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TitleUber 2014
Tags Economies Taxicab Uber (Company) Sharing Economy
File Size908.1 KB
Total Pages14
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Page 1

Jianwei Dong, Christina Filipovic, Julia Leis, Edward Petersen,

Anjali Shrikhande, Rohit Sudarshan







April 2014



STUDENT

CASE

STUDY

UBER:

Driving Change in Transportation

Page 2

Uber: Driving Change in Transportation 1

Introduction

It was a sunny spring day in San Francisco on March 18, 2014, when scrappy Uber CEO Travis Kalanick
emerged from a meeting to hear the bad news: the Seattle City Council just voted to place limits on the
number of drivers alternative transportation companies like Uber could have operating at any given
time. While Uber had faced many challenging regulations in other cities, this was the first time they
suffered from new restrictions in a city where they were already operational.

Since its start in 2009, Uber had spread its operations to over 80 cities in 35 countries.
i
As the company

battled local regulations and worked to understand the unique transportation culture of each city they
operated in, the tenacious Kalanick looked eagerly to the future to turn Uber into more than a car
service and leverage its logistics and technology capabilities into a lifestyle and experience brand.

At the same time, customers appeared to be growing more vocal in their complaints around �^�•�µ�Œ�P����
pricing,�_ where users could be charged 1.5 to 8 times the normal fare price depending on the time of
day and number of UberX drivers on the road. While Uber was birthed from the desire to have a black
car service available to the upwardly mobile in San Francisco, it had become a service that maintained
its luxury feel, yet was somehow more democratic�v it brought together drivers and riders effectively
and efficiently, with UberX typically costing less than a traditional taxi in most markets. �d�Z�]�•���^�o�µ�Æury for
�š�Z�����u���•�•���•�_�����‰�‰�Œ�}�����Z��made it a well-loved company, and Kalanick frequently leaned on public support
as he aggressively fought regulators and powerful taxi commission interests. Armed with a recent
infusion of cash, and poised to further expand internationally and offer new, innovative services,
Kalanick wondered: who should he bring the fight to next?

Emergence of the Shared Economy

�h�����Œ�[�•���P�Œ�}�Á�š�Z���}�À��r the past five years is an example of a major success in the �P�Œ�����š���Œ���^�•�Z���Œ������
�����}�v�}�u�Ç�X�_���>���Œ�P���o�Ç�������š�����Z�v�}�o�}�P�Ç-enabled movement, the general business model enables companies to
help consumers find ways to rent rather than own an expensive asset�v �š�Z�����^�•�Z���Œ�]�v�P�������}�v�}�u�Ç�_���(�������•���}�v��
�š�Z�����‰�Œ���(���Œ���v�����•���(�}�Œ���^���Æ�‰���Œ�]���v�����•�_���}�À���Œ���^�}�Á�v���Œ�•�Z�]�‰�X�_���K�v�o�]�v�����•���Œ�À�]���������}�u�‰���v�]���•���µ�š�]�o�]�Ì�]�v�P�����]�P�������š�������Œ�]�À���v��
algorithms allow people to share expensive goods such as cars, rooms, and other household appliances.
While sharing among friends, family, and community is nothing new, technology companies have
formalized the practice to make it a scalable and profitable business model.

�d�Z�����‰�Z�Œ���•�����^�•�Z���Œ�����������}�v�}�u�Ç�_�����u���Œ�P�������]�v���š�Z�����u�]��-2000s and grew in popularity between 2008 and
2010. In response to the financial crisis and global recession, several companies notic���������}�v�•�µ�u���Œ�•�[��
emerging desire to earn money on the side through shared profit models. One of the early leaders and
pioneering companies of the shared economy was AirBnB, a technology company with an online
platform matching room seekers to homeowners. This consumer-driven peer-to-peer rental market
alone was valued at $26 billion.

ii
However, the success of this new business model attracted a more

discerning eye from government regulators worried that this new �^���}�o�o�����}�Œ���š�]�À���������}�v�}�u�Ç�_ was simply a
means of sidestepping regulations, taxes and insurance.

The History of Uber
Uber was first launched in San Francisco, a city notorious for a highly regulated taxi industry with steep
prices and insufficient services. The idea, however, originated in Paris at the LeWeb conference�v a
popular international event for Internet startups. Kalanick met Garrett Camp, then owner of
StumbleUpon, and discussed the possibility of a reliable and quickly accessible black car service. During
an evening of dining and drinking in Paris, the two gentleman half-jokingly discussed ideas for a

Page 7

Uber: Driving Change in Transportation 6

Austin, sky-�Á�Œ�]�š�]�v�P���}�v���s���o���v�š�]�v���[�•�������Ç�U�����Z�Œ�]�•�š�u���•���š�Œ�����������o�]�À���Œ�Ç in Seattle, and kitten delivery on National
Cat Day.

