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TEACHING NOTE
CASE 12
Uber in 2016
Overview
The story of Uber began on a cold winter’s night in Paris in 2008, when Garrett Camp and Trent Kalanick
had trouble hailing a cab. In true entrepreneurial style, rather than complain about the problem, the two
men developed an idea for a limo timeshare service that would be a mobile, fast, and upper-class option for
travelers. Camp thought the idea would accomplish his goal of developing an iPhone app to help with the taxi issues
While some critics viewed Uber as a company with many faults, others saw the business as a game-changing
boost to economies, especially to those individuals who faced unemployment. In recent years, where economic
hardships have hit America and countries abroad harder than any time in recent memory, Uber, and the extra
income that could be generated through this service, was an important lifeline to many. While speaking at a
conference in 2015, Travis Kalanick, Uber founder and chief executive officer, defended Uber, arguing that the
Can It Remain the Dominant Leader of the
World’s Fast-Emerging Ridesharing Industry?*
*This teaching note reflects the thinking and analysis of Professor David Turnipseed, University of South Alabama. We are most
:
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Although Uber’s commitment to ethics and corporate social responsibility was a topic open for debate, the
company’s success at growing both in the United States and internationally was unquestionable. In less than
Suggestions for Using the Case
The Uber in 2016 is an excellent case for use in your business strategy module covering topics included in
Chapters 1-5, but may also be assigned after your lecture on Chapter 9—Ethics, Corporate Social Responsibility
and Environmental Sustainability. The case should generate a lively discussion since students will be familiar
with Uber and most will have used the service. Also, students tend to have very divergent opinions on the issues
presented, which will enhance the class discussion of the case. The relatively short 12-page case will please
students, and they will easily grasp the nature of the ethical issues facing Uber, and other companies in the
ridesharing industry.
Video for Use with the Uber in 2016 case. There is a 19:18-minute 2016 video entitled “Uber’s Plan to
Get More People into Fewer Cars” that can be accessed at https://www.youtube.com/watch?v=pb–rJGgVIo.
You may consider showing it the beginning of your class discussion of the case or have students view it on their
own.
to assigned study questions to use/refer to in responding to the questions that we pose. Moreover, students often
find having a set of assignment or study questions useful in helping prepare oral team presentations and written
case assignments—in addition to whatever directive questions you supply for these assignments.
Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
class members read the Guide to Case Analysis that appears at the end of Case 31 and is posted in the Instructor
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Suggested Assignment Question for an Oral Team Presentation or Written Case Analysis. We
heartily recommend use of the Uber in 2016 case for a written assignment and oral team presentation. Our
recommended assignment question is:
As a newly hired management associate at Uber, you have impressed the company’s leadership
with your skills of analysis and sound strategic thinking. Your immediate supervisor has asked
Assignment Questions
1. How would you characterize Uber’s business model and strategy? What are the key elements of its customer
value proposition? Its profit formula? Its approach to competing in the marketplace?
2. How would you describe competition in the ridesharing industry? What leverage do buyers and suppliers
have with ridesharing services? What competitive threat is posed by new entrants and substitute services?
Prepare a Five Forces Model of Competition to support your answer.
3. Does Uber operate as a socially responsible business? Assess the five components of Uber’s corporate social
responsibility strategy.
4. Examine Uber’s corporate culture. What are the key features of the company’s corporate culture? Has the
culture shifted over the lifespan of the company?
5. With what strategic issues should Uber management be most concerned in 2016? What are the 4-5 issues
that offer the greatest opportunities or that present the greatest threats to its well-being?
Teaching Outline and Analysis
1. How would you characterize Uber’s business model and strategy? What are the key
elements of its customer value proposition? Its profit formula? Its approach to competing in
the marketplace?
Uber’s Business Model
Uber was part of “sharing economy” defined as a “socio-economic ecosystem built around the sharing of
human and physical resources. It includes the shared creation, production, distribution, trade, and consum-
ption of goods and services by different people and organizations.”
