May. 2015. Vol. 6, No.

ISSN 2305-1493

International Journal of Scientific Knowledge

Computing and Information Technology
2012 - 2015 IJSK & K.A.J. All rights reserved
www.ijsk.org/ijsk

THE IMPLICATIONS OF MOBILE COMMERCE APPLICATIONS:

THE CASE STUDY OF UBER IN ROMANIA
1

ALICE CIRSTEA

PhD Student, Department of Business Administration, University of Economic Studies from Bucharest,
ROMANIA
E-mail: [email protected]

ABSTRACT
The phenomenal growth in the use of smartphones, GPS and Internet a is giving rise to a revolution in the
business world. This revolution is focused on conducting business on the move usually by mobile commerce
applications This trend is fueled by the consumer interest in being able to access business services anytime
and anywhere. It is also motivated by the interest of the business community to extend their reach to
customers at all times and at all places. This paper is focusing on the Ubers mobile application which
challenged the taxi business environment and also the regulations on the field.
Keywords: Mobile Commerce Application, Business Model, Transport, Taxation, Internet.
mobile electronic commerce (mobile commerce).
M-commerce has appeared recently, around the
2000s, along with the penetration of mobile devices
connected to Internet all over the world.

1. INTRODUCTION
The development of information technology has
brought about massive changes in the way people
conduct their daily activities. These changes are
reflected in both consumer behavior and
economics. Mobile applications come in support of
consumers, but it also implies new international
and national legislation challenges that will have to
face. One of these is Uber, an application that has
changed the way transportation is perceived. This
application provides anyone the possibility to be a
taxi driver but also gives consumers the possibility
to find a convenient way of transport, available
even during peak hours. But what are the
implications in the economy, law or taxation? Can
the standard operating model of Uber be applied
anywhere in the world? Are the authorities ready
for those new business models of sharing
economy? The paper's aim is to find the answer at
these questions and to analyze from the economic
perspective the implications that may arise the case
of mobile business models, in particular Uber
mobile application.

Understanding the new business models and the

consumer behavior in m-commerce is an active
concern among researchers due to numerous
development opportunities (Bang et all, 2013; Ko,
2013). The mobile Internet is an opportunity both
for entrepreneurs but also for users, and a genuine
instrument for achieving business goals timely
(Seth, et all, 2015). The role and importance mcommerce are carefully studied by experts to
determine both challenges and to harness its
opportunities (Li, and Yeh, 2010; Maitya and Dass,
2014; Pavlou, 2006). Studies have shown that the
biggest barriers in development of m-commerce
are: fear of sharing information online, privacy and
security concerns, legal framework and others
(Mattew, Sarker, Varshney, 2004; Lyytinen, 2001)
There are multiple areas for using m-commerce,
such as: mobile banking, mobile brokerage,
acquisitions, location-based services, information
services, mobile advertising, etc. (Urbaczewskj,
Valacich and Jessup, 2003). M-commerce is now
seen as a business tool that has a greater potential
impact on business world than it ever had ecommerce in 1990-2000. Unlike e-commerce, mcommerce allows users to overcome the limitations
of location and fixed Internet (Al-Qirim, 2012;

2. LITERATURE REVIEW:
The explosive development of wireless
technologies has increased the number of mobile
device users and emerged a new type of commerce,
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May. 2015. Vol. 6, No.2

ISSN 2305-1493

International Journal of Scientific Knowledge

Computing and Information Technology
2012 - 2015 IJSK & K.A.J. All rights reserved
www.ijsk.org/ijsk

Islam et all, 2011; Ming et all, 2015). There are

many studies which were focused on the
technological aspects of the mobile commerce but
not so many focused on the relations and
implications which may result from this change of
economic and business perspective. The new
sharing economy has brought massive changes that
affect the whole business environment and
competition. A typical business model for this
sharing economy is Ubers business model.

this connection the time spent looking/ waiting for a

costumer is
decreased substantially). Ubers
payment seem to be fair since drivers are happy
with it even if they are not Ubers employees and
the car expenses are supported by themselves.
From the costumers point of view there are
many benefits using Uber app. Firstly, the app uses
a GPS system which enables them to order the
nearest car, they can refuse a car if they dont like
the driver/car (every driver has a profile with rating
from its passengers). Consumers can see on a map
the exact location of the driver, also once it gets the
ride it can send its friends/family a map so they can
see the location and they dont have to worry. The
payment is made online it is safe and the tip is
already included, so the costumer dont have to
concern.

