Then, real-time-on-demand dynamic ride sharing has taken place in the market and now it shows themselves as mobile applications, since late 2000s. One of the most known transportation network company Uber has been established in 2009 in San Francisco, California and spread the world in 7 years. Beside the big success of Uber, they have had to face many lawsuits and protests against them. But still, Uber’s continues to increase its market share as a market leader.
Uber is challenging with some political issues due to state policies in the US. Since the sharing economy is a new trend on recent years and the lack of regulatory law about this subject lead to many problems for each side. Even during the Presidential Debates in the US, Democratic presidential candidate Hillary Clinton shared her approach the ride-hailing app and the “on- demand economy,” also referred to as the “sharing economy.” in her economic policy speech. Clinton referred his concerns about Uber, which is focusing instead on the implications for the labor market and the risks faced by drivers who aren’t shielded by benefits and job security (Che, 2015).
“This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future. (Clinton, 2015)” she said.
Also in other countries, Uber has found itself running up against investigation. While it is banned in Spain and in Delhi, India while German city of Berlin, France, Netherland, Thailand courts attempted to ban Uber.
With the sharing economy takes significant place as a hybrid market, it created new independent workers who works on-demand economy or as also referred as gig economy. Nevertheless, while some approaches refer that it is what future economic world will look like, others like Jacob
Morgan’s, who is author, speaker and contributor in Forbes Magazine, supporting opponent ideas as he said: “While we will indeed see the trend towards independent workers increase, this trend will by no means reach the exorbitantly large levels that some are reporting.” (Morgan, 2015).
Uber’s effect on the economy cannot ignored as we observed it as upraising toward the Uber by taxi drivers around the world. While it is received as a threat that will end the traditional taxicab business, it brings many conflict into current taxation system and even it triggered some regulatory for revising taxation system.
In Turkey, taxation obstacles are lying in front of sharing economy for growing and spreading.
Uber has faced criticism along at least six dimensions:
. It is unfairly competing with taxi drivers by entering their market without following regulations or fare schedules.
2. It aspires to become a monopoly
. Its cars or drivers are unsafe or underinsured
. It may invade customers’ privacy
. It enables discrimination by drivers and passengers
. It is undermining working standards for taxi drivers and compensating its own drivers poorly.
Behind all those unfavorable situations, Uber is the most used ride-sharing app in the United States and also in the world. The word “Ubering” took place in daily language and also as we observe in well known television shows that has high ratings like Modern Family, Saturday Night Live, South Park, etc. this word has been mentioned many times during the shows. Young American rap musician MadeinTYO released a song with name “Uber everywhere” and it peaked at number 61 at Billboard Hot 100 list, which made it very popular song.
Developing technology will be always favor in Uber Inc. In Silicon Valley, Uber is also leader on its classification with their work on During the initial development of the Uber app, the company created a think tank consisting of a nuclear physicist, a computational neuroscientist, and a machinery expert who worked on predicting demand for private hire car drivers and where demand is highest (Bacon, 2012) . Therefore, Uber is also a company that leads technological developments beside being a market leader.
Uber Company has been suffered many times due to legal issues. Most of time, It caused bacuse of drivers’ status on Uber since regulatory rules does not fit to sharing economy. And frequently, Uber was supposed to come face-to-face with the drivers. There have been lots of cases on this issue.
Recently, Uber accepted to settle down on a case about Uber driver status with concession. According to New York Times reporters Mike Isaac and Noam Scheiber, “ Uber will let it
continue to categorize drivers in those states as independent contractors — a landmark agreement that could have lasting implications for the long-term viability of the ride-hailing service.” (Isaac & Scheiber, 2016)
INTERNAL ANALYSIS SWOT ANALYSIS
* It is a well-known brand all around the world.
* It offers high standard of service with verified drivers and cars.
* Regular Taxi service regulations are not applicable for Uber.
* Lower prices compared to taxi cabs
* Uber does not hire drivers and it does not responsible them as employees.
* Operational cost is low.
* Competition is low. There is one rival is Lyft.
* Cashless payment system.
* Dual rating system boosts trust and safety.
* Offering better travel conditions.
* The business model can be easily imitated.
* There are ethical questions on relationship between Uber and drivers.
* Loyalty between drivers and Uber is quite low.
