Does uber continuous business model upgrade help them to stay ahead of the local cab companies and the competition in the US cab industry?
Introduction
Uber Technologies Inc. was founded in 2008 by Travis Kalanick and Garrett Camp and is based in San Francisco, California. It currently operates in 195 cities within North America and 207 cities in Central and South America, Europe, Middle East, Africa, Southeast Asia, Australia and New Zealand. Uber is a downloadable on-demand app service created by Uber Technologies Inc that enable anyone to summon a car that is near him or her for a ride to his or her destination. Uber app uses GPS tracking that allows both drivers and passenger to identify their location in real time. The mode of payment is cashless and e-receipts are given rather than paper receipts. There are a few options for the type of services available to a customer but that depends on the city one is in. For instance, if one is in San Francisco, UberX, UberXL, UberSelect, UberSUV and UberTaxi are readily available while in Nairobi, Kenya where Uber was recently introduced, only UberX is currently available (Uber 2016). Since entering into the market, it has greatly impacted the local cab industry negatively primarily due to its convenience, comfort and affordability. In June 2014, about 100 local taxi drivers staged a noisy demonstration by honking their car horns all the way from San Francisco to Sacramento (Luery, 2014). Just last year November, nearly 300 local taxi drivers staged another similar rally which stranded San Jose’s airport travelers as the taxi drivers abandoned their job calling (Giwargis & Gomez, 2015). Not only these, there are numerous protests against Uber around the world (Macdiarmid, 2016). In addition, Uber has been banned in several cities around the world as shown in Figure 1(Khosla & Grant, 2016). Hence, it is critical to find out if the introduction of Uber’s ride-sharing mobile app is fair to the traditional market of cab industry and if its service quality gives it too much a huge competitive edge.
Figure 1: Uber's current service status in numerous regions around the world. Source: (Khosla & Grant, 2016).
The aims of this research will encompass to establish Uber’s unique selling point globally, how it’s staying ahead of competitors that have long been operating before Uber was established and remaining competitive within the industry despite the challenges it is currently facing and any relevant contemporary issues it may be facing. It is also imperative that this research discusses the local cab companies’ adaptability and dissenting concerns to ride-sharing that has created a lot of friction in the taxi business between Uber and other taxi companies. An additionally important aspect that will be explored in this research will be Uber’s corporate social responsibility and by comparing it with the corporate social responsibility of the other companies and identify the key points that makes Uber to excel over the existing taxi companies in that respect. The theory used to validate the findings being that the differences of framework of the models of doing business will provide insight into the reason why the company emerged and excelled above most of the established companies. This theory will also help in providing factual evidence in the findings as to why the Company is the most preferred form of transport.
In order to take down the vast quantity of data that will be used to validate the probability of the hypotheses, a pen and notebook will be used to note down observations and opinions of both the customers and the critics. A laptop will be preferred for use over a desktop computer to enhance mobility and save on time. Statistical software will also be required to input, compute and analyze data collected from the research sources.
For the purposes of determining the area of research, stakeholder mapping will be. Once the area of research has been established, a method of collecting data will be used: secondary data. Uber Company is less than five years old and excelling. However, this is judged based on the hype of users using its transport facilities and Android App in their phones. In the same light, they have yet to publish their annual financial report: as an American Company, they have the option of not releasing their financial statement for their company is less than 5 years. Secondary research will also be the preferred data collection method given the amount of time available to conduct the research and the resources available to facilitate the research process. However, past and projected statistics of Uber’s global bookings in their 2015 fundraising presentation to investors will be provided instead due to their newly established presence in the industry. Statistical data available from authors - Rayle, L., Shaheen, S., Chan, N., Dai, D., Cervero, R. - may include ride-sourcing waiting time as compared to local cab waiting time and the reasons why consumers choose ride-sharing over local cab. Since Uber is considered as fairly new company in the industry therefore the research might have limitations on the reach for journal articles. Hence, it will comprise of other resources from periodicals, newspaper articles, government documents or some comments from critics, Uber’s user and local cab drivers.
Literature Review
Rayle et al. (2014) state that there are different terms which are used to refer to ride- sourcing. The major differences between ride sharing and ride sourcing come about with the driver's purpose of earning income and aiming at slashing down the travel expenses, possible pollutions, fuel consumption, wait time and traffic. In this case, it is known as ride sharing, a term which the cab industry uses to mean the act of connecting passengers traveling towards the same direction to cut down costs.
As emphasized by Durante et al. and Gavero et al., instead of excessively priced license mandatory to each driver, complicated sets of transport regulation and a wide array of travel checks necessary for a successful registration of their driving career, Uber drivers only require a smartphone and a driving license to practice (Arnold, Eduardo & Bob, 2016). This has enabled the cab industry to maintain its competitive advantage since its simple procedures result to disruption in a market whose penetration was once considered complex. Therefore, there have occurred controversial responses regarding the idea of ride sharing since its popularity. While others feel that the company is fair since it takes as regards the need to create employment, others only feel that the loosened regulations by the company demonstrate unfairness to other drivers seeking employment from other taxi companies.
