Table of Contents
Uber is a transportation network company based in San Francisco, CA that creates mobile software
connecting passengers with drivers of vehicles for hire. Users are able to reserve a driver through
Uber’s mobile application, as well as track the location of their reserved car as it drives to the user’s
location. Uber offers several different tiers of pricing, depending on the type of vehicle the user
chooses to reserve. It is free for users to join; payment is calculated in a manner similar to
conventional taxis and transacted through the mobile app, allowing users to split ride fare between
different passengers. The Company partners with independent drivers and takes a share of each
transaction. Uber operates in major cities across 22 different countries.
The Company was initially founded as UberCab by Garrett Camp and Travis Kalanick in 2009.
Subsequent to developing a prototype, the Company launched in San Francisco in June 2010 and
included Ryan Graves as CEO. Later that year, the Company received venture funding from a group
of super angel investors in Silicon Valley. Uber raised upwards of $11.5M in its Series A round lead
by Benchmark Capital in early 2011. Later in 2011, the Company raised an additional $32M from
investors including Goldman Sachs and Amazon founder Jeff Bezos. In August of 2013, Uber closed
a round of $361.2M, valuing the Company at approximately $3.4B pre-money and $3.76B post.
Initially, Uber offered only luxury vehicles including Lincoln Town Cars, Cadillac Escalades, BMW
7 Series, and Mercedes-Benz S550 sedans , but has since offered a broader range of lower-market
options called uberX which includes the Toyota Prius and Camry  and is intended to be
competitive with conventional taxicabs.
In addition, Uber has experimented with a number of different transportation reservation services in
select locations. The Company has began to offer UberTAXI, a partnership with local taxi dispatch
services that allows users to hail ordinary city cabs using the Uber mobile app . Uber has also
experimented with a service called UberCHOPPER, offering up to five passengers transportation
from New York City to The Hamptons for $3000 via cab and helicopter .
Uber has been subject to regulatory opposition and accusations of illegal taxicab operation in several
jurisdictions. In early 2013, claims were made that Uber posed a danger to society by not providing a
commercial insurance policy . In response, California regulators approved of rules in September
2013 that requiring that the Company offer insurance coverage, as well as charging a percent of total
revenues as fees .
In efforts to cater to the growing instant gratification need, Uber provides an on-demand car service
app powered through the smartphone platform. The software company connects drivers to passengers
through the app seamlessly, making the process user-friendly and eliminating money transactions.
Uber caters to several target markets by providing differentiated services. The types of available cars
include uberX, Taxi, Black, SUV, and LUX . The most affordable option is uberX, which directly
competes with traditional taxi services.
Being the first firm to market, Uber has had the preliminary opportunity to enter profitable areas,
recruit quality drivers, and establish the brand before its competitors . This advantage allowed
Uber to grasp the biggest market share and establish itself as a global company. Uber also identified
a quick way to connect drivers and passengers using a mobile platform. Considering the growing
number of people using smart phones, the process is well integrated into people’s lifestyles with the
help of a user-friendly application.
An important part of Uber’s pricing model is surge pricing. In short, Uber raises its rates during peak
times to offset the increasing demand for rides and upkeep the supply of willing drivers. In the past,
Uber has practiced surge pricing during holidays , on days when most people desired rides and not
enough people were willing to provide them. This strategy has become a hot topic since then, and the
Uber team made a point to explain this pricing model through their blog and interviews.
One of the biggest issues that Uber faces at the moment is the pile of lawsuits from local
governments, taxi companies, and other related parties. Traditionally, taxi companies are heavily
regulated by the city and are required to pay local taxes for the use of roads and other commodities
. Uber has managed to bypass these regulations by instituting their innovative business model,
acting as a third party. This outcome has stirred up several issues that the company now has to
address. For example, cities like Providence considered instituting a $40 flat rate for public motor
vehicles that would greatly affect Uber’s model and profitability . Regardless of these obstacles,
the company has been rapidly growing, and now has a presence in over 22 countries.
