Why Has the Emergence of Uber Disrupted the Taxi Industry Globally - Case Study Example

New Product Report: Uber Name University Introduction One of the tech startup companies that have gained tremendous success is Uber Technologies Inc. The company provides ridesharing services by enabling a connection, using an app, between riders and drivers who work as independent contractors. In essence, Uber has expanded globally from the USA where it was first introduced to 58 countries globally (Taschler and Fellow, n.d.). as the writers point out, the success is attributed to tremendous profitability as the organization is currently valued at USD 41 billion. The main factor for success has been its cheaper services compared to traditional taxis, which has enabled Uber along with similar riding services upend the taxi industry. Its resounding success has fueled domestic and international expansion. Just like any other startup business, Uber is currently facing regulatory, social, legal, and technical barriers. For instance, the taxi industry is voicing its concerns that the company is succeeding because of its unfair advantage emanating from licensure (Boyle. and Peterson, 2015). The claims revolve around the assertion that the company does not face similar licensing requirements as other taxi operators do. Others claim that the company does not vet for its driver thereby subjecting the customers to potentially dangerous situations, such as rape. For example, as Johnston et al. (2015) reported, Uber was outlawed in Victoria following the realization that one of Uber’s drivers operating in Melbourne was found guilty for driving a hire car that was not licensed or accredited by a Melbourne magistrate. Regardless, the company is currently facing numerous praises by giving its contractors and partners a money making opportunity for as long they have a car while also providing convenient services for clients, usually at cheaper rates compared to the competitors. However, since the business also faces competition in the numerous cities it operates in, it need to address various issues, including legal actions taken against its drivers for not having being licensed, the question as to whether they ensure rider and driver safety, lack of adequate insurance, and safety of client and driver information (Feeney, 2015). Counter arguably, if a competitor prospers in these aspects, then it can oust Uber from the increased fame and prosperity the company has enjoyed. Background Back in 2009, Garrett Camp and Travis Kalanick developed an application for smartphone users whereby it could connect clients needing rides to various locations in their destination with drivers-for-hire. This idea had originally been founded UberCab Inc., which was later renamed to Uber Technologies Inc. (Taschler and Fellow, n.d). Particularly, the innovators designed the smartphone application for Android and iPhone mobile phones, which would conveniently enable clients to get an estimated time of arrival from drivers on their gadgets with the help of an integrated GPS system. The app is easy to use. Customers pay for the services via a Transportation Network Company or ridesharing, which a third party, while using the UberX platform which operates by simply scanning or taking a picture of the customer’s credit card information with a camera. As Uber does not maintain automobile inventory for its drivers, it instead allows its independent drivers to use their personal insurance, their automobiles, maintenance for their vehicles, and gas. As such, the driver operates independently without Uber’s control. For this reason, the drivers can drive anywhere, which provides them with freedom. At peak demand, Uber uses a surge pricing model. Owing to the increased demand for rides-for-hire, the revenue for Uber is set to increase significantly. Currently, it has its headquarters located in San Fransisco. With its service being available in 58 countries, it serves more than 250 cities internationally. Industry Background According to Dempsey (1996), the Taxi industry is facing crisis owing to the fact that it was once protected by a regulated monopoly of the commercial passenger ground transportation market. However, the industry is facing from a new type of service within the transportation sector commonly referred to as ride-sharing. (Taschler et al., n.d). For instance, the Australian Taxi Industry Association (ATIA) is the representative body for the taxi industry in the country, and the membership is comprised of the Victorian Taxi Association, Taxi Council South Australia, New South Wales Taxi Industry Association, Taxi Council of the Northern Territory, Taxi Council Queensland, and the Canberra Taxi Industry Association (Davies, 2014). As such, this industry was a monopoly prior to the arrival of other transportation services, including ride-sharing. ATIA represents taxi license owners, operators, drivers, as well as booking and dispatch networks. In Australia, the industry is pivotal in serving key community sections, including the elderly, business travelers, people with disabilities, the young and vulnerable, as well as disadvantaged socio-economic groups. However, since the ride-sharing idea innovative structure was introduced in the country, the monopoly has been subjected to competition. For instance, Taxi Apps Pty in June 2011 released the taxi booking app called “goCatch”, and ingogo Pty Ltd released theirs called “ingogo” in August 2011. However, after uberX was introduced by Uber has placed competitive laws under the spotlight (Davies, 2014). Even so, Ride-Share Services are increasingly becoming a thorn in the taxi industry owing to their cheaper prices and convenience. That is the reason behind the numerous concerns presented by bodies like ATIA as they are increasingly being phased out by new and innovative practices in the industry. Uber Situation Analysis a. Market