Undoubtedly, Uber is a game changer in the global taxi industry. However, two major issues emanating from poor governments’ regulations or lack of thereof and hostility from traditional taxi drivers pose serious operational risks to Uber. Nevertheless, Uber will survive and perhaps focus on technologies that are more advanced such as driverless cars to cut costs.
Introduction of Uber
Uber is one of the service tech startups to have obtained a global appeal with only six years in operation. The company has penetrated the world market due to its ability to narrow the gap that has been there in the transportation industry, especially in the world cities. Currently, it operates in 58 countries and has great potential for growth. Uber, which uses apps, aims at connecting drivers to clients and, thus, making movements within cities more efficient.
Uber International Inc. provides its services in collaboration with drivers who own private cars. The company creates and runs apps, which clients use to request curbs. Drivers then collect clients and ferry them to their desired destinations. Clients make payments using their credit cards, a method that is more appealing than the use of cash. Uber collects the transportation fees (about 20%-30%) and pays its drivers.
A management team, which is competent and conversant with technological dynamics and changes in public transport, heads the company. Their major role is to scan for market niches in cities’ transportation industries. The team then comes up with possible solutions. With great emphasis on values such as innovation and best talents, Uber has grown rapidly. Consequently, the team has set higher and greater goals like having self-driven cars to enhance efficiency transportation further.
Uber’s core competence
Though the taxi industry is quite competitive, Uber has services that are seemingly ahead of others. One of these aspects is the comprehensive approach, and the view it has on city transport. Using a combination of smartphone supported apps, GPS trackers, rating apps and online payment, the company has made quiet formidable work in creating core competence.
The ability to provide services to wide and varied markets has also given the company a competitive advantage. Uber has a global customer base alongside services that can easily be provided by any contracted drivers.
Uber offers customer- oriented services. That is, the customer tends to have added benefits. Customers opt for Uber because of convenience relative to regular taxi.
Uber has an edge over their competitors due to the type of employees it possesses. From the CEO, the top management to junior employees, Uber has a team that is visionary, innovative and aggressive with a focus on the global market. The annual rating of employees uses scores that have a direct influence on their compensation, bonus awarded and future referrals. This compels the employees to give their best and achieve greater success.
Uber is ranked among the most valuable, aggressive startups globally. The company has achieved its competitive edge through its abilities to recruit and retain talented employees who are mainly innovative, talented executives and software engineers. For instance, Uber recently poached an expert from Google to enhance its mapping and geospatial capabilities.
The company has gained its competitive edge from technology. The company did not have to create every technology it relies on deliver services. Instead, Uber has harnessed the power of mapping, location, optimization for closet drivers, payment services, and feedback and rating services to create competitive advantage, which its competitors, traditional taxi failed to exploit. The company did not have to invent new technologies but leveraged cloud to gain access to them.
The company is not restricted with the taxi medallion system, but it relies on a global fleet of cars of willing drivers with minimal investments.
The company controls costs because it does not have full time drivers. Users can opt in and out at their own convenience.
The company also leverages smartphone and mobile capabilities to create distinctive advantage. Mobile technology has disrupted many sectors, including traditional banks and taxi industry. Before the introduction of Uber, the taxi industry enjoyed relative calm. Uber focused on taxi business but with greater convenience to customers. Uber continues to revamp its mobile app based on user reviews and ratings.
Consequently, the power of mobile technology has given the company few distinct advantages over its competitors. First, Uber is known for fast and reliable ride commanding based on GPS and mapping solutions. Second, Uber uses mobile payment for user convenience and simplicity. Finally, user rating and feedback are used to improve experiences.
Competition has intensified for Uber. For instance, new players such as Lyft, Flywheel and Sidecar have emerged based on the mobile on-demand taxi services. Some of these firms run on mobile ridesharing platforms. They are major competitors for Uber.
For fierce critics of Uber, its current valuation is wrong. For investors, the company recently recorded an operating loss of about $470 million with revenue of $415 million. However, the loss could be justified because Uber has become a global firm within few years after its launch. Thus, it is extremely early to claim that the business model is not sustainable. Overall, Uber will have to appeal to many customers and drivers to increase revenue stream.
Legal challenges are threats to sustainability of Uber. Globally, the company must deal with governments’ regulations and protesting traditional taxi operators. Thus, these challenges limit Uber’s ability to transform the global taxi market. Taxi drivers claim that Uber operates outside regulations on pricing and city by-laws and, therefore, it presents unfair competition.
In France, India, the Philippines, South Korea, the Netherlands, and Belgium among other countries, for instance, Uber must contend with crackdowns on its drivers while many accidents have been blamed on its unlicensed, inexperienced drivers. Thus, such lawsuits come with legal and reputational costs.
The UN Women, for instance, had to pull out of a deal with the company citing privacy, safety, and legal issues.
Given these challenges notwithstanding Uber’s rapid expansion and disruption in the global market, it is still difficult to determine the sustainability of its business model. Thus, it might also be difficult for Uber to maintain competitive edge.
Key trends to affect Uber in the coming years
Uber is most like to face several court rulings, which are most likely to be both favorable and unfavorable globally. California and Florida, for instance, rejected Uber’s claim that its drivers were independent contractors.
Uber also refers to itself as a tech firm with the sole purpose of connecting passengers and drives. This model will favor it in new markets while avoiding laws and regulations on labor relations.
With such rulings on drivers being employees, Uber must meet minimum labor requirements, including wages. Alternative, Uber may close its operations in hostile cities, states and nations.
Governments currently are confused on how to handle tech startups because there are no adequate laws and regulations to account for their operations, taxation, and labor relations among others. Many governments now want Uber to pay taxes based on its revenues.
As such, Uber may be forced to increase costs of ride in the affected cities.
Uber Drivers face Risks
The so-called independent contractors face constant police harassment and hostility from other taxi drivers. Some countries have outright banned Uber, others call for stringent regulations while others refer to the carpool app as illegal.
Further, some airport authorities do not want Uber drivers while others have introduced access fees, which ultimate increase costs of operations.
Rapid globally expansion
Internationally, Uber will have to face some operational risks such as competition, for instance, in India where taxis could be many relative to other regions. In China, Tencent – a tech firm reputable for imitation, has already copied Uber business model through its Didi Dache app while also leveraging mobile phone payment. Thus, competition will erase Uber’s competitive edge.
Uber in the next ten years
Uber is most likely to survive once regulations are adopted. Consequently, Uber will focus on driverless cars in the future to cut operating costs while leveraging better technologies that would be available by then. Meanwhile, the company must contend with poorly defined government regulations and hostility from other taxi operators.
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