Uber: Case Analysis

Uber: Changing the Way the World Moves

1. Uber is a service app that connects a two-sided market viz-a-viz taxi drivers and passengers.

• Passengers: Using the app, passengers can request an Uber taxi. Signing up is easy. The passengers get cheaper rates than traditional taxis, at greater convenience. The payment method is simpler, it just requires a passenger to enter the credit card information
• Taxi drivers: When a passenger requests a ride, a driver nearby can choose to accept a ride. Uber determines the price for a ride, depending on the type of car, the number of passengers (in the case of UberPool) and the time of the day. The Uber driver gets paid immediately after each ride, via an electronic payment system.

From exhibits 6, 10 and 11,

In SF, an Uber driver makes $25.77 per hour. Assuming Uber’s cut is 30%, the driver earns 25.77-0.3*25.77 = $18 per hour. Considering a 40 hour week, he earns 18*40*52 – 14,177 (expenses for a year) = $23,263

A taxi driver who works for the same time, earns $28,537 in a year.

We haven’t considered the expenditure of a taxi driver and also the fact that he cannot be hailed as easily as a cab. Taking all of this into account and the technological shift, going Uber is the best bet for taxi drivers

• Regulators: The industry and Government regulators are unhappy with Uber’s disruptive tactics and are at a loss for what to do, as the laws laid earlier didn’t see the entry of technology into the industry
• Suppliers: Uber’s suppliers include limousine companies that let their drivers be part of the UberBlack system, third party payment services and iPhone suppliers. All parties get benefitted from the growth of Uber

• Uber relies heavily on the availability of taxi drivers and passengers. The demand and supply cannot be controlled by Uber. The demand may exceed supply in an area, resulting in higher rates and poor quality of service. If the supply exceeds demand, the driver may not make as much money as expected
• Uber has continued to defy all regulations, calling itself a private company, but the criticism and lobbying against the company is getting stronger
• Uber’s aggressive marketing strategies might further aggravate the growing criticism against it
• The fact that the drivers are not professional could count against them in case of accidents

• The surge pricing enrages passengers who might slowly drift away from Uber, to competitors that don’t surge price as much
• Although Uber claims to have reasons for its surge pricing, it should be open with its algorithm. With all the legal and ethical battles that Uber has going on, this just adds fuel to the fire

1. Recommendations:

• Uber is expanding its services by launching new initiatives, without already resolving troubled waters. This could bring in additional controversies. The driverless car initiative, for example, could cause protests from existing drivers and the industry
• Entering Food Delivery, an area that is not Uber’s expertise, is a bad idea. Food Delivery is already a part of existing restaurants. There is also additional competition from delivery services such as GrubHub. Entering an already thriving  industry, with no established expertise in is unnecessary. Uber should stick to being an e-cab service

Short-term strategies:

• Uber should take a step back and deal with the mounting criticism, before it goes out of control
• Uber should stick to its promise of not surge pricing more than 2.8X. This won’t affect Uber’s revenue, as it always takes a flat 20-30% on each ride. This satisfies the “luring drivers at peak times” concern

Long-term strategies:

• Uber should research on each market it is to enter draw up cleaner marketing strategies that will help them penetrate the market and also not upset regulators.