Disruption of Taxi Industry by Uber in Australia - Case Study Example

Disruption of Taxi Industry by Uber in Australia Name Institution Course Date There are an increasing number of people that are embracing the sharing business. All over the world, people are sharing cabs and rent rooms from people they do not know. As a result, these people are contributing to the sharing economy of a country. Sharing economy has rapidly grown over the years to become a mainstream social movement (Henten & Wildekilde 2016, p. 02). As global resources continue to reduced; technologies become more advanced; and non-biodegradable plastic bags increasingly causing environmental pollution and degradation, people are being forced to use products and services that reduce wastage and are more valuable. In other words, sharing business is seen as a way out of these challenges. Sharing is both an intuitive and intrinsic experience and it is part of human development. Indeed, sharing is among the oldest behaviours of human beings (Kennedy 2015, p. 02). This essay discusses disruption of taxi industry by Uber in Australia. It contends that the reforms introduced in ACT and NSW are sufficient to compensate taxi drivers for the disruption caused by Uber and are good for the economy. It also attempts to explain societal changes that have enabled the rise of ride-sharing businesses such as Uber. The taxi industry in Australia significantly facilitates movement of people and plays a unique and vital function within the entire public transport system. Indeed, nearly more than 20, 000 taxis carry an estimated 350 million passengers each year in Australia (Australian Taxi Industry Association Limited ATIA 2014, p. 03). Moreover, it is directly employing thousands of people and provides business opportunities to a significant number of people. It generates estimated total revenue of more than $2 billion (Wallsten 2015, p. 04). Taxis are important in servicing the needs of community members notably people with disabilities, elderly, business travellers, and young or vulnerable people. Taxis in majority of Australian cities are expensive, unreliable, untidy and slow (Denniss 2016). Primarily, taxis fares are mainly paid in form of cash. However, Uber has revolutionized the industry with non-cash payment method. It is also reliable and convenient because all one needs is an Uber app in his or her smartphone to locate the nearest taxi. Uber business model has transformed and at the same time disrupted the taxi industry in Australia. Indeed, the rise of Uber has brought various social costs and benefits. It enables efficient use of capital and as well as substantially enhancing welfare of consumers (Manu 2015, p. 95). For instance, it reduces incentives of consumers to purchase personal cars due to convenient service provided by Uber. As a result, people save more money and environmental pollution is not increased. It has eliminated many transactions costs that have characterised the taxi industry for a very long time (Gulati, Mayo, & Nohria 2016, p. 129). This is particularly true in case of search costs that are dominant in traditional model of taxis. In contrast, there are no search costs in using Uber as one need an Uber app that connects drivers offering transportation services and passengers seeking these kinds of services. Nonetheless, Uber has been criticised for its disruption in the traditional taxi industry. Uber has been heavily criticised by other stakeholders that offer traditional form of taxi services. It has been argued that Uber is unfairly competing with traditional taxi drivers because it enters the taxi market by not abiding to due procedural regulations or schedules of fares. Secondly, Uber has been accused of conspiring to become a monopoly (Manu 2015, p. 95). The Uber taxis and their drivers have been regarded unsafe and not fully insured. It is thought that the services provided by Uber enable discrimination either by drivers or passengers. Additionally, it is likely that Uber will invade the privacy of customers. All these are criticisms that have been labelled against their disruption of taxi industry. As a result of severe criticisms by other taxi operators against Uber, reforms in Australian Capital Territory (ACT) and New South Wales (NSW) have been introduced to compensate taxi drivers for the disruption caused by Uber. Uber have attempted to be flexible by avoiding taxi regulations that are costly and it restrict control over significant number of taxi’s business operations. It includes having control over important business features such as pricing and control of labour supply. Uber has been able to achieve this through its classification strategy as a ‘technology company’ rather than a taxi business (Wallsten 2015, p. 03). It provides a free-market platform to various drivers and customers seeking rides by connecting them together. The company is facing increased pressure from taxi drivers’ unions, tax lobbyists, and governments aiming at shutting down Uber by claiming that it is not operating within the confinements of traditional taxis laws and acts as an illegal taxi service (McGregor, Brown, & Gloss 2015, p. 02). In ACT and NSW, various reforms have been introduced to deal with disruption caused by