Uber Taxi Business Model and Shared Value In what ways does Uber’s business model both enhance and detract from the creation of shared value?
How is the creation of value for a taxi service shaped over time?
Uber Taxi Business Model and Shared Value Guidelines
In Sessions 7 and 8 of Block 3 you encountered the concepts of shared value from a financial perspective.
In particular, you have introduced to Porter and Kramerís (2011, p. 76) concept of creating shared value (CSV), namely, opening up ëmany new needs to meet, new products to offer, new customers to serve, and new ways to configure the value chainí.
Your answer should consider how Uber is creating shared value, and how this forces traditional taxi firms to develop new business models in response.
Uber Taxi Business Model and Shared Value
The second part of Question 1 requires you to set your answer in the wider context of the relationship between time and innovation that you encountered in Block 3 Session
1. This will lead you to consider whether Uberís business model represents a sustainable innovation culture, as well as the role that different organizational stakeholders and human resource management (HRM) can play for such value creation (Block 3 Session
5). Your answer should draw on appropriate concepts and theories from Block 3 together with suitable evidence from the case study to support your arguments.
Uber Taxi Business Model and Shared Value
Question 1: Always explain and reference the theory/concepts in every question. Define shared value. Sessions 7 and 8 cover financial aspects. Thereís a lot of info ñ eg Porter and Kramerís theory is relevant (Creating Shared Value). Critical evaluation ñ consider the counter argument.
How is Uber creating shared value, and how does this force traditional taxi firms to develop new business models in response? How does Uberís model enhance SV? How does Uberís model detract from SV? How do you create value in a taxi firm long term and sustainably?
Bring in evidence from the case ñ ie is their model sustainable or not? Justify your views with theory and evidence from the case? Think about different stakeholders and functions eg can HRM help in creating value?
Uber Taxi Business Model and Shared Value Case study
Technological challenges in the taxi industry
Uber is a technology company that offers a free programme, or app, available on a mobile device for those wishing to request a ride.
At its core, Uber seeks to match passengers to drivers. The platform is able to track a userís GPS coordinates, even if the user does not know where they are, and within minutes an Uber driver will arrive.
The user is able to track how long until the ride will pick them up and receives a text message confirming when the Uber driver is arriving. The driver is able to hit a button on their own app that says ëArriving nowí which sends the text message.
No cash is exchanged when using Uber since signing up for an account requires providing credit card information. After the ride, Uber charges the user electronically and immediately emails them a receipt. There is a rating system so that passengers can rate their driver and vice versa (Dong et al, 2014).
Uber Taxi Business Model and Shared Value
According to Uber, the company ëpushes the limits of the transportation industry to create a simple, more efficient, and more enjoyable car service experience.
For drivers, Uber is a revenue stream, allowing professional drivers to make more money by turning downtime into profits.í (Uber, 2016). Unlike the taxi industry, Uber does not employ or license its drivers, but rather views them as independent contractors.
The unique experience provided by Uber has enabled rapid growth and international expansion centred on three main focal points: a commitment to on-demand service, an efficient supply of luxurious rides, and the easy accessibility of its smartphone application.
Uber’s growth over the past five years is an example of a major success in what is known as the sharing economy. The sharing economy is an economic system where assets or services are shared between private individuals either free or for a fee, typically by means of the internet. However, the success of this new business model is attracting criticism from government and civic leaders concerned that this new collaborative economy is simply a means of sidestepping regulations, taxes and other legal obligations.
Uber Taxi Business Model and Shared Value
In London, Uber’s growing popularity meant that their drivers completed some £115m of business within London (Quinn, 2016). However, Uber London (the taxi apps UK holding company) recorded only a sales take of £23m and a profit before tax of £1.83m.
The sales figure reflects only Uber’s share of fares for trips booked on its app. In addition, Uber London retain 20% of any fare to the driver. Despite this Uber London paid just the small sum of £411,000 in UK tax last year…
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