Michael ‘Collin’ Zreet is currently a part time student at The University of Texas at Dallas where he is completing his mba and a Masters in Innovation & Entrepreneurship
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- The University of Texas at Dallas mcz130030@utdallas.edu Keywords
- ABSTRACT INTRODUCTION
- IMPLICATIONS
- HISTORY OF UBER IN THE UNITED STATES
- BUSINESS MODEL OF UBER
- UberX
- UberPlus/UberSelect
13th Global Conference on Business & Economics ISBN : 9780974211428 The Failure of Uber in the Republic of Korea: Effects of Culture and Foreign Direct Investment on the Taxicab Industry in Seoul Michael Collin Zreet The University of Texas at Dallas mcz130030@utdallas.edu Keywords: Foreign Direct Investment Joint Venture Public Administration Transportation Geert Hofstede Cultural Dimensions Uber Technologies Inc. Republic of Korea Seoul Metropolitan Government AUTHOR Michael ‘Collin’ Zreet is currently a part time student at The University of Texas at Dallas where he is completing his MBA and a Masters in Innovation & Entrepreneurship. He currently works at Bell Helicopter as a Reliability Engineer and Cost Analyst on the commercial 525 Relentless program, and has previous experience on the H-1 Huey and V-22 Osprey military programs. He received his undergraduate degree in Aerospace Engineering from The University of Texas at Austin in 2009 and currently resides in Dallas, Texas. ABSTRACT INTRODUCTION: The American ride-share company, Uber Technologies, has enjoyed successes and failures across the globe. Recently, Uber had been legally forced out of the South Korea by the local government. Uber has had success in other international cities, but why did it not find success in Seoul? OBJECTIVE: The primary objective of this paper is to explore why and how Uber was unable to maintain business operations in Seoul and not become the success it has been in many other American and International cities. APPROACH: I had recently studied public administration policy in the Case Study Program in conjunction with the University of Seoul and the Seoul Metropolitan Government. This knowledge coupled with research into Uber’s history and business plan are the foundation of this paper. FINDINGS: Research showed that Uber was favorable (95% approval rating) among passengers, while the local taxicabs only were not as favored (56% approval rating). Using the Geert Hofstede cultural comparison tool, it seems that the problem may be deeply embedded in the Korean culture, including many sub contexts like Individualism and Long Term Orientation. IMPLICATIONS: As markets are opening up in East Asia (specifically South Korea), American companies need to be more aware of cultural norms in these countries, possibly creating joint ventures or international branches to accommodate these differences. INTRODUCTION After attending the 17th annual Case Study Program in a partnership with the University of Seoul and Seoul Metropolitan Government in May of 2015, a question had been running through my mind about a phenomenon seen back in the United States. The transportation company, Uber, had wide success throughout many large cities throughout the United State, but I had not witnessed any evidence of it in Seoul. During a lecture from Dr. Joonho Ko, a research fellow at The Seoul Institute covering Seoul’s Public Transportation System, I asked him if the Seoul Metropolitan Government had ever considered a rideshare service like Uber or their competitor, Lyft, and if it would be ever profitable in the area. To my own ignorance, I quickly learned that Uber had been forced out of Seoul and would be have been heavily fined if they ever returned to Seoul. This piqued my interest and furthered my research into the topic. This paper will look into the history of Uber as a company, an overview of Uber’s general business plan, general policies of the taxi system in Seoul, and the history and disputes of Uber in Seoul. HISTORY OF UBER IN THE UNITED STATES Uber was started by Travis Kalanick (founder of the Peer-to-Peer file sharing company, Red Swoosh) and Garrett Camp (co-founder of the web discovery platform, StumbleUpon) in March of 2009. Trying to come with a solution to San Francisco’s taxi problem, they came up with UberCab, which originally was supposed to be a luxury car timeshare company that was based upon an iPhone application (Arrington 2010). Kalanick and Camp were able to recognize the need for fast and reliable transportation service in densely populated areas. In their hometown of San Francisco, the dense city, steep hills, and many local attractions made it very difficult to park a personal vehicle, making taxis a very efficient alternative to owning a car. As of the 2010 census, the population density of San Francisco is 17,246 