Strategy and Target Market Uber capitalizes on a marketing strategy that focusses on people and how to ensure that they enjoy convenience compared to competitor taxi cabs. The business model use by the company capitalizes on smartphone technology of the clients, which the company uses to link them to independent drivers (Schneider, 2016). Also, the strategy also leverages on cheaper prices but without compromising the efficiency. The introduction of Uber in some markets such as Australia can be considered a new product launch. In essence, the company excelled introducing the product into the market favorably, and this is the reason fueling Uber’s success. The company capitalized on putting a focus on the people rather than the product. Customers within the taxi industry want convenience. This is what Uber was offering them. They could easily access Uber Taxis conveniently and with immediate effect compared to the competitors. Traditionally, when a person needed to go somewhere, hailing a cab was not easy. According to Anderson (2014), a client could wave hands to stop taxis only to find that a client had already hired, especially in instances of poor weather conditions. In addition, calling a taxi dispatch would also lead to wastage of time as it would take time before a taxi arrived. The company saw a gap and capitalized on it thereby providing a better service compared to the other taxi cabs. Ideally, the company, via smartphone app Uber, could provide customers with an opportunity to acquire a driver almost instantly. This strategy can be referred to as digital disruption (Hudson, 2015). According to the author, any disruption consists of three elements: consumer frustration should be identified, a leap of imagination, and consequently, countering the problem by offering a digital solution. That is what the founders, Garrett Camp and Travis Kalanick did. They were frustrated by getting cabs and realized that this was a global problem, and this was the frustration. A leap of imagination entailed foreseeing how to create a service where customers would find a car easily wherever and whenever they needed the service. For the solution, they developed the Uber mobile app. The application is easy, fast, and simple to use. The customers pay via credit cards, and thus, there is no cash involved. After the service, the customers are provided with an opportunity to rate the service, and the clients can see the location of their Uber taxi. The rating is available for all to see. The app is free, and just like any other digital product, it is addictive, and it quickly becomes a habit. For this reason, it becomes quite easy for the company to maintain loyalty. The ratings are important as the many customers can see how the service was, and in most instances, it is rated highly. Meeting and exalting the needs of the customers is the core of any business. The Uber service is all about convenience, which earns the company a hero status in the emerging market of “convenience-tech” that saves time while saving effort. As such, the company capitalizes on the psychology of convenience by offering the consumers a simple psychological appeal, promising to buy them time and effort. As such, most of its customers value their service as it is more attractive because it costs them less money but also effort and time. In addition, as Marsden (n.d) reports, Uber delivers convenience across all customer touch-points. By making it easy and fast to choose, acquire, pay, use and enjoy, and re-purchase, offers the customers decision, access, transaction, benefit, and post-benefit conveniences respectively (Marsden, n.d.). Also, as the writer asserts, Uber has not only saved customer’s effort and time, the company has also saved its clients with mental effort and time. However, these aspects are all traced down to its business model innovation inclined to smart technology and cheap service. The target market, from a demographic perspective, include all customers, especially young adults who use smartphones and travel within or outside the cities the company has established itself. The geographical location for the clients is mainly the urban areas and does not care about race and ethnicity. From a physiographic point of view, the client’s perception is that they need to travel in the city. The customer’s motivation is the use of convenient transport service that is safe and affordable. The target audience also needs good transport services and their lifestyle encompasses constant movement within the cities. b. Market Place Issues, Challenges, and Competition Current Australian market is highly competitive. Various transport services, which also use ride-share services, including Taxi Apps Pty taxi booking app “goCatch”, and ingogo Pty Ltd’s “ingogo along with the traditional taxis governed by ATIA, are also providing significant challenges to Uber. As such, the direct competitors include goCatch and ingogo while indirect competitors are taxis under the public transport service (Davies, 2014). As already pointed out, Uber faces a variety of challenges, such as legal and regulatory, as well as internal struggles. They point out that the company is not regulated. Neither does its drivers. Which does not guarantee driver and customer safety. The company operates in an industry where trust is vital, which ensures safety for passengers and drivers. For this reason, the rating system helps assure trust and reliability. Low driver scores mean that the driver is not performing effectively. They risk being suspended or deactivated. Legal challenges entail, as already pointed out that the drivers may not be licensed. As Feeney (2015) points out, another accusation waged against the company is that it does not follow safety standards, and does not guarantee safety for its clients. However, Uber has added a safe ride checklist that provides riders with an opportunity to confirm the