemporary society, people relied on the internet in daily uses which facilitating the growth of online platforms. Uber, the largest global ride-sharing company, found in 2009. The innovative changes in transportation bring shaken the taxi industry and lead the company to become one of the most successful businesses in the ‘sharing economy’(Ayata, Z. 2021). Due on account of the development of information internet and communication technology boosting the availability of locational data and smartphone applications, huge opportunities have been provided to this new online transmission service (Nathan, R. 2019). In this article, the brand organization and concept are discussed and the focus of analysis is on the industry environment and the platform business model. Furthermore, the challenges and concerns of the brand is also been demonstrated.

The found and rise of Uber in Sharing Economy

The idea of Uber originally comes up on a winter night by Travis Kalanick and Garrett Camp when they can’t catch the cab after a conference. The idea was started with a question that “What if you could request a ride from your phone?” (Nathan, R. 2019). Uber, then launched in 2009 as a ride-sharing application brings connection on the network directly from passengers to drivers (Somang, M., Kevin, K., Fung,S., Miyoung, J,. 2019). Which become a successful appearance of sharing economy. With the network effects, sharing economy is becoming the trending business concept in contemporary society. It is an idea of using digital platforms sharing and exchange services or goods. (Ayata, Z. 2021). With the development of smartphones populated in people’s daily life, Uber which obtain the characteristic of sharing services becomes the most successful representatives of consumption adopted by the tourism industry. (Somang, M., Kevin, K., Fung,S., Miyoung, J,. 2019). A huge amount of opportunities are open for Uber due to the character of network: capacity, in which the platform is able to reach a large mass of users on the network that could become potential customers for Uber. (Ayata, Z. 2021)

Business model: How Uber makes money?

The new model of transportation in the taxi industry that Uber provides differentiating from the way of traditional taxi use that to calling for pick up or hailing from the street. Instead, Uber innovated the service to match the drivers and travelers directly through the app (Nathan, R. 2019).With the advanced technology supported, the algorithms based on time and distance calculated the efficient route and price which not only saves passengers time but also improves the drivers’ efficiency of work (David, P. B. 2018). Uber as the service provided agency platform charges 25 percent of the trip payment “ for the use of its software, collection and transfer of fees”(Nathan, R. 2019). This new model that Uber offered in the taxi industry also provides more opportunity and flexibility to the drivers. Capacity, as the most essential market resource of Uber, is carrying passengers by its network which “depends on voluntary participation by those who choose to drive with it, and capacity is directly increasing in driver compensation.” (David, P. B. 2018 ). In addition, a new dynamic system of pricing is used in Uber, which is different than another pricing system in that it respond quickly to higher prices during peak periods(David, P. B. 2018).

Moreover, there are four basic phases of Uber’s business strategy that bring it success and domain the market. Firstly, being the innovator that entering the industry without a presented competitor. Uber entered the industry with disruptive changes rapidly winning the market and leading the industry. After entering the market, the second phase of Uber’s strategy is enhancing the brand position in the market when facing the competitors with its advantage of high capacity of passengers on the network. Thirdly, Uber also launched other services which extending the business and scaling up the brand. As the example of Uber Eats, is a delivery application that provides food delivery service for users. Last but not least the fourth phase is the transition from using traditional vehicles to autonomous vehicles. (David, P. B. 2018). Although Uber shows a successful brand appeal in the industry, there are still many challenges and concerns it is facing.

“Happy Uber Driver: Robert, Zagreb, Croatia” by Premshree Pillai is licensed under CC BY-NC-SA 2.0

Uber: Challenges and Concerns

Several challenges and concerns are faced by Uber that not only having more and more grew up competitors but also confronting legal problems.

A number of competitors that have grown up rapidly in the ride-sharing industry show threats to Uber’s position in the market. Lyft, as one of the biggest competitor to Uber, which opt to reduce the anonymity between travelers and drivers and aim to help students carpool. Its been found in 2012 and get expanded while Uber was facing allegations, that the users believe Lyft is safer to use. Due to both companies stated the drivers as individual contractors, they don’t get workers’ compensation or insurance. Therefore, in the driver’s perspective, Lyft is better than Uber in that they only charge 20 percent of the commission in each trip which is 5 percent lower than Uber charges(Vanessa, P. 2021). Also, Lyft has its own tip system to reward full-time drivers in order to solve their insecurity of not getting minimum wages. Another competitor Juno comes out in the market opts to especially target Uber drivers offering them higher payments and equity in the company (Leslie, H. 2016). Juno’s founder Talmon Marco stated that “What Uber left out in the process of building their company is that they completely and totally forgot about the people who do the work, the drivers” (Leslie, H. 2016). Most of the most online ride-sharing companies often put their efforts to attract consumers with low prices and promotions. However, an ongoing battle of providing drivers better deals for attracting the best drivers is taking place.

The legal problem faced by Uber due to its disruptive innovation effect on the legal framework in traditional. Uber, officially stated that they are a technology company that they don’t have the employer-employee relationship between the drivers. As a result that they don’t have to be restricted by the employment laws and take related obligations and responsibilities. (Vanessa, P. 2021) This becomes a serious problem to those people who work full time as Uber drives since the company will not provide protection by labor law and they need to take responsibility for the damages that may occur during driving. (Ayata, Z. 2021). Uber had faced the class-action lawsuits initiated by drivers in both Massachusetts and California in the United States aim to change this situation. (Vanessa, P. 2021)

Conclusions and discussion

The innovation of ride-sharing service of Uber as the role of success representative of the platform and sharing economy shaken the transitional taxi market at the beginning of its foundation and leading the industry now in the domain position. Uber provides the services as a peer-to-peer platform directly from travelers to drivers, and it charges a commission rate from each fare as their business income. Even it is now one of the most successful worldwide company, many challenges, and concerns that are still facing by the company. One of the biggest challenges is the controversy of the relationship between drivers and the company. Uber started as a non-employer-employee relationship means they don’t take related obligations and responsibilities for drivers which leads them to collective lawsuits by drivers. However, this problem is not only faced by Uber but also other ride-sharing companies.




Reference list

Nathan, R. (2019). How Does Uber Make Money?


Somang, M., Kevin, K., Fung,S., Miyoung, J,. (2019). Consumer adoption of the Uber mobile application: Insights from diffusion of innovation theory and technology acceptance model. Travel & Tourism Marketing, 36(7), 770-783.

https://doi.org 10.1080/10548408.2018.1507866

Ayata, Z. (2021). A Conceptual Overview of Legal Challenges Posed by Uber. Global Perspectives on Legal Challenges Posed by Ridesharing Companies. 7-33.


Leslie, H. (2016). Uber competitor to offer drivers shares.


David, P. B.(2018). Disruptive Entrepreneurship and Dual Purpose Strategies: The Case of Uber. Strategy Science. 3(2). 439-462.


Vanessa, P. (2021). 4 Challenges Uber Will Face in the Next Years