#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.
March 13, 2018 @ 4:42 pm
There are so many different disruptive business models up and running now and Uber’s taxi approach is just one of them. In general Uber’s idea is to use already existing resources to provide a smart solution for people transportation, something like SMART taxi service. Modern business models are generally looking for new direct services without middleman or even distributers. Nevertheless, if Uber should deal with the judge of European Court of Justice, which is trying to save Taxi business as is. Such business models will change our world and shorten the supply chain. Spotify, Amazon, Airbnb and others are doing similar service business, that’s why Uber or even a follow up company will be successful with this kind of taxi service in Europe as well. Of course, Uber underestimated the market entry process in Europe and found themselves in a sort of insolvable situation, but anybody had to do the first step. The next try, nevertheless if Uber or even another company, will have learned from this story. That’s why the success probability for a similar business model has already increased for sure. Other new business models have already shown that.
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.