The Role of Price Discrimination in Uber's Business Model

Creating Shared value

Uber has a two-sided platform that provides alternatives to transportation that are decent to the taxis and creates value for all constituencies: consumers enjoy rides that are cheaper, drivers get a share of the income and the company gets some revenue itself. The commitment of different stakeholders, usually, has implications that are far reaching for the way the running of a business goes. The way Uber makes use of price discrimination to attract both demand and supply to the platform is one of its interesting aspects. Price discrimination is adopted on the type of services that the consumers get (Sayar, 2015). Through differentiating of services like UberSUV, UberBlack and Uberx, users are provided with an opportunity to choose the type of service they prefer. In such a way, Uber manages to attract users from a willingness-to-pay spectrum that is wide. The “Surge Pricing” model is another important way that Uber makes use of price discrimination. This basically implies that prices get to rise whenever there is short supply, for example, during rush hours. When prices increase, more drivers show up in the system and that ensures that supply is steady (Castillo, Knoepfle and Weyl, 2017). Through effective use of price discrimination, Uber does a great job of matching demand and supply.

For a company to successfully, create shared value, it must strive to create value to both its shareholders and key market stakeholders.

However, Uber has, however, failed to focus on all the strategic areas that are crucial to its business and has ignored some key areas like its workplace culture. Uber`s forward leaning approach and workplace culture has created serious cultural and operational challenges that have brought about serious harm to the company, that is, its financial condition and business results. Some significant problems with the company`s culture include its excessive focus on intense competition and aggressive growth and a lack of internal transparency that has resulted in soiled teams whose knowledge sharing and coordination is poor. It has also been reported that there exists a toxic work culture within the company and that saw a former employee of the company, Susan Fowler, detailed gender discrimination and sexual harassment allegations (Carrie Wong, 2019). The company actually acknowledged that challenges that were related to its workplace practices and culture in addition to the negative publicity it attracted brought about attrition that was quite significant something that made it difficult for the company to attract employees of high quality. The key areas for stakeholder value creation are heavily reliant on the nature of the company itself and of every of its operations.

Over time, value for a taxi service is created through the use of information technology in the creation putting in place IT plans and having in place investments that are capable of supporting the required development in IT to meet the goals of an the taxi service. It is worth noting that information technology takes centre stage in modern taxi services like Uber (Cheng, Fu and de Vreede, 2018). IT systems that are capable of improving the speeds of transaction, allowing faster and easier sharing of information and that are adaptable to the ever changing needs of businesses have the potential of adding value through increasing performance and productivity.

Strengthening core competencies also aids shape the creation of value for taxi services. This is achieved through putting more money into development and increasing the amount of time and money spent on those areas considered to be the most important for the growth and long term success of a service provider. For instance, if the business plan of a service provider involves driving growth through diversification of services, the company would then be required to put more money in research and subsequent development.

Risk

Ubers mistreatment of its drivers which it classifies as “independent contractors,” presents an operational risk for the company. The classification of the drivers as “independent contractors,” makes them ineligible for overtime, minimum wage, worker`s compensation insurance amongst other benefits (Kolhatkar, 2016). This makes the drivers that operate under the company unhappy. And there is a high likelihood that in the near future, the drivers will be even more disgruntled as a result of Uber`s investment in autonomous vehicles in a bid to cut on the number of its drivers and its tendency of reducing the payments it makes to drivers in a bid to increase its chances of turning profits.

Disgruntled drivers could possibly damage the culture of a company, leading to work environments that are poor and hostile which would eventually translate to dispirited drivers and reduced profit margins. When drivers are disgruntled, they offer poor services which act as turn offs to customers. Generally, disgruntlement creates a tense and negative atmosphere and creates a bad perception among the customers.

The best way to solve this would be to always involve the drivers whenever making any decisions that involve them. The policies the company comes up with should also always be considerate of the affairs of the drivers to avoid exploiting them. Uber has been treating the drivers as if they are small kids who do not have a say of their own. The culture of a company has an influence on the performance by employees and on the perception of the customers. Ensuring that the company maintains a culture that is positive would definitely do way with the disgruntlement among the employees (Kaplan and Mike, 2012). And when such disgruntlement comes about even when the company is striving to maintain a positive culture, it should ensure that any raised issues are addressed immediately so that they do not destroy the character and inner workings of the entire company.

Factors that could damage Ubers corporate reputation

At all times, ethical initiatives that are strong are always essential for company`s and this is particularly for firms that intend to keep their reputation good. Limited ethical practices in a company like Uber could lead drivers, to slip up and end up making serious errors of judgement. While an occurrence like a driver stealing the goods of their customers of harassing them could be the result of the misbehaviour of one single driver, they could have effects that are significant to the reputation of Uber entirely. Occurrences like these are highly publicised and have the tendency of spreading within media outlets rapidly (PRO FORMATIVE, 2013). It is worth noting that when a driver under Uber does something wrong, when the issue is being reported, Uber would take centre stage. At times, even ethical glitches that one could consider less serious like being late to pick up a customer with a few minutes could spiral out of control when the word hits media outlets and that would seriously damage the reputation of a company.

