The development of information technology and the emergence of the Internet have significantly revolutionized daily interaction among individuals. These changes have also been reflected in the business environment, especially consumer behavior. Businesses have shifted from brick-red stores to online platforms. With the help of mobile applications, the purchasing process has been simplified for both sides. One of such apps is Uber, which is a mobile application that has brought a disruptive change in the transportation sector. Uber that was previously known as UberCab, was founded in March 2009 by Travis Kalanick and Garrett Camp in San Francisco (Cirstea). This app allows smartphone and iOS device users to easily find taxis, even during peak hours, thereby establishing a network between drivers and passengers. Since its inception, the app has grown to be a global brand, and in less than five years later earning revenue totaling $5 billion (Stalmašeková et al.). This paper aims to examine the e-business model utilized by Uber and evaluate its impact on the company in terms of its advantages and challenges.
The sudden development of wireless technologies in the 21st century, coupled with the significant rise in the proportion of mobile device users, has led to the emergence of a new type of e-commerce (Lu et al.). Several studies have examined the technological aspects of mobile commerce; however, few have evaluated the implications and relations that might result from this change by embracing a business and commerce perspective. This new technology has generated massive changes that have affected the overall business environment, including competition. A typical e-commerce business model is the Uber model.
Uber’s E-business Model
Uber is a company that provides on-demand taxi services via the “Uber app,” which connects customers to drivers. Although it is also associated with other business lines, for instance, UberEats, this paper will solely focus on its transportation services. The company is described as a peer-to-peer platform that links both stakeholders and is structurally different from those provided by traditional taxi drivers (Cirstea). Uber does not employ drivers or own cars to transport customers but only mediates contact. The app was launched based on a ride-sharing proponent that would allow individuals (taxi drivers if they had a car) to function as a source of rides (Cirstea). It is essential to note that the drivers are hired by a professional sister company, Uber’s Partners. The company collects the payment on behalf of the drivers, which will then be subsequently transferred to them. However, this will contain a reduced commission of approximately 20% that would be taken by Uber for its intermediary services (Cirstea). Furthermore, recently, Uber has remunerated a support fee to the Partner to provide its services for a specific weekly duration.
How Uber Uses E-business Tools for Connecting and Communicating
Central to Uber’s e-business model is its mobile application. This is available for various types of operating systems and can be downloaded from an array of application stores. The kind of app available to customers and drivers is different. For customers, after installing the Uber app, they have to register through their Google or Facebook accounts. The basic principle behind the development of this app is to create a cashless environment (Cirstea). When customers are ordering a taxi, they have to turn on their GPS localization, which the application automatically finds, and allows the customer to input their destination. Subsequently, the app maps out available vehicles in the area, with information regarding the driver’s ratings (performed by previous customers), contact, and their estimated time of arrival. After confirming a vehicle, a price list for the various classes of Uber taxis will be generated, and this is centered on the traffic information from Google. The customer can then watch the vehicle move on the map as they await their pick-up. During this time, the order can be canceled. The Uber app also provides transparency as clients can quickly review their maps whether the driver is following the optimal route. At the end of the ride, the driver and customer can both confirm the fare, and after payment, an invoice is sent to the customer’s email address. Often, the bill for the taxi ride is charged on the credit card that has been linked to the app (Cirstea). The total fare factors are the driving time, travel distance, and boarding fee.
On the other hand, taxi owners have to download and install the Uber Driver app. They also have to register, in which they are required to input personally identifiable information. Upon receiving a customer’s request, the drivers can choose to either accept or reject it based on the customer’s rating (performed by previous drivers) or location. Once the request is approved, they can reach out to the clients through a phone call or text to confirm the request and point of pick-up. At the end of the trip, drivers should press the “End the ride” button (Cirstea). The app allows drivers to identify areas of high user demand by employing heat maps.
Advantages of E-business for Uber
Uber’s e-commerce model provides substantial gains to both its drivers and customers and, at the same time, generates revenue for the company. From a driver’s viewpoint, there are many benefits to using the Uber app. For instance, when comparing it to the traditional taxi model, the app has enabled the drivers to get more rides. The technology allows them to identify areas of high demand, thus, they can also predict their next biggest car request. Also, their waiting time or time spent waiting for customers is significantly reduced. Lastly, the revenue earned by drivers is fair.
Conversely, from a customer’s viewpoint, Uber offers them more affordable rides than traditional taxis. Moreover, the availability of GPS enables them to find the nearest vehicles. They can also cancel an order if they do not like the vehicle or driver – based on their profile ratings. Third, consumers can monitor the route taken by the driver and share their map with friends or family. Finally, cashless payment is safe, and the tip is already included in the total fare; thus, customers do not have to worry about it.
The Challenges of E-business for Uber
Uber’s business model is relatively simple as the drivers and customers can easily connect and communicate; therefore, income generation is immediate and continuous. However, the model also has its challenges. For instance, since the business is entirely online, there have been several trust and safety issues raised by customers. This is because, in regions where transport regulations are lax, average individuals can quickly enter the e-hail network as service providers. Second is legal issues in which the company is associated with approximately 173 lawsuits around the world. This problem arises from consumer protection, labor code, insurance, unfair trade practices, and operational conditions for taxi services. Third, since the fare factors traffic conditions, Uber is faced with the issue of surge pricing. The fair is raised or lowered depending on the intensity of supply and demand. During rush hour or times of bad weather, the fares hike.
Digital platforms in the transportation sector provide an opportunity for businesses to profit from their capabilities. Uber being a company that has centered its operations on the Uber app for customers and Uber Driver app for drivers has been able to reap the benefits of its e-commerce model by generating substantial revenues and growing at a faster rate. Regardless of the numerous benefits that it offers to either party, this disruptive technology also has its limitations. These are attributed to its distinct characteristics, which are safety and legal issues for Uber.
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Stalmašeková, Natalia et al. “The impact of using the digital environment in transport.” Procedia Engineering, vol. 192, 2017, pp. 231-236. Web.