#131 Uber and Out?
In a previous blogpost, I have written about global ride hailing company Uber’s woes in overseas markets such as China or Colombia. Just recently – on December 20th (2017), to be more specific – the European Court of Justice delivered a nice lump of coal to Uber for Christmas. The European Union’s highest court ruled that Uber will have to be regulated just like any other transportation company. Uber’s argument that they are not providing transportation services, but only an exchange platform or a marketplace that connects supply and demand, didn’t fly with the judges. That doesn’t necessarily mean that Uber’s international expansion or its services will come to a grinding halt, but it’ll make the company’s operations much more complex. For one, transportation is regulated by individual countries, sometimes even down to the municipal level. This means that Uber will now have to deal with a large number of state and local government authorities who are most likely to apply the same rules to Uber that they apply to taxi operators or transportation service providers. That will make adoption among both drivers and riders slower, and it will put a dent into Uber’s growth. Some of Uber’s services have already been banned (for instance, Spain 2014, Germany 2015, Netherlands 2015, Sweden 2016) or suspended (for instance, France 2015), and in other markets Uber has no services at all after they were suspended (for instance, Hungary 2016) or simply never tried (for instance, Austria). And while the ruling only applies to EU countries, other countries in Europe and elsewhere around the globe may get inspired by the court’s decision. There may be even more far-reaching implications of the ruling for similar exchange platforms outside of ride hailing and ride sharing. This is a good testimony to the fact that a little longer than a decade after Thomas Friedman proclaimed that “The World is Flat”, barriers to international markets continue to exist.
February 11, 2018 @ 10:38 pm
Uber uses automated processes to recruit drivers and clients which has led to its success globally but at the cost of operating illegally. After many years of Uber sidestepping regulations as a technology company vs a transportation company, Uber has faced its first major legal and political barrier with the European Union Decision. Uber’s disruptive technology and venture capital have allowed it to bypass regulations and lawsuits that would have otherwise devastated traditional transportation companies. Uber had no chance in China where the government supports only local competition. Uber’s global strategy is to think globally but act locally. When Uber targets a new city, it finds a new team with a separate entrepreneurial manager. Uber’s strengths are that is a well-recognized brand, unlimited number of vehicles, no responsibilities toward employees, very little competition which allows it to have lower prices then traditional transportation companies. Uber’s weaknesses include a very unpredictable business model for the future and its technology can be easily duplicated. It also lacks a real connection with its drivers i.e. accidents, rapes. Long term costs for Uber drivers is high and the pay is low. Its opportunities include clients that are dissatisfied with traditional cab companies because of high prices and long waiting time. It can exploit new markets in countries like India where taxi services are inconvenient and expensive. Uber appeals to investors and as a result, Uber will have more money to operate. Uber’s threats include unhappy drivers with low profit margins, laws and regulations such as the European Union decision. Increased competition and the future of automated vehicles.
April 12, 2018 @ 8:42 pm
I think Uber is a great example how important platforms are in the digital age. Like stated in the post, they are “only connecting supply and demand”. However, as Uber was growing and expanding internationally with lightspeed, it’s impact on local transportation services was not negligible anymore by municipalities. Problems went their way towards the European Court of Justice and upcoming regulations were obvious and only a matter of time.
No doubts that Uber’s business model strongly relies on the driver-passenger connecting service and new regulations will have impact on their further growth. They might have underestimated the differences within the political situation and especially of the legal systems in north America to those in Europe. Uber used their first-mover advantage in Europe for a while but their approach was actually based on a legally unclear situation. Besides their modest chances that the European Court of Justice would rule to their favor, further political and social factors seem to be ignored. Respectful behavior during market entrance, regarding local regulation as well as considering the power of taxi and transportation unions might have brought up chances for agreements.
September 29, 2018 @ 6:05 am
At this point, I believe Uber is unstoppable. Uber will be everywhere regardless of national or local governments. They are not only investing heavily into its platform and information technology infrastructure, but they are also investing into any transportation that any consumer across the globe can find a way to integrate into their daily life, adapting its product for every possible need.