To cushion the risk of reputational damage as a result of ethical issues, it would be necessary for Uber to put in place strong mechanisms that would deter its drivers from breaking the law in any way. Putting in place standards that are high and repercussions that are significant for failure to comply with expectations could go a long way in preventing such occurrences and could possibly even serve to bolster the reputation of a company in the long run.

Customer service failures

Whenever the users of Uber services are treated poorly, the company would face a serious risk of damage to its reputation. Key references would be lost as the dissatisfied customers would never refer the company to their family members, friends and business associates. Company`s always tend to rely heavily on their clients to act as their brand ambassadors and extol their services advantages. As such, to consistently improve the experiences of their customers and to ensure that they are served properly, companies need to work extremely hard. Customers who get poor services, like been moved in a dusty, dirty car, would possibly take up their issues on social media and even complain to other potential customers which would go a long way in tainting the reputation of Uber. When an unhappy customer takes up to social media, their issue could possibly go viral and that would greatly hinder any attempts that Uber could make to improve its reputation (Voorhees et al., 2017).

The best way through which Uber could solve this is through the introduction of training sessions whereby, the company gets to train all its drivers on the best ways to interact with its clients and provide them with the best experiences possibly and how they could also go about improving the experiences of their customers.

Today, there has been an increased awareness of the need to conserve the environment which has seen an increased concern among the populations on waste. Sustainability of the environment, pollution and the impacts companies bring upon the areas they carry out their businesses in. organisations are required to put in place policies that would see them cut on use of resources, pollution of the environment, increase recycling activities and give back to those communities in which they carry out their businesses.

The reputation of Uber would be at risk if it failed to put in place policies for corporate social responsibility as expected by the different customers who use the service. Today, with social media use having become so common, it is easier to access information through the internet and customers of a company`s services can always easily browse and get to know what the company is doing to make the company a better place. Also with increased activism activities, lack of such policies would definitely trigger activists to demonstrate against the company (Graafland, 2018). Uber could put in place that could minimise the emission of carbon by the cars that operate under their names to the atmosphere, and even cut on noise pollution. At all times, there is always an always so near risk that consumers would get to unearth the limited corporate social responsibility of a company.

When it comes to leadership, introverts are just as adept and in in a number of ways are advantaged when compared to their counterparts who are extroverts. There is a misconception about introverts that they are not as motivated to succeed like other people who are more socially driven. That is however, far from the truth as the factors that motivate this kind of people are simply different and they use metrics that are different for measurement of success (Clack, 2017). The wiring of the brain of an introvert is quite different in that different stimuli trigger its reward system. More satisfaction for introverted leaders is gained from high-quality work and maintenance of the productivity of the team they lead. In contrast, professional advancement and recognition are more satisfying for extroverts (Farrell, 2017). Additionally introverts are also good in the development of connections that are deeper and that have more meaning with clients and employees in one-on-one settings. As a result of such a genuine construction of relationships, leaders who are introverts are able to tune properly with individual members of a team than leaders who are extroverts could manage.

References

Carrie Wong, J. (2019). Disgruntled drivers and 'cultural challenges': Uber admits to its biggest risk factors. [online] The Guardian. Available at:

Castillo, J.C., Knoepfle, D. and Weyl, G., 2017, June. Surge pricing solves the wild goose chase. In Proceedings of the 2017 ACM Conference on Economics and Computation (pp. 241-242). ACM.

Cheng, X., Fu, S. and de Vreede, G.J., 2018. A mixed method investigation of sharing economy driven car-hailing services: Online and offline perspectives. International Journal of Information Management, 41, pp.57-64.

Clack, L.A., 2017. Book Review: Quiet: The Power of Introverts in a World That Can't Stop Talking. Frontiers in psychology, 8, p.155.

Farrell, M., 2017. Leadership reflections: Extrovert and introvert leaders. Journal of Library Administration, 57(4), pp.436-443.

Graafland, J., 2018. Does corporate social responsibility put reputation at risk by inviting activist targeting? An empirical test among European SMEs. Corporate Social Responsibility and Environmental Management, 25(1), pp.1-13.

Kaplan, R.S. and Mikes, A., 2012. Managing risks: a new framework. Harvard Business Review, 90(6), pp.48-60.

Kolhatkar, S., 2016. The anti-Uber. The New Yorker, pp.40-47.

Sayar, O. (2015). Uber creates value for everyone. [online] Harvard Business School. Available at:

Voorhees, C.M., Fombelle, P.W., Gregoire, Y., Bone, S., Gustafsson, A., Sousa, R. and Walkowiak, T., 2017. Service encounters, experiences and the customer journey: Defining the field and a call to expand our lens. Journal of Business Research, 79, pp.269-280.

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