Looking into the future, Travis Kalanick, Uber CEO, foresees a business that would function as an
“on-demand” delivery service. He highlights the importance of the push for instant gratification in
current society, and seeks to fill that need by not only providing fast and reliable rides on demand,
but other services as well . One other way Uber can expand is by catering to not only urban but
to rural markets as well. Finally, some of the newest Uber features include sharing one’s estimated
time of arrival (ETA) with other app users as well as sending snaps of one’s current location to show
how far one is from a certain destination. This functionality allows the company to collect valuable
data on user travels as well as traffic, and potentially use this information in a profitable way .
Uber has been tirelessly improving their services, as can be seen with the recent changes the
company has rolled out. One of these changes includes the integration of PayPal into the payment
platform, allowing people to utilize several ways to pay to their fares . In Italy, Uber partnered
with WiMan to provide a 3G/hotspot in all Uber cars . These customer accommodations serve as
means to differentiate Uber from the rising number of competitors.
The company may be considered a disruptive technology, a wave that takes the traditional
transportation industry by storm and completely changes how people use the available services. It is
of little wonder that taxi companies and local governments are making the expansion process
difficult for Uber. With its current growth, the company has the potential to dominate the market and
eradicate the need for current industries.
Uber’s management team is comprised of their two co-founders Garrett Camp and Travis Kalanick
(CEO), VP of Operations Ryan Graves, CTO Thuan Pham,, and General Counsel Salle Yoo.
Garrett Camp - Co Founder & Chairman
Camp is a serial entrepreneur whose portfolio includes founding StumbleUpon, the largest discovery
engine, and serving as the lead investor and advisor to Blackjet (formally GreenJets), an on demand
service similar to Uber, specifically for private jet sharing . He currently runs his own incubator,
Expa, using his ten years of startup experience to generate new ideas and form teams to build them to
scale. Expa advises startups on strategy, product development and user experience .
Travis Kalanick - Co Founder & CEO
Travis Kalanick is the CEO and main face of Uber. As a UCLA dropout, Kalanick and his friend
formed the first P2P search engine, Scour.net, with four million in funding from media tycoons
Ronald Burke and Michael Ovitz. The founders were eventually sued by their own investors for
violating a “No Shop” clause in their agreement for searching for outside funding when they were
strapped for cash. Subsequently they were also sued by the music and film industry for $250 billion
dollars. Scour settled with its litigants for one million in cash and was eventually shut down and sold
in bankruptcy court for ten million . Kalanick and his team went on to found Red Swoosh,
another P2P based business that streamlines the way websites move content. That company was also
eventually sold to a rival tech firm. Kalanick moved on as an angel investor and recruiter for strategic
development. His portfolio includes FormSpring, Livefyre, Pantheon, StyleSeat, CrowdFlower,
Flowtown, Blippy, Honestly.com, Sociable, Kareo, Expensify, and DeviantArt. Kalanick and Camp
came up with the idea for Uber at a tech conference, LeWeb, they attended together in Paris in late
Ryan Graves - VP of Operations
Ryan Graves joined the team in early 2010 after responding to tweet sent out by Kalanick who was
looking for a product manager . Graves is an economics graduate from Miami University and has
a diverse background in both business development and IT. Graves has worked for Foursquare, GE
Healthcare, and created his own third party social media app, Socialdremium, that ultimately failed
Thuan Pham - CTO
Thuan Pham holds a B.S. in computer science and engineering, as well as an M.S. in EE/CS from
MIT. At Uber, Pham is responsible for addressing technical issues that arise with Uber’s rapid
growth. His previous titles include VP of Engineering at VMWare, Westbridge and Doubleclick .
Salle Yoo - General Counsel
As General Counsel, Salle Yoo is responsible for legal issues related to expanding Uber’s global
presence and sustaining their existing markets. Yoo is a graduate of Scripps College and Boston
University School of Law and was once a partner at Davis Wright Tremaine LLP, where she
represented leading energy, telecommunications and technology firms .
