Uber Über Alles!

Since Mr Garret Gamp and Travis Kalanick received their first seed funding of $200,000 in 2009, their little start-up has grown across cities and continents. Uber Technologies Inc. is a ride-sharing service providing company. It is a six-year-old start-up company blossomed from San Francisco, with over $10 billion in raising capital, and one of the best-funded private technology companies in the world. Being valued at $50 billion due the prediction of Uber conquering the taxi industry with its disruptive technology, the company meet tough critique with its controversial technology and growth plans, which could be summed up by the saying “it’s easier to ask for forgiveness than permission” (Ahmed et al, 2015)

The process goes through the mobile phone, making it easier for Uber, drivers and passengers, reducing transaction costs. The business model shifts the risk from Uber to the drivers, as it does not own any cars or pay taxi drivers to drive passengers, thus lowering operating costs, since the drivers have to maintain their own cars. Therefore, Uber competes in transportation network industry rather than the taxi industry. It works as a matchmaker and a marketplace platform where passengers and taxi drivers can meet and exchange services. Instead of hailing or waiting for the taxi driver on the street, the user can find and track available drivers in surrounding areas. After using the service, the customer can rate drivers and vice versa, thus motivating drivers to perform better as they rely on good reviews from passengers to draw in more business from potential passengers in the future. Uber also takes advantage of network externalities (Shapiro & Varian, 1999), where the service gains more value by attracting and recruiting more drivers to make Uber more convenient and available. Similarly, a large customer base means lower downtime for drivers and effective use of their surge pricing model.

The growth of Uber comes from them providing a service in an old-fashioned industry. The taxi and transport industry has for a long time been based on licenses and taxi fleets. But since Uber entered a new area of the industry, they have changed the market. In order to understand their fierce competition, we use Porter’s Five Force to determine their competitive position.

While Uber is waiting for their patents to be filed, the company has no protection from potential entrants, as they have experienced many second-movers trying to copy their business model, such as Lyft, SideCar and Curb. These four firms compete and target the same customers and drivers. Then again, Uber plans to raise $2 billion in capital, which creates an immense advantage over their peers, and Uber has greater network externalities (Shapiro & Varian, 1999), brand recognition and covers a larger geographical area than their competitors; perhaps, it is safe to say that Uber is the market leader. However, the switching