Uber to the taxi industry. NSW government has legalised Uber as a taxi company through introduction of reforms aiming at creation of ‘modern point to point transport industry’ (Enoch 2015, p. 915). The taxis that are facing hardship due to the introduced reforms will be compensated. Uber drivers are required to start paying licence fees and have their cars checked for safety more frequently. This will increase the costs of Uber drivers and in some way, benefit other taxi companies. The new reforms at NSW and ACT include compensating traditional cab drivers in order to adjust to the new regulations. Regulations relating to car hiring will be repealed with appointment of new commissioner and regulator to oversee all the operations of the taxi industry. The adjustment package set aside for taxi drivers is sufficient to compensate them. In any case, this compensation should not have been there altogether since it is a competitive world and businesses are free to compete so long as it is undertaken within the set regulations and policies governing the industry. Reforms are sufficient as it will lead to creation of new jobs and the taxi industry will expand meaning that there is a possibility of higher profits in the future. These reforms are good for the economy. An effective and efficient economy is the one that it is well regulated and all business enterprises contribute to the economy. The requirement that ridesharing businesses especially drivers in the taxi industry to seek accreditation is generally good for the economy since people are safe to conduct their business. All similar businesses should be regulated in the same manner and the reforms introduced in NSW will streamlined the taxi industry and ensure that there is no discontent and various taxis companies and models does not sabotage each other. In this case, businesses will increase generating more jobs hence improving living standards of many people. By contributing to the overall economy, the taxi industry will be ensuring that the economy is improved. Legalising Uber will provide consumers with more choices hence encouraging healthy competition in the taxi industry. In order for economy to grow and sustain itself, there should be presence of competition which forces provision of products and services that satisfies the needs and wants of customers. For many years, humans carried out barter trade, hunted and gathered together as well as forming cooperatives for their agricultural produce. It is not a new phenomenon and various societal changes have enabled the rise of sharing business. Ride-sharing business is a relatively new business model that is increasingly contributing to the entire economy of a country. It provides consumers with the power of getting what they require and need at a cost that is both less personal and environmental (Gansky 2010, p. 49). In Australia, ride-sharing business is increasingly becoming very popular thanks in large part to innovative strategy of Uber. Trust is one factor that has played a significant role in continued growth of ride-sharing business. In fact, it is an enabling factor that is well ingrained within all sharing-business activities (Cannon & Summers 2014, p. 02). It is a central factor to the success of ride-sharing business in an economy. In order to successful carry out ride-sharing business, there must be trust between all the parties involved. Riding with a stranger involve high degree of trust between both parties. People have realised that sharing is an efficient way of utilizing the scarce resources in their environment and trusting each other is a necessity that will lead to this achievement. The widespread common desire of communities is another societal change that have enabled the rise of ride-sharing model of business. In a sharing business, people are involved in various transactions including ‘extensive social experiences’. Gansky (2010, p. 50) notes that adoption of ride-sharing business fosters ‘small world’ type of environment all over the world as people continuously reconnect with members of the local communities and their neighbours. Owyang (2013, p. 05) contends that this hidden need to connect is evident in several sectors of a sharing economy including ride-sharing business. Individuals are increasingly favouring transactions involving some form of getting to know each other. Technology has massively advanced in the last two decades. The advent of smartphones has provided new business opportunities with online businesses increasingly become a norm in many societies. Many people have internet connectivity and they use their smartphones to connect to each other through various social media platforms. Indeed, social media has become an important avenue to market businesses. The increase in ownership of smartphones, high internet penetration and advent of social media has facilitated rise of ride-sharing business. References Abelson, P. (2010). The High Cost of Taxi Regulation, with Special Reference to Sydney. Agenda: A Journal of Policy Analysis and Reform, 41-70. Australian Taxi Industry Association Limited. (2010). Submission to the competition policy review from Australian Taxi Industry Association Limited (ATIA). 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