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Assignment - 2017

Course Code: CST 620

Course Title: CASE STUDY - 1
Student ID: 17JUN1044MBAHR
Mode of Exam: ONLINE

1. What are the ethical challenges that Uber faces in using app-based peer-to-peer sharing
Ans: Uber has become very successful within a very short period of time. People like to use apps or
other digital devices when requesting for services nowadays whether it is for booking a hotel,
paying online, ordering meals etc. We want to get things done on a mouse click. The other new
development is we like to network and share like it happens with AirBnB as well and I am sure
there will be more new services o that kind in the future. It’s the sharing economy and it’s
something interesting and exciting for consumers. It shows new ways of doing things which is not
bad either. At the same time this causes a lot of problems as well.
Some of the serious ethical problems are:
 Uber seems to make its own rules and not care about government rules in the countries.
This is unfair and not ethical business practice.
 U takes away business from professional drivers who are well experienced and trained, and
who pay taxes.
 U increases fares for instance if there is an over demand. They did this when a natural
disaster happened and which is very unethical for a company to take advantage and charge
people higher fares in emergency situations.
 U drivers do not pay taxes like other professional drivers have to do.
 Uber company exposes consumers to risks like personal safety, accidents etc. which is
unethical for a company to do.
 Uber does not provide insurance, training, cars etc. to their drivers so they can easily have
bigger profits.

2. Since Uber is using a disruptive business model and marketing strategy, what are the risks
that the company will have to overcome to be successful?
Ans: Uber depends on managing future risks in below key areas:
Drivers, Surge Pricing, Fares, Drivers happy, Competitors,
1. Drivers: Uber increasing the number of drivers is one of the most important steps Uber will have
to take, it must be controlled. An overflow of drivers will cause a decrease in the number of
customers each specific driver obtains. Inevitably, this will lead to less money for the drivers,
causing frustration. In other words, Uber must find the perfect number of drivers in the streets.
2. Surge pricing: Uber must be careful with its “surge pricing”. Surge pricing is when Uber triples,
even quadruples, their fare pricing on specific days (holidays, for example). Although this leads to
an increase in net revenue for the company and its drivers, none of their customers will appreciate
this. If Uber uses the surge pricing tool too often, it may lose customers.
3. Fares: Uber must also be careful with fares. This may come as no surprise, but Uber’s biggest
selling point is having a lower fare than a taxi. If they raise their prices too much, Uber’s fares will
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not be as competitive as a taxi’s fare, leading to many customers switching back to a taxi as their
preferred mode of transportation.
4. Drivers happy: Uber should make sure it keeps its drivers happy. If this means not taking a
bigger cut from its drivers (currently set at 20%), then so be it. Taking more from drivers will
increase Uber’s net revenue, but it will anger the drivers highly. In the end, if Uber looks to grow
substantially, one of their priorities will have to be keeping their drivers happy.
5. Competitors: Not only can these challengers steal numerous customers from Uber, it can also do
the same with their drivers. The rivalry between the companies is fierce, illustrated by some
news that Uber employees were calling Lyft cars to jam up their service. An interesting note
about Sidecar is that their drivers have the ability to set their own price, meaning that they compete
for the customer’s business by lowering their rates. This allows for some extremely cheap rides!

3. Because Uber is so popular and the business model is being expanded to other industries,
should there be regulation to develop compliance with standards to protect competitors and
Ans: Uber is a new business model with a service that no one else has offered before. In many
countries U has been facing law suits since there is not much regulation for this kind of business. It’
s also called the sharing economy. It’s a big challenge for countries how to deal with it.
I believe there must be regulations in place since it’s the same for any other business. So
governments must develop such regulations and laws which can be applied. A similar business is
Airbnb platform where you can book a room. This room is owned by a private person. This can also
cause problems for the consumer and also hotel owners have been fighting against it. Maybe there
will be other such products in the future.

I believe most important areas for regulations are:

 Accidents coverage for consumer: At the moment it is unclear how consumers are covered in a U car
if there is an accident.
 Protection for personal safety in the car: Some U drivers are private people and non professional
drivers. Like anybody can sign up with U and drive. This is a big risk to consumers who do not know
who this person is and if this person is an experienced driver. Also the consumer does not know if
this person has a clean criminal record.
 Competitors also need to be protected. For instance Taxi fares and working hours are officially
regulated by the authorities. With U fares it is different. The company which is private can change
their fares anytime and harm other competitors.
 Coverage in case of an accident for driver: If they cause an accident with serious implications or if a
consumer files a law suit against them because they are not satisfied with the service they are at a
big financial risk. At least if they do not have insurance coverage.
 Road safety of private cars: These private cars used by U drivers are maybe not well maintained
and all safe.
 Working hours: Some of U drivers are not employed with the company but contractors. So nobody
knows how many hours they work and if they are maybe exhausted from long working hours and
not really fit to drive.
 Renting private rooms: A consumer who rents a private room does not know the owner. Maybe it is
a personal safety risk.
 Airbnb consumers: AirBnB owners do not know the person who comes to their apartment. Like in
a hotel the passport is checked. This also is a safety risk.
 Taxes for the government. Drivers for Uber and also AirbnB owners do not pay taxes. This needs to
be also regulated as hotels and taxi business needs to pay taxes.

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