Eco 561 - Business Proposal

Business Proposal

ECO/561

May 11, 2015

Business Proposal

Introduction

Transportation has evolved tremendously in today’s world. If someone does not have a way of transportation, there is a taxi service available and now a business called Uber. Uber is a company that is available to consumers to request a ride and pay via the mobile app. Uber is available in more than 50 countries and is expanding. This seemed to be very convenient to the consumers because they can go anywhere and even reserve a driver for a day for an individual price.

Market Structure

There are four basic types of market structure. They are as followed; Perfect Competition, Oligopoly, Monopoly, & Monopsony. Uber is fundamentally a marketplace, where supply is controlled not by the company but by the legion of independent contractors and transportation providers with whom they work. (Gurley, n.d.) That being said, their market structure is an Oligopoly because Oligopoly has to do with several large sellers who have some control over their prices.

Elasticity of the product

Price elasticity is imperative. Uber’s analysis and research have shown that both the supply curve and the demand curve are highly elastic (Gurley, n.d.). Uber lets the customers do the talking since the goal is to please them. Price elasticity tells how much of an impact a change in price will have on the consumers’ willingness to buy that item (Tuck, 2015). If the price is too high for the consumer, then they will most likely not use the service. If the price is cheap enough to the consumers, then this will help increase their business because this is a luxury service, and many people would want to experience it. If there are not enough cars or drivers, then this means that they will not be able to service other customers at that time. This may make Uber hire more drivers and more cars if it is affordable. In an oligopoly (where competition is limited), nonpricing strategies can have more effect on the consumer (Kimmons, 2015). Nonpricing strategies have to do with promotion and advertising.

Pricing is one of the most important decisions a person can make. Setting a price that is too high or too low can determine the success of your business. It may limit the growth of the business and could cause serious problems. A person must make sure it is profitable to be beneficial towards them as the owner.

Business Cycles

The business cycles consist of expansion, recession, depression, and recovery. Uber is currently in the expansion phase because they are constantly finding ways to grow and their business is a big success right now. There is a high demand for Uber drivers because this service is so popular. Expansion increases the demand for both capital and consumer goods (Roberts, 2015). In a recession, the economy slows down. A depression is when demand for services and products decrease. The recovery stage occurs after the previous stages and is when an increase in consumers’ confidence in the market happens.