BUSS3500 Business Case Analysis assignment
Business Case Analysis:
Legalisation of Uber and its impact
on Sydney Taxi Industry
Uber’s operation had just been legalised in NSW at the end of 2015 by the Baird government (‘The Sydney Morning Herald’ 2015). The impact of the action and current controversy on both taxi industry, Uber and their stakeholders would be discussed in this essay. To approach the problem, ‘PEST’ will be used to analyse external environment at first, then‘VRIO’ would be applied to address the internal competitive position of the two parties.Finally,the impact on relevant stakeholders will be illustrated.
Firstly, organisational and pricing structure of taxi industry and Uber will be briefly introduced. Sydney Taxi Industry has a fairly complex structure which is a multi-layer structure consists of four private business parties including taxi ‘plate’ owner, taxi drivers, taxi operators and taxi networks (Abelson 2010). Instead, Uber has anextremely simplified operation model building up an orchestrator connecting drivers and passengers directly(Uber Technologies Inc. 2016).As for pricing, Uber has only surge pricing (during high/low demand) besides of base fare and metered fare while Taxi have a range of additional costs including peak/midnight surcharge, public holiday surcharge, advanced booking fee, etc.
The differences resulting fromorganisational and price structure will first be analysed by PEST framework. Meanwhile, taxi drivers’arguments for their protest to Uber’s operation will be discussed under each element (political, technology and sociocultural will be focused).
Highly-regulated political environment for taxi industry:
For NSW taxi industry, it is highly-regulated by Ministry of Transport via Passenger Transport Act(2014),Passenger Transport Regulation(2007) and other associated legislations. In Sydney, taxidrivers, vehicles, operators all need to be authorised with accreditation from government for the purpose of discipline and safety and it is revokable by the government. Moreover, theywill be continuously monitored by government through networks (NSW Taxi Council).
However, the legislation for Uber was almost a grey area, which allows Uber to gradually take the market during the past few years (Tan 2015) when they first launched Australia.Under this circumstance, it is claimed and protested by taxi drivers that Uber should not be allowed to operate in Australia because it is unfair for them to be forced to compete in the uneven market (Boyle and Peterson 2015) and it is unsafe for passengers to accessing unregulated services Uber provided (AAP 2015).
Thus, drivers will be better off because the legalisation of Uber’s operation could be beneficial for the taxi industry as it could firstly provide a more balanced and fair market competition condition and at the same time taxi drivers could receive large government compensation attached with the new legislation and this could actuallyassist them to survive (Code 2015).
Highly-developed Technological environment and Technology-Shaped Socio-Cultural Environment:
As the development of technology speeds up, smart phones, e-payments and real-time localisation are pervasivetechnology in people’ daily life(Caporarello, Martino and Martinez). This has provided potential opportunities for innovative technology firms such as Uber to reform the market. The smooth process of mobile order&pay and possibility of passenger-driver direct interactionhas enable Uber to be ‘smart’ (Caporarello, Martino and Martinez). As a result, it is the overall technology environment promote Uber to revolutionise the taxi industry (Wilson and Davis 2014). This could also explain why Uber has a much direct and simplified structure comparing to the traditional taxi industry.
Moreover, customer behaviour and culture have been shaped by the technology development (Posen 2015). People tends to accept and depend on new technologies to make their life quicker, more convenient and simpler and the existence of Uber has fitted in the demand of these customers (Newstex 2015).
Conforming to the dynamic market, the trend that Uber is taking the market from traditional taxi industry is not surprising. However, even though taxi drivers may not favourable to accept the permission of Uber’s operation, the unavoidable technological and cultural preference have given Uber large customer base and potential opportunity to expand. Only if when Sydney taxi industry could also reform to adapt to technology and social change, it could possible for them to reoccupy the market.
Since external factor could not show the whole picture, internal factors need to considered in addressing thedifferences as well as controversy situation in Australia. To assess the internal environments and suggest on further solutions for both parties, competitive positionwill be analysed through VARO model and how Sydney Taxi Industry should prepare for the ‘surprise’ will be discussed.
For Uber, the most important value-creating activity is to provide passengers with ride-sharing service at lower price (Uber Technologies Inc. 2016), which is not only favourable for its customers but also cut their operation costs to the lowest. This is result from their vigoroso technological support and innovative ideas. On the one hand, cashless and direct connection fit in customers’demand of quick and convenience travel. On the other hand, Uber achieves its efficiency through itsindependent contractor relationship with drivers and also ‘flexible as a driver’ policy has provided Uber with unlimited fleet of vehicles.As for Rarity, Uber has rare capabilities which is its innovative technological team and its well-known brand as a technology company. However, the operational model is easyto inimidatesince it could easily be adopted by its competitors and the start-up cost is not high. Thus, the competitive positionhas provided strong base for Uber to compete in taxi industry but it may be only short-term advantage due to the unpredictability of the operational model.
