Uber Case Review

Question 1: Do you agree or disagree with Uber's surge pricing policy?  What are the reasons it can be perceived as unfair?  What does it mean to say that a pricing policy is exploitative?  What are the risks of the policy to Uber?  Given these risks, should Uber modify its policy?  Defend your answer.

 Answer 1: I do agree with Uber’s surge pricing policy. On days when the demand is high, like the New Year’s Eve, Christmas day etc. many people request for a ride. The surge pricing is also put into effect when the weather is bad and lesser drivers may be available.  This means the available riders have to satisfy the demand for so many customers. Since supply is shorter than demand in this case, Uber can afford to hike prices to maintain constant supply of drivers. How else will it be able to attract so many drivers on these special occasions? Surge pricing in my opinion is a way to solve the demand supply imbalance. Yes, the system might seem a little unfair to some especially during times of natural calamities /medical emergencies. It also faced criticism at the time of hurricane Sandy. But to be fair to the drivers and Uber, it’s a business after all. If the drivers are able to drive in harsh conditions, they should be paid more. Calling a business exploitative because it aims to make profits would be unfair.

Uber might face risks like the following due to surge pricing-

• Customer backlash and losing customer loyalty
• Government regulations and policies
• Lawsuits for implementing surge policy in times of crisis

Even though I defend the Surge policy, I feel it can be relaxed to some extent for extreme situations and emergencies. Also, Uber should keep a check on the surge multipliers (2x , 3x are justified at times but not 10x). Also, a mechanism should be in place to check that the surge wasn’t created by drivers deliberately, this would keep malpractices at bay.

Question 2: Uber is notoriously aggressive in its business tactics.  It frequently operates without getting regulatory approval and it often ignores legal concerns; as a consequence, the company has become a lightning rod for criticism.  Do you agree with Uber's aggressive tactics?  Is there a more diplomatic way for Uber to conduct its business?  Should Uber be taking more of a "tiptoe" approach when it enters new markets?

Answer 2: I feel the aggressive tactics that help consumers and make their life simple but at the same time helps a business make money should not be an issue. Uber is doing good and except for a few policies (e.g. Surge pricing), people are in general happy with it and it proves cheaper than regular taxi cab. It should mellow down a few policies definitely to avoid government wrath. Also, ensure it doesn’t override any regulations and laws. As long as they can continue legally, their tactics should not be termed as unethical. I would also like to point out that if they were extremely cautious in their business model and approach, they wouldn’t have been as successful as they are today. The technology innovation is always risky and aggressive, I don’t think they can take a “tiptoe” approach here.

Question 3: Uber has become enormously popular among consumers in a very short period of time.  How has the company accomplished this?

Answer 3: In the past when you need a cab you need go onto the street, wait for a cab for at least 30 minutes, or call for a taxi service. There was no alternative for taxi service as such. The payment method was in cash or credit card only. There was an issue with the tips too. Uber has become enormously popular because it helps solve so many of the above issues with its amazing business policy. As correctly discussed in the case study “Uber: changing the way the world moves”, Uber has an incredibly lightweight infrastructure: it owns no vehicles, employs no drivers, and pays no vehicle maintenance costs. Instead, its network relies on peer-to-peer coordination between drivers and passengers, enabled by sophisticated software and a clever reputation system.  This is what leads to the current success of Uber.  Its simple, robust , useful and successful .

Question 4: How well does Uber treat its drivers?  From a driver's standpoint, is it better to drive for Uber or is better to drive for a taxi/limo service?  Is it economically more attractive to drive for Uber?  What would you imagine are the biggest complaints drivers have about driving for Uber?  What would you imagine are the most appreciated benefits?  What is the profile of a typical Uber driver, and how does it compare to the profile of the typical taxi or limo driver?

Answer 4: Uber is not known to pay a very high wage to drivers, if they are looking to survive on only these wages, it might be tough.  My opinion and observation on this matter is that the money is good only if it’s a part time job for you. I don’t think it’s possible to support yourself full time with Uber. As per the Guardian article, Uber treats its drivers as Victorian-style “sweated labor”, with some taking home less than the minimum wage, according to a report into its working conditions based on the testimony of dozens of drivers. The money might be the biggest driver complaint. Apart from this, Uber might be a good way to earn some extra cash because if a person needs to drive from point A to B daily, why not partner with Uber to make some money from it? You might not make a lot but without Uber you will make nothing and might anyways be driving the route for your personal work. Flexibility is a big benefit for drivers.  Uber drivers might just be common people with full time jobs who do this part time for money. They could be students, professionals etc. A common taxi driver drives full time. If you want to survive full time on driving taxi /limo, then a job with the regular taxi or limo service is your best bet.

Question 5: How robust is Uber's operating model?  Where are the weak links in its service model?  Is Uber vulnerable?  In what way?

Answer 5: Uber is an on-demand transportation taxi service that has brought about a revolution in the cab business.  Its business model is simple yet robust. A smartphone and the Uber app installation are all that’s required. The operating models success is due to following reasons-

• A user can tap his smartphone and call a cab at his location.
• The driver has the option to accept or reject a ride.
• If driver accepts the ride, driver details are sent to the customer along with ETA.
• The customer can track the driver as he arrives to his location.
• The driver can also track the exact location of the customer and reach his exact location.
• The payment procedure is handled by Uber.
• In some countries like India, Uber has even started accepting cash payments which are paid directly to the driver.
• Uber business model had a rating system in place for drivers right from beginning, where a customer can rate the driver after his ride.

In spite of being robust, some weak links that can make Uber vulnerable and need to be remediated are as follows-