Uber: Transforming Transportation


Uber is a company that has taken new technological developments and used them to create a superior service within the transportation industry amid the changing sociocultural influences of today’s societies. In their strategies to align stakeholder interests and expand into new territories, Uber has instigated some public concern about their operations, but has overall set the company up with the potential to provide a great value to society. In addition to providing an explanation of why Uber has been valued so highly in the eyes of investors and the admiring public, my analysis of Uber will look at whether the company is providing sufficient benefits to outweigh its downsides on the basis of consequential ethics. As a user of Uber’s App myself, the analysis will provide a foundation for Uber customers to decide whether this is a company worthy of our business.

The two essential elements (outside of personnel roles) to Uber’s services are their cars and their mobile app. In terms of cars, Uber riders are given the choice between UberX (low-cost), UberTaxi, UberBlack (high-end sedan), UberSUV (for larger parties), and UberLUX (luxury rides).

http://startups.fm/2013/09/02/luxury-car-experience-now-in-india-as-uber-rolls-in-with-its-bangalore-launch.html

The Uber App makes the riders’ experience effortless through the technological developments that have emerged in recent years. With one tap on Uber’s App, customers can get a ride using their phone’s GPS to detect their location and connect them with the nearest available driver. Uber ensures reliable pickups with their app by providing riders with a map to track the drivers’ location and details on the driver and their car. The Uber experience is also cashless; riders’ fares are automatically charged to their credit card on file with the tip included. Uber’s service allows for immediate pickup at the touch of a button without having to wave down a taxi at a cost 45% cheaper than a taxi. In addition, Uber just recently launched uberPOOL that connects riders with others traveling along the same route. This further reduces the cost, making uberPOOL 70% cheaper than a taxi. [Kingsmill]

http://www.taxifarefinder.com/newsroom/2014/10/20/uber-vs-taxi-price-comparison/
Price Comparison: Taxis, UberX, & Uber Black

After each trip, riders rate and give feedback on their drivers in order to provide future riders with more information. Unlike taxi drivers, Uber drivers have to be on their best behavior since negative reviews affect their ability to drive in the future. This review process also works in reverse – Uber drivers rating riders – to encourage passengers to act respectfully. In further effort to ensure the riders’ safety, the drivers must pass a three-step criminal background screening for the U.S. before they even get a change to be reviewed in the rating system. 

Uber first started in 2009 in San Francisco and has expanded rapidly, now operating in over 250 cities and 51 different countries. From New Year’s Eve in 2012 to New Year’s in 2013, Uber’s growth rate was an impressive 369%, and in 2014, Uber’s growth rate was 300%. [Kosoff] The reason behind such massive growth is Uber’s attempt to expand as rapidly as possible so that if it gets big enough quickly, the political price for an elected official could be too high to shut their operations down. The company is doing this by undercutting their competition on price, even if that means losing some money in the process. These price-cuts have created unrest for the drivers who are worried that reduced prices will mean cuts in their pay; however, Uber is arguing that in the end, drivers’ pay will increase, because lower prices means more demand which means more rides for the drivers. [Wohlsen]

Uber is utilizing the strategy of being a “loss leader” through these price-cuts in order to grow their customer base as quickly as possible. This strategy is similar to Amazon’s strategy: low prices and free shipping deals eat away at profitability, but they also keep customers coming back. Neither company is afraid to lose money. Rapid expansion into cities increases their customer base, and therefore, their dominance over the taxi industry. As popularity increases in one city, there will be spillover effects in other cities, further increasing demand for Uber’s services. [Wohlsen] However, this rapid growth strategy has also result in some issues for the company.

