Uber vs. Taxi: A War of Innovative and Technological Standards

This presentation analyzes the competition between Uber and traditional taxis in Australia, and proposes an integrated platform to settle the war. It also examines the sustainability, scalability, and potential difficulties of the proposed platform.

Uber vs. Taxi: A War of Innovative and Technological Standards
Institutional Affiliation
Name of Student
Date of Submission

Table of contents
• Abstract 3
• Introduction 4
• The Design Thinking Model Applied 7
• The Double-diamond Design Thinking Model7
• Understanding the Problem 8
• Defining the Problem 8
• Exploring the Potential Solutions 8
• Creating the Solution 9
• Sustainability of the Solution 9
• Measuring the Effectiveness of the Suggested Solution 11
• Scalability of the Proposed Platform 11
• The Impact of the Platform to the General Taxi Industry 11
• The Impact of the Proposed Model to the Industry Producers 11
• Effects to the Community 12
• Potential Difficulties of the Proposed Platform 12
• References14
•
•

Abstract
• Ridesharing is an emergent form of point to point commutation. Businesses
such as Uber, 13 cabs, and Lyft run their operations whereby drivers who
offer their own vehicles are matched with commuters who seeking to travel
(Meleen & Frenken, 2015). The impacts of this disruptive innovation are far
reaching and thus the need to find the perfect balance for the functioning of
both the new and old model of business operations in the taxi industry
(Bocker & Meelen, 2017).
• Operations of the Uber online platform began officially in Australia in April
2014. Since then, the company’s operations have expanded from Sydney and
Melbourne, where they began, to other cities such as Perth, Brisbane,
Canberra and Gold Coast. The assessment of the impact of this emergent and
disruptive innovation is essential since the effects are far-reaching and affect
numerous key industry stakeholders (Deloitte Access Economics, 2016).
•

Introduction
• The trends and patterns of consumerism habits and the offering of services have seen enormous changes in the past few years.
The development of emergent innovations in the information and communication technology (ICT) sector has resulted in the
materialization of novel channels of product and service distribution on the basis of uninterrupted exchange of information
and data between systems and the users.
• The heightened connectivity between users and information systems has led to an increase in the potential of
the industries with online platforms like previously observed in retail, marketing and classified advertising like in Craigslist,
and the Entertainment industry as in services such as Netflix and Spotify. The innovative online platforms that has led to the
revolutionizing of various industries, not only decreases the cost of transactions but also facilitates the transactions among the
providers and consumers and simplifies the provision of services by enabling peer-to-peer transactions. Notable examples of
these individual, peer-to-peer transactions include services provide by ride-sharing online platforms such as Uber and 13 cabs
in Australia (Botsman & Rogers, 2010).
• Online platforms streamline the exchange of products and service provision to any interested individual
without stringent restrictions. The ability of interested parties to freely offer or receive services without constraints has led to a
substantial impact on various economic sectors (Hamari, Sjoklint, & Hukonnen, 2015), particularly where the cost of entry
was formerly restrictive. One of the most significantly impacted sectors is the highly restrictive and regulated taxi industry.
Normally, for new entrants, a license is required from the drivers. Moreover, the practice of regulating the taxi fares is quite
common.
• Uber, on the other hand, is a business model solely based on a mobile application, which connects commuters directly to the
drivers (Kramer & Krueger, 2016). The Uber business model enables new entrants to make a breakthrough in their businesses
without necessarily complying with the restrictive and constraining obligatory regulations of the taxi industry (Rauch &
Schleicher, 2015). Uber’s success can be observed in a variety of determinants. Uber has given life to solutions that are
innovative and even led to enhancement of the experience of the users. One major feature of the Uber app is the ability to
book a driver and track their location, which is a quite reassuring feature for customers (Quinton, 2015).
• Furthermore, Uber uses a pricing algorithm that is dynamic in striking an ideal equilibrium between the two most significant
market forces of demand and supply. This pricing algorithm eradicates wastage of time by shortening the average waiting
time. Traditional taxi companies have to adhere to stringent regulations, thus giving Uber an unfair competitive advantage.
•