Propensity for risk
Kalanick’s motto as an entrepreneur is to “break stuff in order to fix it”, well evident in his history
with Scour . It is his attitude that really drives Uber’s mission to be become “everyone’s private
driver” and sets the tone for the management team. Kalanick has demonstrated a willingness to give
up school in pursuit of something he believed in. Even when that failed in grand fashion, he did it
again. Graves, too, has pursued what ultimately was a failure in Socialdremium. His self-proclaimed
hustle has made up for that. Before becoming an intern at Foursquare, Graves impersonated an
employee at Foursquare and collected thirty potential deals with local businesses, leveraging those in
order to get the job . Now at Uber, the team is facing a stiff adversary, challenging the
establishment and laws regulating of the taxi industry. Some see it as a blatantly illegal cab service,
and others as a new disruptive technology.
Can they execute?
Uber is treading in very dangerous waters. The technical expertise to effectively maintain a mobile
application at a rapidly growing scale is imaginatively high. Pham’s educational and professional
background proves adequate. Salle Yoo’s legal counsel is more questionable.Davis Wright Tremaine
LLP is a mid-size firm with 500 attorneys. To make it to partner there lends her some merit but the
firm itself has a limited international focus in a broad range of industries. Uber is facing very specific
legal challenges and is currently in 22 countries. Yoo has her work cut out for her. The management
team also lacks formal knowledge of the critical success factors within the taxi industry, but that does
not mean the knowledge cannot be picked up through the customer experience and/or outsourced to a
consulting company. In fact, Uber’s inception can be traced back to Camp’s remark at LeWeb where
he wished he had a ride “at the push of a button” .
The beauty of Uber is that they act as a third party by bringing the driver to the customer; no fleets
and no maintenance are necessary (with the exception of UberBlack). The team has had to partner
with rental companies to provide higher end vehicles for their premium service. Otherwise, the team
has no issues with supplier connections. Their operational services are limited to background checks
on drivers, IT support, and general business management, all of which are accessible internally or
The management team knows who their customers are and have strategically launched in select
cities. As a mobile app, Uber is always gathering user data to refine their scope. The team is business
savvy and capable of assessing the external environment for competition. For instance, uberX was
recently made available for a lower cost to match the price of Lyft. Uber plans its marketing strategy
by looking into the future.
Uber’s Macro Market: Disruption in the market
Uber is amongst the leaders in the technology for mobile car shuttling services. Only after a few years,
this disruptive technology has sent a noticeable jolt down the taxicab and limo market. In order to identify
Uber’s current and future market let’s take a closer look at the taxicab and limo market in the U.S.
Granted, the entire public transportation market, including taxis, buses, railways, metros, and subways,
etc., will be altered with the continuing success of Uber, but given current statistics, Uber is essentially
carving its own market share out of the taxicab and limo market. This year the taxicab and limo market is
generating $9.7 billion in revenue (1). With projected growth rates at 1.4% a year, this market is in a safe
steady state, ripe for disruption (1). Over the past four years of Uber’s existence, taxicab and limo
companies have watched their ridership fall 10-30% in cities where Uber operates (2). This means that in
four years, Uber has captured roughly $1-$3 billion of a market that is already mature in its lifecycle
stage. Another statistic that speaks to the future of the taxicab and limo market is that “Los Angeles’
[largest] taxi company – has 15 percent fewer calls coming in, after fours years of double-digit growth” in
their market (2). This speaks to the fact that mobile apps are quickly replacing the call system, and that
Uber is at the forefront of this successful practice.
Uber’s Micro Market: Who are they selling to?
With such success comes a focused understanding of their customers. This understanding is derived from
Uber’s two target age groups: 18-25, 25-35, and 35+. Each of these age groups utilizes Uber’s services
for differing purposes, so Uber built a marketing strategy around these vary ages. In the 18-25 age range,
Uber partners with B-list celebrities that have a large social media following. One example would be their
partnership with Ryan Sheckler. This partnership provides Sheckler with an Uber ride to and from his
destination, and then he must tweet and instagram his Uber ride. With around 2,500,000 twitter followers
and just over 1,000,000 followers on instagram, Sheckler indirectly advertises Uber to the target 18-25
audience. Uber is also strongly targeting the college towns in the cities they operate in. They contract
students at their universities to be Uber campus representatives and in exchange the student reps voice
and represent Uber on their college campuses. Uber provides them with free giveaways and promotional
code cards, and the campus rep is paid based on how many sign-ups they can generate. This system is
vital to their initial success in the 18-25 age group.
