Enterprise car share popularity & traffic ananlysis
UBER
1. 1
Is Uber a Disruptive Innovation?
Ryan Fear
Jeremy Eyester
Dante Pantalone
Industrial Organization and Public Policy
Kent State University
Professor Harris
2. 2
Executive Summary Important
As the dictionary states, uber is “denoting an outstanding or supreme example of a
particular kind of person or thing”. Seems to be a worthy name for a company who believes in
offering an outstanding service. Connecting people who are looking for rides to drivers who are
of service, supplying jobs in return. They are currently available in 67 countries, 300+ cities, and
6 continents from Akron, Ohio to Tokyo, Japan.
Uber has a diverse and functional management team that has grown rapidly since opening
in 2009. The Co-Founder and CEO Travis Kalanick has guided the company from a small
market in San Francisco to becoming a global powerhouse. Chief Technology Officer Thuan
Pham, previous VP of Engineering at VMware, Westbridge and DoubleClick has a B.S. in
Computer Science and Engineering and an M.S. in EE/CS from MIT. A vital member is Ryan
Graves, Head of Global Operations who grew operations from a single employee to a global
workforce, holding a B.S. in Economics from Miami University (Ohio). Ubers main investors
include the following: Lowercase Capital, Benchmark, Goldman Sachs, First Round, Menlo, and
Google Ventures.
When looking at the business from a large viewpoint, it is simply an Application run
company. The app requires you to set up a user profile with a credit/debit card to take away from
cash payments. Once this has been completed you send for a driver and one within the area will
come to you and drive you to your location. Also the rider can see when they should arrive, the
route, and cost all on the application! Lastly and most importantly to the customer, the app
automatically pinpoints your location providing door-to-door service.
A main concern with Uber is safety for the riders, since anyone with a car can be an
driver it is understandable. Uber has taken steps into becoming extremely safe for their riders.
3. 3
First, offering end-to-end insurance coverage, giving the riders peace of mind. There are
background checks before anyone can be a driver, screened through a process that includes
county, federal, and multi-state criminal background checks. On the app, the driver has a profile
so you know what they look like and what car they have.
In closing, it appears that Uber is a rapidly growing company that could either be another
form of transportation, or downright change the industry. Since they are a newer company (six
years in business), it will be interesting to see how their company unravels and if they have more
growth to observe.
Description of Industry (Refer to Graph 1)
“Companies in this industry provide passenger transportation by automobiles not
operated over regular routes or on regular schedules. No major companies dominate. The US taxi
and limousine services industry includes about 7,500 establishments (single-location companies
and units of multi-location companies) with about $7 billion in combined annual revenue. Taxi
and limousine revenue is driven by business and leisure travel. The profitability of individual
companies depends on good marketing. Small companies can effectively compete with large
ones because there are few economies of scale in operations. The US industry is fragmented: the
top 50 companies account for less than 35 percent of industry revenue (IBIS World).”
“The Taxi and Limousine Services industry has coasted on clear roads during 2010-2015.
The economy's return has directly benefited the industry as business expense accounts have
grown and consumers have been more willing to spend on small luxuries such as taxi and
limousine rides. Moreover, increased demand from corporate travelers, tourists and private
households is expected to result in the continued recovery of the industry. However, the volatile
nature of fuel prices remains a threat to the industry (IBIS World).”
4. 4
“Barriers to entry for new firms offering taxi services can vary significantly between state
and city. The moderate to high start-up costs act as one of the major barriers to entry in the
industry. Major outlays include satisfying regulatory requirements and the cost of purchasing a
taxi license (medallions), which can range from several thousand dollars in some cities to about
$1.0 million for a corporate medallion in New York City. Initial costs also include purchasing a
suitable vehicle. If the operator intends to make fares from being hailed, then the overall standard
is not critical; however, larger operators must begin to build brand loyalty and encourage repeat
customers. In such cases, quality of service is essential to these larger operators (IBIS World).”
“Uber has an affordable ride for every business need, and the uberX option is up to 40%
cheaper than a taxi. By switching to Uber, your business can save up to $1,000 per employee
every year (www.uber.com).”
Summary Tables of Data Utilized
Our Data Set is composed of 331 observations and 20 variables ranging from 1985 to
2013. There are 21 companies within our data set. The companies range from ANC Rental Corp
andAP Holdings Inc. to Amerco and Hertz Global Holdings Inc..
Description of Innovation
“Whenever a disruptive force enters an existing marketplace, chaos and confusion are
sure to be present. That certainly seems to be the case when it comes to Uber, as experts and
5. 5
analysts try to measure how much of an impact the new company is having on more traditional
transportation methods, particularly taxis (Digitalist Magazine).”
“Uber hasn’t been shy about discussing the effect its Big Data efforts have had on the
transportation industry in general. Taxi companies in particular have been hit hard by the new
competition. In just one, statistically backed instance, the number of people using cabs in the city
of San Francisco has fallen off dramatically. Back in March 2012, the average taxi made more
than 1,400 trips per month. In late 2014, that number had fallen to just about 500 trips every
month. The startling drop is blamed on the growing use of services like Uber, and the effect has
been a negative one on taxi cabs. Though San Francisco has seen a sizable decline, others within
the taxi industry are urging people not to panic. As the head of New York’s Taxi and Limousine
Commission has stated, while taxi use has declined, the industry will continue on and is not
facing the threat of going completely out of business (Digitalist Magazine).”
Our hypothesis is that Uber has a negative effect on the profits of the other transportation
companies, due to the fact that they reduce costs and offer a faster service.
Empirical Findings
In this section, we will discuss what we found while sifting through the data. First if
looking at section 3 in the graph section you’ll see we looked at the advertising for all companies
through 2006-2014. We were interested to see if these companies increased or decreased their
advertising after Uber entered (in bold). Finding that 60% of companies decreased in advertising,
and as shown Avis and Dollar Thrifty experienced a loss in cost of goods sold. The companies
who increased in advertising experienced gains after 2009.