Uber Case Analysis PDF

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Uber Case Analysis E-Commerce (Individual Case Analysis) Ranoo Sharma - June 26, 2017!

UBER CASE ANALYSIS - RANOO SHARMA

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1.########Cri'que#Uber’s#surge#pricing#model#and#aggressive#business#tac'cs.#Support#your# answers.## !!!!!!!!!!!!When!Uber!applica.on!was!loaded!with!more!demand!than!it!could!supply,!it!applied!a! phenomenon!called!“Surge!Pricing”!to!their!customer!base.!These!.mes!included!peak! hours,!bad!weather!or!special!occasions!like!new!year!evening!etc.!Though!Uber’s!share! remained!20!percent!from!each!ride,!it!was!implemented!to!push!drivers!to!come!and! drive!during!these!busy!.mes.!The!price!could!be!raised!anywhere!from!1.5!.mes!to!7! .mes!the!normal!rate.!Some%countries%even%reported%that%Uber%has%tested%demand%on% 50%6mes%the%average%rate.%(Reference(A)! !!!!!!!!!!!!When!the!surge!price!was!in!effect,!the!rider!had!to!acknowledge!the!surge!pricing! before!booking!and!the!company!faced!a!lot!of!backlash!as!the!customers!were! unaware!of!what!the!final!price!would!be.!Many!riders!lost!their!trust!on!Uber!as!they! were!charged!exuberant!rates!and!they!felt!exploited!by!the!company.!One!such! famous!event!happened!during!new!years’!eve!in!New!York,!2011!when!riders!were! charged!as!much!as!seven!.mes!the!cab!fare.!The!open!ended!nature!generate! uncertainty!and!Uber!received!a!lot!of!media!and!customer!nega.ve!reviews!for!this! prac.ce.!The!CEO!believed!that!it!is!a!necessary!evil!as!drivers!need!mo.va.on!to!bring! their!vehicles!on!road!and!to!curb!the!backlash,!Uber!decided!to!limit!the!uncertainty! but!it!failed!during!the!Sydney!Hostage!Crisis!of!2014!when!their!algorithm! automa.cally!applied!a!larger!surcharge.!! !!!!!!!!!!!!In!my!opinion,!Uber’s!surcharge!during!peak!.mes!is!a!necessity!but!having!an!upper! limit!is!absolutely!essen.al.!The!company!should!limit!their!algorithms!to!charge!only!a! certain!fixed!amount!of!surcharge!during!these!high!demand!peaks.!Not!only!the! company!should!add!the!surcharge!in!the!es.mated!fare!which!is!shown!before!you! book!with!the!applica.on!but!also!tell!the!customers!the!benefits!of!this!applied! surcharge.!Marke.ng!the!benefits!of!the!surcharge!could!go!a!long!way.! !!!!!!!!!!!!For!example:!LeWng!the!customers!know!how!much!.me!they!are!saving!would!be!a! great!alterna.ve!to!show!besides!the!addi.onal!charge.!Drivers!who!are!already!on! road!and!agree!to!take!passengers!without!the!charge!should!also!be!shown!and!the! customer!could!wait!for!them!if!they!wanted!to.!Giving!a!choice!and!showing!reasons! backing!up!the!surcharge!would!play!into!a!posi.ve!image!for!the!company.!Also!the! name!“surge!pricing”!has!a!nega.ve!connota.on!to!it,!the!company!could!change!it!to! “priority!service”!or!“UberFirst”,!where!you!have!to!pay!more!but!the!service!would!be! available!to!you!immediately.!(Personal!idea!derived!from!airports!who!implement! priority!boarding!and!people!pay!extra!for!it)! !!!!!!!!!!!!Looking!at!their!aggressive!business!tac.cs,!Uber!has!been!a!media!center!of!a]en.on! for!it’s!unethical!and!rash!business!tac.cs.!From!poaching!drivers!from!compe..ve! services!to!disregarding!local!laws!completely!has!been!a!center!of!discussion!among! many!who!despise!such!aggressive!tac.cs.!!

