The reasons for giving up Uber In China.PDF
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The document analyzes Uber's unsuccessful venture in China, highlighting its competition with the local company Didi Chuxing, which had a dominant market share and employed strategies better suited to Chinese consumers. Despite its global success and financial backing, Uber faced challenges such as cultural differences, regulatory issues, and the preference of Chinese customers for local services. Ultimately, Uber was forced to sell its China operations to Didi in a bid to refocus on more profitable markets and reduce losses.
The reasons for giving up Uber In China.PDF
- 1. BGMEA University of Fashion & Technology Department of Apparel Manufacturing & Technology Course Title: International Trade & Transaction Course Code:AMT-2207 Submitted To: Mr. Golam Kibria Lecturer Department of AMT BUFT Sirajum Monira Dola (191-036-101) Monzurul Muktadir (201-023-101) Sadikur Rahman (201-118-101) Prosanto Saha (201-120-101) Eusuf Harun Hasnat (201-122-101) Submitted By:
- 3. The reasons for giving up In China
- 4. Introduction Uber is a worldwide famous company name in the segment of transportation. Uber is a platform where those who drive and deliver can connect with passengers, eaters restaurants. It’s services are mainly mobility or vehicles for hire. In the cities where Uber is available, a person can use the Uber app to request a ride. When nearby driver accepts request, the app displays an estimated time of arrival for the driver heading to your pickup location. The company mainly possesses a mobile app and a website. Uber found its business around 69 countries and over 900 metropolitan areas. In February 2014 Uber started its service in China. The service offered by Uber was going fruitfully at first. As it was going to be the convenient tool for both foreigners and Chinese to hire a transportation such as car, taxi etc because it can be used by both Chinese and foreigner languages and the fare offered cheaper than other companies. But the market of China was not easy at all. Uber had to fight for market share against its powerful Chinese rival, Didi Chuxing. At last Uber had to sold its business in China to its competitor Didi Chuxing.
- 5. History of Uber Headquartersin San Francisco, California,U.S “Uber” was founded on March, 2009. By using “Uber” mobileapp passenger can call a car and connect with driver. StumbleUpon GarrettCamp, Travis Kalanick
- 6. Uber Business Strategy: Uber business strategy consists of the following 4 pillars. • Increased service range to cater for the needs of great amount of costomers. • High level of user convenience. • Cost-saving through innovation. • Growth through acquisition.
- 7. Increased service range to cater for the needs of great amount of costomers. Extensive offering is rightly considered as Uber competitive advantage. Depending on their budget, the occasion and purpose of ride, customers can choose among Uber X, Uber XI, Uber Pool, UberGO, Uber AUTO, Uber Access, Uber MOTO, Uber Premium or Uber Rush. It is important to note that the ride-hailing giant has been consistently increasing its range of service on the basis of the same platform and therefore, utilizing the same set of competitive advantages. Accordingly, each additional service comes for little additional cost for the company, effectively contributing to the bottom line.
- 8. High level of user convenience. Uber offers unprecedented user convenience at multiple levels. No need to call dispatch,wait in a line, or wave from a curb. Customers can tap ‘Request” on their phone from comfort of indoors and wait for notification that their driver is “arriving now.” Even in dense urban locations Uber drivers usually arrive in 1-2 minutes. When they reach their destination, customers just say thanks and get out of the car. No need to reach for cash or credit card. The payment is automatically charged to card on customer’s Uber account and receipt is sent via email. Moreover, dispute resolution with Uber is easy. Each ride receipt includes a map and a GPS track, customers can complain if their driver took a longer route and Uber is prompt with refunds.
- 9. Cost-saving through innovation. Extensive user conveniences described above come for a little cost for the company, thanks to the app that integrates innovative features and capabilities. Therefore, it can be argued that operating at low costs thorough innovation is placed at the core of Uber business strategy. Moreover, first mover advantage in internet-based ride-hailing sector is one of the most important points of Uber competitive advantage.
- 10. Growth through acquisition. Attaining high growth rates through acquainting related and adjacent businesses is an important element of Uber business strategy. The most notable acquisitions by Uber include artificial intelligence company Mighty AI in 2014, grocery delivery app Cornershop in 2015 and geospatial software platform deCarta in 2015. Even in pandemic-troubled year of 2020 the ride-hailing giant completed the acquisitions of vehicle hire company Careem, food delivery service Postmates, taxi booking and dispatch software Autocab and transportation technology firm Routematch. Uber Technologies Inc. Report contains the above analysis of Uber business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Uber. Moreover, the report contains analyses of Uber leadership, organizational structure and organizational culture. The report also comprises discussions of Uber marketing strategy, ecosystem and addresses issues of corporate social responsibility.
