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Uber: Changing the Way the World Moves

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by

Christine Aiad

on 8 March 2016

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Transcript of Uber: Changing the Way the World Moves

Porter's Five Forces
Threat if New Entrants: Low
Low overhead but large amount of funds required to compete at a loss
Strong brand and huge global presence
Can price new ride sharing services out of market (Sidecar, Hailo)
Customers: Moderate
High degree of dependency
Low switching costs
New and unique product
Customers may or may not have access to other ride sharing programs or traditional transportation
PEST Analysis
Political:
Local, State, and Federal governments in some cases have resisted or banned Uber
Loss of licensing revenues and costs traditional cabs incur such as drug tests, insurance, and official status are main arguments against Uber
Outdated laws allow Uber to operate in a grey area
Economic:
Uber and other on demand products are growing at rapid pace
Uber is clearly meeting an economic need
Use of credit cards and not cash
VRIO Analysis
Topics for Discussion
Surge Pricing
Pricing structure based on a well-formed algorithm
Surge pricing is a direct result of supply and demand
During peak ridership (rush hour, bad weather, special occasions) prices rise anywhere between 1.5x to 7x the normal price.
This dynamic pricing has made many riders infuriated as fares have reached as high as $415 on NYE.

Treatment of Drivers Recommendation
Continue the same treatment
While there are no benefits offered, Uber drivers are paid more and there is an ease of attaining employment with Uber
Taxi drivers have to take tests, wait for deployments from managers, and raise a large sum of money for Medallions
70-80 percent profit per fare for Uber drivers is fare given the lesser amount that taxi drivers make in comparison

GOAL!
Uber: Changing the Way the World Moves
Christine Aiad, Rachel Mazzoni, Christina Phillis, and Joshua Pratt
Suppliers: High
Suppliers of Uber are also its workforce.
Competition for drivers is very high
Costs to entice drivers is growing
Surge pricing is a function of Ubers reliance on its contracted drivers to respond
Government regulation and pushback by labor unions increasing costs
Competitors: Moderate
Lyft
Sidecar, Hailo (Out of Business)
GrabTaxi, Didi Kauidi, and Ola (China and India)
Substitutes: Moderate
Public Transportation
Personal Cars
Zipcar
Traditional taxi and Limousine services
Social:
Strong customer support
Some anger over incidents with surge pricing model taking advantage of customers
Younger crowd has been very responsive to the business model
Social resistance strongest where traditional cabs are the most entrenched (Paris, London, New York)
Technological:
Uber’s technology has been a disruptive force in not just the ride sharing industry but the economy as a whole
Many companies copying the Uber model
Surge Pricing
Inexperienced UberX Drivers
Treatment of Drivers
Aggressive Tactics
Incurred Losses
Sustainability
Surge Pricing Recommendation
Continue this practice but create a cap on the amount
2.8x cap promised to riders as a result of outrageous prices
Reasonable cap that still allows for dynamic pricing
Maintain this practice because Uber has a steady stream of customers
Still generally more reliable and affordable than a taxi or private limo
During peak times Uber should send push notifications to drivers to encourage more supply to meet the demand
Give more to drivers as incentive

Inexperienced UberX Drivers
Inexperienced UberX Drivers Recommendation
Treatment of Drivers
Non-professional drivers with no commercial license
Less rigorous requirements than UberBlack
Clean driving records and background checks required as well as specific car requirements
Critics have claimed that the use of these nonprofessional drivers was putting lives at risk

Continue to require background checks and clean driving records
Require fingerprinting as required by taxi services
Add a free online course requirement for drivers
1-2 hours

Drivers are considered Independent Contractors
Therefore, no benefits (health, dental, etc.) are offered
Uber retains 20-30 percent of fare depending on the city
Uber drivers can screen riders and their ratings
Uber has offered potential drivers lower car payments

Aggressive Tactics....
Accused of slowing down competitors service & attempting to poach drivers from other ride-sharing applications.
Uber hired David Plouffe, a political strategist, to be their PR rep.

...Or Entrepreneurial Tactics
Most cities don’t have regulator restrictions around ride-sharing
Contractors vs. employees
All the media attention and ‘complaints’ have generated a lot of free publicity for Uber; possibly getting new customers.
Aggressive tactics are an asset; when they move to a new city and try to push Uber on customers, it works.
They offer free ride, even free ice cream.
It has been their biggest asset; they are no different than Lyft and other ride sharing apps.

Tactics Recommendation
Continue use of aggressive tactics
Prove to governments and consumers a commitment to staying in business
Incurred Losses
Showing signs of profitability in mature markets
Regulatory battles
Subsidizing riders to gain control in Asian markets
Differentiating product offering
Continuing to invest in R&D

Incurred Losses Recommendation
Follow the same operate-at-a-loss to grow approach that other disruptors have used
e.g. Amazon
Keep attracting investors, maintain low levels of debt
Communicate potential in Asian markets and autonomous cars
Stay private, reevaluate IPO in 5 years
Sustainability
Tetra Threats:
Imitation
Lyft, Sidecar
Substitution
Car rental, taxi cabs, public transportation

Sustainability Recommendation
Increase switching costs
UberEAT, UberPOOL
Follow a winner take all strategy
Reap benefits of network effect
Continue to upgrade offering
Autonomous cars, accuracy

Conclusion
Cap surge prices at 2.8x
Send push notifications to drivers during peak times and offer additional income as incentive
Add requirements for UberX drivers
Fingerprinting and online course
Continue to seek opportunities for product differentiation and international expansion
Full transcript