Uber Business Model

Analysis of Uber Business Model
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  Analysis of Uber Business Model Introduction
One of the most critical aspects of Uber is how the company develops in the early stages. In the early days of its establishment, the company spent almost no money on marketing but relied on word of mouth to spread the word about its services. In an interconnected world, the speed with which persuasive proposals can be conveyed by word of mouth is surprising, which is another reason why analysts and observers generally underestimate the growth and potential scale of simplified procedures (Calo &Rosenblat, 2017).
Uber succeeded because it found some exceptional needs that traditional taxis or car services could not meet. As stated briefly on its website, these three needs are requests from anywhere globally, stylish and comfortable walks, and carefree payments were the needs and inefficiencies that present modes of transportation and rental services did not offer.
Discussion
Uber's Surge Pricing in the Context of Shifts in Supply and Demand
Uber surge pricing based on the concept of supply and demand increased. Uber explained: "When the travel demand exceeds the supply of cars, the cost starts to rise, raising the price. The company will automatically see the start icon. If the customer still wants to utilize their services, Uber will show the start multiplier and then ask for your consent to pay a higher price. The price jump has two effects: people who can wait to travel often decide to wait until the price falls, and nearby drivers traveling to the area may receive a higher fare. As a result, the number of people willing to drive and the number of available drivers increase, reducing waiting time. "
Overall, Uber's goal is to maximize the number of trips and drivers it can provide, regardless of human-made or natural phenomena that may prevent traditional transportation methods from meeting customer needs. Any increase in price does not mean that the Uber game is over. It uses calibrated models to meet times and areas in high demand. Ideally, Uber's growth is to balance supply and demand by redirecting cars to these areas, thus ensuring that growth slows due to the influx of drivers.
Uber's Surge Pricing in the Context of Price Discrimination
When Uber launched its preliminary pricing in the United States earlier, its fixed-price passenger charging system when booking a trip and also separated the driver's income from the fee paid by passengers, the price Uber charged for passengers is the best guess for the price of the trip; the amount the rider pays the driver depends on the time and distance (Helling, 2020).
The issue which arose was that Uber did not tell the driver (or anyone else) what they were doing, and they began to doubt it. Different governmental and regulatory agencies asked Uber about the parameters it sets for prepayment - and whether it uses the difference between the driver's fees and the driver's income to increase its profits - and received various unsatisfactory answers. Most of them are informal answers. However, Uber finally revealed more information about how its pricing model works:
The fare system is called "route-based pricing," It charged customers based on the price they were expected to pay. When Uber uses a combination of mileage, time, and multiplier to calculate tariffs based on mileage requirements, it is different from the past (Helling, 2020).
Daniel Graf, product manager at Uber, said the company uses machine learning technology to assess how many customer groups are willing to pay. Uber calculates passengers' tendency to pay higher prices for specific routes at certain times of the day. For example, even if the needs, transport, and distance are the same, a person traveling from a rich area to another delicate area may be asked to pay more than another person in a lower area (Helling, 2020).
Price discrimination refers to the idea that a company will charge a person based on their willingness and ability to pay a particular amount for a particular product or service. The difference between the company's fees and the fees paid by the customer is called "consumer surplus" in economic terms.
"There is only one price in most markets. However, if Uber knows exactly how much each consumer is willing to pay, they can charge a fee," wrote Dan Suirski, an economics student at Harvard University who studies the income of Uber drivers at Harvard University, which allows them to take all the surplus users and pass them on to themselves (Helling, 2020).
Over the past eight years, Uber's pricing has undergone several changes. Initially, Uber was like a taxi, charging passengers according to time and distance. In 2011, the company made a price increase, which is his signing practice, increasing interest rates as demand increases. In 2012, the company adjusted the system already established and replaced it with a system that allows drivers to be paid in minutes and miles on the condition that drivers will agree on the price before agreeing to take a ride.
Economies of Scale and Economies of Scope to Uber's Business Model.
The destructive business model company Uber became one of the most valuable companies globally not because it was replaced by freelancers such as taxi drivers, but because of the economies of scale. If Uber is valued solely based on its results, it will never be possible to close to the current estimate of about $ 60 billion.
However, high-tech companies are inherently global, as their product development requires a global market that proves its value and truly reflects their business model.
Uber is primarily an operations and services company; as Uber increased its customer base and subsequent increase in the number of vehicles it was utilizing for its services, Uber manages to reduce its production cost substantially as there were more than enough cars to provide services it needs to fulfill the demands of its customers.
Concepts of Game Theory to Uber's Market.
Uber's completion with Lyft is a classic concept for the game theory dilemma. In a sense, they can compete with each other and deal with competition (it is happening now), or they cannot compete for each other's employees, or they may not have such a high income, but each of them has a stable share and friendly competition (Pendergrass, 2019). Otherwise, the other two companies will have the fact that one company will continue these activities...