Question

1. Describe Uber’s business model.
2. Compare this business model with traditional taxi services.
3. Discuss the strategy of ‘disruption’ with respect to both Uber and e-commerce in general.
4. Pick a side on the 'gig' economy epitomized by Uber. Is it good, or not so good? Explain your position.   

Answer 1

a) Uber’s business model is based on the Smartphone app, which provides on-demand service to users. It connects willing passengers to taxi cab drivers. Here Uber app lays a mediator between the passenger and the service provider. Taxi drivers use their own cars when providing taxi service and Uber gets 20% of the fare. The whole strategy of Uber is cost minimization with a competitive advantage. Uber's direct costs and capital are tied up in their technology infrastructure, marketing, partner & driver management, and customer service. It is focusing on sustainable competitive advantage. as a business model matures, strategic companies try to create sources of sustainable competitive advantage.

b) if we compare Uber’s business model and general taxi model there is nothing much difference between the two. The only earning which Uber got is by doing the synchronization between the passenger and taxi driver and there is no point of bargaining and searching for passenger. In the case of the taxi driver need to search for its passenger and there may be fluctuation in pricing so passenger may or may not feel secure about the drive. The security in terms of Uber is moderate where the taxi driver own can’t give the verification and customer don’t have the database about the driver with whom he/she is traveling.

c) Disruptive innovation or Disruptive theory in business theory is an innovation that creates a new market and value network from the flaws of the existing market and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.

Uber and e-commerce have adopted this innovative strategy to overcome the problem of:

1) Price discrimination

2) Searching for a better option, which is a tedious task.

3) Security and value addition

4) Various options with quality.

5) Minimization of cost and time.

d) In a gig economy, jobs are temporary and flexible. In commonplace and companies tend toward hiring independent contractors/part-time workers and freelancers instead of full-time employees. This type of economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career. There is some positive point and also some negative point associated with this type of economy. The advantages include the flexibility of working, one can make extra money in terms or exchange of leisure, no commitment, no tension of getting stuck with company formalities, and hierarchy arrangement. Where are there are some disadvantages associated with this type of economy? The first and the most important fact is this type of arrangement is not suitable for the long-term arrangements for any company. As there is no liability of a worker towards the company so there are fewer chances of loyalty and getting leaked to your competitor. There is no fixed future for a worker in the long term so future security is unstable. So with a futuristic vision gig economy is not suitable for any economy in the long term.