Uber Business Model

UBER’s business model

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Abstract

This paper explores the business model of Uber and how it has revolutionized the taxi industry. Uber is an on-demand smartphone application that links potential client vehicle drivers for ridesharing and hire^[1]. Uber has operations in 35 countries and is one of the major success in the larger shared economy. Uber is a technology company that provide a software platform through which smartphone owners can request for a ride. The core function of Uber is to match passengers and drivers based on their geographical location. Uber targets both riders and drivers. For riders, the company targets individuals living in big cities where the transportation, particularly taxi transportation is a huge problem. For drivers, Uber segments them into three categories including UberX, UberTaxi and UberBlack. The main value proposition of Uber is a software application that facilitates on demand transportation services and transactions between passengers and drivers. For passengers, Uber offers a reliable, convenient and fast way to travel from one part of the city to another. Uber has forged partnership with a number of companies such as google and Braintree to facilitate its operations in either sides of the market. Due to its huge success, Uber’s business has been applied in other industries. Various technology companies are emulating Uber’s business model in other industries such as medicine, legal services and laundry and grocery services. Some of the applications that have been derived from Uber include Wag, Handy and Ubery.

Introduction

Uber is an on-demand smartphone application that links potential client vehicle drivers for ridesharing and hire. Uber has operations in 35 countries and is one of the major success in the larger shared economy. The shared economy is a technology enabled movement where the business model enables business organizations to help consumers to find ways of renting rather than owning an expensive asset. Uber identified an opportunity in the transportation industry where people were forced to book in advance more so during high traffic time. Uber was developed by Travis Kalanick and Garrett Camp in 2009 and started operation in San Francisco in 2010^[2]. The company then expanded its operations to other cities in the United States and then to other major cities in the world. Due to the use success of Uber, its model has been adopted in other sectors. This paper examines how Uber’s business model has revolutionized the taxi industry as well as other industries where the business model can be applied.

Research questions

This paper aims to answer the following questions;

1. How is the business model of Uber changing the taxi industry?
2. Which other industries can the business model of Uber can be applied?

Aims and objectives of the study

The aim of this paper is to understand Uber’s business model and the impact the company has caused on the industry. The study will also demonstrate how the model can be applied in other industries. The main objectives of the study are:

1. To carry out internal analysis of Uber to find data and information that can help understand and describe the business model of Uber.
2. To analyze the taxi industry to discover the Uber’s influence and impact.
3. To assess the attitudes of employees and customers to understand their behavior and perception.
4. To identify another industry where application of Uber’s business model can yield positive impacts.

Background of the study

Uber is a technology company that provide a software platform through which smartphone owners can request for a ride. The core function of Uber is to match passengers and drivers based on their geographical location^[3]. The software tracks the position of the user using GPS coordinates without asking the user and then alerts the nearest taxi driver. The user provides the user with the ability of tracking the arrival of her/his ride and receives a confirmation message that the Uber driver is arriving^[4]. On the other hand, the driver can press a button labelled “Arriving now” to indicate availability. The driver is not provided with the phone number of the driver directly but can be provided in case he/she fails to locate the customer. Although Uber is less costly and efficient as compared to the normal taxi, its price can be as high as 1.5 to 8 times that of normal cabs during high demand times such as snowstorms, new year’s eve and Halloween festival. As by 2014, Uber operated in about 80 cities with over 800 employees. The company has also received more than US$1.5 billion through angel investors and ventures. The company is currently valued at US$18.2 billion3. The success of Aber is largely attributed to its efficiency and effectiveness in matching passengers with the nearest taxi driver. In order to understand how Uber has differentiated itself and managed such a high growth rate, this paper examines its business model and how it has been applied in the taxi industry.