BUSS3500 Business Case Analysis assignment
As a result, in order to be better prepared for the ‘surprise’, the traditional taxi industry in Sydney should start from its internal reform and build up its core competency. Its major value-creation activity is to provide an integrate, safe, customer focus and quality service as a public transportation. They haveunique capability and the difficulty to imitate infrastructure, comprehensive government support. these could actually be the competitive advantages for Sydney taxi industry in the long-term. However, its costs and process of operation are high and complex which decrease the profit margin for all the parties in the industry. The technology such as GPS and radio networks taxi networks are using is mainly perform the monitoring function as government required (NSW Taxi Council). Facing the situation, taxi industry could prepare for the ‘surprise’ by adopting technology to achieve the objectives of cutting cost, promoting customer interaction and providing better customer experience (Transport for NSW 2016).
When it comes to stakeholders, the most obvious beneficial party would be customer as a whole. They could have more choices, better customer experiences with lower price.
As for taxi drivers, legalising Uber and compensating the industry could amelioratetheir present situation where they are forcing to compete in the uneven market. Moreover, they could choose to be an Uber driver as an alternative.
As for owner of Uber, the regulated environment could possibly bestricter for them which may increase their cost but they should continuously adapt to the dynamic market to enhance their competitiveness.
AAP 2015, ‘FED:Uber flaunting Australian taxi laws: ATIA’, Australian Associated Press, 23 January, viewed 19 April 2016, <http://ezproxy.library.usyd.edu.au/login?url=http://search.proquest.com.ezproxy1.library.usyd.edu.au/docview/1647576324?accountid=14757>
Abelson, P. 2010, ‘The High Cost of Taxi Regulation, with Special Reference to Sydney’, A Journal of Policy Analysis and Reform, vol. 17, no. 2, pp.81-137, viewed 18 April 2016, <http://press.anu.edu.au/apps/bookworm/view/Agenda,+Volume+17,+Number+2,+2010/6691/abelson.xhtml>
Boyle, P. and Peterson, C. 2015, ‘Taxi drivers rally against Uber’, Green Left Weekly, vol. 4, no.1069, view 19 April 2016, Informit, <http://search.informit.com.au.ezproxy1.library.usyd.edu.au/documentSummary;dn=495100809717363;res=IELHSS>
Caporarello, L., Martino, B. M. and Martinez, M. 2014, ‘Composing and Orchestrating the Smart Artifacts: Technological and Organizational Challenges’, Smart Organizations and Smart Artifacts, Springer International Publishing, viewed 19 April 2016, Springer Link, doi:10.1007/978-3-319-07040-7_1.
Code, B. 2015, ‘UberX ridesharing service legalised in NSW, taxi drivers to be compensated’, ABC News, 17 December, viewed 18 April 2016, <http://www.abc.net.au/news/2015-12-17/uber-x-legalised-in-nsw-under-government-proposals/7037600>
Newstex 2015, ‘CompaniesandMarkets.com: Uber Technologies Inc. Company Profile: New analysis: Uber Technologies Inc.: Calling a cab for the Taxi Industry?’, Newstex Trade & Industry Blogs, web blog post, 22 January, 20 April 2016, <http://ezproxy.library.usyd.edu.au/login?url=http://search.proquest.com.ezproxy1.library.usyd.edu.au/docview/1647385086?accountid=14757>
NSW Taxi Council, Structure and Peak Bodies, Sydney, viewed 19 April 2016, <https://nswtaxi.org.au/structure-peak-bodies>
NSW Taxi Council, Structure of the NSW Taxi, Sydney, viewed 19 April 2016, <https://nswtaxi.org.au/structure-nsw-taxi-industry>
Passenger Transport Act 2014, (NSW Legislation)
Passenger Transport Regulation 2007, (NSW Legislation)
Posen, H. A. 2015, ‘Ridesharing in the Sharing Economy: Should Regulators Impose Über Regulations on Uber?’, Iowa Law Review, vol. 101, no. 1, pp. 405-433, viewed 19 April 2016, ProQuest, 1770930427.
Tan, B.2015, ‘The Rise and Rise of Uber in Australia’, Gizmodo, 16 January, viewed 19 April 2016, <http://www.gizmodo.com.au/2015/01/the-rise-and-rise-of-uber-in-australia/>
The Sydney Morning Herald 2015, UberX legalised in NSW, video online, viewed 19 April 2016, <http://www.smh.com.au/video/video-news/video-nsw-news/uberx-legalised-in-nsw-20151217-47zvf.html>
Transport for NSW 2016, ‘Future Transport Summit: pushing the boundaries for technology in transport’, media release, 18 April, viewed 20 April 2016, <http://www.transport.nsw.gov.au/media-releases/future-transport-summit-pushing-boundaries-technology-transport>
Uber Technologies Inc. 2016, Uber, view 19 April 2016, <https://www.uber.com/our-story/>
Wilson, A. and Davis, W. 2014, ‘Uber Regulated?’ Frontier Economics, 15 July, viewed 18 April 2016, <http://www.frontier-economics.com.au/publications/uber-regulated/>
BUSS3500 Business Case Analysis assignment