Analyzing Business Dynamics of Ride-Hailing Services: A DPM Approach Applied to Uber Inc.

Abstract

Purpose – The purpose of this paper is to explore business dynamics of a rising ride-hailing service industry through case study and foster understanding of hypothetical feedback effects within the broader system. Design/methodology/approach – The research adopts the dynamic performance management framework with simulation-based methodology for developing a dynamic case interpretation of specific type of business complexity. Findings – Scenario analysis shows that changes in the commission percentage for drivers, and cutting prices for customers (car hailers) by competitors have significant impacts on the car hailing industry. Research limitations – The findings of our analysis are limited to a city, which cannot be generalized without modification of the model and adjusting it with the underlying dynamics of similar cities. Furthermore, the data was collected from different news websites and online databases. Some contradictions were found in the process of data gathering. However, the mechanism can be taken as an exemplary for development of a system dynamics model in the context of the ride-hailing industry. Originality – Simulation-based analysis of the ride-hailing business contributes a ground base research in a relatively less-explored field in the management domain. This research also provides managerial decision insights through applying the dynamic performance management. Readers can gain a holistic dynamic perspective, and a simplified explanation on some of the key business mechanisms which exist behind a ride-hailing service.