As of September 2018, Uber has decided to help solve a problem they helped create around the world; traffic congestion. Drivers are on the road carrying passengers, but also drivers are waiting to be hailed in the worlds busiest cites. Uber announced that it would spend $10 million to help cities all over the world combat this problem. Over three years they plan to entice more people to leave their personal cars at home, as well as using the funds to create congestion pricing plans the will charge drivers more for entering cities without a passenger at peak traffic times.
Uber is also diversifying into the electric bicycle market by acquiring a company called Jump. Uber has little experience with this type of transportation, so they will be entering a joint-venture with a company called VentureBeat to test the market in Sacramento, California. Copy cats are already popping up in New York City and Los Angeles, so they will need to fine tune their market entry strategies before expanding beyond Sacramento.
I do not believe that Uber’s troubles with national or local governments is near over. And I agree that their operations are much more complex than they would prefer because of it, but as Uber continues to grow a service that some consumers have grown to love, I believe they will continue to work through challenges down to the municipal level. With likely growing taxation of Uber, on top of investment by Uber into local infrastructures across the globe, I am guessing some cities will warm back up to the idea of allowing the ride-hailing service back in.
April 18, 2019 @ 7:16 am
In my opinion, this is not the first time Uber has encountered a government-level boycott on the world. The reason behind this is that Uber’s services have brought unfair competition to the local taxi industry. It relies on dozens of billion dollar venture capital, which will squeeze out competitors through predatory pricing. It is said that Uber began to illegally subsidize and cut fares in 2013 to affect taxi services. For example, Uber’s withdrawal from China market is closely related to its own native problems. There is no customer service call, and complaints can only be handled by email, making Uber China criticized by users and drivers.In China, users have become accustomed to dialing customer service calls at any time. Some people from Uber should listen to complaints and deal with problems quickly. However it didn’t happen. Uber emphasizes that customers don’t understand their products, but in my opinion I have to say that Uber does not understand China.
April 29, 2019 @ 1:36 am
Uber has definitely taken the world by storm, and even here in America I know there have been serious difficulties as well. Specifically in Vegas, when Uber first launched it was shut down real quick in Las Vegas. The taxi business out there is so incredibly relevant, lucrative, and monopolized that the city was not about to just let Uber walk in and single-handedly destroy the business that the Taxis had built. The important thing to consider is that one might think that a place like Last Vegas is really the absolutely perfect market for Uber considering all of the tourism where people not only don’t have their cars, but also are likely drinking and can’t drive themselves anyway. Now whether or not Uber predicted these serious roadblocks, I don’t know, but I could see how that barrier to entry in a domestic market could have easily been either missed or underestimated. However, Uber eventually was able to break through into that market, and just as the Taxi businesses predicted, Uber has entirely taken over the market and taxis are essentially irrelevant now.
https://onemileatatime.com/uber-already-shut-las-vegas/
https://www.tripsavvy.com/using-uber-in-las-vegas-4041359https://www.tripsavvy.com/using-uber-in-las-vegas-4041359
April 30, 2020 @ 11:37 am
I think Uber is a very good example of a failure to adopt a business concept that was initially developed for the US market and its regulations, to international markets. Through the attitude think global and act local, problems have arisen (especially in the legal area), which still leads to major and very costly problems for the company today. The problem areas range from the unresolved employment relationship of drivers to the business model itself. It sometimes even seems as if the immense investment of venture capital and capital inflows are blinding the management board to losses. Entering new markets and putting growth above all other rational indicators is too much of a 2010 and should be overtaken urgently. However, one should not blame the company entirely for the partly irrational roll-outs in various countries, but also admit that the company is a pioneer in the development of new employment relationships and market liberalization. It is up to each individual to decide whether to take a positive or negative view of this.
However, if the liberalization of the markets continues in the future, the long-term bet of the investors of Uber could pay off and would massively strengthen the value of the company.
