Uber in China Individual report PDF

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There is always the same topics and Uber is the first one.
Individual report 79.6 / 100
Assessment 2 part A, there are only 2 parts....

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Uber in China This Essay will make an analysis of the main issues or problems that Uber faced when they decided to expand into the Chinese market. Uber first started in 2009 in the United States, it proved to be an alternative to taxis and other modes of public transport. It was until 2014 when Uber decided to enter the Chinese market (Liu, Yunhan; Kim, Dohoon 2018), starting in Beijing. Shortly after the market became competitive as Didi Chuxing was established in 2012 in Beijing. Even though the platforms had similar strategies both were ride-hailing platforms and both employ P2P (Peer-to-Peer) business models, they had different targeting groups and methods used. As an example, Uber´s strategic focus is on the high-end premium segment while Didi attempts to cover segments from low to high ends, this will be discussed in more detail below. One of the mistakes that Uber made when entering the Chinese market was its lack of localization (Parente et al. 2017), Uber ended its internationalization in the Chinese market because of failing to acknowledge local users’ preferences, underestimating local competition, and avoiding local partnerships. Uber did not adapt to or fulfilled the needs of the Chinese customers, for instance with the way of payment. At the beginning, Uber customers needed to have a credit card before opening an account; this was an obstacle or did not motivate Chinese customers to have an Uber account as people in China use cash 95 percent of the time (Lisa Chow, 2018) and would not think of obtaining a credit card just to use Uber, Uber China recognized this disadvantage and modified it in February 2014 by adding different methods of payment like Alipay (William C. Kirby 2016). It took them a while to solve this problem, which could have been prevented in the first place with a better market analysis. After it became possible to use Alipay and UnionPay credit cards to complete the payment function it easier and more attractive for Uber Chinese customers. Didi on the other hand provided many options for payment, which made it more complicated for Uber to compete with. For example, Didi is still in close cooperation with WeChat and Alipay which are two major payment platforms in China. Furthermore, Didi allowed its users to choose to pay for fares in cash. This influenced the decision making that customers had when deciding whether to use Didi or Uber and the benefits or convenience that they could have for it. Uber connected Baidu map to complete positioning and navigation functions as there are government regulations on internet traffic causing, some sites are blocked including Google, this means, of course, that Google Maps is also blocked and it was hard for Uber to function like it would normally function in other countries where Google maps is used as a navigator. There was already a problem with brand recognition, there were more people who knew from Didi from friends´ referrals than from Uber, it might have been part of the marketing strategies that both platforms were using. Uber for instance, gave the first time Uber ride for free (if the trip was worth up to 20 dollars) by using a code (Dom Taylor, 2019). Didi on the other hand had also a strong referral program in which if you refer a friend to the program, they get 20 dollars and you also get 20 dollars to use for your rides. They also get their sign up bonus (Dan Jordan 2019). These were offers to attract potential customers, at the end more competition in ride-share market benefits customers according to Gary Mortimer, Marketing expert professor, which can affect the company´s revenue but was beneficing the customers on the other hand.