Uber classified itself as a technology company, rather than a transportation company, and asserted that
Uber. Instead, they were said to be independent contractors. This lessened Uber’s liability for drivers’ actions
and obligations to pay certain taxes. Drivers were also then unable to unionize or receive benefits from Uber.
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toward the side of employee as well, as Uber had claimed in other lawsuits that its services were not offered
to the general public. Additionally, driver services were an integral part of Uber’s business. Drivers in return
could be too dependent on Uber’s technology to be a contractor.
Uber’s Profit Formula
Uber’s profit formula depended on the continuation of its classification as a “technology company” and its
drivers as “independent contractors”. Uber made money by taking a percentage of the transportation fare.
It was able to keep costs low because it did not obtain the same licenses and registrations that a regular taxi
2. How would you describe competition in the ridesharing industry? What leverage do buyers
and suppliers have with ridesharing services? What competitive threat is posed by new
entrants and substitute services? Prepare a Five Forces Model of Competition to support
your answer.
Competition in the Ridesharing Industry
The taxi and limousine services industry in the United States was relatively fragmented with the largest
companies generating less than 3 percent of the industry’s overall projected $16.2 billion revenue in 2016.
The industry could be segmented into two basic types of companies, including traditional taxi and limousine
services and transportation network companies (TNC) or transportation network services (TNS) as they
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Porter’s Five Forces Model of Competition indicates that the level of competition in the ride-
sharing industry is moderate (3/5).
nFirms in Other Industries Offering Substitutes (Competitive pressure – 4)
Substitutes were a strong force in the ridesharing industry. Good substitutes for ridesharing were readily
nBuyers (Competitive pressure – 2)
Buyers were a moderately weak force. There were no costs involved in switching to competitors or
substitutes, and the services were only weakly differentiated. However, buyer demand was strong,
nPotential new entrants (Competitive pressure – 4)
The cost of entry in the ridesharing industry was far less than the cost of entry in the traditional cab
nSuppliers (Competitive pressure – 2)
Suppliers (drivers) were a weak competitive force as they had insufficient bargaining power to influence
nRivalry Among Competing Sellers (Competitive pressure – 3)
The information in the case suggested that the limited number of companies in the ridesharing industry
competed fiercely in some markets; however the players in the fledgling industry had ample room
for growth both foreign and domestic. The U. S. taxi and limousine services industry was relatively
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3. Does Uber operate as a socially responsible business? Assess the five components of Uber’s
corporate social responsibility strategy.
nActions to ensure the company operates honorably and ethically:
From the available information, there was no indication that Uber made any attempt to operate honorably
or ethically. Uber appeared to make every attempt to evade licensing, registration, and rules that apply
to the traditional taxi industry and self-categorized itself as a technology company, which consequently
protected it from the rules and licensing. Under its self-classification as a technology company, Uber
was able to enter markets easier.
Uber had been somewhat lax in screening its drivers and there had been charges of assaults, kidnappings,
rape and deaths associated with Uber drivers. Uber did not require fingerprints for its background check.
California prosecutors claimed that Uber’s background checks in Los Angeles and San Francisco had
was support for “Ride for a Cause”, collecting donations for European refugees, and their effort to
recruit veterans as drivers.
nActions to protect and sustain the environment:
There are no environmental actions addressed in the case.
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4. Examine Uber’s corporate culture. What are the key features of the company’s corporate
culture? Has the culture shifted over the lifespan of the company?
Uber’s corporate culture was a blend of the shared values, ingrained attitudes and company traditions that
determined the norms of behavior, accepted work practices, and styles of operating. Uber’s corporate culture
was bottom-line focused, with no discernible concern for laws, its “contractor” suppliers, the buyers, or
society in general. The best description of Uber’s culture was unethical and greed-driven.
The key features of the Uber’s corporate culture were:
nValues:
Uber appeared to value only their bottom line. The classification of their drivers as contractors (therefore
no wages and benefits to drivers), the classification of the company as a “technology” company (to
app. Drivers reported poor treatment by Uber and a lack of ability to provide meaningful input. Uber’s
practice of unilaterally changing mileage prices (and thus drivers’ earnings) and deactivating drivers
were indications that the company’s approach to managing people was profit maximization for the
company.