January 23, 2021 @ 9:58 am
UBER polarizes. Whenever people talk about digital disruption, you can’t avoid mentioning UBER as a prime example. Rarely does the impact of digital technology so profoundly disrupt a market and redefine the value proposition within it. As part of this digital business transformation, Uber has been able to offer its customers significant cost advantages but also provide additional value through user experience and the benefits of a platform.
Nevertheless, their expansion strategy has failed so far. Although the company appeared among the Fortune 500 companies since 2020, the company generated a loss of $8.5 billion in 2019. Even though the company’s technology is currently available in over 50 countries, many legal issues have still not been resolved and the list of cities in which Uber has problems is getting longer. Despite increasing sales figures, the loss is also increasing, and therefore Uber has changed its strategy and is now also focusing on autonomous driving for example. But here, too, it still seems to be a long way to go before this trend becomes established and courts will probably continue to be involved and lawsuits are to be expected. Uber has also focused on another concept in Europe as part of its strategy shift, Uber Freight, which aims to connect the freight industry through broader collaboration opportunities. However, after only about a year, they have withdrawn from this business again. Of course, the Corona pandemic also had a major impact on the industry, but the concept transferred from America was not appropriate for Europe.
I still think Uber has developed a brilliant concept, but unfortunately has not dealt enough with product readiness. Various tools such as the “PESTEL” analysis should have been used to better assess especially the political and legal aspects in other countries. I believe UBER will succeed and follow a successful path but will have to reinvent itself and better adapt to local conditions.
December 10, 2021 @ 8:02 am
Uber a fairly young company that was only founded in 2009 in San Francisco has grown tremendously in the last 12 years amassing a net worth of $73.8B in 2021 and is projected to continue growing. This growth can be attributed to aggressive expansion into different cities across the US and internationally as well as diversification of its product offering with product/services such as UberX, UberPool, UberEats and UberRush. This rapid growth and expansion has not come without its fair share of legal woes as commented in the 2017 article by Professor Apfelthaler. The legal issues in the EU have been one of many that Uber has had to deal with both internationally and domestically. For instance, when Uber launched in Buenos Aires, Argentina in 2016 it was met with protest from taxi drivers who claimed the ride sharing app was operating illegally and putting the livelihood of 38,000 taxi drivers at risk. Also, at the time of launch Uber may not have been authorized to operate as it had not met the requirement for transporting passenger, but none the less there where ~20,000 Uber drivers registered and thousands of residents of Buenos Aires had downloaded the app at the time of launch. Domestic legal woes that Uber has had to face is having to combat Prop 22 in the California November 2020 elections in which it is said was heavily financed by Uber & Lyft to ensure that app-based transportation and delivery companies can classify there drivers as “independent contractors” relieving them of having to offer their drivers any form of employer benefits.
These are just a few of the legal issue surrounding Uber and other app-based transportation and as they expand move into other service/product ventures their legal woes will only continue.
December 11, 2021 @ 8:53 am
The case showed Uber was in a big trouble because of the decision of the European Court of Justice. The European Union’s highest court ruled that Uber will have to be regulated just like any other transportation company. If Uber accepted the judgment, it would lose its advantages, such as low cost and fast speed for calling a trip. Thomas Friedman proclaimed that “The World is Flat”, and most countries said global market is fair for local and international companies, but barriers to international market and local protectionism continue to exist. Uber claim they do not offer transportation services, but only is an exchange platform or a marketplace that connects supply and demand. However, most of local governments did not agree with the arguments. They could want to protect the local transportation companies or local companies who are similar with Uber. Like in China, Didi is very similar with Uber and Didi is a local company, so Didi knows the Chinese customers’ culture and habits. Didi make Uber leave the Chinese market. In addition, Uber’s technology can be easily copied. Therefore, after serval years, Didi started to enter Latin American market and made a big trouble for Uber. Moreover, it wants to open the markets in Europe, Middle East, and Africa. Therefore, if Uber want to continue to developing, it should innovation for their technology, because it claim that it is an exchange platform and a technology company.