Shervin Pishevar�U�������À���v�š�µ�Œ���������‰�]�š���o�]�•�š�����v�������o�}�•�����(�Œ�]���v�����}�(���<���o���v�]���l�U�����Æ�‰�o���]�v�������h�����Œ�[�•���u���v�����š���W���—�h�����Œ���]�•��
building a digital mesh �v a grid that goes over the cities. Once you have that grid running in everyone's
pockets, there is a lot of potential for what you can build as a platform. Uber is in the empire-building
�‰�Z���•���X�_xxii

�������}�v�À���v�]���v�š�U���•�����u�o���•�•�������o�]�À���Œ�Ç���•�Ç�•�š���u���(�}�Œ���P�}�}���•�����v�����•���Œ�À�]�����•���Á�}�µ�o�����(�]�š���‰���Œ�(�����š�o�Ç���]�v�š�}���h�����Œ�[�•���v���Á��
�•�o�}�P���v���^�Á�Z���Œ�����o�]�(���•�š�Ç�o�����u�����š�•���o�}�P�]�•�š�]���•�X�_ The recent $258 million capital infusion from Google Ventures
suggests that this could be a very real possibility. The relationship with Google also points to the future
potential for driverless cars.

xxiii

Conclusion

Opportunities and challenges abound for Uber. The company must both settle its ongoing disputes and
continually innovate to stay ahead of its competitors. A clear tension between convenience and
affordability continues to persist. In addition, Kalanick refuses to acknowledge Lyft, Sidecar and other
ride-sharing apps as serious competition. Furthermore, its expansion into large metropolises with
smartphone users will continually force it to confront regulation from powerful, local authorities. What
should Uber do to understand and approach the local markets better than local players? Will the
growing number of Uber users help them bypass these challenges or will they be subject to a
devastating backlash?

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Uber: Driving Change in Transportation 7

Appendix A. Options for Uber Drivers
xxiv

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Uber: Driving Change in Transportation 12






i Uber Website, “https://www.uber.com/cities?gclid=CKi6vcuexb0CFcyhOgodXCoAxg.
ii “Peer to peer rental, The Rise of the sharing economy”, The Economist, March 9, 2013,
http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy.
iii Liz Gannes, “A Status Symbol Moves Down Market: The Context for Uber’s Lower Price Launch”, All
Things D, July 2, 2012, http://allthingsd.com/20120702/a-status-symbol-moves-down-market-whats-
behind-the-uberx-launch/.
iv Ryan Lawler, “Uber Slashes UberX Fares in 16 Markets to Make it the Cheapest Car Service Available
Anywhere”, Tech Crunch, January, 9, 2014, http://techcrunch.com/2014/01/09/big-uberx-price-cuts/.
v “FAQs for Riders”, Uber Website, http://support.uber.com/home.
vi Devan McClaine, “Rider Seeking Taxi Driver”, San Francisco Business Times, February 3, 2012,
http://www.bizjournals.com/sanfrancisco/print-edition/2012/02/03/rider-seeking-taxi-driver.html
(accessed February 28, 2012) .
vii “Surge Pricing Followup”, Uber Blog, January 3, 2012, http://blog.uber.com/2012/01/03/surge-
pricing-followup/.
viii “We’re Going Global with Big Funding”, Uber Blog, December 7, 2011,
http://blog.uber.com/2012/01/03/surge-pricing-followup/.http://blog.uber.com/2011/12/07/were-
going-global-with-big-funding/.
ix “Protesting taxi drivers attack Uber car in Paris”, Al Jazeera,
http://stream.aljazeera.com/story/201401132019-0023311.
x Eric Van Susteren,“Ride-sharing startup Uber plans China expansion”, Silicon Valley Business Journal,
February 14, 2014, http://www.bizjournals.com/sanjose/news/2014/02/14/uber-eyes-china-expansion-
with-luxury.html.
xi “Indian Credit Card Market Growing After Economic Slowdown”, Payments Journal, May 20, 2013,
http://www.paymentsjournal.com/Content/Featured_Stories/16443/.
xii Phoebe Magdirila,“Nielsen report: the smartphone adoption gap in Asia Pacific”, Tech in Asia,
September 16, 2013, http://www.techinasia.com/nielsen-report-smartphone-adoption-gap-asia-
pacific/.
xiii Lora Kolodny,“UberCab Ordered to Cease and Desist”, Tech Crunch, October 24, 2010,
http://techcrunch.com/2010/10/24/ubercab-ordered-to-cease-and-desist/.
xiv Emily Parkhurst, “Teach chief blasts Seattle’s decision to limit Uber as ‘reckess disregard’ for the tech
industry”, Puget Sound Business Journal, March 28, 2014,
http://www.bizjournals.com/seattle/blog/techflash/2014/03/tech-chief-blasts-seattles-decision-to-
limit-uber.html.
xv Ibid.
xvi Ibid.
xvii Larry Downes, “Lessons From Uber: Why Innovation and Regulation Don’t Mix”, Forbes, February 6,
2013, http://www.forbes.com/sites/larrydownes/2013/02/06/lessons-from-uber-why-innovation-and-
regulation-dont-mix/.
xviii David Steitfeld, “Uber and a Child’s Death”, Bits, The New York Times, January 27, 2014,
http://bits.blogs.nytimes.com/2014/01/27/uber-and-a-childs-death/?_php=true&_type=blogs&_r=0.
xix Megan Rose Dickey, “Why Uber Sometimes Asks You to Pay a Lot More Than Usual” Business Insider,
December 16, 2013, http://www.businessinsider.com/uber-surge-pricing-2013-12#ixzz2vfr7u9j0.
xx Bill Gurley, “A Deeper Look at Uber’s Dynamic Pricing Model”, Uber Blog, March 12, 2014,
http://blog.uber.com/dynamicpricing.

