Uber's Global Expansion Strategy From the Beginning

Taxis are one of the key public passenger transport service providers in big cities. The Hong Kong Transport Department defines a taxi as a vehicle “[providing] a personalized point-to-point transport service for passengers”. In accordance with the law, taxis need to follow specific regulations given out by local authorities. Each city gives out a specific number of taxi licenses. The taxi drivers usually need to pass a test and apply for a license. The primary goal is to ensure safety amongst customers and drivers. Only drivers with an adequate equipped vehicle and physical, as well as psychological health are allowed to apply for a license. Due to the limited amount of licenses, the cities want to decrease the supply of taxis while enhancing the demand also for other public transportation forms. Cities hope to reduce traffic jams on the streets with limiting the number of operating taxis. Another important reason why taxis are regulated is the price control. Price is either regulated by using a fixed pricing system which is usually known as a taximeter or sometimes by negotiating a rate that rider and driver agreed to before the rider uses the service, although this is prohibited in some cities. However, a limited number of accepted taxis and strict regulations by city authorities led to a shortage of available taxis in a lot of cities. Less competition amongst the taxi companies also resulted in higher prices for the customer which is another reason why the total number of taxis used decreased significantly in the past years. After the launch of Uber and especially after 2014 the ride-hailing industry boomed and got very popular amongst the customers who mostly preferred this service over taxis.

Uber, the leader in global ride-hailing, was founded in San Francisco in 2009. It started as a limousine service, but as success increased, the company started to expand. It introduced UberX which allows private citizens to carry passengers with their own vehicle. Today Uber tries to declare itself as a technology company which simply connects drivers and passengers, but not as a passenger transport company. However, this did not work out everywhere. The European Union declared Uber in 2017 as a transport company which gives the members states the right to prohibit the service. Before that, Uber was able to break down the usual taxi regulations by putting pressure on the government. The company used social networks to help them support their goal. The strategy of Uber worked out well: their annual net revenue in 2016 is estimated to be around 6. 5 billion US-dollars. Uber is currently active in more than 670 cities in 83 different countries. The drivers earn 80 percent of each ride and the other 20 percent belongs to Uber. They work independently which gives Uber the chance to avoid paying Social Security taxes, unemployment insurance and worker’s compensation. Every driver can decide his or her working hours freely. If demand increases, the app automatically increases the prices for a ride in this area. On one hand, surge pricing should motivate more drivers to get on the road, but on the other hand, it scares customers, so it is mostly just a short-term reaction.

Nevertheless, Uber still has to fight constantly against local laws and regulations, demonstrations of regular taxi drivers and the competitive market. The company is not allowed in every country due to its local laws, and in most countries Uber has a specific agreement, allowing them for example to only offer some of their services. UberPop is one category which is forbidden in most countries. Here, drivers are allowed to carry passengers without a license. Regional regulations, like a minimum wage paid to its drivers, are constantly forcing Uber to change their strategy in the local markets. Strikes and demonstrations of frustrated taxi drivers who earn less than Uber drivers and have fixed working hours caused city authorities to take a close look at Uber and its operations. In some countries, such as Denmark or Hungary, Uber was completely banned while in other countries at least parts of their services offered were prohibited.

Another challenge the company has to face is that competition increases as the success of Uber increases. The major competitors are called Lyft, Grab and Didi, the latter bought up Uber in China completely. The fierce competition forces Uber to constantly invest in its strategy and adapt to the local market. Grab as an example introduced a service called Grab Bike to allow a faster drive in crowded cities while other competitors also try to come up with new ideas to gain competitive advantage over Uber. This is the reason why Uber is sometimes forced to sell parts of their operations to one of the competitors if their local strategies founder. Taxis are usually strictly regulated to ensure safety and a working market environment. However, the limited amount of available licenses led to a shortage in cities.

Uber, which was launched as a technology company to connect independent drivers and customers via an app, was able to bypass these regulations and achieved international success by providing its ride-hailing service. Today Uber struggles with the increasing competition and local regulations forcing the company to change its operations in the local markets.