In this Article, Sakshi Jain pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata analyses the Business Structure of Uber.

Introduction

Uber Technologies Inc. is a largest global taxi technology company which operates Uber App. Uber is essentially an On-Demanding taxi hailing services which people with smartphones use to book a trip by third-party private owned vehicle. It is operating in over 633 cities and 60 countries worldwide. Uber was founded by CEO Travis Kalanick and Garrett Camp in San Francisco, USA. Uber is private limited liability company incorporated under the laws of the Netherland with the registered office in the Amsterdam. The company has its headquarters in the San Francisco, USA. It is the world largest company which owned no vehicles but have a valuation of more than $ 50 billion and funds of $ 10 billion.

How do Uber works?

Uber is a smartphone app which connects the passengers and taxi cab drivers. It gives on-demand services of cabs. Most taxi drivers use their own car while they can also use it by renting.

• Firstly, the customers have to download the app and register themselves by using their mobile number and email id.
• The Uber App have options to choose, Like Uber X for bigger cars, Uber Go, Uber Micro for smaller cars and Uber Share for sharing the car with the fellow passengers. The passenger can choose the cab as per their requirement.
• The Uber App uses GPS tracking system of passenger’s smartphone for detecting the location or they can also put their location themselves, then UBER App connects with the nearest driver. An Uber driver then dispatched to the passenger’s location and assists the passenger to reach his destination.
• Uber also provide with the performance feedback rating form to passengers to rate the drivers or write any problem they faced with the particular driver. These ratings are also filled by the drivers of the passenger.

Elements of Uber Business Model

The main elements of the Uber Business Model are:

Taxi Drivers

A person having a driving license and a car can apply to Uber for registering himself as Uber driver in cities Uber covers. After screening process, the drivers are enlisted and given an Uber phone for connecting passengers. The taxi cab drivers can use their hard resource to immobilize in the steady income without any major investment.

The Passengers

Registered Uber users use their smartphone app for booking the on-demand services. Now they also provide the name of the driver and the fare you have to pay at your destination. The passengers can also track the taxi on their phone. The details of the driver and the contact number of the driver have also come in the app. This service is convenient, comfortable, cheap and readily available at any time of day. The passengers can also split the fares by help of Uber App.

Fare and Payment

Uber sets the taxi fares and provides the fare before the ride. The fare hikes during the peak hours and charged at the flat rate in the off hours. Passengers can pay by debit card, credit card, wallets like Paytm Wallet in India. They can also pay in cash at the end of the Journey. The fare is determined on the basis of car type, distance and peak hour.

Strength of the Uber Model Structure

1. The model simplifies the process of hailing the taxi services, no need of phoning or searching the taxies. It came directly on the address provided by the passengers. As Uber use only one App for all cities, you can book the drive in any city you are travelling easily.
2. The model also provides choices to passengers for types of cars with their estimated fares. It makes the prices transparent and gives accurate fare estimates for the trip. Important notifications about the ride, fare, cab details etc. are provided on the app as well as on SMS and emails.
3. Uber provides Pool Services where Customers can get the Ride at 50%-70% less cost than that of a Ubergo Ride. They also provide many vouchers and discounts to attract the customers, this makes Uber less costly than simple taxi services.
4. The payment of fare is very easy as you can either pay in cash or e-money like credit cards/debit cards or Mobile e-wallets.
5. Uber have large market share with Ola as an only major competitor in many cities in India. It has established a solid infrastructure, branding and consumer trust.

The weakness of the Uber Model

1. Uber is plagued with many liability and security issues. Like the rape case in Delhi attracted public outburst towards the security policy of the company. This has questioned the security management and screening policy of drivers before appointing them.
2. Many Lawsuits with liability questions and insurance issues have been filed on the company.
3. The security issues and privacy concerns are also weak points in this model.
4. As the competition is increasing in major cities, Uber have to cut out its revenue increasing its overhead cost.

