Uber: The Ultimate Business Model for The 21st Century

In a very short number of years, Uber has revolutionised the traditional taxi business industry throughout the world. Simply put, it has enabled millions of people to press a few buttons on their smartphone and have a cab driver pick them up from their current location in the shortest space of time.

Uber driver as a business owner

The company is one of few in the technology industry to be valued at more than $70 billion, it operates in more than 630 cities worldwide.

This article will look to provide a brief explanation of the company’s business model. Uber was founded by Travis Kalanick and Garrett Camp, and is based in San Francisco, California, United States. More than 50 million people use Uber around the globe, its services are provided by more than 7 million taxi drivers. If you work for the company, find and compare cheap taxi insurance and save money today.

Normally when you travel in a taxi, you pay the cab driver once you’ve arrived at your destination. Uber’s revenue source is the same, with a few modified factors to make the business plan work.

The company offers different taxi models to serve its customers. Options include Uber X, Uber Black, Uber Taxi and Uber SUV. The firm uses surge pricing technology to calculate fares based on the supply and demand, this is a key aspect of their business model. Whenever demand rises, the cost per mile will also rise automatically based on the number of requests from customers during that period and the number of available drivers.

Customers can use the company’s smartphone application or website to call a cab to their location. Uber drivers in the nearby area will then have the option to accept or reject the ride. If a driver does accept, his/her details will be sent to the customer along with their estimated time of arrival. The app uses the smartphone’s GPS to provide precise location data for both the customer and the Uber taxi driver. Payment is taken through the app and the revenue is shared between the driver and Uber. A review system is built into the app, allowing customers to provide a rating for the driver once the journey has concluded.

What’s The Value Proposition?

The firm’s value proposition to customers and drivers can be seen below.

For customers:

  • Cheaper than normal taxi fares
  • No long waiting times
  • Fixed price for common locations such as airports
  • Simple to use mobile app with additional features

For Uber drivers:

  • Additional source of income
  • Simple and straightforward payment process
  • Work flexibility, allowing you to choose when you want to work

How does Uber Work?

Here’s a simplified step by step model on how Uber works:

  • Step 1: A customer will use his/her smartphone to request a ride immediately, or schedule it for a later time.
  • Step 2: Once the request has been made, a nearby driver will receive the customer’s details on his/her smartphone. The taxi driver has the option to accept or decline the ride. If the driver rejects the ride, the next nearby driver will receive the same notification.
  • Step 3: Customers are able to track the cab and see it’s estimated time of arrival through the Uber app.
  • Step 4: Once the customer arrives at the destination and exits the vehicle, the trip will end and the fare is automatically calculated and charged to the payment method linked to the Uber account. Customers will also be able to provide a rating for the driver, which is a key feature of the service.

Why Uber’s Business Model Works

Uber’s business model has become successful for several different reasons. These include the amount of time saved when booking, better pricing, especially during peak hours and an all in one convenient solution through the popular app no matter where you are.

Some of the main growth opportunities that Uber has benefited from include business travellers and tourists, those who attend social events such as bars or clubs, or anyone who needs a taxi at their doorstep during adverse weather conditions.

Uber ride sharing app

Uber does face a number of legal issues though; these surround how it identifies Uber drivers. Uber sees its drivers as partners, although courtrooms in New York and San Francisco view them as employees.

Uber’s partner network does not own any cabs but is still able to provide more than one million rides per day. Uber chose the taxi industry, identified the most common problem customers face and offered a disruptive solution by taking advantage of recent advancements in consumer technology.

The company has revolutionised the taxi industry, not just in San Francisco, but across the world, by offering its services to customers and drivers in more than 630 towns and cities. What’s astonishing is, that the taxi industry may just see another revolution in the years ahead, as Uber and a number of other technology giants are investing billions in self driving cars.

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