* Privacy concerns
* Legal issues
* Traditional taxi cab’s high prices and long waiting time.
* It can exploit new and big markets in countries like India where taxi services are inconvenient and expensive.
* Drivers aren’t happy with the low-profit margins.
* Legal regulations
* Uber is highly dependent on political and economic changes.
EXTERNAL ANALYSIS MARKET DYNAMICS
Finite oil supplies, rising gas prices, traffic congestion, and environmental concerns have recently increased the interest in services that allow people to use personal automobiles more wisely. The demand for ride-sharing services, which aim to bring together travelers with similar itineraries and time schedules, has increased sharply in recent years (J.Saranow, 2006) Ride- share providers across the globe are offering online notice boards for potential carpoolers, whether for daily commutes or for one-time trips to festivals, concerts, or sports events. Some online services, such as Nuride, provide incentives like restaurant coupons, gift certificates, or retail sales discounts to participants (Niels Agatz, 2009)
The annual cost of congestion in the US in terms of lost hours and wasted fuel was estimated to be $78 billion in 2007. Private automobile usage is also the dominant transportation mode producing carbon dioxide emissions. Vehicle emissions give rise to problems both on a local and global scale. Locally, the health effects of air pollution represent a serious problem in many of the most densely populated regions worldwide. Globally, carbon dioxide emissions are associated with climate change and global warming. (Niels Agatz, 2009)
Demand of the ridesharing is increased day by day. Just for Uber; as of April, 2016, the service is available in over 60 countries and 404 cities worldwide. By late-2015, Uber was estimated to be worth $62.5 billion. (wikipedia.org/wiki/Uber, 2015) Competitor of Uber, Lyft, In 2014, announced that it had grown ride numbers and revenue by five times (Nagie, 2015).
A 2010 survey at the University of California, Berkeley found 20% of respondents willing to use real-time ridesharing at least once a week; and real-time ridesharing was more popular among current drive-alone commuters (30%) than transit or non-motorized commuters.The top obstacles to using real-time ridesharing were short trip lengths and the added time of ride logistics (Elizabeth Deakin, 2012).
PORTER’S 5 FORCES ANALYSIS
Bargaining Power of Suppliers: Since Uber works with individuals, there are many suppliers with limited bargaining power. Low concentration of suppliers positively affects the company. Uber will have a long-term positive impact on the suppliers, which adds to its value. This
qualitative factor will lead to a decrease in costs. This statement will lead to an increase in profits for this entity.
Bargaining Power of Customers: the company have large numbers of customers, so any customer tends to have bargaining leverage. Limited bargaining leverage helps Uber to create powerful affect among the users. They also have low dependency of distributer as well. On the other hand, customers have limited choices they end up paying more for the choices that are available.
Limited buyer choices are a positive for Uber case.
Threat of Substitutes: When products and services are very different, customers are less likely to find comparable product or services that meet their needs. However Taxi, Public Transportation, Subways and other private companies are the ones that can be threat of the operations of Uber. Threat of New Entrance: Regulation is the most important issues for the industry to enter. On the other hand Brand Image and strong distribution network is must for the industry to survive. Since the sector is required economies of scale, we can say that entrance barrier is high. However Uber’s Business Model is easy to copy.
Rivalry Against The Competitors: Lyft is the main competitors of Uber in Us. Both allow you to hail cars from your phone. Prices for the basic service tend to be similar - they fluctuate frequently, but the companies generally try to match each other. As a points of differences Uber is larger and available in more places. Lyft's brand is more about community and friendliness so drivers interact with passengers more, Uber's brand is more about a professional service so drivers interact less. Uber has more upscale options like luxury cars, private town, cars and
SUVs. However in Turkey there are Bitaksi and blablacar which can excepted as a threat of substitutes.
SIZE, GROWTH AND PROFITABILITY
Uber is one of those few tech companies in the world that has been valued over $50 Billion. Uber has already received an equity funding of $8.2 Billion and is present in 60 countries. (wikipedia.org/wiki/Uber, 2015) These facts surely shows the trust of investors in Uber’s business model and make it easy for us to imagine how much revenue will Uber be making once it attains liquidity.