However, Anderson D. N. argues that the Uber taxi has brought forth increased traffic and congestion since the numbers of operation licenses offered to Uber are not strictly regulated (Anderson, 2014). In response to this concern, Sarah et al and Lawrence et al., provide insights into how the Uber taxi win over the regulators (Cannon & Summers, 2016). These taxis recognize that cooperation with the relevant regulation bodies ease their operations and therefore, they stay at the top of the regulators lists by being offensive instead of being defensive, sharing their business data with the regulators and coming up with appropriate measures to reach the government. These steps further enable the company reduce travel costs, wait time and congestion.
Ricardo Valerdi also comments on the improved customer service delivery by the Uber taxi. Due to its flexibility, the Uber drivers have therefore demonstrated an interest in their occupation (Valerdi, 2016). Ricardo notes the applications requirement to rate both the client and drivers regarding performance and cooperation. An aspect enabling the company maintains its game.
Nevertheless, when it makes reference to the association demonstrated between the Uber-Company and the drivers, Logan et al. stress that this compromises the drivers' welfare since they are only hired as independent contractors.
According to a report compiled by the Huffpost business, Uber launched its business in Tokyo in 2013. The corporation has encountered astonishing difficulties regarding the making of inroads in Japan. This has partly been attributed to the over flooding of the city with over 50,000 taxis, which is way above the number in New York. Intensifying competition from local Taxi operators has not proved useful. Recently, the largest taxi Corporation in Japan, Nihon Kotsu, launched a business alliance with Line, a free messaging Corporation, to expand the already existing app, as a way of fighting back the Uber Taxi. (Che, 2015).
In January 2014, a mobile app service was introduced by (THTA) the Tokyo Hire-Taxi Association. This smartphone application enabled potential clients to efficiently connect with approximately 6500 taxis within the central Tokyo regions. Later on in March, Rakuten purchased a share in Lyft, valued at around 11.9% in the same month, Uber was ordered to postpone a major scheme for its ride-sharing venture within Fukuoka. The order was issued by the transport ministry in Japan, as a result of violating the laws regulating unlicensed service delivery by Taxis.
The Taxi Company, which managed to raise 1.2 billion dollars in June during a 17 billion dollars pre-money valuation, is also carrying out assessments regarding other delivery services, such as, the New York, messenger services. Other extra delivery services being evaluated include UberPool, in San Francisco and ride-sharing options. Moreover, the company launched the Uber Corner Store, which is based in Washington D.C. in Santa Monica; the corporation is still testing the UberFresh delivery strategy. Uber has attracted several stockholders through the help of the Google Ventures. The Uber investors comprise of Google and Goldman Sachs.
Body
Rayle et al., shows that there are various names that can be used to denote ‘ride-sourcing’. The difference between ride-sourcing and ride-sharing goes to explain the ability of the cab driver to gain an economic advantage due to the involvement of driving the cab while passengers and the driver aim to cut down the cost of travel, traffic congestion, reduction in fuel consumption and pollution of the environment. The sharing concept seems to be embraced and the concept has become more relevant due to the ability of the humans to remain social. The social nature of humans therefore becomes important in ensuring that curb sharing becomes a major part of life. The sharing of cabs is a new concept and therefore there are chances that it will be more embraced as time comes.
Up to now the high cost of buying a license which is pushed on every driver, going through a number of credit card checks and having to follow a number of stringent industrial regulations that require cab drivers to be registered has an end, there is an alternative to this and a driver just requires a driver license and smartphone to start using Uber in order to get access to the customer. There is only the entry barrier that has been characterised by a number of bans on the service and the stringent measures that hinder entry into the service (Gevero, Alves and Durante, 2016). Since the inception of the concept, there has been a lot of controversy in which taxi drivers oppose the move and the existence of Ubers services. The drivers insist that the service is out of question and it tends to disposes them of work. There is unwavering concepts where globalization is enhanced and people feel that the use of the service is important to enhance transportation.
Rayle et al., still bring out the best side of Uber services where it is guaranteed that ride-sharing enhances mobility in congested cities, it is convenient in that it can pick the customer at any strategic place and that the service is cost effective. Anderson, D. N. (2014) proposes that there is increased congestion and pollution in the cities due to this services. There are no regulations to check on the number of licenses offered to Uber. It means that members can be on unlimited scale which tends to pollute the business concept itself. . Gevero, A., Alves, E. and Durante, B. (2016) support the concept of congestion and lack of regulation but insists that it gives the much needed services by increasing ‘human interaction’ with the ability of Uber have a rating system between drivers and passengers. The other advantage given by the service is the ability of the company to receive and remit payments in a cashless manner. It means that there is less hassle in the use of money and the need to have cash at hand.
