The market has decided that Uber and its immediate competitors are adding efficiency to our society. How is Uber providing that added efficiency?

The $68 billion dollar firm Uber Technology, Inc., is unsettling the traditional taxi business. In
over 84 countries and 737 cities around the world, Uber and similar companies are challenging the
existing taxi business model. Uber and its growing list of competitors, Lyft, Sidecar, and Flywheel
in America, and fledging rivals in Europe, Asia, and India, think their smartphone apps can
provide a new and improved way to call a taxi. This disruptive business model uses an app to
arrange rides between riders and cars, theoretically a nearby car, which is tracked by the app. The
Uber system also provides a history of rides, routes, and fees as well as automatic billing. In
addition, driver and rider are also allowed to evaluate each other. The services are increasingly
popular, worrying established taxi services in cities from New York to Berlin, and from Rio de
Janeiro to Bangkok. In many markets, Uber has proven to be the best, fastest, and most reliable
way to find a ride. Consumers worldwide are endorsing the system as a replacement for the usual

way to find a ride. Consumers worldwide are endorsing the system as a replacement for the usual
taxi ride. As the most established competitor in the field, Uber is putting more cars on the road,
meaning faster pickup times, which should attract even more riders, which in turn attracts even
more drivers, and so on. This growth cycle may speed the demise of the existing taxi businesses as
well as provide substantial competition for firms with a technology-oriented model similar to
Uber’s.
Uber is a software company. It does not own any cars, but it is the largest taxi company in the
world. The Uber business model bypasses taxi ownership and a number of regulations, while at
the same time offering better service and lower fees than traditional taxis. However, the traditional
taxi industry is fighting back, and regulations are mounting. The regulations vary by country and
city, but increasingly special licensing, testing, and inspections are being imposed. Part of the fee
charged to riders does not go to the driver, but to Uber, as there are real overhead costs. Uber’s
costs, depending on the locale, may include insurance, background checks for drivers, vetting of
vehicles, software development and maintenance, and centralized billing. Additionally, with 5
hillion transactions ner
minito
comnuter costs are sionificant
How these overhead costs comnar

vehicles, software development and maintenance, and centralized billing. Additionally, with 5
billion transactions per minute, computer costs are significant. How these overhead costs compare
to traditional taxi costs is yet to be determined. Therefore, improved efficiency may not be
immediately obvious, and contract provisions are significant (see
www.uber.com/legal/terms/us).
In addition to growing regulations, a complicating factor in the model is finding volunteer drivers
at inopportune times. A sober driver and a clean car at 1:00 a.m. New Year’s Eve does cost more.
Consequently, Uber has introduced “surge” pricing. Surge pricing means a higher price,
sometimes much higher, than normal. Surge pricing has proven necessary to ensure that cars and
drivers are available at unusual times. The variation in prices can be a shock to riders and drivers
alike, making price variation a contentious issue.

ABOVE IS THE READING BELOW IS THE QUESTION THAT NEEDS TO BE ANWSERED

1. The market has decided that Uber and its immediate competitors are adding efficiency to
our society. How is Uber providing that added efficiency?
2. Do you think the Uber model will work in the trucking industry?
3. In what other areas/industries might the Uber model be used?

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