Question

Uber, headquartered in San Francisco, was founded in 2009 by Travis Kalanick and Garrett Camp and has grown explosively since then to over 500 cities across the globe with drivers signing up at an exponential rate.
Uber offers a compelling value proposition for both customers and drivers. Customers can sign up for free, request and pay for a ride (at a cost Uber claims is 40% less than a traditional taxi) using a smartphone, and get picked up within a few minutes. No need to stand on a street corner frantically waving, competing with others, or waiting and waiting for an available taxi to drive by. Furthermore, customers using the Uber app know just how long it will take for the ride to arrive and how much it will cost in advance. Uber’s value proposition for drivers is that it allows them to set their own hours, work when they like, and put their own cars to use generating revenue.
Rather than having a dispatcher in every city, Uber has an Internet-based app service running on cloud servers located throughout the world. It does not provide radios to its drivers who instead must use their own smartphones services. It does not also provide insurance or maintenance for its drivers’ cars. Uber has shifted the costs of running a taxi service entirely to the drivers. Uber charges prices that vary dynamically with demand: the higher the demand, the greater the price of a ride. Therefore, it is impossible to use public information to know if Uber’s prices are lower than traditional taxis.

Uber has disrupted the traditional taxi business model because it offers a superior, fast, convenient taxi-hailing service when compared to traditional taxi companies. Uber’s business model is much more efficient than a traditional taxi firm. Uber does not own taxis and has no maintenance and financing costs. Uber calls its drivers “independent contractors,” not employees. Doing so enables Uber to avoid costs for workers’ compensation, minimum wage requirements, driver training, health insurance, and commercial licensing.

For quality control, Uber relies on user reviews to identify problematic drivers and driver reviews to identify problematic passengers. Riders on a 5-point scale evaluate drivers. Drivers that fall below 4.5

are warned and may be dropped if they don’t improve. Customers are also rated with a 5-point system. Drivers can refuse to pick up troublesome customers, and the Uber server can delay service to potential customers with low ratings or ban them entirely.

1. In which three categories of e-commerce does Uber fall? [3 Marks]

2. Describe five major components of the Uber e-marketplace. [5 Marks]

3. What is Uber’s revenue model? Apart from the sales revenue model, how can Uber leverage the other revenue models? [6 Marks]

4. What two benefits (value) is Uber offering both customers and drivers? [2 Marks]

5. How is Uber ensuring good customer service [2 Marks]

6. Construct a diagram to model how Uber interacts with customers and drivers in its operations. [2 Marks]

Answer 1

1) The 3 major categories of E-commerce are:

a) B2B (Business-to-Business)
b) B2C (Business-to-Consumer) &
c) C2C (Consumer-to-Consumer).

Uber falls into the category of B2C. It offers service to the customers. It offers services to individuals. The customers can register for free on the app. They can book a ride and can pay online or by cash.

2) Components of Uber e-marketplace

• Uber provides fast, convenient, and superior taxi services than traditional taxis.
• The customers can register for free, request, and pay for a ride using a smartphone.
• The customers do not have to wait for long on the roadside as in the case of traditional taxis.
• The payment can be made online.
• The customers can monitor the ride and get to know the price of the ride beforehand using their smartphones.

3) Uber Revenue Model

Uber provides an internet-based app service. It has a model that is much more efficient than traditional methods. It does not own any vehicles. The drivers registering with Uber has to use their own cars. They do not provide insurance to the drivers. This way the company does not incur any financing and maintenance cost. The drivers are considered independent contractors which helps the company to not provide any training. health insurance, workers' compensation, etc to the drivers. This helps in significant cost cut down. Uber earns revenue through gross booking.

4) Benefits offered by Uber to its customers and drivers

TO CUSTOMERS

• The customers can sign-up for free and can avail a ride at a price much lesser than a traditional taxi.
• The customers can get to know about the price and the arrival time of the taxi beforehand. Uber also picks the customer from the location specified.

TO DRIVERS

• It provides drivers with the flexibility to choose their working hours.
• The drivers can use their personal vehicles for the drive. It also provides the option of rejecting the troublesome customers.