people per square mile, becoming the 20th densest city in the United States (U.S. Census Bureau 2010). Because of this density, it made it very difficult to find and hail a taxi in a timely manner, averaging out to about 30 minutes per instance (Chokkattu & Crook 2014). The overlying idea behind Uber was to employ non-professional drivers to use their personal vehicles to ferry around customers by the use of an iPhone application that facilitates communication between the two parties involved. After a few key hires, developing the software, and test run in New York City with three cars and a cell phone, UberCab (as it was originally known) was launched in San Francisco on July 5th, 2010 (Chokkattu & Crook 2014). Shortly after, in October of 2010, UberCab received its first (of many more to come) roadblocks, as the San Francisco Metro Transit Authority sent them a Cease & Desist Order for operating like a taxi company without the required licensing (Chokkattu & Crook 2014). After a name change, to just “Uber,” the company was able to get around the regulation because unlike a taxi company, Uber pre-arranged customer pickups and does not acquire customers curbside, more like a limousine service. By late 2011, Uber had raised $49.5 million dollars through angel investments from large entities across the country including Goldman Sachs, Bezos Expeditions (Jeff Bezos, founder of Amazon), and Benchmark Capital and was valued at $330 million (Myers 2015). As of May 2015, Uber had been valued as a $50 billion company (Myers 2015). As Uber had problems in its hometown of San Francisco, Uber also came up against similar issues in other U.S. cities with taxi unions and municipal governments. The state of Nevada has some of the strictest taxi and limousine regulations in the country, which is why Uber is absent in Las Vegas, as the third largest metropolitan area in the country (Shine 2014). To be able to operate in Nevada, they would have to apply for a taxi medallion and operate under the same rules and regulations as taxis (Shine 2014). Uber is also not allowed to operate in Portland, Oregon due to city ordinances (Kulikowski 2014). Uber expanded internationally into Paris, France in December of 2011 (Tsotsis 2011), Vancouver, Canada in March 2012 (Sawers 2012), and London, United Kingdom in July of 2012 (Apps Rush 2015). As in the United States, there was also some push back from taxi union groups, including a violent riot in the streets of Paris in June of 2015 (Smith-Spark 2015). Uber has also been banned in other international cities, like Brussels, Belgium and Berlin, Germany (Kwaak 2014). BUSINESS MODEL OF UBER Uber’s business model is fairly simple. They employ non-professional drivers to drive their own personal vehicles around, picking up pre-scheduled customers through an easy-to-use smart phone application. The customers having already pre-loaded their credit card information through the smart phone application, digitally pay their fare once the ride is over. The fare is calculated by combining a base fare (B) plus a rate cost (ct and cd) for both time (t) and distance (d) traveled, displayed as: 
This method of charging customers allows Uber and its drivers to make money both when time is short but distance may be longer (low t; low traffic scenarios), when distance is short but time takes longer (low d; high traffic scenarios), or when both are short (low t; low d; B fare is constant) since the base fare (B) is always a constant amount. All of these variables are different between the regions they operate in. This is very similar to how taxicab companies operate today across the world. Uber also provides varying levels of vehicles to be picked up in, increasing in luxury, size, and cost (Uber 2015):
To combat high demand scenarios (during work rush hour or other high density events), Uber also applies an overall multiplier that increases the overall fare, in which they call “Surge Pricing.” In these high demand “Surge” instances, the Uber pricing model behaves exactly in a typical Supply-Demand curve scenario. When demand (D; passengers) is greater than supply (S; available drivers), an increase in price is motivation for the demand to return back to equilibrium. This also encourages more drivers to be available during peak hours due to the lure of making more money at these times. Allowing the prices to change, allows for Uber to set prices that will be most beneficial to the current traffic situation. As far as paying their employees, the drivers actually keep a majority of the fares. Uber only keeps 20% of the fare for administration services, allowing the drivers to keep the remaining 80% (Uber 2015). On average, Uber drivers make $19.04 per hour (Driver Jobs 2015). 
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