Uber Business Strategy: Uber's Business Model

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Uber’s business model: Uber has very simple platform, all it has is a smartphone app which provides a platform to connect drivers with their customers while Uber simply charges a 20% cut off the transaction. It is one of the pioneers of the up and coming on-demand economy. Its business strategy currently is to operate at low costs and loss to capture as much market as possible, which will lead to huge profits when the market is more matured and it has worked well so far for them as most of the direct competitors have already closed shop and current valuation is over $51billion, with over $1.5 billion in commissions from 2 million rides every day.
• Uber provides the customers an easy way to access a ride even from remote locations within a
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Uber’s Robustness & Vulnerability: Uber starts by getting new drivers in an area through marketing teams and depend on the early adapter, marketing schemes like offers and word of mouth publicity to gain customers in a new area, they have been able to implement its business model to more than 330 cities in 60 countries all across the globe, It has 1million drivers and handling over 2 million rides every day which gives us a sense of its robustness.
• Uber has a universal appeal to customers across the world, however, it has faced some issues related to legislation and some protests from local groups which even turned violent, there have been issues raised about lenient driver onboarding process. On the other hand, high surge pricing is the main cause of customer’s direct
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It sometimes could get as high as 7 times of the original fare which lead to humongous bills and discontent amongst the customers. This may lead to loss of potential customers and existing customers ditching the service due to bad experiences. However, it seems like a necessary evil without the lack of which drivers won’t be motivated to work at inconvenient timings.
• Ditching the surge pricing policy won’t solve Uber’s problem either as it helps them bring in drivers at the time when they are needed the most. To balance the situation they can put a cap on the amount of surge pricing. 1.5x to 4x can be in place for shorter rides up to 3-4 miles and longer rides can be capped at 3.5x surge, this will help them maintain the adequate ratio of drivers on the road while maintaining their image with customers.

Road Ahead: To aim at the larger picture my decision would be to start working on improving Uber’s surge pricing model to better suit its customers need. This will improve Uber’s image & garner more customer from word of mouth publicity while continue to take a positive stance in the legal battles as

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