UBER: Changing the Way the World Moves

Service Marketing (A) || Group - 3

TEAM MEMBERS
2021PGP098 || Chiranjibi Dalabehara
2021PGP423 || Varnika Gupta
2021PGP527 || DHRUVARAJ PRADIPKUMAR HUPARIKAR
2022PGEXC03 || Alizée Dorson
About Uber:
Uber launched officially in 2015 with the name of UberCab,
by Travis Kalanick and Garrett Camp, as a private luxury car
service for the executives of San Francisco and Silicon
Valley. At the beginning, customers had to email Kalanick for
a code to access the app and service.
Uber used to charge 20% flat as its commission and in return
it provided convenient & efficient service to the executives.
After getting a cease-and-desist order from the CPUC and
SFMTA for operating without Taxi License, it changed its
name from UberCab to Uber with an argument that it only
provided the software platform to connect the customers and
drivers, not provided a taxi service.
On February, 2011, Uber raised $11 million from Benchmark
with a valuation of $60 million. From then onwards, its
valuation increased over the years. By late 2015, Uber had
raised $8 billion (total) with a valuation of $51 billion.
Gross annual revenue of Uber was leaked to be $500 million
in 2013 with a net revenue of more than $100 million. It was
estimated that net revenue had increased to more than $400
million in 2014 and got doubled in the next year.
Uber had always prioritized for expansion and growth over
profitability. It is also assumed to be a loss making company.
Uber’s working model:
For customers, it was very easy to use the Uber
application. After downloading the app, they had to create
accounts and give credit card information. To book a cab,
they just have to open the app & press a button. Customer
was able to see the driver details and the followed path over
the app with Uber’s built-in GPS system. Payment used to
get deduct from the account with the credit card information
& customer used to get an email receipt for the same. Time
and Distance of the trip were used to get the price for the
Uber trip. Customers were informed before Price Surging
takes place.
For Drivers, the system used to work in reverse. After a
customer requests for a Car, a near-by driver gets an option
to accept or reject. They were provided with the customer
details through the app. Few additional features like Heat
Map, breakdown of earnings, feedbacks of customers were
present on the Driver’s app.
Uber’s headquarters have a facility such as God View (tiny
cars and tiny eyeballs). Uber found pickups points for drivers
around the city using various data analysis by their team.
 Problem Statement: Competition and Sustainability

Case Facts: Recommendations:

● Taxi industry was conventional taxi medium where there ● Increasing Switching cost so as to reduce switching
was not online booking system and cabs needed to be number of drivers as well as users
booked directly based on availability ● Incentivising drivers so as to increase their loyalty towards
● Because of high prices to get medallion most of the the Uber
medallions were bought by taxi companies and leased to ● Time to time discounts and offer to users to increase their
drivers, so the owners earner high profits where as the retention rate
drivers earned very less. ● Working on product differentiation and increase customer
● In US most taxi cabs required medallion which was really perceived value by it.
hard to get because of regulatory processes and through ● By continuing upgradation in offering such as autonomous
this medallions no. of cabs were capped in most of the cars with more accuracy
cities.
● Other Platforms like China’s Didi, Lyft who have same
model as Uber and reducing Uber’s market share
significantly
● Threat from substitutions like Public Transport services,
Car Rental services etc.
● Poaching of driver by rival platforms present in the market
 Problem Statement: Clashes with Government Regulations over the time

Case Facts: World-wide Regulation Status:

● Uber previously known as UberCabs was perceived as
illegal taxi services company by Govt. and Taxi Cartel.
● Uber’s business model doesn’t treat drivers as direct
employees, to give them benefits like any other
employees.
● In 2010, Uber received cease-and-desist orders from
California Public Utilities Commission & San Francisco
Municipal Transportation for operating without taxi licence.
● Clashes with regulators and courts in multiple countries,
sometimes resulting in protests and violence.
● Mayor de Blasio threatened to put cap on number of
vehicle Uber can operate in New York.

Views:
● Uber is just a platform which has simplified the user
journey & experience for taxi booking compared to what
used happen earlier.
● Government regulations are important but not required to
be implemented excessively if some technology is
disrupting market for a better change.
● Discouraging Uber’s operations just to encourage other
competitors like Taxi Cartel or State Run Luxury car rental
services is wrong if its not beneficial for end users
Recommendations:
● Defining driver selection process and sharing it with
Governments so as to maintain transparency and ensure
the safety of passengers.
● Aligning policies with respective governments to certain
extent so as to avoid clashes and run smooth operations.
● Adding more employee benefits scheme so as to avoid the
criticism of partner not being treated as employee
 Problem Statement: Surge Pricing Effect

Case Facts:
● During 2011's New Year's Eve, demand was extraordinarily
high, and prices were seven times the average.
● In 2013, when East Coast snow storms occurred, prices
rose dramatically once more.
● A large number of people expressed their unhappiness,
like Jessica Seinfield, who posted a picture of a $415 bill
on Instagram to express hers.
● Even with these criticisms, Uber continues to employ this
method to ensure that the number of passengers meets
demand during peak hours.

Recommendations:
● Uber should provide additional drivers for times when
demand increase so the prices don’t increase. It is possible
to expect some increases depending on the date, the
weather forecast and the information.
● Uber should promise not to exceed a certain percentage
above the base price even in times of high demand, as
they have done before. (Taken from the Exhibit 3 of the Case:
● Even though surge price effect can’t be removed UBER: Changing the Way the World Moves)

altogether, but can be lowered keeping customer

satisfaction in mind.
 Problem Statement: Incurred Losses

Case Facts:
● In 2013, its gross revenue was roughly around $500 million
and net revenue $100 million.
● In 2014, net revenue had grown more than $400 million
and a year later, company doubled that
● Uber was widely assumed to be taking a loss
● Investments came from high profile firms like Menlo
Ventures, Google Ventures, Fidelity and BlackRock
● Uber was subsidizing riders to gain control in Asian
markets
● Uber continued to invest in R&D

Recommendations:
● Uber should follow same operate-at-loss feature to grow
approach and expand that other disruptors have used. Eg,
Amazon
● Keep attracting investors and maintain low levels of debt
● Uber should stay private and re-evaluate IPO in next few
years.