- 11. The Beginning of Uber Giving Up in China. We all used the on-demand service once or twice. Uber is a smartphone-based American company that works with ride-sharing. When uber get entry into Chinese company in 2014, they already a global giant ride-sharing company. At that time Uber China already had some local Taxi service companies as rivals. In all of them the famous two are DiDi Chuxing and Kuaidi. If we saw the budget, Uber has a big budget. If we calculate Didi Chuxing and kuaidi together, the budget of Uber will be greater. When Uber comes DiDi Chuxing was already giving service for three years. And Kuaidi is also an local service there. So, includingchina there are three ride sharing service. After entering the Chinese market uber facing three problems. ✓ Uber is an American company. In China, the acceptancerate ofAmerican companies is very low. ✓ Uber was based on Google map. Which is also an American service ✓ Security concern of stealing data Chinese people does not accept mostly.
- 12. Some Significant Facts About Chinese Market. ➢Chinese people prefer their local company most. ➢The Chinese market is not very good for the foreign company for business. ➢There are 18% of people all over the world are in China. So, if someone is able to get famous in china, he is capable of making a giant company. For the following reasons mainly Uber can’t able to gain success in the Chinese market by fighting with Chinese Company. Here it is also true that uber is also a good company. They are successful in many more countries. So, it can say, they don’t have a lack of management or investment and planning. But they haven’t able to get success in the Chinese market.
- 13. Complication Unraveling Policies Applied by Uber. The first attempt by Uber had taken was sign a agreement with Baidu for maps. Then the problems relating to map were solved. Then, DiDi Chuxing and Uber are going through a business fight and both are starting to invest more and more. The company which can able to gain more and more customers will be the owner of the business race. If someone invests more and more, he has more possibility to win.Uber has no lack of money. Behind them, silicon valley company is ready to invest. So, they have great Invest support. On the otherhand, DiDi Chuxing has also no lack of investment. Because at that time Alibaba and WeChat were supporting DiDi Chuxing. ( We all know, Alibaba is a Giant company in china and also WeChat is a very famous company inchina. They are not only supportingwith money, but they also giving Different supports) Wechat has payment integration features. They give access to DiDi Chuxing. On the otherhand, Alibabahas more than a million customers and they are giving access by giving many offers related to DiDi Chuxing.So, DiDi Chuxing was getting customer supportsand Uber was not able to access those advantages. There was anotherreason for believing DiDi Chuxing. The President of DiDi chuxing was Lui Qing. Who is the daughter of Lui Chaunzhi. Lui Chaunzhiwas the founderof LENOVO. LENOVO is also a big company and the founderwas a very respected person in the Chinese business market and local people. So, DiDi Chuxing has more acceptancerate than uber.
- 14. The Starting of the Business Fight. DiDi Chuxing started giving more and more discount offers to the customers. They also hired more drivers, renting and buying cars for expanding business. So, DiDi Chuxing was getting more and more market share. At that time Uber had no options for getting market share because people using DiDi Chuxing services for saving their costs So, Uber was also started to giving offers for gaining customers. But, Uber had not that much of invest where they can offer discounts for an unlimited time. So, for getting market share they started to think very Deeply. After some days, Uber launched its new service named Uperpool. That means two people could call the same taxi at a time when they were going to two different places but that’s on the same road. They were sharing rides together. So, the cost of riding will be shared and it made the cost light. For example, Two people are wanted to use Uber. One was going from Malibag to Kuril and another one is from Kamalapur to Khilkhet. So, They booked the same Car and shared the ride together. They had to paid different amounts of money according to their travel distance. They were sharing the same service. So, the cost of traveling was decreased. Also Uber launched a luxury service which was named UberLux. This was for those who wanted to use the best, Luxury, and costly ride. For these two new services, Uber came back to the Business Fight and stated to reaching their customer goal. They started getting more and more customers. But It was a piece of bad news for them that they can’t able to go through more days. DiDi Chuxing has also launched the same feature as for them. So the two companies were gone in their past situation.
- 15. Sample size Silent first mention P Figure 1 Brand Comparison between Didi Chuxing and Uber China
- 17. Uber vs. Didi in China: Demand and Revenue Model Uber China failed in creating a winner-take-all situation in the Chinese ride- hailing market, where there are huge potential customers who are difficult to get taxi, particularly in peak hours. According to iR esearch (2016), the number of users enjoying the ride-hailing service reached 399 million in Chinese market by the end of 2015. And in the first quarter of 2016, 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 (2016). The big difference in the market share implies that despite Uber’s strong brand power in the global market, there were other factors in the Chinese market which affected users’ choices of the ride- hailing platforms. Now, we first propose the following factor about the effect of the brand power on the Chinese ride-hailing market.
- 18. Factors in the Chinese market which affected users’ choices of the ride-hailing platforms from Uber to Didi. Factors The larger regional coverage of Didi than that of Uber would significantly helped the market penetration and complemented the disadvantage that Didi had as a follower. Didi’s target segments and service offerings were better matched than those of Uber’s. Furthermore, this matching strategy of Didi’s was consistent with its value proposition. Didi’s partnership structure was more diverse and richer than Uber, enabling Didi to develop a broad range of service offerings. On the other hand, Uber was forced to concentrate on marketing efforts (e.g., frequent promotions) and rely on the brand popularity as a last resort. Didi’s richer service offerings appealed to Chinese users more attractive than Uber’s strategy of focusing position. The users in China did not seriously take the brands of ride-hailing services into account despite Uber’s strong brand recognition in the Chinese /* or global? */ market. The way that Didi operates the service process (e.g., matching passengers and drivers) was different from that of Uber. This difference resulted in different focus on their service operations, and eventually the way to boost both sides of the platforms.
