Digital Disruption: Uber
Challenges Facing the Firm
Although Uber has ventured into most of the world’s markets, it is still confronted with many problems that it has not yet solved. They include the following:
- Ensuring that all its drivers offer high-quality services
- Safeguarding customers’ privacy
- Stiff opposition from states and cab companies.
Quality of Its Service
Currently, Uber is unable to ensure that all its chauffeurs offer high-quality transport service. This problem has been occasioned by Uber not owning the vehicles used by its drivers; thus, some of them use poorly maintained cars, which adversely affect user experience. Additionally, some of the company’s clients have complained of poor services, such as being carried by a drunk, arrogant, or overspeeding driver (Teo & Kien, 2017). In practice, Uber’s use of a rating method to identify bad drivers is a reactive approach; therefore, it is ineffective in preventing cases of dangerous driving.
Opposition From Cab Companies and States
Uber faces a lot of opposition from various contemporary taxi companies that it has displaced and states that accuse it of violating existing taxi’s laws. The current cab businesses have repeatedly accused Uber of failing to adhere to regulations on public transport, which has in effect enabled it to charge lower fees. In the same vein, some states claim that Uber circumvents the current taxi’s laws to avoid restrictive regulations. Although Uber has repeatedly argued that it is not a cab company, but one that provides a platform where private car drivers can connect with customers, some states still do not agree with its position (Teo & Kien, 2017). For example, in January 2012, a car belonging to one of its drivers was impounded in Washington D.C. on the allegations that Uber was operating without a license (Teo & Kien, 2017). Consequently, the company was forced to pay substantial fines and implement various changes to its operations to avoid a backlash from its opponents.
Uber’s mode of operation requires its users to disclose some of their private and sensitive details. In particular, the company’s mobile application discloses its users’ location and that of their driver. Additionally, users of Uber always disclose their credit card number when activating the company’s mobile application (Teo & Kien, 2017). Since the company has custody of crucial personal details of its clients, it has come under a lot of scrutiny and investigation about the safety of its systems and ability to secure this information.
An external analysis evaluates the opportunities and threats that exist outside an organization’s environment. In Uber, this analysis entails an evaluation of customers, competitors, markets, and the company’s business environment. Importantly, it will enable the firm to identify areas where it can earn more income and develop ways of countering threats to its existence.
There are few barriers to entry in the ride-hailing business, and as a result, Uber is facing stiff competition from new companies such as Lyft, Sidecar, Hailo, and Via, which have recently entered into this market (Teo & Kien, 2017). In this regard, an analysis of competitors can enable the company to establish appropriate tactics to safeguard its market share. For example, it can identify competitors that it can acquire. Similarly, it can learn their competitive strategies and either incorporate them into its business or counter these tactics.
An evaluation of the applicable legislation in Uber’s market can enable the company to determine whether to exit or remain in a specified jurisdiction. Some punitive laws can unnecessarily increase the company’s operational costs or reduce its competitiveness. Moreover, an analysis of these statutes provides the firm with appropriate ways of defending its operations in case of a legal dispute. For example, in 2013, one of Uber’s drivers killed a pedestrian when he was going to pick a customer. The company’s insurance policy at the time was vague on when the package covers the drivers, which resulted in a complicated legal tussle (Teo & Kien, 2017). Therefore, a review of regulations can also help the business to avoid future dispute cases.
An internal evaluation of Uber is necessary for enabling the business to identify its resources and opportunities. Importantly, the analysis can help the company to discover new possibilities and ways of penetrating markets.
Uber has a huge capital base that can help it to establish the appropriate infrastructure necessary when it is entering new markets. The company’s massive capital can also assist it to promote its operations in regions that do not have ride-hailing businesses. Finally, it can use these funds to establish new enterprises, which can complement its current operations.
Connection to Service Providers
Most of Uber’s shareholders have significant influence in the digital communication industry; therefore, their contribution will guarantee the business a huge online presence. For example, Uber’s shareholders include Google and Microsoft, which are among the largest companies in online businesses. Additionally, these companies can provide Uber with skilled personnel that would allow it to develop a more secure platform for its customers and drivers.
Mutually Exclusive Activities
One of the mutually exclusive decisions that can help Uber to enhance the quality of its services, reduce opposition from some states, and ensure its clients’ information is private is either hiring permanent or contract drivers. With permanent drivers, the company will employ competent individuals, ensure they drive well-maintained vehicles, standardize their salaries, and provide them with a pension. The main advantage of having this type of chauffeurs is that Uber will be able to monitor its employees closely and ensure they offer quality services. The regular supervision will, in turn, help the company to hire experienced drivers and establish that they all have well-maintained vehicles.
The use of contract drivers is cheap and enables the company to minimize its liabilities. Contract drivers are those who provide services for the company at their discretion by switching their Uber-driver application. Therefore, they are only paid when they pick and drop customers. The use of this type of drivers will allow the company to reduce its supervision and employment costs. Noteworthy, Uber pays its chauffeurs only when they are working. Drivers, on the other hand, make more income by extending their job hours or driving during peak times, when mileage rates are high.
Uber should continue with its current policy of using contract drivers; however, it should increase the number of its supervisors to ensure that all drivers offer high-quality services to its clients. Additionally, the company should require its chauffeurs to install cameras in their vehicles. The use of contracts will also enable its drivers to increase their incomes based on their diligence. Consequently, hardworking drivers will make more income than those who work for only a few hours. Importantly, this system will ensure that drivers have the freedom to plan their job schedule and holidays because their employment is voluntary.
On Uber’s side, the use of contracts will help it to reduce its costs since it will not pay pension to its retired drivers. Similarly, chauffeurs will not claim for leave or holiday. The use of contracts will also enable the company to reduce the inefficiencies caused by worker’s strikes since all employees will make their arrangements independently.
Finally, the drivers’ rating score will help the business to determine the quality of services offered by each driver. Consequently, the company should make it compulsory for clients to rate a driver once they complete their trip so that it can always have reliable statistics. The system of drivers’ ratings should be complemented with the use of cameras in the vehicles of contract drivers. The video recordings will allow the supervisors to monitor the drivers’ interactions with the customers. Introducing such a system of quality control will enhance the services offered by the company and solve one of the major Uber’s challenges.
Teo, G., & Kien, S. (2017). The quest for legitimacy in digital disruption: The case for Uber (A). AsiaCase.Com: The Asia Business Center, NTU111, (ABCC-2017-008), 1-22.