What has made Uber so successful is the fact that the revenue model of Uber is as unique as their business model. It can be explained as:
. Different cab models to cater to everyone:
Uber has not limited itself to a particular segment of cars or to a particular segment of people. There is Uber X, Uber Black for those who love to travel in a black car, Uber Taxi for those looking for cost-efficient solutions and Uber SUV for those who want luxury.
. Surge Pricing Technology:
Variation in cab fares according to situation is an important aspect of Uber’s business model. Whenever the demand increases, per mile prices are automatically increased. The new price
depends on the number of available drivers and the number of requests made by people who want to travel. Uber has applied for a price surge technology patent in the US.
. Other Uber rides:
Uber has come a long way from cabs. It now offers boats, helicopters as well as some other transportation means on demand. Uber recently launched a motor-cycle-pickup service in Paris, a delivery service in San Francisco, and an ice-cream-truck-delivery service in 7 other cities.
However, these means are available in selected geographical locations but it has led Uber to add new streams of revenue into its business model
In less than 6 years, Uber has managed to become the best example of a city-by-city mobile service company roll-out. Many generic pointers that I talked about in this Blog Post regarding scaling User Acquisition efforts for On Demand platforms borrows elements right from Uber’s playbook.
The underlying principle here is that for every city it launches, it faces the same chicken and egg problem. The advantages that Uber has as compared to new startups in this space are:
Lot of money to incentivize both drivers and customers.
Rock solid processes or playbooks that have evolved through experience launching Uber in 311 cities till date. Already known brand that gets early curious adopters.
Everything starts with a small city launch team. Every city has a general manager who heads the customer acquisition as well as driver acquisition. The first cabs to come on board are generally
professional drivers who are already associated with local taxi companies and have their own cars.
First customers come from various local advertising channels like FM radio, newspapers, online advertising etc. Uber is such a large name that people are already waiting for the cab company to start services in their city.
Main Growth opportunities tapped by Uber Party people who go to clubs, parties or events. Business Travellers and Tourists.
Cab at doorstep in bad weather conditions. City’s Nightlife.
CORPORATE AND BUSINESS LEVEL STRATEGIES VALUE-CREATING STRATEGY
As a value proposition for customers, Uber offers no need to wait for a taxi for long times. Additionally, free rides on certain occasions and discounts from time to time. Since the prices lesser than the normal taxi fares it is more attractive on customers mind. Uber’s tagline says – Your personal driver. It lets customers travel in style. And they determine fixed prices for common places like Airport etc.
As a value proposition for drivers, Uber has additional source of income and flexible working schedules. Drivers also can work part time or simply whenever they like.
Easy payment procedure helps everyone to use Uber easy. Those who love to drive can earn money while pursuing their hobby. And Uber pays drivers to be online, even if they don’t get any request.
INTERNATIONAL LEVEL STRATEGIES UBER IN EUROPE AND TURKEY
Uber starts to operate in 2015 in İstanbul. UberBlack is the product that they establish for Turkey. As a marketing, National basketball player Sinan Güler is chosen as a testimony. Uber take Sinan Güler with a Mercedes S Class car via its application.
UberBlack starting price is 11,20tl and for each kilometer 3tl will charged. (Webrazzi.com, 2015) It’s operating just only in İstanbul and they are try to work with taxis as well. Even for the market penetration Uber uses 20% off, legal issues may affect their performance badly for the near future.
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Boland, M. (2014, 12 01). Apple Pay’s Real Killer App: The Uber-ification of Local Services.
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Clinton, H. (2015, July 14). Washington, DC.
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Isaac, M., & Scheiber, N. (2016, April 21). Uber Settles Cases With Concessions, but Drivers Stay Freelancers . New York Times.
J.Saranow. (2006). Carpooling for grown-ups.
Morgan, J. (2015, December 17). Are Uber, Airbnb And Other Sharing Economy Businesses Good For America? Forbes.
Nagie, E. (2015). Increased Shares: Lyft's Rides and Revenue Grew Five-Fold in 2014.
Newcomer, E. (2015, 12 3). Uber Raises Funding at $62.5 Billion Valuation. Retrieved from BloomberBusiness: http://www.bloomberg.com/news/articles/2015-12-03/uber- raises-funding-at-62-5-valuation
Niels Agatz, A. E. (2009). Sustainable Passenger Transportation: Dynamic Ride-Sharing. Pursell, W. (1943). "When You Ride Alone You Ride With Hitler.". Office of Price