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!!!!!!!!!!!!Though!these!tac.cs!have!helped!Uber!capture!major!market!share!but%it%seems%to%be% losing%it’s%percentages%to%it’s%compe6tor%Ly=.%(Reference(B)! !!!!!!!!!!!!In!my!opinion,!if!the!public!becomes!wiser!of!such!business!tac.cs,!the!reputa.on!of! the!company!goes!down.!Uber!needs!to!work!on!their!public!image!by!highligh.ng!and! marke.ng!all!the!posi.ve!things!that!Uber!does!for!their!employees/drivers!and!what! perks!they!offer!to!the!public.!Also!Uber!should!be!penalized!if!they!do!not!follow!the! laws!but!as!it!is!a!new!concept!and!uber!is!just!an!applica.on,!they!have!taken! advantage!of!the!gray!area!in!terms!of!legality.!Personally,!I!think!such!aggressive! business/sales!tac.cs!should!encourage!the!compe.tors!to!up!their!game!as!well.!And! not!only!Uber!but!Lya!also!uses!the!same!techniques.!Exhibit#A!is!one!adver.sement!I! found!during!my!research!which!clearly!targets!people!who!search!for!the!term!Uber! and!offers!monetary!benefits!to!make!their!applica.on!look!appealing.!

# ###2.#####How#has#Uber#achieved#its#popularity#among#customers#in#such#a#short#period#of# 'me?#Support#your#answer.# ############Before!geWng!into!Uber’s!business!model,!I!would!like!to!point!out!that!Uber!is!highly! successful!to!this!date!as!they!answered!a!huge!need!of!a!frustrated!society.! ! From!a!personal!experience,!geWng!or!booking!a!taxi!which!was!oaen!run!by!private! ins.tu.ons!or!the!government!was!a!.resome!and!unreliable!process.!Most!of!the! .mes!a!phone!call!had!to!be!made!to!book!one,!in!which!you!had!to!hold!the!line!for!as! long!as!thirty!minutes,!the!driver!oaen!didn’t!know!the!way!to!your!des.na.on!or!your! house,!that!is!if!you!got!the!cab!in!.me.!The!long!wai.ng!hours!was!the!most!numbing! of!them!all.!If!you!hail!a!cab!from!the!road,!the!driver!could!refuse!you!to!take!to!a! par.cular!des.na.on.!Some!drivers!would!deliberately!take!you!the!wrong!way!to! increase!their!fare!plus!you!couldn't!do!anything!about!a!rude!driver!or!a!dirty!taxi.! Especially!in!places!like!France!and!other!European!countries,!due!to!a!great!language! barrier,!it!was!impossible!to!communicate!the!des.na.on!to!the!driver.!Fares!were! highly!unregulated!in!the!private!sector,!they!could!quote!any!amount!and!a!person! had!to!pay!in!mostly!cash!as!cabs!didn't!have!a!card!machine.! !!!!!!!!!!!!Uber!with!it’s!business!model!has!solved!each!and!every!one!of!the!above!men.oned! problems.!Though!it!has!its!own!drawbacks!but!it!answers!and!caters!to!a!huge!need!in! the!society.!Due!to!Uber,!many!governments!and!private!organiza.ons!have!improved! their!models!tremendously.!Uber!is!convenient,!spontaneous,!efficient!and!easy!to!use.!! !!!!!!!!!!!!The!plaform!allows!you!to!enter!your!final!des.na.on,!shows!your!es.mated!fare!and! gives!you!the!ability!to!choose!your!driver!based!on!ra.ngs!and!interac.ons.!Also,!it!is! reliable!as!you!can!follow!the!driver!on!the!map!and!have!a!direct!communica.on!with! him/her!in!case!of!any!ques.on.!It!has!also!driaed!from!the!non!working!conven.onal!

