The Strategist

Uber’s unceasing fight

09/29/2017 - 11:05

The strategy "Move fast and break the order of things" seems to be failing. This is an unofficial motto of successful technological start-ups and status quo infringers such as Uber Technologies Inc., which are rapidly moving forward to occupy market share, win customers and drive potential competitors away.

Elekes Andor
Elekes Andor
Uber and other companies have shown that sometimes the existing rules, perhaps the laws, and even the basic standards of human decency, become their victim. Uber acted like a pirate in the world ocean. This is not the case in a decent society, but it's hard to imagine that Uber could become a global company estimated at $ 68 billion if its managers sat at meetings with representatives of city taxi services, and the company complied with all the rules of the transport industry.

Recent events in London are the first sign that Uber’s arrogant demagogy, who was arguing about the transport revolution, has significant financial consequences. The London transport department said it would not renew Uber's license to work in the city, because "the approach and behavior of the company demonstrate a lack of corporate responsibility." In addition, the regulator accused the company of using Greyball software to avoid the authorities' attention, and that the company did not properly report crimes and did not receive medical certificates. The company itself and 40,000 of its drivers in London can continue to work as usual until the decision is appealed, but if the company ultimately flies out of London, it will be a landmark event.

Uber London Limited, a UK-based legal entity that is to lose its license, reported revenue of £ 23.3 million ($ 34 million at the exchange rate at the end of 2015) in 2015, the latest available data in the UK registry. Uber’s revenue for the first three quarters of 2015 amounted to $ 1.2 billion.

These figures should be taken with doubt, since Uber is a private company. Observers can see only particular data from financial statements that may have been processed to obtain the most acceptable financial results. Nevertheless, if we take into account these financial indicators in general terms and assume that the share of London in the company's business remained about the same as in 2015, it means that revoking a license in a large European city can deprive Uber of several percentage points of revenue. This is not a catastrophe, but it is not a trifle either, especially given that Uber was forced to abandon operations in China and Russia and that rivals complicate the company’s life in an increasing number of markets. London is one of the places where the company has managed to take root - it accounts for a larger number of trips and, therefore, the company earns profits here more likely than in India or South-East Asia. According to Uber report in the UK, its London subsidiary doubled its profit in 2015.

Just like in most countries in the world, in London, Uber blew up the market, and this brought the company fans and critics. Its tariffs were more efficient and cheaper than the famous "black cabs". Uber has got accustomed. According to the British authorities, the number of licenses issued for traditional taxis in the period from 2013 to 2015 decreased by 1.3%, while the number of licenses of private carriers for Uber and others increased by 18%. The taxi drivers protested at first, but now Uber drivers are tired of the fact that because of the glut of the market they have to work longer to make ends meet. Last year, the court ruled that Uber should treat drivers as employees, and not as contractors who do not receive regular salaries or benefits. This decision, which Uber now protests, can also be fraught with serious financial consequences for the company. The battles with officials, drivers and courts in London turned for Uber into an almost uninterrupted boxing match. The company wins some lawsuits and battles with regulators and competitors, but loses others. The fact that this year outside of Europe has become a year of scandals, litigations and noise for Uber shows that this state of affairs is not a disease of growth. Scandals and wars are a natural state of Uber.