Introduction
• Characteristically, the regulations that taxi drivers have to comply with include the controlled entry into the market
(Dempsey, 1996), licensing by authorities and other performance requirements, considerable standards of financial
accountability and responsibility and the price caps set for various journeys covered by the taxi drivers (Frankena
& Pautler, 1984). Meeting the set requirements is quite costly and thus unachievable by new market entrants. These
costs associated with the regulations for entry into the industry are reflected on the exorbitantly high taxi fare
prices in the traditional taxi industry model.
• Online taxi hailing platforms such as Uber and 13 cabs provided an alternative to getting an unrestricted entry into
the market without necessarily having to follow all the industry’s strict policies. By easing these restrictions, the
online platforms have a competitive advantage over the traditional companies. The transport industry regulatory
body in Australia and other parts of the world are having difficulties trying to find the perfect way to deal with
these disruptive firms’ impact on the industry.
• This paper aims to offer a theoretical framework in analyzing the competition of the online taxi hailing platforms
and their licensed traditional counterparts. All the dynamics and equilibrium of the pertinent market forces in this
competition is clearly presented together with the aptest solution for the underlying concern in this war of
supremacy in the industry by the use of a creative mind map. Additionally, the paper will provide ways to measure
the effectiveness of the developed solution.
• The paper also aims at examining the functioning of the online cab hailing platforms such as Uber and 13 cabs, and
how they compare to the traditional business model still followed by some taxi companies. Additionally, the paper
explores the success and the effectiveness of the integration of these two business models in the taxi industry.
Moreover, the paper will discuss whether the solution to the taxi wars is sustainable. Finally, the paper explores the
potential complexities that might come with the adoption of the suggested solution.

Uber Vs Traditional Taxis in the Australian Context
• Uber began its operations in Australia in 2014. The unprecedented and
rapid growth of Uber services has led to the ceaseless wars with their
traditional counterparts. Novel platforms have been developed to settle
the wars between the two competing business models. The platforms,
essentially, aggregate the offers of the traditional taxi companies, and
introduce the innovative solutions of their more technologically advanced
counterparts with peer-to-peer system of taxi hailing. A notable example of
this company is the MyTaxi app. The app for traditional taxis provides all
the principal innovations used by Uber such as booking a ride and tracking
the driver, and paying through a cashless system. This solution is attractive
since it offers services from both ends of the spectrum. The solution
adopts the revolutionizing innovations used by Uber while offering the top-
notch quality services that can only be offered by licensed drivers in the
traditional taxi business model.

The Design Thinking Model Applied
• The Double-diamond Design Thinking Model
– Understanding the Problem
– Defining the Problem
– Exploring the Potential Solutions
– Creating the Solution

Sustainability of the Solution
• A brief analysis of the two business models reveals that; Uber and other taxi hailing companies with online platforms enable
direct peer-to-peer (individual) transactions by connecting the two ends of the market: the commuters and drivers. The two
parties connect and interact solely through the Uber app. The fares are set by the app’s algorithm, which takes into consideration
the base fee and the varying fares that depend on the distance and the length travelled (Uber, 2017). The fare is then paid to Uber
which then forwards the payment to the driver. Basically, Uber provides the requisite IT infrastructure in this transaction.
• By developing this solution of integrating Uber’s functionality and features, with the high-quality services offered by the
traditional taxi drivers, the platform operates on dual and multi-sided market for customers who prefer either of the above
options. The platform facilitates interactions among multiple distinct and generally interdependent user groups of the taxi
services. This subsequently leads to value generation for both groups (Downes, 2013). The two different sides are provided with a
more integrated platform which capturing the economic value of their relationship (Evans & Schmalensee, 2007).
• Platforms are highly dependent on the external factors. This implies that, an increment in the elements in the network leads a
proportional increase in the network value to the individual user (Rochet & Tirole, 2003). Even though the increase in the number
of users holds a positive external impact to the incumbent network elements, it also holds negative external impacts to the
rivaling network (Elsner et al., 2014). Therefore, the integration of two rivaling networks in the same industry diminishes the
negative effects while amplifying the positive impacts. Passengers will certainly choose to hail a taxi in a platform that has more
drivers so as to raise the likelihood of obtaining top-notch services at affordable prices. Drivers will also choose to work with a
platform that has more registered passengers. Therefore, by adopting the integrated system in the taxi industry, the whole
process of booking a taxi to paying the driver is reinforced (Lephardt & Bast, 1985).
• Moreover, companies can scale up their activities with ease, since they only offer the requisite IT infrastructure, and do not
require making investments in physical assets when providing the services. By having virtually no marginal costs (Rifkin, 2014),
the collaborative consumption and integrated platform will allow easy expansion of services to accommodate more drivers and
passengers and hence, entirely revolutionizing the taxi industry through the profit margins attained and ease of transactions and
operation.

