March 2009, San Francisco, California,

United States.
The Uber Business Model in a Nutshell:

 The Taxi Driver - Anyone with a driving license and a car can apply for an Uber
driver in any Uber covered cities. After screening, the driver is enlisted in the Uber
system and given an Uber iPhone. This provides a steady income to anyone with a
car without additional hazard or investment.
 The Passenger - Registered Uber users download the Uber app to their phones
and if they need a taxi, they call a taxi via the Uber app. They can also track the
taxi on their phone as it approaches. This service is convenient for the passengers,
provides them relatively low cost comfortable service.
 Fare and Payment - Uber set the taxi fares. Premium fare during peak hours and
flat rate for off peak hours. Passengers pay through their credit cards and don’t
have to pay any cash to the drivers. The fare is based on car type, distance and
peak hour. Payment is secure because passengers pay only via credit card using
Uber app.
 Dividing the Profits - Uber divides the fare, usually 80% to the driver and 20%
to Uber. Even after a 20% pay cut, the taxi drivers earn more than the traditional
taxi services. In some cities Uber had to reduce its percentage because of
competition from similar companies like Lyft and Haio. It is estimated that Uber
have to lower its profit in all the cities it operates in coming months.
 Future Growth – At present, Uber doesn’t own any taxi and because of that
Uber can show a higher amount of its earnings as profits. Uber needs to invest in
research and development for future growth. The initial reinvestment will be a
modest amount, but enough to slow down future earnings. In addition, legal and
regulatory issues will increase costs. Growth opportunities for Uber is vast, it
already covers 200 cities in 55 countries and will progress to dozens of new cities
within a year.

2 answer:

According to the World Economic Forum, a disruptive innovation is a theory that “a smaller
company with fewer resources can unseat an established, successful business by targeting
segments of the market that have been neglected by the incumbent, typically because it is
focusing more on profitable areas.” However, there has been controversial discussion over
whether Uber is actually a disruptive innovation or technology that is improving our overall
economy.
While in class on Tuesday, our professor asked us to give examples of disruptive
innovation. My partner and I believed that Uber was a disruptive innovation because it has
had great impacts on the taxi-cab industry. More and more people are paying for Ubers
through the simple and efficient app rather than paying for a more expensive taxi. Young
adolescents and college students are using Uber to get to places faster, and ultimately,
save more money

Open the Uber app, type the pickup location and the destination and your
estimated price will appear at the bottom of the screen. This price is based on the
traffic and the hour at which you check the estimator, meaning it is subject to change
depending on the availability of drivers.

The conflict between metered taxi drivers and Uber operators has persisted despite an
intervention by the Transport Department and the Police Ministry. The parties agreed last week
to stop acts of intimidation and harassment that claimed the life of an Uber driver a few weeks
ago.

5.

At the recent Africa CEO Forum – held in Geneva, Switzerland – Alon Lits, Uber’s general
manager for sub-Saharan Africa, highlighted some of the challenges the company is facing in the
region, and how it is overcoming them.

Payments

When Uber launched in Kenya’s capital Nairobi, it discovered that a large number of people
were hesitant to pay using their bank cards. “When we engaged with these individuals who were
signing up and had a clear intention to ride with Uber, the biggest barrier was lack of credit card
access or discomfort using a credit or cheque card online,” explained Lits.

To circumvent this reluctance, Uber introduced a cash payment option, which according to Lits
“really transformed the business”. He added the company is slowly seeing cash customers
transition to card payments.

Vehicle financing
Many Uber drivers on the continent don’t own their cars, but work for the vehicle owners. The
inability to access financing is preventing many drivers from buying their own vehicles, and
thereby boosting their earnings.

Uber is now using the data its app collects on drivers – such as their earnings and rating – to
allow them to qualify for vehicle financing. The company has formed partnerships with lenders
such as WesBank (South Africa), Sidian Bank (Kenya) and FirstBank (Nigeria).

“A bank can now look at an individual who previously did not qualify for credit, and give them
access to capital on the back of their track record on the platform,” said Lits.

Internet connectivity

Internet use in sub-Saharan Africa is on the rise, supported by growing smartphone ownership
and connections to multiple undersea communications cable systems. McKinsey estimates
broadband uptake grew 34% per year between 2008 and 2015, and penetration is anticipated to
reach 80% by 2020, up from 20% in 2015.

But despite this, internet connectivity can still be sketchy at times. This is not a challenge Uber
can directly solve, but it has encouraged its drivers to adopt a simple solution: carry SIM cards
from more than one network operator, and simply switch networks if one goes down.

“It is not a fancy solution, but it is a practical one which overcomes the challenge.”

Mapping

Another hurdle has been inadequate city maps and underdeveloped address systems. Although
Uber drivers don’t necessarily need the exact street address of a user, as they can just drive
towards a pin, the company is working on improving its maps of African cities. For example, in
Kenya, Uber has worked with local mapping start-up OkHi which incorporates images of
landmarks rather than only relying on formal addresses, and in South Africa there are currently
cars mapping the roads.