Growth & Marketing Strategy
Growth & Marketing Strategy

Over the past year, Uber has been bombarded with issues regarding their privacy policies, drivers as liabilities, and regulation challenges in national and international cities. Some details on these issues are given in the video below:

In response to these issues, Uber has become a master of public relations. They turn their legal obstacles into an asset that drives growth by letting controversies play out in the eyes of public opinion. As a result, Uber, with their pro-consumer platform, often gains public support for the company, which helps them overturn and change laws. [Kingsmill]

A key factor of Uber’s continued success is the company’s potential. Uber is taking an established infrastructure of car ownership and transportation and utilizing it in a totally new way. It’s a win-win for the drivers and riders, and the economic, environmental, and social benefits are huge. Uber is changing the mindsets of societies by initiating the transition from people purchasing their own cars to purchasing their own rides. Kalanick, Uber’s CEO, explains: “We think that cities deserve to have another transportation alternative. It sounds crazy to have to say that but you have to do that because you have incumbent interests which are often trying to curtail innovation and curtail sort of transportation alternatives that might compete with their existing business (Brown).” Uber and other transportation network companies are able to have a significant impact on the industry because of the technological developments and sociocultural influences that exist today.

Uber plays is a prominent part in the rise of the sharing economy and on-demand delivery service industry, which have blurred the lines between personal and commercial property and space. The sociocultural influence of the sharing economy has led to the success of the transportation network companies, because of the new demand for instant gratification services. This includes the sharing of everything from commercial real estate to household goods, which is made possible by mobile apps and online platforms. In addition, recent trends show the number of Americans driving is declining, as can be seen in the below picture. Market research also suggests that Millenials have a greater brand attachment to a smartphone than to an automobile. [Lesser] These trends indicate a transition away from traditional car ownership in search of new, convenient and less costly options, fueling the demand for public transit ridership.

http://dialog.scarborough.com/index.php/millennials-driving-habits-are-geared-towards-alternative-transportation/
Transit Trends

In addition to their prominence in the rise of the sharing economy, Uber has also already begun experimenting with on-demand delivery. Recently, Uber began its foray into on-demand food delivery by launching UberFRESH, a meal-delivery service; Uber Rush, an on-demand courier service; an on-demand delivery service for convenience-store goods; and they even experimented with an on-demand adoptable kitten delivery service. [Kosoff] This strategy for future growth has the potential to disrupt a whole variety of industries. It is because of this potential that investors have given Uber a current valuation of $18.2 billion.

Ethics

In analyzing the ethics of Uber’s business operations, I will use consequentialism as defined by William Haines: “Of all the things a person might do at any given moment, the morally right action is the one with the best overall consequences. (Haines, 2)” This means that a company should make decisions based on which decision/action results in the least harm and provides the most benefits for its affected stakeholders. While consequential ethics has many critics, it provides a wider analytical basis when looking at the ethics of a company with several key stakeholders. I will therefore examine the transportation, environmental, economic, and social impacts in relation to the benefits and downsides of Uber’s key stakeholders on the basis of consequentialism.

Transportation Industry Impact:

Transportation network companies, like Uber, are threatening the taxi industry because they are providing a superior service. One article from the New Yorker describes the struggle between Uber and the taxi industry as: “It has become a fight between free market innovation and old-guard competition-killing regulation (Goldwyn).” With GPS and real-time passenger feedback, anyone can be a professional driver. The new companies are able to provide a greater variety of ride options at different prices, they improve driver efficiency by matching drivers with rides more quickly, and they weed out bad drivers.

Uber is able to provide all of these enhanced services because they have capitalized on the technological developments that are continuously becoming available to society. [Goldwyn] Kalanick, Uber’s CEO, explains: “We think that cities deserve to have another transportation alternative. It sounds crazy to have to say that but you have to do that because you have incumbent interests which are often trying to curtail innovation and curtail sort of transportation alternatives that might compete with their existing business (Brown).” Although taxi companies are now facing what they deem as unfair price-cutting competition from Uber, who is not disadvantaged by the same taxi driving regulations, Uber has “Insisted the laws are irrelevant because it’s not a taxi service – it’s a technology company. (Globe & Mail)” While these regulations were imposed in order to protect customers and ensure service standards, they also protect the big taxi cartels that are fighting to keep their monopoly in the car service industry. Their existence as a monopoly ultimately limits the improvement of customer service. Uber is therefore providing benefits of enhanced service to riders and drivers, outweighing the downsides imposed on the taxi companies.