On the relationship of the driver and the passenger, there is need to have a more direct way of dealing. The operation tends to put the driver and the passenger in direct dealing which might be dangerous for the welfare of the driver. The driver and the passenger have to operate as independent entities and there is high chances that some parties may suffer in the deal.
The discovery of uber cab services has been a material invention in the current world of transportation. It is the best method to ensure that travelling is flexible in any place of the world. The company involves the use of technology in the practice and by the use of mobile Apps and the internet, it is easy to get a cab at a convenient place and the bonus comes with sharing the cost of the cab with other people. It means that a group of individuals can decide to hike a cab and pay the same amount less the actual fair due to the sharing. This method of travelling has a number of advantages that include flexibility, reduction of congestion and even pollution in the major cities.
The cost of travelling for individuals has to go down. This is to say that when sharing the cab, the individuals get to pay a less amount for the same services that they would have paid more if the trip was taken alone. Cost saving is made and it is important to the individuals. It also raises the activities in the cab services and providence. It means that more business is enhanced as more people will want to have the experience of sharing taxis. The improvement of activities in the field makes it viable for the taxi business and therefore important to the investment.
The congestion is reduced in cities where the number of vehicles heading into a place will be reduced. It means that there is reduction in the number of vehicles travelling to a certain place. The reduction is because many people that are willing to travel to the place get to share one vehicle and hence reduce the number of vehicles on the same road. There are instances when the reduction of vehicles help to reduce congestion and time wasting. There is reduced time of travel which is enabled by the ability of less vehicles on the road and therefore there is more space for travel than that brought by a number of vehicles carrying a single passenger.
The ability to have four passengers in one vehicle means that the number of vehicles travelling on the same road is reduced. The problem with taxi sharing means that only a selected number of taxis will get to work while the traditional ones will have a hard time to adapt to the changes. Pollution is another aspect that is reduced when the uber concept is used. This is because the number of vehicles in a place is reduced due to sharing of the transportation. It shows that there will be reduced number of vehicles on the roads which will cut down on fuel consumption and hence reduce pollution. The pollution is reduced by the reduction of the vehicles on the road and hence cutting down on heat and smoke emission.
Global Bookings
The invention of Uber cab Services has enhanced the booking services to a global margin. Booking can be done at any place on the globe and benefits reaped at another. It means that a parent can involve the cab services especially when booking for a family member like a child. This is to say that flexibility in booking has been given a priority in that one can book a cab at any time and even schedule it for the next time that he or she is available at the particular station. This tends to enhance service flexibility to the margin of giving the customers flexible schedules. The following figure shows the firm’s growth.
Figure 2: Uber's growth and projections. Source:
Stakeholder mapping
Like any non-trivial business, Uber has a number of stakeholders, both internal and external. Internal stakeholders are: employees, directors, managers and connected stakeholders. Connected stakeholders include customers, distributors and shareholders. External/stakeholders are stakeholders not directly connected to the company are governments, local community and media houses.
Figure 2: Uber Stakeholder Mapping.
It is important to note some of these categories belong to more than one category. For example a customer who is an internal stakeholder is also part of the external stakeholders since they are also part of the local community and they may also have more than one role as an internal stakeholder if they are a customer and a shareholder.
UPS
Uber’s unique selling proposition (USP) is based on elements such as pricing, Expected Time of Arrival (ETA) and safety. The company understands that service always overrides pricing and they emphasize on offering superior customer service to that offered by competition. They also have a lower ETA as compared to their competition; currently the companies ETA is five minutes and the cab company is looking to make it less than two minutes in the future. The safety of their customers is also a top priority for the cab service provider.
Uber expanded into Tokyo in the year 2013 and the major challenge is competition from the numerous taxis from local taxi drivers. In the same year a competitor made a partnership with a local mobile company adding a messaging line to their mobile app. Tokyo Hire-Taxi Association also introduced a mobile application which allowed people to get taxis anywhere in the city, early 2014 in January. Later in March the same year the Japanese government put on hold a ride sharing idea by the company on claims that it enabled unlicensed drivers to operate. The company has beaten all these odds by devising other methods to deliver its services to its customers. Some of the delivery services are. UberPool, Uber Comer Store and Uber rush in its various locations.
Conclusion
As with any free market, the forces of demand and supply ought to be left to operate freely. However, as seen in this research, it is evident that Uber has caused major disruptions in major parts of the world where protests have been witnessed. The protesters are mostly other local taxi operators who cite a massive loss of business. This research can be taken forward by examining just how Uber and other similar services such as Lyft have upset varied markets and the kind of losses these drivers are experiencing. It would be equally imperative to examine the actual percentages of Uber rides in various cities compared to other local taxis and how these percentages in market share are shifting over time.
Lastly, it is worth to note that the firm’s continuous upgrade to its business model has immensely helped them grab the lion’s market share in areas where it has been introduced. This has enabled the firm to segment the market extremely well while at the same time offering affordability, comfort and convenience in the ride-hailing segment that had never been witnessed before.
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