“There is nothing for us at this stage that is a deal breaker to doing business on the continent,”
said Lits.
Uber has an outstanding business model, and it’s been the leader in
successfully disrupting the declining taxicab industry–but all of that will
mean nothing if the company continues to stumble into one
controversy after another.

The name Uber is synonymous with bad PR , and for good reason.

Multiple drivers in the U.S. have been accused of sexual assault, and
in India, a female passenger accused a driver of rape, setting off calls
for Uber to institute background checks and boost its safety measures.

Add to that a high-profile blunder by an Uber executive and concerns

about how the company recruits drivers and treats customer data, and
the ride-share startup faces a precarious situation.

Despite its problems, Uber is still considered safer than most taxi
services, and it has created an efficient system for ride sharing that
seems to be here to stay. The problem is that Uber is terrible at
communicating these things, and it needs to do a better job of
responding to issues as they arise.

Being the leader in a fledgling industry means Uber is a natural target

for detractors, but the company needs to avoid giving its critics fuel to
add to the fire. If Uber wants to restore its public image, it will need to
make a concerted effort. Here are three steps to get started:
1. FOCUS ON GOODWILL MARKETING

Uber has shown that it’s capable of reacting well in tricky situations.
When its automated “surge pricing” kicked in during the Sydney
hostage crisis and rates skyrocketed for rides out of the area, Uber
responded quickly.

The company offered free rides to people trying to leave Sydney’s

central business district, and it reimbursed people affected by the
surge pricing. Uber’s actions were spot-on, and it needs to follow this
script in the future.

Better yet, the next step is to make it a matter of policy that drivers will
offer free rides during crisis situations to help get people out of harm’s
way. A small gesture such as this could go a long way toward
rehabilitating Uber’s image.
2. VALUE DRIVERS AS MUCH AS RIDERS

Uber has spent a lot of time—and used a lot of shady tactics—trying to

undermine Lyft, its chief competitor, and poach Lyft drivers, but the
company needs to realize that the best way to attract drivers and beat
its competitors is to treat its drivers better. Specifically, Uber should
focus on two areas:

1.

EMPLOYEE RELATIONS

I recently rode with an Uber driver who told me that there were
numerous times he couldn’t get technical support because there
were no Uber offices in Los Angeles. Setting up small satellite
offices in various cities would be a quick way for Uber to improve
relations with its drivers. Uber could also help drivers secure
lower insurance premiums or offer perks when they refuel or buy
new cars. Little gestures like these can significantly improve
employee satisfaction.

2.

COMMISSIONS

Currently, Uber collects a commission ranging from 20% to 28%.

Because Uber is in a high-growth market and the cost of adding a
new driver is marginal, it could afford to lower its commission or
offer a tiered system that spurs drivers to take on more rides per
day. The company also needs to adjust its income claims. It says
the median UberX income in New York City is $90,766 a year. In
reality, that probably represents the top quartile. Drivers who
expect to make that much will be sorely disappointed.
3. LET RIDERS CONTROL THEIR DATA

Uber came under fire last year after it was revealed that company
executives could use an internal tool called “God View” to track
customers and view their ride history.

Uber needs to make it clear that users have complete control over their
own data and guarantee a certain level of privacy. The service needs
to give users better visibility into what pieces of data the company
retains and give them the ability to delete or withhold certain data in
some cases.

Uber could expand on this privacy mantra by offering “private rides” in

which information isn’t shared with Uber unless there’s an emergency.
WHAT BUSINESS LEADERS CAN LEARN FROM UBER

Uber isn’t the only company that will suffer from a public image crisis.
For business leaders, there are several things to take away from
Uber’s experience.

First of all, it’s critical that business leaders monitor customer

sentiment scores–whether that’s through public polls or Net Promoter
Scores–and provide easy feedback channels. If those scores start to
drop, they need to determine why and fix the problems. Offer
customers incentives to return, and explain how the issues have been
resolved.

Secondly, business leaders should understand the importance of

safeguarding customer information. Businesses should set strict limits
on what customer data is available to employees and ensure it’s the
minimum necessary to deliver a product or service. Customers
appreciate and expect transparency, and they’ll reward you with loyalty
if you respect their privacy and let them know how you treat their data.

Above all else, don’t be afraid to apologize. Consumers want

companies to accept some form of responsibility when bad things
happen–whether the company was directly involved or not. Consumers
have a certain level of tolerance for mistakes, and if you’re willing to
apologize, they’re usually willing to forgive.
Ultimately, it comes down to whether a company can exhibit humility
and a willingness to change. This is a very simple idea, but it’s hard to
execute. Although Uber isn’t in danger of losing its foothold in the ride-
sharing industry quite yet, if it fails to show a willingness to fix what’s
wrong, it could easily lose its place in the market.