The Effect of Uber
As introduced earlier in this paper, below are some of the specific effects that Uber, one of the companies that benefit from the “sharing economy,” have on the traditional taxi industry.
Effect 1: Taxi Licenses and Medallions Price Decline.
The purpose of taxi medallions is essentially to serve as permits for a driver to operate as a taxi. Although the price of these medallions had already been in decline, the arrival of Uber only made the decline steeper. For example, New York taxi medallions were at about 1.3 million dollars in 2013. But just two years later, in 2015, with the arrival of Uber, their value is at just $850,000. This decline is further illustrated in the illustration below ("7 Strategies Uber …show more content…
People are always on their phones, the fact the Uber has now tapped into that and is making their presence known, will only lead to success. The internet has also allowed Uber to speed around the world easier than other companies. As I talked about earlier in this paper, Uber has taken full advantage of technology and has made their app the best it can be. For example, their integrated GPS technology matches drivers with passengers and monitors the trip; this cuts down on time, effort, and search costs ("7 Strategies Uber Is Using to Disrupt the Taxi Industry", 2017).
Strategy 3: Flexible Pricing Model.
Uber is involved in Business-to-Consumer (B2C) transactions, which is the most prevalent kind of ecommerce. They are a business providing a service to consumers. As a business, they want to provide the best possible service for their consumers at the lowest possible price. That is why being able to have a flexible pricing model is so important. It allow Uber to do just that.
Uber doesn’t have to follow any regulations on fare, so their prices are very flexible. Uber executives argue that Uber is a ride-sharing service and not a taxi company. Thus, they don’t have to follow taxi regulations, which include pre-approved prices and fare rates. Initially, consumers thought that Uber was more expensive than taxis, but in the long run, it is the more affordable option ("7 Strategies Uber Is Using to Disrupt the Taxi Industry", …show more content…
Consumers are able to rate their driver at the end of the ride. If the driver’s star rating falls below a certain mark, set by Uber, then the particular driver can be removed from the company. This system encouragers Uber’s drivers to prove and maintain excellent service to consumers; by how they drive, how they interact with riders, to how they keep their vehicles ("7 Strategies Uber Is Using to Disrupt the Taxi Industry", 2017).
The big question is, who will come out on top? At this point… we can’t be sure. Uber is not guaranteed to be the winner. Although Uber is increasing in popularity, today, they are actually losing money. Their subsidizing of fares, thus enabling lower rates, are to blame. Uber finished 2015 with a loss of $2 billion, and a cumulative $4 billion in loss since inception (Gathii, 2017).
What can taxi companies do to compete? They need to take a look at what Uber is doing and use that to improve their services. They can implement an app and thus off alternatives to cash payments. By getting with the times and catering to market demands, taxi companies have the ability to win back the market (Gathii,