3. THE UBER BUSINESS MODEL

Uber is a company incorporated and established
in 2009 in the USA, California, San Francisco,
which facilitates on-demand car and limo services
through the Uber app (iPhone, Android, mobile
web, and SMS), which connects consumers with
drivers (Uber has also, other lines of business, but
this paper will focus on transportation services).
Uber is a software company and does not own any
of the cars which transport Uber customers. These
drivers can be individuals, self-employed drivers or
individuals
employed
by
a
professional
transportation company (Ubers Partners).

The business model is pretty simple Uber has an

app, the company dont have to look for other
monetization sources of the application. In other
words, income generation occurs immediately and
continuously. Ubers main concern is that drivers
from the system should rise to the desired standards
and more customers enroll in the system. The taxi
market is usually very fragmented and it seems to
be still huge demand everywhere in the world for
those type of services.

Uber does not provide any kind of transportation

services, but only provides intermediary services to
a network of town car and limo vehicles. The
application was launched as a ride sharing app
utilized by any user as a source of rides. Any user
could be a taxi driver (if he had a car). Uber collects
the payment of the ride on behalf of the drivers and
the payment of the fare that will be subsequently
transferred to the driver, will be reduced with the
commission of Uber (usually 20%) for its
intermediary services.

When defining its services, Uber always refers at

them as a peer-to-peer platform which connects
drivers with customers, structurally different from
commercial activities of professional taxi drivers. If
it would have been a tax company, Uber should
obey to specific regulations. But how similar is
Uber to other taxi companies?
3.1 The Case Study of Uber in Romania

Moreover, in the recent period Uber pays a

support fee to the Partner for making itself available
to Uber for a certain amount of time per week. At
the beginning, the company has experienced rapid
user proliferation of 30-40% per month (J.P.
Mangalindan, 2012.). The appendix shows the steps
in the Uber business model, includes also comments
on what it is that Uber offers at each stage and
whether that offering is unique (see appendix).

Recently Uber has launched its app also in

Romania and established a local company Uber
Romania with a local team that supports Uber in
setting up, increasing and maintaining the
operations in the local market. Uber Romania
provides marketing support and operation services
to the Headquarter, such as contracting with new
local drivers and users of the Uber App (i.e. the
passengers), running local promotions, providing
customer care support, liaise with the local drivers,
answer questions from the local consumers and/or
drivers/partners, etc. The price per kilometer in
Romania is the same as the one practiced by the taxi
companies. This application was well received by
the local consumers as well as the drivers. Most of
Uber drivers are employees of transportation
companies or self-employees drivers.

As we may observe Ubers business model offer

some substantial gains to its drivers, to its
customers and also offers a substantial business
revenues.
From the drivers point of view, Uber offers them
through the application more rides than traditional
companies, this because Uber use a technology
which enables them to predict when it will be the
biggest car request and also to connect the rides (by
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May. 2015. Vol. 6, No.2

ISSN 2305-1493

International Journal of Scientific Knowledge

Computing and Information Technology
2012 - 2015 IJSK & K.A.J. All rights reserved
www.ijsk.org/ijsk

The services provided by Uber Romania are

similar to those offered to other markets. Currently
Uber is present in 57 countries and more than 250
cities. But Uber wasnt received with open arms by
its competitors or by the taxi drivers, because at its
beginnings, in the standard operating model, in
order to be a driver for Uber it was not necessary to
be a professional driver or to have a taxi license.
Now things have changed a little bit due to protests,
manifestations and regulatory opposition from the
host countries.

From the point of view of the salary taxes, there

are a few implications. Usually the taxi drivers are
authorized persons which mean that they have a
collaboration contract with the transportation
company. They earn an income which is not quite a
salary but they also pay social contributions. There
are cases when the taxi drivers are employees of the
transportation company. In this case the social
contributions paid to the Budget are more than 60%
of the salary (employer plus employee). But if you
are an authorized person this mean that you should
have to pay only the part of the employee which is
around 30%.

In most of the worlds countries the taxi industry

is well regulated and the companies have to obey to
those specific regulations of human transportation
services. In order to be a taxi driver, almost
everywhere in the world, you have to possess a
professional driver diploma/certificate. Also, the
number of taxi cars is regulated by local authorities
who release a limited number of licenses. In many
cities of the world those licenses are ceased/ sold/
obtained for a lot of money. In New York, for
example, a medallion (the equivalent of a license)
was worth $872,000 in October 2014, down 17%
from a peak reached in the spring of 2013 due to the
apps like Uber and its competitor Lyft (Barro,
2014).