Measuring the Effectiveness of the Suggested
Solution
• Scalability of the Proposed Platform
Without doubt, there is enough room for expanded adoption of ridesharing (Belk. 2010). The underlying IT infrastructure and
technology used by online platforms are promising and can support more elements in that network. Instead of dispatching
cars individually, it is possible to have pool riders commuting in customized routes for particular cabs. The incorporation of
this ride-sharing innovation into both the private and public transit is yet to see the daylight. Therefore, the best way to
measure the effectiveness of the integrated platform is if it allows for the expansion into the public transit as well without
disrupting the smooth flow of traffic in the routes the taxis.
• The Impact of the Platform to the General Taxi Industry
The taxi industry is greatly affected by the ride-sharing model (Bocker & Meelen, 2017). By popularizing an integrated platform of
ride-sharing with feature of the traditional taxi business model will have even more far-reaching impacts. The rapid speed at
which the traditional taxi services are substituted for the online ridesharing platform is evident in Australia. The
effectiveness of the proposed novel integrated model can be measure by how impactful it is to the taxi industry. Massive
migration from the incumbent models to the emergent integrated one will prove its effectiveness.
• The Impact of the Proposed Model to the Industry Producers
Drivers are among the key players in the taxi industry. Introduction of a new business and operation model will most certainly
hold corresponding impacts on the drivers. The new model may result in decreased price in taxi licensing. Conversely, the
fare prices may decrease as well if the proposed solution is adopted. Therefore, establishing the real impact of the model to
the drivers may be quite intricate to discern. Nevertheless, the reaction of the drivers to the suggested platform can serve as
a great way of gauging the effectiveness of the model in the market.

Effects to the Community
• Sharing rides has numerous impacts to the general
community (Bardhi & Eckhardt, 2012). Since the propose
model also involves the ridesharing feature like in Uber, it
is therefore important to examine the concerns of the
community regarding to this type of model. The principal
concerns relate to both the ease and the safety of using
the model. While it does not guarantee absolute safety,
the platform offers a great way of easy transportation
(Rogers, 2015). The community’s reception towards the
model can serve a great way of measuring its
effectiveness.

Potential Difficulties of the Proposed
Platform
• The commercial transportation of commuters and its lawful regulation dates back to the sixteenth century. The horse-
drawn carriages operated freely and independently in London and Paris. Due to lack of regulation, the proliferation of the
coaches led to chaos in the transport sector.
• Similarly, the unregulated entrance of new taxi-service provision cars in the market is bound to cause chaos in the
transport sector in Australia. History indicates and proves that the regulations put in place were enforced for the
betterment of the transport industry. From history, the major drive of introducing regulatory interventions is the excessive
increase of transportation service provision vehicles which often led to chaos.
• Judging from the popularity of the online ridesharing platform, a better platform such as the proposed integrated platform
will certainly have more traction. Inevitably, the industry will get to a point of saturation. This will have a huge impact on
the overall transportation system. From the environmental perspective, the system will be less enviro-friendly. The
transport system will also be always clogged up and congested.
• Conclusion
• Analyzing the success of the online platforms of sharing economy as ridesharing and, their traditional counterparts
indicates that the online platforms triumph and enjoy a huge unfair competitive advantage (Belk, 2014). This is contrary to
the ideal case that should be, the inclination towards collaborative and integrated mechanisms. Typically, the online
platforms experience rapid growth due to little marginal costs and the greatly reduced costs of transactions. Platforms are
similar to technological standards (Stango, 2004) as experienced in companies such as IBM and Intel; they are heavily
reliant on the external factors. A new model that presents the key industry stakeholders with the ‘best of both worlds’ will
go a long way to bridging the gap left by the regulatory challenges in the taxi industry that were never solved (Barrett,
2010).
•