Other company actions such as surge pricing and ordering and cancelling rides with competitors further
supported the “us versus them” mentality. Uber’s atmosphere appeared to be innovative, all-business,
and omnipotent.
nManager – employee interaction:
There was no information provided that addresses direct manager-employee interaction. However, if we
assume that drivers were indeed employees, the company’s approach to people management indicated
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nActions and behaviors explicitly encouraged:
The case paints a clear picture of an aggressive, profit-oriented company culture with a history of self-
nThe manner in which the company deals with external stakeholders:
Uber’s dealings with external stakeholders could be described as combative and mercenary. The
information in the case illustrated Uber’s disdain for its external stakeholders: there was no indication
offer any protection from discrimination. Drivers complained about being treated poorly: for example,
in 2013, drivers could make $15 – $20/hour when working full time. But as more drivers signed up, Uber
reduced the price per mile without any driver input. The reduced mileage payout, plus the requirement
that drivers pay for their own insurance, resulted in some not making minimum wage. These actions
were consistent with the company’s bottom-line focused culture.
Riders were another external constituency who were treated in a subpar manner by Uber. Riders
were victimized by criminal Uber drivers in assaults, rapes, kidnappings and deaths. Uber did not use
fingerprints in driver screening and thus, the FBI criminal data base could not have been used. California
prosecutors claimed that Uber’s background checks in Los Angeles and San Francisco missed 25 drivers
Uber dealt with governmental bodies in much the same way that it dealt with its suppliers – Uber’s
way or no way! When a proposition to reduce regulations that held Uber drivers to the same standards
as taxicab drivers failed in Austin, TX, Uber withdrew from the market. Uber left Auburn, AL because
Uber drivers had to comply with the ADA. Specifically, they claimed that while ADA compliance was
required for transportation companies, it was not required for technology companies and since Uber was
not technically a public service, it did not have to comply.
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culture. Despite mounting opposition to its classification of drivers as independent contractors, and the
increasing competition as traditional taxicab companies, Uber showed no sign of adapting or changing
to address these challenges. The greed-driven culture appeared to be strengthening as the company
continued to do business as it had since its beginning.
5. With what strategic issues should Uber management be most concerned in 2016? What are
the 4-5 issues that oer the greatest opportunities or that present the greatest threats to its
well-being?
There were several “front-burner” issues that should concern Uber’s management, some present opportunities,
while others pose threats.
Opportunities
each completed ride could generate substantial revenue. The taxi and limousine industry was projected
to have $16.2 billion in revenue in 2016. Uber’s experience and capability at ridesharing should give
them an advantage in the traditional cab market with a scheduling app.
nIntra-city delivery may have presented an opportunity for Uber. There were many more Uber drivers
than UPS or Fed Ex drivers in a city, consequently there was a very good possibility that a driver would
Threats
classified as employees, their malfeasance would attach to Uber, which could be held liable for damages
caused by the drivers. Reclassification of drivers from independent contractors to employees would
seriously disrupt Uber’s business model.
requirement that all drivers had to have their fingerprints entered into an FBI database for background
checks. After the proposition was defeated by Austin voters, Uber and Lyft withdrew from the market.
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This void in the market led to the entry of competitors such as Boston-based Fasten Inc., and InstaRyde,
a Canadian-based company that was willing to comply with Austin’s requirements. By June 2016,
there were more than seven ridesharing services vying for the business Uber and Lyft had left behind.
Competition for Uber was also growing internationally as startups sought to become the Uber of their
country.
nUber and the ridesharing industry should be concerned about the vacillating global regulation of
ridesharing apps. In 2015, the Chinese government proposed a draft of regulations that forced ridesharing
apps to operate more like taxi fleets; India also considered a set of similar regulations. The Uber X
Epilogue
While Uber’s valuation soared to $69 billion in December 2016, the company was projected to lose as much as
$3 billion on revenues of $5.5 billion in 2016. The company’s latest statements about its commitment to drivers
and other company news can be found at https://newsroom.uber.com.