Uber and the sharing economy case study solution

For the exclusive use of S. Han, 2020. case W04C79 February 19, 2016 Uber and the Sharing Economy: Global Market Expansion and Reception Alexander Cooper,i head of Asia expansion for Uber Technologies, Inc., was sitting in a Tesla that he did not own. The Tesla showed up for his Uber ride to the meeting he was about to have with Travis Kalanick, Uber’s CEO, and Ryan Graves, head of Global Operations. It was morning in San Francisco, California, but the sun was setting in China where the action had occurred. Cooper checked for updates on the new petition they had launched to keep Uber running in Hong Kong, where days before five Uber drivers and three office staffers had been arrested in a police raid.1 Hong Kong was a new market for Uber, and its success or failure there could define the company’s next move, not only in Asia, but globally. Uber had posted bail to release the drivers and employees, but the situation was still developing. The drivers would be due in court in several months on charges of operating without car permits. For Cooper, this represented another challenge to Uber’s growth. As he mentally prepared for his meeting, he knew that Kalanick and Graves, while concerned about the situation in Hong Kong, would have broader and more significant questions related to Uber’s quest for global expansion and leadership role in growing the sharing economy. What should be Uber’s next move? How would the company handle the challenges presented by their competitors around the world? What strategies should Uber implement? Should it leave its challenging global markets and simply focus on the U.S. market? The Sharing Economy Evolution and History Broadly speaking, the sharing economy, also referred to as collaborative consumption, can be defined as an economic model that allows individuals to borrow or rent assets owned by other individuals.2 The concept of the sharing economy had existed for thousands of years, but the development of the Internet allowed the peer-to-peer rental market to expand hugely,3 and in 2011 collaborative consumption was identified by Time Magazine on its list of “10 Ideas That Will Change the World.”4 By 2015, the sharing economy had emerged as a serious economic model; five key sectors using this model were travel, car sharing, finance, staffing, and music and video streaming. A PricewaterhouseCoopers report projected that these five key sharing sectors would likely increase global revenues from $15 billion in 2015 to $335 billion by 2025.5 i Alexander Cooper is a pseudonym and a fictional character created for class discussion purposes and is not meant to depict a specific person within the Uber organization. Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan. ©2016 Qingxu Jin (Bill), Carl Spevacek, Nasreddine El-Dehaibi, and Whitney Johnson. This case was written under the supervision of Andrew Hoffman (Holcim Professor of Sustainable Enterprise) at the University of Michigan’s Ross School of Business by graduate students Qingxu Jin (Bill), Carl Spevacek, Nasreddine El-Dehaibi, and Whitney Johnson. This case was designed for academic purposes to simulate a scenario that could occur in the business world. While secondary research was performed to accurately portray information about the featured organization, this is a hypothetical scenario, and company representatives were not involved in the creation of this case. This document is authorized for use only by Sheng Han in ADMN 703, Spring 2020, Strategic Management taught by LEE MIZUSAWA, University of New Hampshire from Jan 2020 to Jul 2020. For the exclusive use of S. Han, 2020. Uber and the Sharing Economy: Global Market Expansion and Reception W04C79 The sharing economy was considered an alternative to conventional business models because it prioritized access to goods, resources, and services, rather than ownership of them.6 This new collaborative consumption model offered economic advantages over traditional business models. Providers generated revenue by utilizing underused assets, and users had increased access to goods and services at lower prices than with traditional providers.7 Sharing economies maximize a good’s capacity, saving time and money for both the producer and consumer.8 Driving Forces The development of information technology significantly expanded the sharing economy. Smartphones and social media created increased and continuous access to information for consumers, allowing new users to discover and quickly adapt products and services within the sharing economy.9 Sharing in the economy had existed long before and could be thought of as a collaborative economy, but the Internet created a new platform on which the sharing economy could operate. The Internet transformed the sharing economy and enabled it to grow significantly in a short period of time within multiple sectors (see Exhibit 1).10 Exhibit 1 The Sharing Economy in Almost Every Sector Source: Owyang, Jeremiah. “Collaborative Economy Honeycomb 2 – Watch It Grow.” Web-strategist.com. Accessed 6 Jan. 2016. . Another driver of the sharing economy was the financial crisis of 2008. The sharing economy emerged as a response to the economic downturn and instability that followed the 2008 financial crisis, resulting in networking and pooling of resources.11 Cultural shifts also helped nurture the development of the sharing economy. In the U.S., car ownership had long been a sign of independence and many people could not imagine their world without owning a car. This was not true for younger generations, however.