Environmental Impact:

Uber offers many environmental benefits through its current services and potential partnerships with other companies to better utilize cars. More than encouraging ridesharing and uberPOOL to reduce emissions now, Uber’s future could hold a partnership with Google and other innovative companies to create a driverless ridesharing service. Because of the rise of the sharing economy, not only could Uber encourage a societal transition from riders choosing access rather than ownership, but a combination of Google and Uber’s services could eliminate the liabilities that come from having drivers by getting rid of that role entirely. [Wilhelm & Tsotsis]

In addition, more than just providing driverless ridesharing, this combination of services could provide driverless delivery of any on-demand services, as that is the other focus area that Uber intends to infiltrate. [Wilhelm and Tsotsis] Through potential partnerships with other innovative companies, Uber will be able to increase efficiency and reduce emissions. Uber has the potential to transform the transportation industry by eliminating the need to own a car, therefore establishing a profound benefit to the environment and surrounding communities.

Economic Impact:

Uber’s greatest economic benefit is attributed to its job creation. According to consequentialism, “In the long run only the results remain, so the only thing that really matters about an action is in its results. (Haines, 6)” This notion is best realized in the economic gains created by Uber.

An article from the Wall Street Journal discussed a study that Uber did on the 160,000 drivers who work under contract for the company in the U.S.. It showed that the number of drivers is doubling every six months, adding 40,000 new drivers just last December. In addition, Uber recently partnered with UN Women, pledging to create 1,000,000 jobs for women globally by 2020. This job creation provides distinct benefits for the drivers, because there are a lot of professional drivers who are out of work and are now using Uber to make a living. However, about half of its drivers become inactive after one year, either because they quit or were fired. The study also showed that 64% of Uber’s total number of drivers came from the part-time job opportunity the company created for semi-professional drivers. In addition, 62% of Uber drivers also have at least one additional source of income, which shows that Uber is not an economically feasible full-time job for semi-professional drivers, but simply an additional source of income. The study also shows that Uber drivers are often paid more than taxi and other car-service drivers based on average hourly wages. [MacMillan] Although I mentioned drivers’ complaints with price-cuts earlier, the economic benefits of job creation to the communities Uber operates in, outweigh drivers’ complaints with price-cuts since the majority of the drivers are only using Uber as an additional source of income and the price-cuts are estimated to lead to even greater demand for ridership.

http://techcrunch.com/2015/01/08/uber-us-price-cuts/
Chicago Fares Example

Social Impact:

Uber’s social benefits are clear in job creation and improved transit options. The rising popularity of the sharing economy and on-demand delivery has materialized due to recent technological innovations that are perceived by some to be leading society into a social trap. As explained in Orr’s article, “The Problem of Sustainability,” he states Robert Costanza’s definition of social traps: “’Social traps draw their victims into certain patterns of behavior with promises of immediate rewards and then confront them with consequences that the victims would rather avoid. [Orr, 75]’” Orr describes technology, spurred by economic growth, as being the biggest social trap of all.

Many of the sharing and on-demand services claim to free up people’s time that can be spent on family, friends, or work and not on time-wasting chores. However, a Carnegie Mellon report from 1998 showed that “web-surfers started talking less with family and friends, and grew more isolated and depressed. (Smiley)” The study demonstrates the downsides of technology on human socialization. Orr poses the ethical dilemma of the advancements in technology in relation to social sustainability when he says, “At every turn, the prospects for sustainability hinge on the resolution of problems and dilemmas posed by that double-edged sword of unfettered human ingenuity. (Orr, 85)” While these technological innovations make day-to-day lifestyles simpler and more efficient, they encourage anti-social behaviors leading into this social trap. While Uber’s move into delivery services promotes anti-social behavior, its service in the transportation industry actually provides more opportunities for individuals often shut-in to get out and socialize without the concerns of drunk driving, hazardous weather, and limited parking. Therefore, as a technological innovation, Uber as a transportation service counteracts the typical shut-in behavior that leads into the social trap caused by the instant gratification services.