Generally, an Uber driver is:

8. an authorized person so it will pay about 30%
taxes and 16% income tax or
9. an employee of another company so this mean
that it does not pay those contributions but only
16% income tax.
The standard operating model was adopted
different in many countries due to the fact that the
company faced a number of legal difficulties.
Moreover the vision of the business has changed in
time for that reason. Below are the main differences
between the ways Uber started to operate versus the
actual business model in Romania versus US.

In Romania, if you want to be a taxi driver you

should:

10. At the beginning in US the Uber application was

generally used in order to share car costs, for
ridesharing whereas now, in Romania this app is
used more like a taxi app.
11. At the beginning in US the application was used
both in the city and the surrounding area
whereas now used for in city travel.
12. Generally Ubers drivers were people who want
to share car costs not professionals, now drivers
are usually taxi drivers.

1. be a professional driver (this mean that you

should pass the authorized examinations and to
obtain the diploma of professional driver);
2. have at least 2 year experience;
3. have a clean background (this mean that you
shouldnt be convicted or to violate the law);
4. to obtain an authorized license from the local
authorities (their number is limited and you
dont have to render your services in other place
other that the one for you have the license);
If you are an Uber driver you should:

An interesting observation results from this short

comparison, Uber is turning more and more into a
taxi application similar to those used by taxi
companies. So we can observe why Uber is making
so many rumors, because drivers usually dont pay
so much taxes and create unfair competition. Uber
is not the only company who applied the sharing
economy model. There are many others in different
domains. In Figure no 1 are presented the main
advantages and disadvantages of this type of
services, with their economic implications.

5. pass an Uber exam which is not authorized by

the local regulator;
6. to have a clean background;
7. and to have a driver license but not professional
driver license;
Moreover if you are a regular taxi driver you
should pay bigger taxes for: your car insurance,
your local car taxes, a yearly fee for your authorized
license. All those are resulting in bigger taxes and a
better collection of taxes of the State and Local
Budget, but if you are a Uber driver you would not
obey to the taxi Law and you shouldnt pay all
those taxes.
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May. 2015. Vol. 6, No.2

ISSN 2305-1493

International Journal of Scientific Knowledge

Computing and Information Technology
2012 - 2015 IJSK & K.A.J. All rights reserved
www.ijsk.org/ijsk

this fact a number of issues are raised: passengers

safety and security or fiscal and legal implications.
Note: This paper was co-financed from the
European Social Fund, through the Sectorial
Operational Programme Human Resources
Development
2007-2013,
project
number
POSDRU/159/1.5/S/138907
"Excellence
in
scientific interdisciplinary research, doctoral and
postdoctoral, in the economic, social and medical
fields -EXCELIS", coordinator The Bucharest
University of Economic Studies.

Figure 1 Advantages and Disadvantages of Ubers

Application and the Economic Implications
As we can see from the figure no 2 there a few
economic implications related to Uber business
model. Firstly, this type of business creates unfair
competition on the market because Uber is a
competitor to taxi companies where it activates but
has no employees, does not invest in car acquisition
and has generally more reduced costs. Secondly,
this type of business, force Governments to seek
new regulations. On long term this type of activity
creates economic instability for drivers because
they are no employees so they earn as much as they
work but this income is not constant as a salary. For
drivers and customers as is mentioned in figure no
2, there are advantages and disadvantages. Main
advantage for drivers is that they can earn extra
money in their free time, they have a flexible
program, can share car costs (i.e. with
maintenance). Main disadvantages are related to
safety and security because Ubers drivers are not
nonprofessional drivers. Also, the drivers may have
an unbalanced lifestyle, they could not benefit from
some employment advantages (if they are not
employed elsewhere) or they can have an unstable
income. In conclusion, these Uber applications
challenge Governments and business environment
to adapt themselves at new technology and new
requirements of customers.

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4. CONCLUSION
Uber is a company that has developed an
application for tablets and smartphones that permits
customers to connect with drivers enrolled in the
application. The application allows passengers to
connect directly GPS mobile phone with the nearest
car with driver registered in the database of Uber.
The company is not a regular taxi company, and is
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4

May. 2015. Vol. 6, No.2

ISSN 2305-1493

International Journal of Scientific Knowledge

Computing and Information Technology
2012 - 2015 IJSK & K.A.J. All rights reserved
www.ijsk.org/ijsk

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