Uber Presentation
Transcript: References: Brown, M 2016, ‘Uber – What’s fueling Uber’s growth engine’, Growth Hackers, viewed 23 August 2013, https://growthhackers.com/growth-studies/uber Brunton, C. 2003, 2002 National Taxi Users Survey Report, prepared for Department of Transport, Western Australia, accessed on 29 August 2016, <www.transport.gov.au> Flegenheimer, M 2013, '$1 million medallions stifling the dreams of Cabdrivers', New York Times, 14 November 2013, <http://www.nytimes.com/2013/11/15/nyregion/1-million-medallions-stifling-the-dreams-of-cabdrivers.html?_r=0> Hawkins, A 2016, Uber is trying to make you forget that surge pricing exists, The Verge, viewed 27 August 2016, http://www.theverge.com/2016/6/23/12017002/uber-surge-pricing-upfront-fare-app-update-announcement Konrad, A. 2016, "Uber Raises $3.5 Billion From Saudi Sovereign Wealth Fund, Keeps $62.5 Billion Valuation". Forbes.com. N.p., Web. 1 June 2016. Nicks, D. 2016, Uber really wants to get rid of surge pricing, Money, viewed on 28 August 2016, http://time.com/money/4316366/uber-surge-pricing-stop/ Theweek.co.uk. N.P., 2016. Web. 28 July 2016. Shontell, Alyson. "Uber Is Cleverly Controlling Its Stock So It Doesn't End Up Like Facebook". Which business model did Uber emulate? Uber - History Porter's 5 forces Service regulations Initially founded as UberCab by Garret Camp and Travis Kalanick in 2009. Uber initially offered only luxury vehicles, but has since begun offering a lower-market option called UberX which is intended to directly compete with conventional taxicabs. Company partners with independent drivers ( subcontractor basis) and takes a share of each transaction (20%) (fixed commission). Uber currently operates in major cites across 58 countries. The Uber Story! Threat of New Entrants Threat level - Dependent on location: Cities were licenses are capped due to regulation = more protected New York, San Francisco and (some degree) Sydney. However jurisdictions that have deregulated their taxi industry: E.g. UK (2003), Ireland (2000), and Netherlands (1999) - experienced an influx of supply. Dublin Demand has only risen 6% over 1997-2008, while supply has increased by 530% during the same period (Nicholls 2011). Asset light model - easy to replicate No switching costs - no membership requirements. Fierce retaliation from the Taxicab Industry - strikes, marketing campaigns, government lobbying. Improvements in technology Smartphones, social media and GPS navigation devices open the market to novo ride sharing apps (Burbank, Brinckerhoff and Nigro 2012). We know that ride sharing companies are stealing market share directly from the taxi industry. HIGH "Eight-Forces" Analysis What happens when supply remains steady and demand goes up? Price regulations Varies from Jurisdiction - NSW: the Independent Pricing and Regulatory Tribunal (IPART) recommends maximum taxi fares (and fare structures) to the Director-General of Transport who almost always adopts them (Abelson 2009) . The basic fare includes a flag fall fare and distance and time charges. Night time surcharge and booking fees. IPART does not distinguish between peak and off peak periods although there is considerable excess demand for taxis in peak hours and excess supply in off-peak hours (Abelson 2009). Pricing information is widely known – set taxi rates therefore no possibility of price discrimination - increase in BUYER POWER. Power of Buyers Customers do not need the service on a day-to-day basis - Taxis only used in specific circumstances. No alternatives for point to point transportation in this price range. However high bargaining power if there is a large supply of different cabs. No factors to keep them attracted to a single service Switching costs - very low However when there is high barriers to entry-like control then customers often experience low buyer satisfaction Colmar Bruton (2002) found: 38% of respondents in inner Sydney tried to get a taxi in the last 6 months and failed. MEDIUM -> HIGH Identify the critical resources and activities Uber used to add value or cut cost? Rivalry among existing players Competition on costs/margins Very low switching costs No product differentiators - easy to imitate Sydney market: In 2009 there were 5 semi independent networks: - CCN (Cabcharge) 3200 taxis (3400 with subsidiary St. George); - Premier 825 taxis; - Legion 520 taxis; - Manly/RSL taxis 380 taxis. Cabcharge controls over 60% of the taxis on Sydney's streets. Between the Cabcharge, Premier and Legion networks control about 90% of the taxi operators (and taxis) in Sydney. MEDIUM Answer: $380,000. Extra-Credit Time! Regulation The economics literature (Bekken 2007) identifies three main forms of regulation on the taxi industry: quantity (entry regulations), quality of service; and price regulations How Uber Moves Your City Forward with Innovation | Uber Threat of Substitutes Competing in the Network Transportation Industry: Novo ridesharing apps, public transport, livery services (premuim paying