Reference no: EM131848299

Problem: SOME CRITICS WOULD argue that Uber's motto seems to be "we don't care for any laws, rules, or regulations; we will deal with the legal fallout later, after we create a large number of happy users and drivers in a city that will support us and will lobby politicians on our behalf." Uber's customers are happy because they can hail rides conveniently and cheaply, often in areas that are underserved by regular taxis, and drivers are happy because they can choose when and how long to work. Uber is also vehemently defending its policy of dynamic pricing. Without surge pricing, Uber emphasizes, taxis are simply not available during peak times because the limited supply is filled up so quickly. Surge pricing attracts more drivers on the road and helps in matching demand and supply. In further defense of its business model, it stated that the median income of an Uber driver in San Francisco is $75,000 while it is $91,000 in New York City. Meanwhile, Uber is investing heavily in the development of self-driving cars and more sophisticated online mapping systems. The goal appears to be to offer Uber rides by autonomous vehicles, replacing Uber's some 250,000 drivers, at some point in the future. Commenting on this strategic intent, CEO Travis Kalanick stated: "The reason Uber could be expensive is because you're not just paying for the car - you're paying for the other dude in the car. When there's no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle."56 After an outcry by Uber drivers on social media such as Facebook and Twitter, Kalanick backpedaled by stating that he doesn't think autonomous cars will be ready for widespread use until 2035.

In contrast, Google sees self-driving cars on the road as early as 2020. Uber is also much more than a simple ride-hailing service. It is the greatest disruptor that the transportation industry has seen since the invention of the automobile. Uber is first disrupting old-line taxi and limo services, often protected by anticompetitive rules and regulations. But Uber also is disrupting transportation more generally. With a fleet of autonomous vehicles offering cheap rides, people don't need to own cars anymore. When car ownership is no longer needed, it will certainly impact the old-line car manufacturers. From there Uber might expand into the "delivery of everything," taking over last-mile deliveries for Amazon. com, Zappos, and other online retailers. Uber might even work in concert with shippers such as UPS and FedEx. To improve public relations and to lobby politicians, Uber hired David Plouffe, whose claim to fame is being the manager for the 2008 Obama campaign and then a senior adviser to the president. Now senior vice president of policy and strategy at Uber, Plouffe sees Uber as an integral part of the transportation eco system.

He argues that as more and more people live and work in cities, Uber will help to address traffic congestion, provide an alternative to personal cars in suburbs, cut down on drunk driving, and provide reliable and safe services to underserved city and suburban areas. Plouffe highlights that one of the reasons people remain trapped in poverty is the lack of reliable transportation, which Uber helps to overcome. Concludes Plouffe, "I don't subscribe to the idea that the company has an image problem. I actually think when you are a disrupter you are going to have a lot of people throwing arrows."

Questions: 1. Have you used a ride-hailing service such as Uber or Lyft? How was your experience?

2. Explain Uber's business model and deduce its strategic intent.

3. Do you agree with Peter Thiel's assessment that Uber is the "most ethically challenged company in Silicon Valley"? Why or why not? Explain.

4. Several lawsuits are under way to determine if Uber drivers are independent contractors or employees. The drivers bringing those lawsuits argue that they are employees and should be treated like employees, which would include being reimbursed for expenses such as gas and car maintenance that they currently pay out of pocket.

• How do you view the so-called sharing economy with companies such as Uber, Airbnb (hospitality), Task Rabbit (house cleaning and odd jobs)?

• What are the benefits and downsides of being an employee versus an independent contractor? Do you think drivers for Uber (and other ride-hailing services such as Lyft) are independent contractors or are employees?

• If the ruling of California's labor commissioner should stand that Uber drivers are employees, and this view would prevail in the United States and other countries, what would this do to Uber's business model? Explain.