EMBA (April 2019)

Submitted By – Jijesh
Chandran

Competitive & Corporate Strategy

– Individual Assignment
As Group D, we Uber
analysed this vs
case byDidi - Case
looking at Uber’s strategy atAnalysis
a global level and how this was
applied at a local level to compete with Didi in China which has a very different demographic.
Group D
Doing Business in China - Assumptions
China is one of the fasting growing economies in the world and the fast-growing middle class is a
market too big to ignore for Uber. This growth is expected to continue for the coming many years.

Uber
Uber entered a market in China in 2014. The app-based taxi hailing business was no longer a Blue
Ocean in China as it had been in most of the other countries it had started operations before.
Uber wants to dominate the growing Chinese market like it had done in most of the other countries it
had launched its services. Uber understands that doing business in China would require new tactics
that were localized to the Chinese market. As a first step, Uber created a new entity called Uber China
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GROUP D EMBA (April 2019)

which would operate locally. Uber’s partnership with Baidu, one of the largest IT firms in China,
should help Uber make in-roads in the Chinese market.
Uber spent $2 billion as part of the plan to increase market share by subsidizing driver incomes and
passenger fares in its first 2 years. They expected the local partners to be pushed out of the market
by this tactic since they wouldn’t be as cash rich as Uber.

Didi
Kuaidi and Didi launched its services in May and September 2012 respectively. By 2013, Didi Dache
and Kuaidi Dache controlled most of the Chinese app-based taxi-hailing market. They were engaged in
a price war between themselves when other local start-ups and Uber entered the market in 2014. Didi
and Kuaidi merger in May 2015 consolidated their leadership position in the market.
By September 2015, Didi Kuaidi had obtained 80% market share in private car hailing services and
99% of the taxis market share.¹ Didi was confident that an outsider would not be able to make in-
roads into the Chinese market very easily. Didi was backed by some of the biggest names in China
such as Alibaba and Tencent providing them with big funding.

¹https://en.wikipedia.org/wiki/DiDi#cite_note-20. Retrieved 1st of August 2019

Recommended Strategy
Based on the above assumptions and the strategic analysis as shown in the group presentation, it was
clear that a low-cost strategy had not worked for Uber with the price wars. Also, in the long term, it
will not yield any benefit since Uber was losing money on each ride and their competitor, Didi, was
also cash rich and backed by giants who could support them in a price war.
This was not a sustainable position and as a result, the best approach for Uber in China would be to
adopt a differentiation strategy that would be able to move them away from loss making price wars
and into a more niche market within the mobility industry.

As part of this, Uber would need to re-direct their funds from subsidizing rides for passengers and
drivers towards:
 Market research – find out the areas where mobility can be improved and consumers’
willingness to pay is higher
 Marketing campaign – raise awareness of the new services and its focus on customized
services, cleanliness, security, etc. Create an emotional connect with the consumer. Make the
ride more about the journey than the destination.
 Vehicle diversification – increase the availability of different types and sizes of vehicles to cater
to specific needs such as buses, mini-vans, disabled friendly, etc.
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GROUP D EMBA (April 2019)

 Service development – develop new apps and services that are customized for specific needs
such as schools, hospitals, senior citizens, etc.

Along with this, Uber would need to focus on service portfolio diversification such as:
 Morning rush service – have enough vehicles available at designated points during rush
hours giving consumers that confidence the Uber is always there when it is needed.
 Delivery service – home or office delivery service for food or grocery at convenient times.
 Uber stations – shuttle services between popular landmarks or transport hubs as a cleaner
and faster alternate to public transportation.

Uber’s partnership with one of China’s largest technology company, Baidu should also be leveraged to
make in-roads and establish itself as a player with strong local ties.

Challenges
Uber is not Chinese
One of the biggest challenges Uber has to face in the Chinese market is that it is not Chinese. China
historically has not been a market where global companies have been able to create a dominance.
This would also include the difficulty in working with the government for regulatory compliance which
has been an issue for Uber even in other countries which would pose an additional challenge in a
difficult market like China.

One of the biggest steps Uber would need to take in order to compete with a local competitor that
has strong financial backing like Didi would be to try and establish itself as a local player.
As stated in one of their mottos “We build globally. We live locally”, they would need to create a
bond with the local community such that they look at uber as one of their own.

“People’s Uber” launch was a step in the right direction but it was a non-profit service and was more
of a marketing tactic rather than a revenue generating service. This would need to be built upon to
launch new services which is very localized and relatable.

Low Barrier of Entry

Another challenge is the low barrier of entry and the financial strength of its competitor. Didi
wouldn’t require much time to move into a service that has served Uber well and turn it into a Red
Ocean.

Conclusion
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GROUP D EMBA (April 2019)

Uber has the tangible (financial), intangible (technology, reputation) and human resources to work
towards creating the capabilities to achieve its key competitive advantage for its targeted
differentiation strategy in the Chinese market assuming the key industry success factors that has
been identified in this report.