Limitations

1. Drivers Availability at any time;
2. Technological and Capital Infrastructure;
3. User’s Internet availability;
4. User’s Device;
5. User’s willingness to provide their personal information on the internet;
6. Policies and Legislation of the host country.

Revenue Model of Uber

Uber majorly make money through the customer’s trip commission. The company nearly takes 20 percent of the fare charged to the customer and other 80% is given to the driver. It charges 1.5X, 2X, 3X or more based on the surge in a demand-supply ratio from the passengers and then draws its commission. The revenue model of Uber is based on the type of the car, primetime fares and the distance travelled by the passenger.

The trip fare is a combination of:

1. Travel Time (in Minutes): Uber fare includes charges per minute of time travel after initial free X minutes (varies according to the cities and type of cab)
2. Distance Cost: Uber charges per km of travel after an initial fixed fare.( Fixed fare varies as per the country and type of cab)
3. Waiting Minutes: In case any passenger made the driver wait beyond the prescribed time of waiting, additional waiting charges are levied in the fare.
4. Taxes as applicable in every country.
5. When the passenger cancels a booked ride, it charges a cancellation fee from the passenger next ride fare. The company also made revenue by advertising other company’s products on the app.

Benefits for the drivers

Uber works with the corporation of taxi drivers and customers while it plays as a platform for them to reach each other. The benefits Uber Model provides to the drivers can be summarized as below:

• Uber provides jobs to the drivers who do not have any source of income but have hard cash. It also provides an additional source of income for drivers who are associated with other people also.
• Uber provides flexible working schedules. They can work permanently or part-time or simply whenever they like.
• Uber provides easy payment procedure. The drivers do not need to indulge in bargaining process as fares are determined by Uber system.
• Those who love to drive can easily earn money while pursuing their hobby.
• Uber pays drivers to be online, even if they don’t get any request. They also pay for the phone and internet charges of the drivers.
• They also pay the base salary to the permanent drivers in some cities.
• They also give incentives and bonuses to the drivers for completing X number of rides in a month.

Human Resource of Uber

Uber has more than 12000 employees worldwide. Uber appoints drivers on independent contractors basis. For Uber, they can easily obtain the service of lot drivers with very limited restrictions in terms of the kind of people they can hire. So long as the driver has a vehicle, has proper licensure, and has passed their background test, they can work as a driver under the company’s transportation network service.[1]

Improvements Needed

• Uber has faced many lawsuits related to its limited liability, insurance, and security issues. They have spent the large amount in these litigations. They need to resolve these issues.
• Uber have to spend the large amount in the infrastructure and technology with the expanded base. India’s Population is increasing and demand for this demographic will grow in the next years.
• Uber needs to improve the slow working of its customer-service department.
• Uber has improved its security issues by providing the details of the drives and its efficient tracking process but still its need to ensure that the security of passengers remains in its motive. They can improve the screening process for selecting drivers.
• The company needs to develop and implement an anti-surge-pricing policy that prohibits surge pricing from exceeding 10 percent of original fare to compete with other taxi services.
• Educate customers so they can perform their roles and responsibilities in service delivery effectively.[2]

Conclusion

Uber is one of the successful startups which have increased its value proportionately in the last 10 years. Uber have expanded its base in around 60 countries and still counting. With the expansion of the company, it also needs to invest highly in innovation and technology. Still, with an expansion of Uber, it is not one of the profitable companies. The profit margins are even decreasing with the increase in other online taxi cab services which have been the major concern for the company. The company can increase its profit margin by introducing other services with the trip. It has also been recently been questioned on HR policies. The company needs to improve its internal management so that these types of news does not come outside to have the negative impact on the branding of the company. On the positive note, the company is estimated to soon become a profitable start-up.

References

[1] Pullen, J. P. (2014, November 4). Everything You Need to Know About Uber. Retrieved from Time: http://time.com/3556741/uber/

[2] Wirtz, Js., Lovelock, C. H., & Chew, P. (2012). Essentials of services marketing (2nd ed.). Singapore: Prentice Hall.