Possible Realistic Approach of Uber - Case Study Example

Uber Taxi of the Table of Contents Introduction 3 Background 3 Technology, Data and Pricing Strategy ofUber 4 Challenge in Market Expansion 7 Conclusion 8 References 9 Introduction Uber is an International transportation network company which has its headquarters in San Francisco, California. This US transport company was founded on March, 2009 by Garrett Camp and Travis Kalanick. The main functions of the company include developing, marketing and operating the mobile app known as Uber mobile app. Uber’s service is available in 58 nations and 300 cities across the globe (Bloomberg Business, 2015a). The aim of the study is to identify the possible realistic approach of Uber. It also tries to evaluate its technology and data process system along with its pricing strategies. The research also tries to focus on the challenges faced by the company when it adopts the policy of progressive growth. Background There are basically three approaches of market operation system out of which Uber can follow any one in order to function effectively in the market. Three approaches are Conservative, Liberal and Radical approach (Carson, Thomas & Hecht, 2015). Conservative approach is against any fundamental change. The conservative approach can be identified with limited rules and regulations that dominate market operations. These rules and laws are implemented by the government like trade restrictions, monopoly rights, etc. Liberalism on the other hand is opposite to conservative approach. In a liberal market, all the individuals have the right to procure and protect their business and property. They are rational decision maker and are not controlled by the government. Rational view declares all men are equal. They have the right to maximize their profit and they are believed to compromise with each other to gain personal materialistic satisfaction. These lead to competition in the market which keep the prices under control and provide high quality product. Moreover, since the government has a small role to play, it points out to the fact that there exists social benefit for the consumers and the society. Apart from that liberalization also gives birth to different labor Unions. However, the fundamental view argues against the capitalism that exists in market economy in the form that capitalist society is marked by the presence of conflicts between different races. It also believes that capitalism is the reason behind inequality that exists in the society. Most importantly, It considers the role of government as neutral since the government is believed to support the capitalism (Listed, 2014). According to the above thorough analysis, it is recommended that Uber should adopt the liberal approach. The liberal approach will give the company the freedom to work efficiently. It will also make the company competitive which will enhance its productivity and services. The company will get the opportunity to interact with other companies, their workers, suppliers and customers in any method they prefer but it should be within the regulations of the government. The liberal form of market is vperceived as a free market enterprise which points that a company can set its own price level depending on the cost of productions as well as marked demand. It is also true liberal approach leads to a competitive market and as a result there is less chance of monopoly. However, there are government restrictions which are mainly enforced in order to stimulate competitiveness among the companies and restricting the rise of monopoly. Uber will benefit from the liberal view since it will foster its business activities since the limited government interference will encourage it to deliver its service to those customers who have low level of income. This will increase the consumer base of Uber (Bloomberg Business, 2015a). Technology, Data and Pricing Strategy of Uber Uber applies highly advanced technology that is visible in its updated apps that are available. The app’s other version known as UberPop was launched in 2014. In this app, on one hand, users are attached with the drivers who do not have chauffeur and professional taxi licenses and on the other, supplemental insurance is covered by Uber. Uberpool service was also introduced at the end of 2014. UberPool enables a rider to know who is riding in the same direction and who is being hired first. If the riders are unable to find a match, then a discount is offered on a regular Uber trip. There is another app known as UberX which allows standard low-cost service with Uber’s own drivers and cars. The company has experimented in 2014 with pilot testing of online food orders known as UberFresh. It also has package delivery service called Uber Rush which picks up couriers from anywhere in Manhattan. The other services include Uber Essentials or Corner Store service which offers the competence of ordering from a list of 100 items online. Uber integration via API was installed in Google Maps in 2014 (Bloomberg Business, 2015a). However, a unique technological feature of Uber is that it efficiently solves the Travelling Salesman Problem (TSP). Travelling Salesman problem is to find a shortest probable route that covers each city and returns to the original point in a certain set of cities and their distances (Carson, Thomas & Hecht, 2015). Figure: Depicting Travelling Salesman Problem (Source: Bloomberg Business, 2015a) Uber has a skilled group of computer scientists who apply complicated mathematical formulas to create a solution to this age-old economics problem affecting the cab industry. Its objective is to optimize driving direction with sufficient cars so that it can pick up maximum number of customers in the least quantity of time (Bloomberg Business, 2013). Uber often faces this problem of Travelling Salesman but it has a team of 15 members that includes community support reps, engineers and driver operations managers who utilize different social media sites to make an interaction with the riders. This