Didi, the competition, managed to offer a low fare ride, affirming that it was up to 10 percent more affordable than other rideshare rides. However this just mentioned has been changing overtime. Apparently Uber is now a days more affordable than Didi, according to Xu Desheng, “I used to use Didi most of the time, but I switched to Uber because it was cheaper,” said Xu Desheng, a 32-yearold living in Beijing”. Compared with traditional taxi services, a variety of differential ride services are provided on both Didi and Uber platforms to fulfill the different needs of different customer group. Yet Didi provided more service offerings than Uber, and targeted almost every market segments from low-end to high-end in order to meet the different needs of ride hailing in different types of income groups based on market segmentation. For example, Uber attracts a large number of customers through its carpooling service (People's Uber) that is cheaper than taxi services. As a strategic business for opening up Chinese market it was a good plan until Uber changed it and planned to provide luxury car services for people with a high income with Uber Black which did not work very well in China. It took a position that represented company’s unique competitive advantage, but it still failed because the most of the revenue came from the lower segments the strategy to have customers who would make use of the luxury service was not a large number. To sum up, Uber focus area (the premium category) and revenue sources in practice (below the premium class) means that the marketing and operational plans was considerably unreasonable. Not only the group targeted was an issue but also the number of cities that Uber was covering was less than half of the competitions coverage, showing that this factor was also affecting the number of active users. In consequence of this last one, the user’s growth rate for Uber was less than Didi´s customers. Didi expanded more rapidly than Uber, they have a larger product range “so” even though they both are engaged in similar types of systems, there are differences between the two companies in market penetration and growth. Didi’s market share (in terms of the order volume) reached 85.3%, ranking first in the industry; on the other hand, Uber’s market share reached only 14.9%, taking the second place (CNIT-Research, 2016). As mentioned in class, the fact that rural poverty has dropped dramatically since 1980, income inequality has declined, there is constant investment in infrastructure and, the country is huge seeing this as an advantage because the market could also be bigger and therefore Uber have more opportunities to target different groups, these were attractive motivations for the foreign company to enter China. Uber came from the United States; they were already very competitive on the first fastest-growing economy of the world, it was considered lucrative to expand to the second largest fastest-growing economy. We also talked about China´s trade in the global economy and this is just an example of how a service of transportation like Uber which could have stayed in just one country, decided to expanded to the second fastest-growing economy and provided incremental value on a macro scale. It has always been a problem for United States and China with the bilateral economic trade relationship these two have because even though they both want benefits of contributing to the development and expansion of the world trade by providing broader international cooperation, it has not always been like this, the next trade that will be discussed was going to benefit China more than the US, this is for example one of the main issues that there is always a party that is more benefited. Analyzing how the tax or duty to be paid on a particular class, (taking transportation as the main focus), of imports or exports; Tariff. The trade of transportation and communication accounts for

76.5for China’ imports of US products in percentage and 3.9 for US imports of Chinese products, according to the Tariff equivalents of NTBs between the US and China in 2009 in the “CHUSFTA” this is just to mention one of the regional trade agreements between this two countries to have a better understanding how agreements between countries and international companies affect the economy and be able to have a more open perspective of what an international business really means, as we discussed in class. As mentioned previously, the competition that Uber had with Didi in China was not easy. Not every strategy that Uber used was wrong. For instance, Uber had a very simple two step platform in order to complete the request of the service in comparison to other pl atforms. The waiting time was also efficient as Uber drivers were not able to reject a requested service, the system that they had to see the performance of the drivers was also well planned… but ultimately there were more negative factors than these positive ones . Additionally Uber were sluggish in adapting these strategies to the situation this would not have been an issue if they undertook more rigorous planning before the expansion. To conclude the lack of localization as one of the main problems that caused Uber to fail and forced them to exit the market. It was not only the matter of expanding the business to China but the fact that they took too long to adapt the service to the Chinese market, this gave other platforms like Didi the possibility to improve themselves during this time, for example concerning Uber´s flawed payment method or the use of Google maps at the beginning. The target group was not ideal and the fact that Uber either lacked or provided insufficient versions of the services that other platforms offered was also a disadvantage. Didi had a platform already built and it was 10 times bigger or more than Uber. Possible solutions or proposal from my side to the issues that come in the case study would be now discussed. You as a company have to find out how the customers in a specific region function or react to incentives, how businesses develop, is not about copying strategies that other companies from the same xxx have but is the ability to analyzing other successful strategies and work on them to be more assertive or objective when expanding a foreign service into a unknown market. Uber had 2 years to adapt their service to the customer needs and the performance was clearly not to its maximum. The strategy of having Uber Black as one of the services was not bad idea, an Uber X drivers earn a fare of $2,20 and Uber Black drivers earn nearly four times that, 8$ to be precise but this depends on the city and country where the service is provided, according to Industrial Securities Research, One of the smart traffic reports - Key Data Interpreting Industry, 2016 April, most of the revenue did not come from Uber black and this strategy should have been changed an advice to this factor would have been, to change the targeted group with a different service. If Uber was still in China, on the first year I would increase the services to compete at the same level with Didi, target a different level of income costumers with more attractive offers like Didi did by knowing that people in China are more likely to use a product if a friend recommended it instead of having services for free like Uber did. The Chinese market was geographically ideal, it could have been a potential market that could have increased Uber´s company revenue, profits and value and it wouldn´t have affected the company if they would have invested more at the beginning for a couple of years because the investment would have been massively reflected and would have maybe taken over the rest of the world like founder and CEO of DiDi, one said in an interview for BBC in 2018.

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