Uber is also able to establish their universal appeal to differing geographic and demographic cities in their
25-35 age range. Each city that Uber operates in has its own Yelp and Twitter accounts, set up to provide
instant feedback, reviews, and current happenings with the company. For individuals curious in the
system and interested in learning more about the process, these two web-based outlets eliminate any
skepticism. With readily available information through non-Uber affiliated sources the individual will get
a holistic, fair view of the company. Because Uber is still relatively new, these extra sources of
information add a necessary layer of trust to the company.
Who is buying Uber’s services?
When determining who is going to be purchasing Uber’s services, let’s first look at the demand factors
that currently drive the taxicab and limo market. Such factors include: “disposable income, tourist
volumes, corporate profit, quality of services and vehicles, convenience, availability of substitutes, price
and special events” (3). All of these factors run parallel to those of Uber’s, yet there are some differing
elements. Disposable income, tourist volumes, the availability of substitutes, and special events are
demand factors that are uncontrollable in the entire market. However, corporate profit, quality of services
and vehicles, convenience, and price are all controllable factors. As indicated by their astounding growth,
Uber usually outperforms taxicab and limo companies in these categories.
In order to understand the network transportation industry’s attractiveness and potential growth, we
will use Porter’s Five Forces Analysis to consider the industry at the macro-level. For the micro
level, we will analyze Uber’s sustainable advantages by examining their proprietary elements,
organizational processes, and economic viability.
Macro-Level Analysis: Porter’s Five Forces
Threat of Potential Entrants
Although Uber has already filed for several patents to protect their system and process , their
patents were filed recently and will not provide protection until they are approved. While the timeline
for the patents’ approval is not clear, Uber currently does not have any protection from new entrants
as it have no proprietary elements that can prevent new entrants from competing in the industry. In
terms of capital cost, Uber’s seed capital was $200,000 paid in full by the two co-founders .
Prospective new entrants into the industry can expect relatively low seed capital. Due to the low
capital requirement to enter the industry, Uber faces low protection against new entrants. Since Uber
does not require membership for prospective customers and offers their app for free, there is virtually
no cost to switch services. Due to the lack of propriety elements, low initial capital requirement, and
lack of switching cost, Uber faces high threat from potential entrants. These factors will likely limit
Since Uber does not own any vehicles, their business model depends entirely on drivers with their
own vehicle and partners. Essentially, Uber outsources all assets and labour to limo companies
and individuals who are willing to use their web application. There is also no substitute for individual
drivers. Although there was news of Uber buying driverless cars from Google, the news proved to be
a hoax. In addition, prospective drivers have the option to pick and choose between Uber, rival
services, or traditional taxi services. Therefore, suppliers have the power to negotiate for a higher
price at Uber’s expense. Lastly, drivers do not face any switching cost since they essentially own
everything other than the app. These factors give drivers immense bargaining power. This is not to
say Uber is powerless; since there are many qualifying drivers, Uber has the power to set terms and
rates. Taking all factors into account, suppliers have moderate power to impact Uber’s profits in the
Uber is a service that customers do not need on a day-to-day basis. Most customers only use Uber in
specific circumstances. Therefore, Uber customers have the option to choose when to utilize Uber
and when to go with a competitor. In addition, Uber has many competitor and substitute in the
industry. Lastly, since Uber is a free app that only requires prospective users to register with them,
the switching cost for customers is quite low. When taking into consideration the low switching cost
and an abundance of competitors and substitutes, it is clear that customers are more likely to be price
sensitive. These factors give buyers significant power to limit Uber’s potential profits.