https://www.uber.com/cities?gclid=CKi6vcuexb0CFcyhOgodXCoAxg
http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy
http://support.uber.com/home
http://www.bizjournals.com/sanfrancisco/print-edition/2012/02/03/rider-seeking-taxi-driver.html
http://blog.uber.com/2012/01/03/surge-pricing-followup/
http://blog.uber.com/2012/01/03/surge-pricing-followup/
http://blog.uber.com/2012/01/03/surge-pricing-followup/
http://www.paymentsjournal.com/Content/Featured_Stories/16443/
http://www.techinasia.com/nielsen-report-smartphone-adoption-gap-asia-pacific/
http://www.techinasia.com/nielsen-report-smartphone-adoption-gap-asia-pacific/
http://www.businessinsider.com/uber-surge-pricing-2013-12#ixzz2vfr7u9j0

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Uber: Driving Change in Transportation 13


xxi Joshua Brustein, “Uber’s Workforce is Built to Do More Than Chauffeur”, Bloomberg Business Week
Technology, December 11, 2013,
http://www.businessweek.com.ezproxy.library.tufts.edu/printer/articles/172174-ubers-workforce-is-
built-to-do-more-than-chauffeur.
xxii Michael Pachter, “PRISM…Progress Report for Internet and Social Media”, Wedbush Private
Company Research, November 13, 2013,
https://equities.wedbush.com/clientsite/Research/ActionAlertFilePreview.asp?UUID=023CB4B4-1407-
48A0-8E08-46A9B5ABD258&ViewerID=F6E7691E-6722-41B4-9367-DAA43021B9B2.
xxiii Christine Lagorio-Chafkin, “Resistance is Futile”, Inc.,
http://www.inc.com/magazine/201307/christine-lagorio/uber-the-car-service-explosive-growth.html.
xxiv Uber website, https://partners.uber.com/signup/boston/.
xxv Michael Arrington, “UberCab Closes Uber Angel Round”, TechCrunch, October 15, 2010,
http://techcrunch.com/2010/10/15/ubercab-closes-uber-angel-round/.
xxvi Ryan Lawler, “A Day After Cutting a Deal with Lyft, California Regulator Reaches an Agreement with
Uber as Well”, Tech Crunch, January 31, 2013, http://techcrunch.com/2013/01/31/a-day-after-cutting-a-
deal-with-lyft-california-regulator-reaches-an-agreement-with-uber-as-well/.
xxvii Donna Tam, “UberX cuts fares by more than 15 percent in top US cities”, CNET, January 9, 2014,
http://www.cnet.com/news/uberx-cuts-fares-by-more-than-15-percent-in-top-us-cities/.
xxviii Uber Blog, http://blog.uber.com/2012/03/14/clear-and-straight-forward-surge-pricing/:.
xxix Uber website, https://www.uber.com/cities?gclid=CKi6vcuexb0CFcyhOgodXCoAxg.

http://www.businessweek.com.ezproxy.library.tufts.edu/printer/articles/172174-ubers-workforce-is-built-to-do-more-than-chauffeur
http://www.businessweek.com.ezproxy.library.tufts.edu/printer/articles/172174-ubers-workforce-is-built-to-do-more-than-chauffeur
https://equities.wedbush.com/clientsite/Research/ActionAlertFilePreview.asp?UUID=023CB4B4-1407-48A0-8E08-46A9B5ABD258&ViewerID=F6E7691E-6722-41B4-9367-DAA43021B9B2
https://equities.wedbush.com/clientsite/Research/ActionAlertFilePreview.asp?UUID=023CB4B4-1407-48A0-8E08-46A9B5ABD258&ViewerID=F6E7691E-6722-41B4-9367-DAA43021B9B2
http://techcrunch.com/2013/01/31/a-day-after-cutting-a-deal-with-lyft-california-regulator-reaches-an-agreement-with-uber-as-well/
http://techcrunch.com/2013/01/31/a-day-after-cutting-a-deal-with-lyft-california-regulator-reaches-an-agreement-with-uber-as-well/
https://www.uber.com/cities?gclid=CKi6vcuexb0CFcyhOgodXCoAxg

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