license plate number and name of driver before boarding. c. The 4Ps Uber’s products are digital. Consumers have to download an app to their phones. Whenever they want to request a ride, they have to request it via the app. The pricing is significantly cheaper compared to other taxi cabs. It charges based on the time spent and the distance. In terms of promotion, the company has adopted a $20 Uber promotion code for its first users. Also, it depends on word of mouth based on the satisfied customers. Considering the place, the company targets the urban areas with huge population densities. Old Product Reply Strategies Marketing Objectives, Strategies, and Recommendations For the “old” product, which mainly falls under the traditional cab industry which does not use any smart technology, they need to have a paradigm shift to adopt technology. In essence, a counter strategy will encompass setting marketing objectives inclined to the use of technology. For this reason, it can also use strategies that Uber has not capitalized on. For instance, since Uber only targets urban population, “old” product can target all population locations regardless of their location. Also, just like Uber, “old” product should objectify to use smart phone applications as many people are currently using. This will ensure that they improve the convenience of their services. In addition, the 4Ps have to be incorporated in the marketing mix of the strategies. After adopting a technology, it would be easier for them to acquire clients. They can now make the net objective, which is adopting discounted prices to make the service effective and efficient. In addition, another strategy that can be recommended is use of promotions and marketing the product. In essence, it should make advertisements via mass media and social media. Many smartphone users make use of social media for communication, and it would be a cost effective strategy to market the improvement of the old product to one that utilizes technology, just like Uber. Also, since some of the Uber operators are unlicensed, it would be viable for the ‘old’ product companies to ensure that their drivers are licensed and conform to regulation. In addition, since most of the Uber taxis are unregulated in Australia as ATIA reports, it would be important for the government to start regulating all “new” products to ensure that they comply with the set regulations and do not compromise any legal measures adopted by the government. In addition, benchmarking Uber’s success factors is also important, including the application of geospatial and geolocation services, such as GPS to ensure that the drivers and customer locations are precisely known. This would promote the service convenience of the companies, thereby fostering fair competition from Uber (Davies, 2014). Also, another gap that Uber has not capitalized on is vouching for their drivers. Uber does not verify the individual traits of the driver and thus, unsuspecting customers may fall prey to these drivers and they may be harmed in the process. The actions can damage the brand of the company, and thus, the old product should vouch for the safety of their drivers, which in turn promotes the safety of the clients. Also, since most of the “old” product in the industry are tiled to local places, an expansion strategy is recommended to increase the profitability. In essence, this could be both domestic and international expansion based on how the brand has been built. Conclusion The emergence of Uber has disrupted the taxi industry globally forcing many forms in the industry to adopt similar business model. Ideally, profitability in the taxi industry has shifted to companies which have adopted technology and combined it with effective marketing, such as Uber’s UberX, Taxi Apps Pty’s “goCatch”, and ingogo Pty Ltd’s “ingogo”. In essence, most of world’s population currently uses smartphones, and capitalizing on it will make a business, not only in the taxi industry but also in any other industry succeed. The digital disruption strategy, as in the case with Uber is effective, especially for new companies. However, conforming to regulatory and legal issues is also as important. Also, security and safety of drivers should be incorporated to avoid legal sanctions. For this reason, drivers and customers safety should not be compromised. Besides, these issues, especially on the customer’s side will negatively affect the image of the company. References Anderson, D.N., 2014. “Not just a taxi”? For-profit ridesharing, driver strategies, and VMT. Transportation, 41(5), pp.1099-1117. Boyle, P. and Peterson, C., 2015. Taxi drivers rally against Uber. Green Left Weekly, (1069), p.4. Davies, B., 2014, Competition Policy Review Submission, Australian Taxi Industry Association (ATIA), p1-16 Dempsey, P.S., 1996. Taxi industry regulation, deregulation, and reregulation: the paradox of market failure. University of Denver College of Law, Transportation Law Journal, 24(1), pp.73-120. Feeney, M., 2015, Is Ridesharing Safe?, Cato Institute, 767, pp 1-14 Hudson, K., 2015, What Uber tells us about disruption. The Sydney Morning Herald. Media Release, viewed 21 March 2016 http://www.smh.com.au/it-pro/business-it/what-uber-tells-us-about-disruption-20150905-gjg0ln.html Johnston, M., Schulz, M., & Dunn, M., 2015, Uber acting illegally, landmark case finds, Herald Sun. Media Release, Viewed 21 March 2016 Marsden, P., n.d., The Uberfication of everything-The psychology of digital disruption. WPP. Media Release. Viewed 21 March 2016 < http://wpp.com/wpp/marketing/digital/the-uberfication-of-everytshing/> Schneider, A., 2015. Uber Takes the Passing Lane: Disruptive Competition and Taxi-Livery Service Regulations. Elements, 11(2). Taschler, E. and Fellow, S., n.d., A Crumbling Monopoly: The Rise of Uber and the Taxi Industry’s Struggle to Survive. Institute for Consumer Antitrust Studies. Pp1-8 Read More