Analysis of Uber's Unprofitability: Business Model and Market Factors

This report examines the reasons behind Uber's inability to achieve profitability since its establishment, despite its rapid growth and high valuation. The analysis highlights issues such as illegal corporate behavior, unethical practices, and the challenges posed by the gig economy model, particularly following court rulings that classify drivers as employees rather than freelancers. The research explores the impact of low switching costs between ride-sharing platforms and Uber's struggles to establish a dominant global market share, especially in established economies. The report aims to identify the underlying causes of Uber's financial difficulties and propose appropriate strategies to address these challenges, using a methodology that includes an in-depth literature review, qualitative and quantitative data analysis, and stratified sampling to gather insights from stakeholders across different countries.

Running Head: RESEARCH IN BUSINESS 1
Research in Business
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Institution

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Table of Contents
Problem statement.....................................................................................................................................3
Aims and objectives....................................................................................................................................4
A brief methodology...................................................................................................................................4
In-depth literature review......................................................................................................................4
Qualitative and quantitative data..........................................................................................................5
Sampling and questionnaires.................................................................................................................5
References..................................................................................................................................................6

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Project title: Why Uber has been unable to make a profit since its establishment"?
Problem statement
The seven-year since the invention of Uber, a ride-sharing company, it has not all been a
cozy journey. Even though the company has experienced unprecedented growth over the years to
reach a lofty valuation, it has been faced with huge losses and lawsuits. For example, in 2017,
the company reported a loss of nearly 3.2 billion US dollars (Dudley, Banister & Schwanen,
2017). Much of the predicaments experienced by Uber have been largely due to illegal corporate
behavior and numerous unethical practices (Smichowski, 2018). The business model of the
company is largely broken, following the recent court ruling in the UK that acknowledged Uber
drivers as employees and not freelancers (Pal & Clark, 2015). This ruling has dealt a major blow
to Uber (Kim, Baek & Lee, 2018). The company has over the years structured its business model
under the gig economy framework to prevent it from incurring the costs of maintaining the
employees. The drivers were viewed as mini-entrepreneurs who operated their taxi business
under the facilitation of Uber.
Those who support the business model of Uber often emphasize the unfulfilled potential,
asset-light business models and string network effects as key factors that will propel Uber
international growth ("Why Can't Uber Make Money?", 2019). However, not one of these factors
can revert the fundamental weakness that Uber is facing in its business model (Smith, 2016).
Many analysts forecasted that Uber would enjoy global market due to the large network size and
outsized balance sheets (Edelman & Geradin, 2015). However, most of the network effects have
been mostly local and not global. For instance, Uber enjoys a market share of 89 percent in
Tampa but there is a huge contrast in Portland where the market share is below 50 percent
(Cannon & Summers, 2014). Uber has largely struggled to establish a market share in many

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established economies such as China, Asia, and India. These low figures are characterized by
low switching cost between the rival ride-sharing platforms such as Lyft (Kornberger,
Leixnering, Meyer & Höllerer, 2018). The purpose of this research is to establish the causes of
uber failure and recommend appropriate strategies to remedy the situation
Aims and objectives
The aim of this study is to understand the business model used by uber in its global
operations. The main objectives include:
• To determine the business model that Uber has been using in its global market
• To explore and identify issue as to why there is low switching cost among rival
ridesharing service providers
• Explore the attitudes and feelings of the consumers and the drivers towards the
services provided by uber
• To identify appropriate strategies that can be used to mitigate the situation facing
Uber
A brief methodology
For the purpose of addressing the outlined objectives, the following methodology is
established
In-depth literature review
This is aimed at developing a clear understanding of the topic of the study by researching
relevant thematic areas that are affecting the business models of Uber. The literature review
should focus on such themes as the business model used by Uber, the competitors in the ride-

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sharing industry, the number of countries uber operates and the rate of payment suggested by
uber (Gabel, 2016). The literature review will include customer reviews, online articles and
newspaper extracts, peer-reviewed journals and journals from related stakeholders.
Qualitative and quantitative data
The study will review data in the seven-year period since the inception of Uber. It will focus on
the number of drivers using the uber-platform, the financial analysis of Uber operations and
additionally sought customer ratings on using the app.
Sampling and questionnaires
Since Uber operates globally, it would not be possible to question all its operators. The
study will use stratified sampling and select a group of stakeholders from different countries and
administer the questionnaires to them. This group will represent the views of the whole
stakeholders in their chosen locality. Stratified sampling is used in order to come up with a
random sample group from the strata and prevent biasedness. The questionnaires will be
administered anonymously to protect the privacy of the participants.

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References
Cannon, S., & Summers, L. H. (2014). How Uber and the sharing economy can win over
regulators. Harvard business review, 13(10), 24-28.
Dudley, G., Banister, D., & Schwanen, T. (2017). The rise of Uber and regulating the disruptive
innovator. The political quarterly, 88(3), 49
Edelman, B. G., & Geradin, D. (2015). Efficiencies and regulatory shortcuts: How should we
regulate companies like Airbnb and Uber. Stan. Tech. L. Rev., 19, 293.
Gabel, D. (2016). Uber and the persistence of market power. Journal of Economic Issues, 50(2),
527-534.
Kim, K., Baek, C., & Lee, J. D. (2018). Creative destruction of the sharing economy in action:
The case of Uber. Transportation Research Part A: Policy and Practice, 110, 118-127.
Kornberger, M., Leixnering, S., Meyer, R. E., & Höllerer, M. A. (2018). Rethinking the sharing
economy: The nature and organization of sharing in the 2015 refugee crisis. Academy of
Management Discoveries, 4(3), 314-335.
Pal, L. A., & Clark, I. D. (2015). Making reform stick: Political acumen as an element of
political capacity for policy change and innovation. Policy and Society, 34(3-4), 247-257.
Smichowski, B. C. (2018). Is ride-hailing doomed to monopoly? Theory and evidence from the
main US markets. Revue d'économie industrielle, (2), 43-72.
Smith, J. W. (2016). The Uber-all economy of the future. The Independent Review, 20(3), 383-
390.

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Why Can't Uber Make Money?. (2019). Retrieved from
https://www.forbes.com/sites/lensherman/2017/12/14/why-cant-uber-make-money/
#756c345710ec