Question

Uber : Going Global from Day one

Uber, the controversial San Francisco-based ride-for-hire service, has made a virtue out of disrupting the estab-lished taxi business. From a standing start in 2009 , the company has spread across the globe like wildfire. Uber's strategy has been to focus on major metropolitan areas around the world. This strategy has so far taken Uber into about 600 cities in more than 80 countries. The privately held company is rumored to be generating annual reve- nues of around $10 billion.

At the core of Uber's business is a smartphone app that allows customers o hail a ride from the comfort of their own home, a restaurant, or a bar stool.The apps shows cars in the area,notifies the rider when a car is on the way, and tracks the progress of the car on screen using GPS map-ping technology. The rider pays via the app using a credit card, so no cash changes hands.The driver takes 80 per- cent of the fee and Uber 20 percent. The price for the ride is determined by Uber using an algorithm that sets prices in order to match the demand for rides with the supply of cars on the road. Thus, if demand exceed supply, the price for a ride will rise, inducing drivers to get on the road. Uber does not own any cars.Its drivers are independent contrac-tors with their own vehicles.The company is, in effect, a twenty-first-century version of an old-style radio taxi dis- patch company. Interestingly, Uber's founders got their idea for the app-based service one snowy night in Paris when they were unable to find a taxi.

Historically, taxi markets around the globe have been tightly regulated by metropolitan authorities. The stated purpose of these regulations has often included ( I ) limiting the supply of taxis in order to boost demand for other forms of public transportation, (2) limiting the supply of taxis in order to reduce traffic congestion, (3) ensuring the safety of riders by only allowing licensed taxis to offer rides, (4) ensuring that the prices charged are "fair," and (5) guaranteeing a reasonable rate of return to the owners of taxi licenses.

In practicew, widespread restrictions on the supply of taxi licenses have crcated shortages in many cities, making it difflicult to find a taxi, particularly at busy periods. In New York, the number of licenses barely increased from 11,787 in 1945 to 13,587 in 2017, even though the population ex panded significantly. In Paris, the number of licenses was 14,000 in 1937 and had only increased to 17137 by 2017, even though both the population and the number of visitors to the city had surged. The number of' taxis in Milan was frozen between 1974 and 2014, despite Milan having a ratio of taxis to inhabitants that wa sone of the lowest for any major city. Whenever metropolitan authorities have tried to increase the number of taxis in a city, they have often been meet by strong resistance from established taxi companies. When the French tried to increase the number of taxis in Paris in 2001,a strike among transportation workers shut down the city and forced the government to back off.

Uber's strategy has been to break these regulations, establishing its service first and then fighting attempts by regula-tors to shut the service down.In pursuing this strategy, Uber has often used social networks to enlist the support of its riders, getting the mto pressure local governments to change their regulations and allow Uber to continue offering its ser-vice. In many cities ,the strategy has worked, even in the face of protests from established taxi companies and their driv-ers. In London, for example, when taxi drivers went on strike to pressure the government to restrict Uber, Uber reported a surge in downloads for its app and thousands of new riders.

However, this confrontational strategy has not always worked well. The government of Vancouver, Canada, re-acted to the unauthorized entry of uber by banning it out- right. So did the local authorities in Brussels in Belgium, Delhiin India, and ahost of other cities around the globe. In Paris, the government has tried to limit Uber by impos-ing several restrictions that makeit harder for Uber to do business there. To complicate matters, Uber drivers in Paris have unionized something that they cannot do in the United States due to their status as independent con-tractors.They went on strike when Uber tried to lower fares. Similar protests by Uberd rivers have occurred in other cities. Overall, there is a sense that Uber's abrasive strategy has not always worked well, particularly outside of the United States where locals see Uber as a brash American startup that pays scant attention to local laws. customs, and culture.

Uber is also witnessing the emergence of local rivals in some countries, such as India and China, where startups using a smart phone app and a business model similar to Uber are gaining traction. In China, local rival Didi Kuaidi has raised $4 billion in venture capital and claims that soon it will be operating in more than 400 cities in China.Didi already has a 90 percent market share in Beijing, where the company fields more than 1 million daily ride requests.

Questions

1. Companies like Uber, Lyft (one of Uber’s main competitors), and Airbnb (an online marketplace that enables people to lease or rent short-term lodging) are innovating in fields that traditionally have been very complex and regulated. Can Uber’s business model be applied in other industries globally?

2. Are cities around the world doing a disservice to citizens or visitors, or both, by banning it outright from operating in their community?

3. Uber’s strategy has been to break these regulations, establishing its service first, and then fighting attempts by regulators to shut the service down. This goes along with the old saying, “do first, ask questions later.” Is this business approach viable globally in the long run?

Answer 1

Can Uber’s business model be applied in other industries globally?

Answer : yes, the best example is from India like OYO, which has implemented almost the same model as uber, it does not own any hotels, but provide standardized service on all the listed hotels on its app and charges commission from the owners.

Are cities around the world doing a disservice to citizens or visitors, or both, by banning it outright from operating in their community?

Answer: Yes, Because every system can not be perfect, the government has put some regulations so that irregularities can be reduced but banning the entire model is unacceptable and problematic for citizens of the country.

Is this business approach viable globally in the long run?

Answer: No

Explanation: The major reasons can be understood By the following points:

1. The cost of lobbying & Legal issues with the government is very high in comparison to the benefits.

2. Low customer loyalty, as customers, change the preference of booking taxis in a fraction of seconds on the basis of fare & waiting time.

3. Model is easily copied by competitors like Lyft, ola in India, didi in china, even there is some news that union of drivers is coming up with their own app.

4. Second mover advantage is very high as the cost of marketing, customer awareness is already covered by the first mover.

5. Low driver loyalty due to a large number of ride-sharing apps and commissions offered by them.

6.Labour issues: Unionisation, frequent strikes is against the idea of offering discount fares to customers.

7. Increasing safety concerns as one car is driven by many drivers with no regulatory criminal checks.