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method!on!the!employee!front!and!has!given!their!drivers!freedom!to!earn!more!on! their!own!terms.!It!has!been!a!win!win!situa.on!for!both!rider!and!the!driver.!Even!the! payment!portal!is!fast!and!easy!which!allows!you!to!pay!automa.cally.!! ! Also!the!posi.ve!word!of!mouth!from!customers!and!employees!has!contributed!to! their!success!heavily!combined!with!their!aggressive!business!tac.cs.!Uber!also!offers! free!rides!to!its!customers!especially!the!first!ride!(by!code!or!by!a!friend’s!invite),! hence!everyone!can!try!without!paying!and!are!oaen!impressed!by!the!service.!A! network!effect!not!only!amongst!the!customers!but!also!the!part!.me!drivers!was!the! major!contributor!for!the!applica.on’s!success.!Uber!has!revolu.onized!transport!and! can!be!considered!as!a!disrup.ve!technology.!It!has!catered!to!all!the!segments!giving! an!alterna.ve!to!monopolized!transport!network.!Exhibit#B!shows!how!a!rider!has! access!to!their!codes!to!pursue!friends!to!try!or!become!a!driver!for!Uber!plus!both! par.es!are!benefi]ed!when!they!try!the!invites.!

3.#########How#well#does#Uber#treat#its#drivers?#What#are#the#best#benefits#and#worst#features# of#being#a#driver?#Support#your#answer.## ############Uber!drivers!act!as!a!liaison!between!the!company!and!the!customer,!they!do!not!hire! the!drivers!as!their!official!employees.!The!drivers!go!through!a!background!check!and! documenta.ons!before!they!can!drive,!Uber!also!provides!them!with!phones!and!the! choice!to!select!trips!and!passengers!based!on!their!nearness!or!ra.ngs.!Though!people! fear!that!Uber!is!giving!rise!to!the!much!debated!part!.me!economy!as!Uber!drivers!are! not!subjected!to!health!benefits,!re.rement,!vaca.on!leave,!disability!compensa.ons! and!many!more!perks!which!a!permanent!employee!receives!but!this!hasn’t!slowed! down!the!independent!contractors!who!want!to!work!with!Uber.! !!!!!!!!!!!!One!of!the!most!important!perks!that!drivers!receive!working!with!Uber!is!the!ability!to! earn!more,!drivers%can%earn%more%than%500$%a%day%whereas%conven6onal%cab%drivers% earn%that%much%amount%in%a%week%(Reference(C).!Not!only!wages!but!also!the!freedom! of!being!your!own!boss!and!choosing!your!own!hours!has!made!Uber!a!popular!op.on! to!earn!money!for!many.! !!!!!!!!!!!!Uber!also!helps!drivers!in!loaning!cars!and!giving!added!monetary!benefits!to!switch!to! Uber!plus!if!they!are!in!their!first!year!of!driving!for!mo.va.on.!Also!the!drivers!were! not!only!earning!more!money!but!also!they!were!guaranteed!automa.c!payments!aaer! each!trips.!The!driver!interface!of!the!app!allowed!them!to!view!their!earnings,!view! high!demand!areas!and!review!passengers.!Less!stringent!criteria!for!UberX!allowed! many!people!to!earn!part!.me!wages!and!made!it!more!popular.!Hence!Uber!treats!its! drivers!well,!the!entry!process!is!much!easier!than!driving!conven.onal!taxis!!and!as!a! result!many!have!joined!the!app,!though!it!may!not!offer!addi.onal!benefits!that!are!

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offered!in!tradi.onal!jobs!but!the!hiring!process!is!much!fasters!and!easy!plus!more! money!is!offered!upfront.!