January 30, 2022 @ 4:25 am
I think it is great that the Europen Union is setting a stopper for Uber taking advantage of a fragile market. The transportation market is already having a hard time getting the benefits etc. they deserve the same way as other fields. In Norway they only let uber do their “uber black” for a while as they only got approved to provide their service in Norway if they presented themselves as “private drivers”. Therefore, they were the same price as a regular taxi. In Norway most taxis are luxury cars and they are substantially more expensive than they are here in the US. Norway is valuing the work of a driver and wants people with that kind of work to be able to do it full time and make a decent living of it. And not limit the field to people who do it as a second job. In Norway they do not want it to be necessary for anyone to work multiple jobs for a living.
February 8, 2022 @ 10:37 pm
While I believe Uber may continue to grow internationally and enter into more foreign markets, it will nonetheless have difficulty overcoming various challenges and hurdles when it comes to regulations, consumer adoption, and pushback from taxi drivers, local competition, and government authorities in order to stay profitable. For example, aside from dealing with huge amounts of international local and state authorities due to the European High Court’s ruling as noted in the blog posting, it will also have to overcome legislative and court challenges when classifying its drivers as independent contractors instead of employees, tax liabilities, limitations and bannings in various countries and airports, and additional fees imposed by authorities that increase ride costs, which will ultimately make Uber’s services less competitive in comparison to the traditional taxi services. In terms of its drivers’ status, Uber has maintained its position as a technology company that connects drivers and passengers, which not only allows it to start its operations within new markets and somewhat disregard the related employer-employee obligations and responsibilities, but also allows it to avoid paying social security taxes, unemployment insurance, and workers compensation as well as reimbursing its drivers’ mileage. Furthermore, while Uber claims to offer flexibility and freedom to its drivers, some drivers also claim Uber treats them unfairly as independent contractors, and discuss both their poor working conditions and how their earnings amount to less than the minimum wage. However, thanks to the voters’ approval of Prop 22 in California which had overridden Assembly Bill 5 in November 2020, app-based transportation and delivery drivers would be recognized as independent contractors. While this may have been a victory for ridesharing companies, not only will there be uncertainty as to how long Prop 22 will remain in effect, but drivers will likely have to wage court battles against Uber while Uber will likely have to continue waging court battles against authorities. Regarding its tax liabilities, if Uber loses its status as a technology company and becomes classified as a living company, each ridesharing payment will be considered as revenue, making it subject to city and state taxes. Furthermore, Uber has received complaints from government authorities that it not only neglects paying its taxes, but also passes down these liabilities to its drivers as they will be the ones who will be held responsible for paying their own taxes. As such, this could result in not only greater tax legislation, but also in either increased fares for rides or the end of Uber’s operations. Regarding Uber drivers themselves, aside from their non-compliance with taxes, they also face huge risks when it comes to working within countries who have banned the company completely, called for ridesharing industry regulation, or advocated for the ridesharing app to be declared illegal. Airport authorities have also started cracking down on Uber drivers’ activities, such as charging access fees to drop off and pick up their customers at the airport; these actions overall make Uber’s services less competitive in comparison to traditional taxis. On the flip side, Uber also faces complaints about its drivers, how they conduct themselves during their ridesharing services, and the types of risks they face on the job; these issues can include improper qualifications and certifications when it comes to working as an independent contractor for Uber, lack of customer service, and driver-consumer harassment. Regarding international expansion, Uber’s expansion into new foreign markets also brings new risks. For instance, in Asia, the taxi service has become fast, clean, cheap, and easy to pay for in some countries through apps like Alipay. In addition, the taxi service ratio relative to the Asian population has been determined to be higher than in America. As such, considering how taxi services have become more reliable and cheaper as well as how government opposition and protests have increased since Uber’s launch, these factors will ultimately negate Uber’s previously-considered competitive advantages.
Source:
https://www.investopedia.com/articles/investing/072215/4-challenges-uber-will-face-next-years.asp