Read and Analyze Case 8 (Uber)

* Summarize the case in One Paragraph

*Perform a SWOT analysis (Identify the Strengths, Weaknesses, Opportunities and Threats) and address the case questions 1-4.

Case 8 Uber Riding the Gig Economy In many ways, the gig economy has begun to revolutionize how people consume products and services. Companies such as Airbnb, for example, provide an online marketplace that connects would-be renters with people seeking accommodations and eliminates the middleman in 192 countries worldwide. Companies following a gig approach are growing in number and popularity, with more appearing every day. The list is huge and includesjust to name a fewLyft, which connects drivers with passengers; Turo, which connects rental cars with customers in need of a car; and OpenAirplane, RVshare, Sailo, Boatsetter, Parking Panda, Closet Collective, and Grubhub. We are seeing a revolution in the way the market functions or are we?

Uber Perhaps, currently, the best known of the gig companies making big waves in the press and in the new economy is Uber. And it all started because no one would give them (Ubers founders) a ride. In 2008, Travis Kalanick and Garrett Camp were in Paris and couldnt get a cab. Their experience led to the development of an extremely convenient, relatively safe, and also rather inexpensive app-enabled online driver service. Founded in 2009 and currently operating in 63 countries and 700+ cities, Kalanick and Camps simple solutionUberhas become a cultural phenomenon. Uber connects customers in need of a ride with gig workers who pick them up. The model is simple and extremely streamlined. Uber provides the market and takes a cut of the proceeds. No cash is exchanged between drivers and passengers. Everything is handled by Uber, whose app-enabled market has changed the way people think about transportation.

Untraditional Financial Models Following in the path of other well-known new economy companies, Uber has continued to generate eye-popping revenuesestimates put Ubers revenues in excess of $11 billion in 2018its balance sheet is startling, but in the wrong way. Although these kinds of sales numbers are astonishing, particularly for a company that is only 10 years old, they have to be understood in light of the companys massive financial losses during the same period. Uber is estimated to have lost nearly $3 billion since its inception (exact figures are difficult to calculate because, as a privately held company, Uber is not required to disclose its financials). It is estimated that Uber spends $1.55 for every dollar in revenue it generates. So, although Uber generates huge annual sales numbers, it also spends a lot of money on drivers pay, incentives, and bonuses.

What Is Uber Really Doing? Uber is spending a substantial amount of money on technology. These investments include the recent strategic purchase of Geometric Intelligencea start-up cofounded by academic researchers focused on making artificial intelligence (AI) systems that can navigate in the real worldperhaps hints at the companys longer-term strategic intent. This intent becomes more apparent when one considers that the companys investments in AI coincide with the fact that Uber is currently running fleets of self-driving cars. These vehicles are operating on the streets of California and in the city of Pittsburgh, Pennsylvania, where Uber is actively and aggressively testing its AI assets on the same city streets on which you and your friends and family drive every day. The city streets have essentially become a laboratory for Uber to road-test the machinery of its long-term vision. Given these kinds of investments, does this long-term vision include human drivers?

Whats the Long-Term Vision? Although some estimates put the number of drivers currently employed by Uber at upward of 150,000, the companys recent investments in AI, navigation technologies, and self-driving cars suggest that this particular gig employer may not be in it for the long term, at least as far as opportunities for human drivers are concerned. What do you think the new CEO of Uber, Dara Khosrowshahi, has in mind for the future of Uber? What role do you think he wants this emerging giant in the mass transit market to play moving forward? Do you think that investments in AI and self-driving cars are a good signal for future human employment with Uber? Why or why not? Is Uber the long-term answer for gig employees?

Case Analysis Questions 1. Discussion Although many argue that the gig economy has opened up opportunities for individuals to be self-employed in ways that complement their lifestyle, the investments that gig giant Uber is making suggest a different kind of future for the uber-successful taxi substitute. What do think Uber has in mind?

2. Discussion What are some of the potential applications for fleets of self-driving vehicles? What role might this kind of infrastructure play in towns and cities in the future? How might Uber leverage these kinds of assets to generate a profit? Do you see a way for Uber to be successful while still employing human drivers? How?

3. Problem Solving Youve been hired on by Ubers CEO Dara Khosrowshahi as the Chief Financial Officer and asked to address the issue of huge quarterly losses, despite massive sales revenues. The Uber fleet is not likely to be self-driving for at least another five years, and it isnt clear whether the current model will be sustainable until then, particularly given increasing competitive pressures to raise drivers rates from companies such as Lyft. What steps could you take to address these competing pressuresmarket pressures to raise rates and the need to generate profits?

4. Further Research Look into some of the more well-known gig companies currently making headlines in the financial press. Are any of these companies generating a profit? What factors are at work here? How have these profitable companies organized to become profitable? Are any of these companies moving toward models that remove the human factorthat mechanize in the way that it looks like Uber could be seeking to mechanize? How are the financial values of some of these gig companies being determined? In light of the huge losses experienced by some gig economies, what factors are likely playing a role in these financial evaluations? Are people speculating on an unknown future?