- 19. Burning cash Didi international expansion Focus on other big battles New products Removes a hurdle for IPO
- 20. Burning cash: Earlier this year, Uber chief executive Travis Kalanick said the start-up was losing $1 billion a year in China and, a source told CNBC, that the company had spent $2 billion in two years trying to battle Didi. It was an unsustainable way to run the China operation, a fact that Kalanick acknowledged in a blog post circulating around Chinese social media. “Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term,” Kalanick said. Uber was also losing to Didi which claimed to have a nearly 80 percent market share, so it appeared to be a good time to leave China.
- 21. Removes a hurdle for IPO: Analysts believe Kalanick has been very vocal that Uber is not looking to go public anytime soon, but when that eventually happens, removing the cash-sucking China business could make the company more palatable to investors.
- 22. Focus on other big battles: With China off of the company’s plate, Uber can now focus on the hundreds of other regions it operates in where it is also facing challenges. In Europe, Uber has run into trouble with regulators while in the U.S., the company is in constant debate over whether its drivers are classed as employees or contractors. India is another big potential growth market for Uber and it can now perhaps devote more resource there. But like China, Uber is battling local incumbent Ola in India. “India is the single biggest un-won opportunity, there it is a much more level playing field than in China,” Rob Kniaz, partner at London-based venture capital firm Hoxton Ventures, told CNBC by phone. Now that Didi owns Uber China, it’s less likely to invest in competitors to Uber around the world, Kniaz added.
- 23. New products? Uber can also focus its effort on developing some of its other products such as UberEats, the food delivery business . A report in the Financial Times said that the company is planning to invest $500 million into building its own mapping system.
- 24. Didi international expansion: As part of the deal, Didi has taken a small stake in Uber’s global business which is worth around $62.5 billion, according to analysts’ estimates. This could give Didi potential exposure to Uber’s customer base outside of China. Earlier this year, Didi partnered with U.S. ride-hailing app and Uber rival Lyft so that its Chinese customers visiting America could use Lyft’s services. “Didi Chuxing will also continue to expand its international strategy. We look forward to working with our partners at home and abroad to create more value for drivers, passengers and communities,” Jean Liu, president of Didi Chuxing said in a statement on Monday. While there was no suggestion in the comment that a similar model to Lyft could be done with Uber, the options remain open.
- 25. Uber was locked in a bloody battle with its Chinese rival Didi Chuxing. In order to gain market share, Uber subsidized its riders heavily, losing $1 billion a year. To me, that was a sign of trouble, because competing on price is never the way for foreign firms to win in China. Didi had more than 80% market share in China’s ride-hailing business. Besides Uber was a late comer to China. When Uber entered China two years ago, Didi already had a large presence in Chinese cities. For a long time, Uber used Google maps, which did not work well in China. Switching to Baidu maps was a good move, but it was too late. As an American company, Uber offered a credit-card based payment system, while most people in China do not use credit cards. Didi, on the other hand, had a solid grip on the local market. First, it worked with taxi drivers rather than individual car owners. This immediately won over local authorities and pleased grumpy taxi drivers. In addition, Chinese riders tend to trust a taxi driver more than a stranger who happens to own a car. Three lessons from uber defeat in china:
- 26. Second, Didi gives riders an option to pay in cash. This is a great convenience to Chinese as most of them are accustomed to paying in cash for their daily activities. Soon, Didi incorporatedWeChat’s payment system, which has become hugely popular. Uber had an uphill battlewith Didi. One of the reasons is that Tencent, WeChat’sparent company, had invested in Didi. Sometimes, WeChat even blocked Uber from using the app, which hurt Uber’s business. In a way, Uber’s defeat is not a surprise. China’s internet world is a very different universe. Few Western firms have had luck cracking it. eBay failed a long time ago, Google retreated, Amazon hasn’t gained much footage. The lessons remain the same: adapt to local markets and respect local cultures. To summarize: Never compete with Chinese companies on price that’sa no-win strategy. Three lessons from uber defeat in china:
- 27. Conclusion: China is one of the biggest market of the countryfor any kind of business as its the countrywith largest population in the world. But it is really tough to settle a business in China because its totallya different market than any other. Here the local brandsare more successful than the foreign brands. By analyzing the business strategy of global giant uber and Didi Chuxing in the Chinese ride-hailing market. The factors which are responsible for the failure of uber in china market. By analyzing those two platforms we gathered important information which helps us mostly to start a business in the future. We know that uber is also a giant company and also provides its services all over the world but they can not carry on in china.If they analyze properlyabout china market, about their culturesand belief may be uber will be succeeded in china. According to our study, the results show that the comparisons of the strategic positioningand implementation of the two platforms with respect to the major buildingblocks of the Canvas model are pointed out the success of Didi Chuxing as well as the failure of Uber.
- 28. Thanks to all