Threat of Substitutes
Since Uber competes in the Network Transportation Industry, it has many substitutes across the
transportation industry. The closest substitute to Uber is traditional taxi service. Although taxi
services cost more than Uber on average, its prevalence and established presence also limits Uber’s
ability to raise prices. Public transportation is substitute that poses serious threat; in exchange for a
slower speed public transit also offer substantially lower fare. Since Uber poses virtually no
switching cost, it faces very high threat of substitute from a wide array of transportation methods. As
a result Uber’s profitability is seriously impacted by the high threat of substitutes.
There are many competitors in the Network Transportation Industry which Uber is classified under.
Notable, the two biggest competitors in the space are Sidecar and Lyft. The three companies use very
similar business model and suppliers; therefore, they are competing not only for customers but also
for suppliers. In addition, the different companies target customers living in the same geographical
locations, notable major cities across the United States. Although rivalry and competition is fierce in
the space, Uber has much more capital compared to its competitors. Uber’s $307 million in funding
overshadows Lyft’s $82.5 million in funding and Sidecar’s $10 million  . Therefore, Uber can
be regarded as an industry leader. However, due to low switching cost and little differentiation in the
industry, Uber’s price and profits are once again seriously limited by the fierce rivalry.
Micro-Level Analysis: Sustainable Advantage
Macro-level industry outlook alone will not determine Uber’s potential for success in the industry. In
order to gain a holistic understanding of Uber, we must examine the sustainable advantages Uber has
over its competitors. In order to determine Uber’s sustainable advantages, we will examine their
proprietary elements, economic viability, and superior processes or resources.
In terms of proprietary elements, Uber has an advantage over its competitor in the sense that it have
filed for patents. Although the patent is still pending, Uber still own more proprietary elements
compared to their competitors. Since their competitors utilize technology that not only function
similarly, but also look similarly to Uber’s software, Uber can potentially sue their competitors once
their patents are approved. Uber has no proprietary elements for the time being. In fact, outside
perception refer to Uber, Lyft, and Sidecar as “clones of each other.”  It is safe to conclude that
Uber does not have the proprietary elements necessary to sustain its first-mover advantages at the
moment, but this will change in the future.
Uber’s economic viability is relatively sound, but undifferentiated from its competitors. Uber’s sole
fixed cost is their app and software hosting services. Software and hosting services are inexpensive
and can be maintained by contribution margins. Operating cash cycle is also relatively short since
payments are done electronically. Uber’s biggest economic viability concern is its high customer
acquisition and retention cost, especially in a highly competitive environment. Since competitors’
business structure is undifferentiated, Uber has no sustainable advantage in terms of economic
Ultimately, Uber’s competitive advantage comes from their access to resources that are unavailable
to competitors. Uber has received over $300 million in funding so far. The number is especially
impressive considering Uber has more than three times their competitors’ funding. The access to
extra capital allows Uber to spend more money on acquiring more drivers, pushing into more
markets, and developing better infrastructure. As a result of Uber’s superior access to capital, it is
present in 9 different countries and over 30 cities worldwide. Their competitor will have an
extremely difficult time reproducing results like this, especially given their funding. Uber’s superior
access to funding is the driving force behind their sustainable advantage.
On the macro-industry level, Uber faces high threat of potential entrants, high supplier power, high
buyer power, moderate threat of substitutes, and fierce competition among rivals. It is safe to
conclude from the five forces that Uber is competing in a cutthroat industry where prices and profit
margins will be kept relatively low. However, since the industry is relatively immature, there is huge
potential for growth. The current outlook for the industry at the macro-level is not very attractive.
This is not to say that the industry is doomed; should the industry mature and Uber is the only one
left standing, there is a huge profit to be reaped from the sheer volume of potential customers that is
still untapped. In addition, Uber has the resources to secure those potential customers. Of all the
competitors in the industry, Uber is the one that has the best odds of becoming the industry leader. If
Uber survives the currently crowded industry, it will become the leader in network transportation and
prove to be an extremely lucrative company.
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