References
• Bardhi, F. & Eckhardt, G. M. (2012). Access-based consumption: The case of car sharing. Journal of Consumer Research 39, 881–898.
• Barrett, S. D. (2010). The sustained impacts of taxi deregulation. Economic Affairs (Institute of Economic Affairs), 30(1), 61-65. Retrieved on 18th September, 2018 from
http://search.proquest.com/docview/886912527?accountid=14793
• Belk, R. (2010). Sharing. Journal of consumer research 36, 715–734.
• Belk, R. (2014).You are what you can access: Sharing and collaborative consumption online. Journal of Business Research 67, 1595–1600.
• Bocker, L. & Meelen, T. (2017). Sharing for people, planet or profit? Analyzing motivations for intended sharing economy participation. Environmental Innovation and Societal Transitions 23, 28–39.
• Botsman, R. & Rogers, R. (2010).What’s mine is yours. The rise of collaborative consumption.
• Cramer, K., & Krueger, A. (2016). Disruptive changes in the taxi business: The Case of Uber. National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w22083
• Deloitte Access Economics. (2016). Economic effects of ridesharing in Australia. Retrieved 18th September, 2018 from
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-economics-economic-effects-of-ridesharing-australia-150216.pdf
• Dempsey, P. (1996). Taxi industry regulation, deregulation, and reregulation: The Paradox of Market Failure. University of Denver College of Law, Transportation Law Journal, Vol. 24, Issue 1, 73-120.
• Downes, L. (2013). Lessons from Uber: Why innovation and regulation don't mix. Forbes, 1-3. Retrieved 18th September, 2018 from
http://www.forbes.com/sites/larrydownes/2013/02/06/lessons-from-uber-why-innovationand-regulation-dont-mix/3/#f57cee5702b3
• Elsner, W., Heinrich, T. & Schwardt, H. (2014). The microeconomics of complex economies: Evolutionary, institutional, neoclassical, and complexity perspectives. Academic Press.
• Evans, D. S. & Schmalensee, R. (2007). Catalyst code: the strategies behind the world’s most dynamic companies. Harvard Business School Press.
• Frankena, M., & Pautler, P. (1984). An economic analysis of taxicab regulation. Federal Trade Commission: Bureau of Economic Staff Report. Retrieved from
https://www.ftc.gov/sites/default/files/documents/reports/economic-analysis-taxicabregulation/233832.pdf
• Hamari, J., Sjoklint, M. & Ukkonen, A. (2015). The sharing economy: Why people participate in collaborative consumption. Journal of the Association for Information Science and Technology.
• Lephardt, G., & Bast, J. (1985). The economics of taxicab deregulation. Heartland Policy Study, No. 3. Retrieved 18th September, 2018 from
https://www.heartland.org/sites/all/modules/custom/heartland_migration/files/pdfs/5776. pdf
• Meelen, T. & Frenken, K. (2015). Stop saying uber is part of the sharing economy. Fast Company 14.
• Nessler, D. (2016). How to apply a design thinking, HCD, UX or any creative process from scratch.DXD. Retrieved 18th September, 2018 from https://medium.com/digital-experience-design/how-to-apply-
a-design-thinking-hcd-ux-or-any-creative-process-from-scratch-b8786efbf812
• Quinton, S. (2015). How should Uber be regulated? The Pew Charitable Trusts: Stateline. Retrieved 18th September, 2018 from
http://www.pewtrusts.org/en/research-andanalysis/blogs/stateline/2015/11/24/how-should-uber-be-regulated
• Rauch, D. E. & Schleicher, D. (2015). Like uber, but for local government law: The future of local regulation of the sharing economy. Ohio St. LJ 76, 901.
• Rifkin, J. (2014). Uber and the zero marginal cost revolution . Retrieved 18th September, 2018 from http://www. huffingtonpost.com/jeremy-rifkin/uber-german-court_b_5758422.html.
• Rochet, J.C. & Tirole, J. (2003).Platform competition in two-sided markets. Journal of the European economic association 1, 990–1029.
• Rogers, B. (2015). The social costs of Uber. The University of Chicago Law Review Dialogue.
• Schneider, J. (2015). The double-diamond: Strategy+ Execution of the right solution. ThoughtWorks. Retrieved 18th September, 2018 from https://www.thoughtworks.com/insights/blog/double-diamond
• Stango, V. (2004).The economics of standards wars. Review of network economics 3.
• Uber. (2016). Retrieved 18th September, 2018, from https://www.uber.com/