problem gets aggregated when the company has to find the shortest distances between pick-ups along with circumstances like some kind of natural disasters or any game show. To resolve this, Uber’s system tries to track its ride-request pattern in various parts of the city so that it can measure and forecast demand. In order to avoid situations of natural calamities like rainstorm and any mega events that could affect traffic, it has weather forecast data and expert employees who keenly monitor the occurrence of any special events in the city. At the end of each day, it designs a chart to examine the accurateness of its demand predictions of riders and the actual rate of demand in the city. Using these charts, it modifies its prediction algorithm. It has also implemented heat-map system which signals where the demand is likely to be more so that the drivers can be around those points (Bloomberg Business, 2015a). Figure: Heat Map System (Source: Bloomberg Business, 2015a) Bloomberg Business (2015) has pointed out that there is another system which shows “God view” of the city. It basically exhibits active Uber cars in order to show that the quality is maintained at all times. Figure: “God-view” (Source: Bloomberg Business, 2015a) It is not only known for its cab business but also the app that employs luxury sedans which raise its brand value. In order to drive a cab, the drivers must display a “medallion”. The medallions are implemented to maintain regulations of the quality and quantity of cabs driving around the city. However, the number of medallions has remained constant even though the traffic and the population have increased. Due to this limitation there is huge competition among the cab drivers. Also, due to the scarce car supply in the city, there is immense competition among the riders as well. Uber provides an app-powered car service that aids drivers to earn income outside the medallion system. A startup was launched in 2010 which partnered with other sedan services so that it can employ their drivers and attach them with iPhones that contained the Uber drivers’ app (Bloomberg Business, 2015a). As a result, the customers can use the Uber app which is available on both Android and iPhone to hire drivers. Even customers can send a text message to Uber’s number. With the arrival of the message, the drivers get the coordinates of the rider. The riders can also pay through their credit cards online. Uber does not charge anything for the app. However, the riders are required to pay a premium every time they hire an Uber cab. The charge is 40 percent more than any regular car fare. The premium is charged because it delivers its services in a timely manner. The company agrees that their service is expensive. However, the company soon plans to introduce a tier level pricing arrangement for riders which will depend on the driver’s quality and car type. The managers have chosen the price leadership strategy. The company has introduced UberX which provides lowest possible price to attract more customers. It has noticed that the transport system of the company is highly elastic (Bloomberg Business, 2013). Challenge in Market Expansion Just like any other growing company, Uber also adopts the strategy of market penetration and expansion. It now plans to expand in Asia. It has already expanded its business operations in Singapore, Taipei, Taiwan, India (Bangalore, Hyderabad and New Delhi), Thailand (Bangkok), China (Hong Kong, Beijing), Malaysia and Japan (Tokyo). However, the company has encountered bumps on its road. The regulatory policies in Asia are unstable like in 2013. According to Bloomberg Business, (2015b) local government of China imposed a ban on cab hiring app and then the local government of Shanghai approved the application of cab hiring app but with the condition that the customers should not be charged with any extra charge other than the trip fare. There are other emerging cab apps in Asia which impose a threat to Uber. With the advent of other car hire services like TaxiForSure, OLA Cabs in India and Didi Dache, Yaoyao Zhaoche in China, it is becoming challenging mission for Uber to enter and establish itself in Asian markets. Didi Dache has also tied up with China’s largest search engine Baidu’s mapping app for iPhones (Bloomberg Business, 2015b). The company requires a market concentrated with rich people. Another hurdle that the company is facing is the lack of Smartphone users. Also the company is believed to be investing heavily in the development of its app for androids. As a result, it is not focusing on providing its service through text messages. It is also a challenging task for the company to deliver its service in countries where there are cultural and language barriers (Bloomberg Business, 2013). Conclusion The study could identify the right approach that Uber need to adopt. Liberal approach is an effective option for the company as it provides stimulus for its development with adequate government interference that will help the company to maintain its high standard. The company has a pool of skilled personnel who provide scientific solutions to its unique problems. Its newly revised pricing structure is also proving to be efficient. However, to deal with the problems in Asian market, Uber is trying to eliminate cultural barriers by employing local people who know the area well. Given the superior R & D team, it will be able to overcome these initial hurdles and for that it requires some time to stabilise itself in foreign lands. References Bloomberg Business. (2013). Board Director Pay Hits Record $251,000 for 250 Hours. Retrieved from Bloomberg Business. (2015a). Company Overview of Uber Technologies, Inc. Retrieved from Bloomberg Business. (2015b). Chinese Uber Rival will Raise Funds at $15 Billion Valuation. Retrieved from Carson, R. B., Thomas, W. L., & Hecht, J. (2015). Macroeconomic Issues Today: Alternative Approaches. London: Routledge. Listed. (2014). Ira Millstein: Why Governance is our Best Defence. Retrieved from Read More