Beyond Uber and Didi Chuxing Merger: Global-Local Dilemmas of E-Commerce in Asia - Marketing Assignment Help

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The business model of Uber At the beginning of 2016, Uber employed close to 7,000 people worldwide. This ‘transportation network company’ operates on the basis of an innovative smartphone app devised by the company. Approved drivers need to use their own cars and respond to passenger pick-up service requests over the app. The app also calculates the fare and immediate payments are passed on to the drivers. The global reach of this simple model has generated very strong resistance and opposition from the age-old taxi industry, as well as challenging the regulations of national governments. In addition to this, there has been strong opposition to its pricing model. The basic sharing system allows Uber to receive 20% of the fare. The role of the taxi driver lies in following a standard system of value-based technical efficiency. They are provided with an Uber 2 iPhone and do not need any investment beyond supplying their own cars. The passengers also need to be registered users of the Uber app. The system allows a passenger to track the taxi on their phone after their call has been confirmed. The rule of 80% for the driver and 20% for Uber had to be varied in some cities in recent times due to competition. For example, in some countries companies like Lyft, Hai-O and Ola Cabs have impacted on the business model of Uber. The strength of the Uber model lies in its innovation and simplicity of their app as well as its associated ‘brand’ and trust advantage. However, the question of insurance, legal liabilities as well as an uncertain industrial relations approach in dealing with the Uber drivers’ union poses a serious disadvantage. Through Uber’s basic pricing structure is similar to standard metered taxis, except in some countries, there is no involvement of the driver in collecting payments. However, the pricing algorithm automatically varies the charges based on traffic surges. This ‘surge pricing’ has been a very contentious issue. The crux of the business model lies in balancing the supply and demand. The company claims that increased demand in a given time slot sees increase in prices termed as Surge Prices. This, in turn, motivates more drivers to enter the scene and gradually stabilising the pricing structure. Besides the basic taxi service, Uber has tried to diversify its offerings. A limited helicopter service, in New York, luxury car rental in Singapore, hot air balloon rides in India and a package delivery service in New York are some of these initiatives. In 2015, Uber even attempted to be involved in a ‘water taxi’ service in Istanbul. With a very short history, Uber drivers are increasingly being viewed as ‘independent contractors’ with appropriate legal compliance for their role. The revolutionary approach of reaching out to customers at their own location by disrupting a traditional industry has now become an inspiration for many other start-ups in various industries. However, serious challenges remain to be resolved. For example, the company’s success depends on the technical efficiency of its software and therefore talent procurement, nurturing and retention will be a major challenge.

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