http://statescoop.com/boston-uber-sign-unique-data-sharing-agreement/
Go Somewhere

According to consequentialism, “The right action is the one that causes the most happiness. (Haines, 2)” One example illustrating the public’s favoritism of Uber over other taxi services is a recent strike by London’s black cab drivers that caused Uber’s subscription numbers to escalate to 850%. [Kingsmill] In addition, a recent study found that 78% of Uber drivers are satisfied with their experiences working for the company. [MacMillan] Both of these examples demonstrate the public’s satisfaction with Uber over taxi services. In light of these accomplishments, Uber’s continued success depends on the trust of its riders and drivers, so it has been making efforts to strengthen its privacy and safety practices. “If the Uber service did not satisfy the needs of its customers and drivers, it would have no influence and would die. (The Australian)” Uber is an innovative company focused on the future and long-term results. While the company is still facing security and legal issues as it expands into new territories, its widespread admiration amongst its driver and customer base indicates the value it has created within the transportation industry. In my opinion, this value prevails over the societal consequences that have resulted from its business operations thus far.

 

Works Cited

Arthur, Charles. “‘Sharing Economy’ could be the Net’s most Divisive Revolution Yet: Concerns are Growing that the Philosophy Behind the New Wave of Internet Star Names such as Airbnb and Uber Simply Disguises a Rapacious Business Model, Writes Charles Arthur.” The Observer: 44. Dec 21, 2014 2014. Print.

Brown, Morgan. “Uber – what’s Fueling Uber’s Growth Engine?” GrowthHackers (2014) Print.

Gigaom: The Problem with Uber’s European Job Promises. Chatham, United States, Chatham: Newstex, 2015. Print.

Goldwyn, Eric. “Will Uber Destroy the Driving Profession?.” The New Yorker (2014) Print.

Haines, William. “Consequentialism.” Internet Encyclopedia of Philosophy Print.

Kingsmill, Denise. “Uber is Starting to Look as Hungry for Growth as Amazon is – and there’s Not Much London’s Black-Cab Drivers can do about it.” Management Today (2014): 20. Print.

Kosoff, Maya. “Uber Seems to be an Unstoppable Force.” Business Insider (2014) Print.

MacMillan, Douglas. “Corporate News: Uber Touts its Employment Opportunities for Drivers.” Wall Street Journal: B.3. Jan 26, 2015 2015. Print.

“The Meter’s Ticking on Uber’s New Humility.” Globe & Mail (Toronto, Canada): A11. 12/29; 2015/3 2014. Print.

Mims, Christopher. “Keywords: Uber and a Fraught New Era for Tech.” Wall Street Journal: B.1. Nov 25, 2014 2014. Print.

Orr, David. “The Problem of Sustainability.” Hope is an Imperative Essential (1992) Print.

Shekhtman, Lonnie. “Uber Builds a Foothold in the Worcester Market.” Telegram & Gazette: D.12. Feb 8, 2015 2015. Print.

Smiley, Lauren. “The Shut-in Economy.” Matter 2015 Print.

“Uber.”Web. <https://www.uber.com/>.

“Uber Lessons in Disruption.” The Australian (National, Australia): 10. 01/05; 2015/3 2015. Print.

Wilhelm, Alex, and Alexia Tsotsis. “Google Ventures Puts $258M into Uber, Its Largest Deal Ever.” TechCrunch (2013) Print.

Wohlsen, Marcus. “Uber’s Brilliant Strategy to make itself Too Big to Ban.” Wired (2014) Print.

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One thought on “Uber: Transforming Transportation”

  1. You raise several important issues. Uber is shaking up the transportation sector. I wonder if its loss-leader strategy is a mismatch for a trust-based mechanism at the heart of its app and matching strategy.

    Like

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