# ###4.######Is#Uber#vulnerable?#Check#out#LyM,#Curb,#and#Grab#and#decide#how#formidable#they# could#be#for#Uber.#Do#any#of#them#envelope#Uber’s#features?#Or#is#it#the#reverse?# Provide#some#backup#to#your#answer#by#lis'ng#and#comparing#major#features#that# are#offered#by#the#four#in#a#simplified#table.# !!!!!!!!!!!!Uber!is!theore.cally!vulnerable!to!other!plaforms!as!similar!ride!sharing!companies! have!emerged!around!the!world!and!many!difficul.es!arise!as!compe..on!is!globally! fierce!and!customer!switching!costs!are!fairly!low.!We!can!talk!about!Uber’s! vulnerability!by!porter’s!five!forces!analysis!(Exhibit#C)!of!this!ride!sharing!industry.!! !!!!!!!!!!!!Barriers#to#entry:#The!barriers!to!entry!are!not!too!high!as!anyone!with!the!exper.se! can!make!an!applica.on!for!peer!to!peer!ride!sharing.!Though!the!next!step!of! acquiring!market!share!and!marke.ng!the!applica.on!could!prove!costly!but!the!first! step!would!be!rela.vely!easy.! !!!!!!!!!!!!Rivalry:#Compe..on!is!high!as!there!are!some!huge!industry!players!like!Uber!which! captures!major!market!share.!Other!compe.tors!include!Lya,!Grab!and!Curb.!Every!city! now!has!their!own!personal!applica.on!to!hail!cabs.! !!!!!!!!!!!!Suppliers:!Independent!contractors!would!be!suppliers,!though!collec.ve!suppliers! would!have!high!power!in!a!conven.onal!seWng!but!individual!supplier!power!is!low! though!they!have!a!significant!impact!on!customer!ra.ngs.! ############Buyers:#Customer!power!as!an!individual!is!low!as!one!person!leaving!the!applica.on! won’t!make!a!difference!but!group!customer!power!is!high!as!customer!ra.ngs!on!the! applica.on!and!driver!ma]er!a!lot.! !!!!!!!!!!!!Subs'tutes:!The!threat!of!subs.tu.on!is!high!as!switching!costs!are!very!low!and! subs.tutes!are!available!in!the!market!like!cabs,!public!transporta.on!etc.!! !!!!!!!!!!!!Considering!the!above!facts,!Uber!is!vulnerable.!As!Uber!was!first!in!the!industry!to!be! launched!on!a!large!scale!and!had!high!growth!rate.!It!can!be!credited!to!first!mover! advantage.!Many!compe.tor!applica.ons!envelope!similar!features!and!their!user! interface!is!pre]y!similar!(Exhibit#D).!Personally,!compe..on!learns!from!one!another! and!envelope!new!features!to!be]er!themselves!con.nuously.!The!table!below! represents!all!the!a]ributes!across!different!plaforms.!!

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#####Table#represen'ng#different#aZributes#across#various#ride#sharing#pla[orms! (Reference(D)!

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References:# Reference(A:!h]p://www.businessinsider.com/ubers-highest-surge-price-ever-maybe-50x-2014-11! Reference(B:!h]ps://www.usatoday.com/story/tech/news/2017/06/13/uber-market-sharecustomer-image-hit-string-scandals/102795024/! Reference(C:%h]ps://growthhackers.com/growth-studies/uber! Reference(D:( Curb!Reviews:!h]ps://www.google.com/?gfe_rd=cr&ei=PpyoVrj3IMLCUPmRspgJ#q=curb+taxi! Lya!Future:!h]ps://techcrunch.com/2016/09/18/lya-self-driving-network-plan/! General#References# ❖

h]p://www.nasdaq.com/ar.cle/who-are-ubers-biggest-compe.tors-cm743770!

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h]ps://www.zacks.com/stock/news/263249/who-are-ubers-biggest-compe.tors!

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h]ps://en.wikipedia.org/wiki/Grab_(applica.on)#Recep.on!

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h]ps://www.lya.com!

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h]ps://www.grab.com/sg/!

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h]ps://www.lya.com/ci.es!

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h]p://support.gocurb.com/customer/en/portal/ar.cles/1641636-how-do-i-pay-for-myride-in-the-app-!

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h]ps://www.grab.com/ph/driver/!

❖

https://www.grab.com/sg/grabpay/

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Exhibits#

Exhibit#A:#An!adver.sement!about!Lya!shown!to!people!reading!about!Uber!on!certain! websites.!

Exhibit#B:#Showing!invite!codes!on!Uber!

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!

Exhibit#C:#Porter’s!five!forces!analysis!for!Ride!Sharing!industry!

Exhibit#D:#Comparing!Lya!and!Uber!front!user!interfaces!side!by!side

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