Uber: Feeling the Heat from Competitors and Regulators Worldwide

Issue/Problem Identification

The development model of Uber is mainly profitable, based on the policy of exploiting

taxi drivers. Uber plays a role as a broker to make a profit. It is using internet technology to

create platforms to facilitate taxi service users (customers) and service providers (drivers) to

meet. Uber sets the price of each ride and takes the percentage of taxi driver income as its

commission. However, Uber is not responsible for either ensuring a minimum wage for drivers

or paying insurance for its drivers. Uber considers the drivers as independent contractors who

have to pay for their working-related expenses, including car purchases, gasoline, car

maintenance, and car insurance. In terms of the law, Uber is not limited in time or the number of

working hours per week. They can work as much as they can and whenever they want. On the

other hand, in terms of human resource management, Uber is obviously exploiting drivers and

treating women unequally. This growth model of Uber is criticized socially for the relationship

between employer and employee.

Uber registers as a technology application company, but its operation is like a taxi

business. Meanwhile, the legal system does not have specific provisions on the identification and

management of this type. Uber was also facing challenges in the political realm. Many markets

were not open to Uber, as regulations prevented access. This regulatory of entry barriers would

significantly impact Uber’s expansion possibilities as well as potentially force Uber out of some

of its current markets.

Uber adopted “surge pricing,” a dynamic pricing policy that rates can skyrocket during

rush hours, or during bad weather, or in suburban locations. This policy, of course, brings a

higher revenue for Uber. And it is a flexible application of the principle of demand-supply based

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pricing. However, it could create a trap for Uber users if they did not notice. The idea behind

surge pricing is to adjust prices of rides to match driver supply to rider demand at any given

time. During periods of excessive demand, when there are many more riders than drivers, or

when there are not enough drivers on the road and customer wait times are long, Uber increases

its normal fares. The surging price will depend on the scarcity of available drivers. The surge

fares may be twice the normal fare on a Friday night, for example. In most markets, this price is

lower than what a taxicab or limo service costs. However, for instance, when you have just paid

$13 on the way to a party, paying $47 three hours later for the same trip in reverse is bound to

seem pricey. Therefore, it is normal for consumers to feel that Uber is taking advantage of them

by ramping up prices when they are in direst need.

Stakeholder Analysis and Management Evaluation

Travis Kalanick and Garrett Camp are co-founders of Uber, which is originally known as

“UberCab,” in San Francisco, California, in 2009. Uber started its ride-sharing operations in San

Francisco in 2010. Its target customers were young, educated, tech-savvy urbanites more likely

to rent than own their own homes and generally got around via public transportation, biking, or

walking. The company grew rapidly, and by 2015 it was providing carpooling services in 300

major cities in 58 countries around the world. By the end of 2014, the company’s U.S. driver

base had grown to 160,000 active drivers and 1 million drivers worldwide. Uber also operated in

59 countries and 300 cities around the globe. By early 2016, it seemed as though Uber was

expanding to a new city every other day.

As of 2015, Uber had completed 13 rounds of funding for a total of $8.21 billion from 53

investors, including Google, Fidelity, and Baidu (China). These rounds included traditional

venture capital funding as well as both private equity and debt financing. While this capital

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funding provided Uber with a valuation of over $50 billion, it was reported that Uber had

initiated yet another funding round in late 2015, seeking more than $2 billion, bringing the total

potential value of the company to $64.6 billion.

These rounds of funding provided Uber with the financial strength to expand product

offerings, especially UberXL and UberPool, and enter new markets, including China, in 2015.

Without the funding, Uber could not continue to expand at the rate it had in 2015, nor could it

continue to sustain the level of loss rumored to have occurred.

Recommendations and Implementation

1. Uber needs to have a complete background check of the driver due to some issues like

sexual assault by drivers that Uber has faced some serious criticism. And if, on the

contrary, the driver turns out to be the harassed person, Uber also needs to support its

drivers in legal matters. That will help Uber to improve its reputation as well as to have

more responsibility to its workers.

2. One massive differentiator between Uber and traditional taxis is that the transportation

disruptor has rating systems for both drivers and passengers. Drivers are probably more

motivated by their ratings since passengers cannot easily find out where they stand.

Either way, the system promotes trust in Uber and better behavior on the parts of both

driver and passenger.

3. Last but not least, Uber, in order to be unique in its own way, has launched different

services, including Uber Black, UberRush, UberEat, UberKids, etc. This strategy is

leading Uber to the heights of distinctiveness compare with its competitors, and people

from anywhere from any age can now access any of these services.