Beruflich Dokumente
Kultur Dokumente
in
China
Company
Background
mobile app platform for both iPhone and Android cellphones. Its value proposition is
a solution to the pain that conventional taxi users have been experiencing through the
years, such as: steep prices, insufficient cabs supply for an increasing demand, and
matchmaker that allows users to enter a pickup location on their cellphones. Then, an
Ubers driver will accept the request to pick them up and after that, they drive to the
Since its start in 2009, Uber had grown over 68 countries and more than 300 cities
around the world1. In August 2015, it reached the title of the most valuable startup in
the world, valued at $50.0 billion as is showed in Exhibit 1. As an example of its rapid
growth, Uber announced in January 2015 that it had more than 160,000 active drivers
in the US who provided more than a million rides a day, covering 75% of US
population and it was expected that the startup would have a yearly revenue of $10.84
Uber has come, as a disruptive innovation in an industry that long ago showed no
efforts to improve its services in order to attend their costumers needs. That is the
main reason because this application service has been extremely popular with
consumers.
The great success of the company has not been deployed without problems in each
country where Uber has been implemented, and it has been criticized from several
sides
of
the
incumbents.
On
one
hand,
in
each
city
it
has
received
a
hostile
reception
from
unions
taxi
drivers,
who
are
at
risk
in
its
operation
and
market
share
with
the
entry of this type of competitors; on the other hand, state regulators have put barriers
to normal operation of this new type of transportation service, since they do not
receive incomes for taxi licenses and other taxes, as they do with conventional taxi
industry. Finally, from consumer side, Uber has been criticized by one of the
cornerstones of its business model based on the surge pricing, which varies according
to the demand. This last issue had also the potential to raise ethical concerns in
society, for example, during the 2014 hostage crisis in Sydney, Australia, the minimum
fare for a Uber`s ride in that city was more than AU$100, which means four times the
regular price. The company apologized for this situation and refund all who had paid
There have been other concerns such as those related to passenger safety, like in India
Uber has a unique business model that gives it comparative advantages over their
competition, which are the taxi & limousine industry. It owns no taxi and has no cab
driver as employees, clearly an advantage in the company cost structure over its
competitors.
Its role or function is to match a driver with its passengers who are looking for a ride
in a timely efficient manner, and for this service Uber will take an average of 20% of
the total payment made it to the driver. There are no cash transactions between driver
and
passenger,
because
prior
to
the
first
use
of
the
app,
the
user
needs
to
enter
a
credit
card
account
or
other
electronic
mode
of
payment
(e.g.
Paypal),
with
the
One of the core features of its business model is the surge pricing strategy, based on a
patented technology built-in algorithm that automatically adjust the rate for a journey
Uber operates in the taxi & limousine service industry, which has total revenues of
$11 billion in the US, $14 billion in the UK and $25 billion in Japan6. A variety of
products and services are offered within this industry, such as: taxi services, leasing to
taxi operators, special needs transportation services, limousine services, and luxury
In recent years, a bunch of new app-based rides have entered to this industry,
representing direct competitors to Uber. Examples of these new apps are: Lyft, Hailo,
enjoys an important brand positioning, because of its quality and for being one of the
Uber has 34 US patent applications pending7, this means that it doesnt have
any protection over these processes or key activities. This could be a time
order to get the technologies that Uber has been trying to protect.
Uber started with a low initial capital investment of $200,000, an amount that
Customers have a variety of substitutes and the switching costs are low for
Within the industry of network transportation, Uber has quite a few substitutes
that can be utilized by customers for transportation (such as another app`s like
Uber drivers and their vehicles can choose to operate with rivals such as Lyft
Despite this situation, Uber has the power to set their rates, and as they reach
more and more Uber`s drivers, they will be enabled to control supply power.
Competitors (High):
Fierce competition for space (cities), and drivers and their cars.
Based on this analysis we can say that Uber is in a very competitive industry, where
prices and profit will be kept relatively low in the future. But, since is an immature
industry so far, there is a huge potential for growth that this company can take
advantage of.
Uber did its first entry to China in 2013 under the name of Youbu. This country
offers interesting business opportunities within the taxi market, and specifically for
new ventures as the app based companies like Uber. Chinese taxi & limousine industry
still have several pains that are not completely solved by local companies, such as:
expensive rates in large cities, distressing experiences during busy hours (traffic
jams), cab drivers refuse to transport a passenger if the distance between the two
points of the ride is short, the car conditions and quality service are inconsistent, etc.
The number of taxis was growing every year in this country (see Exhibit 2) alongside
with a rapid growth in online-to-offline commerce (see Exhibit 3), which offered a
By June 2015, Uber had covered 11 major Chinese mainland cities and reported to
have one million rides per day, fact that is comparable to all rides in Uber markets
Uber first entry was in Shanghai trough the UberBlack implementation as a premium
chauffeur service, but it did not have a great reception from passengers, given its high
response, Uber announced a dramatic price reduction in Shangai (50% off) in order to
October 2014, which led to an extraordinary growth. This initiative existed only in
China and it was a non-profit ride sharing program that was to believe stimulated by
this program was a part of a promotion and marketing plan of Uber in order to engage
Local
Deals
In order to get a closer relation with its costumers and gain visibility in the Chinese
market, Uber linked its service to Alipay, China`s most popular payment solution. In
December 2014, Uber partnered Baidu Inc., a Chinese giant web, for mapping support.
These strategic commercial associations were seen as real intentions of Uber to build
good relationships with local government, leveraging support from the regulation
point of view.
Cultural Distance:
transactional act, which is the service that Uber offers. But since Uber is only a
China and US economic trade relationship has been developed over the years
Geographic Distance
Since Uber is an app, geographical distance it has been reduced with the use of
this technology, and because the business model of this company doesnt own
cars or other physical assets, there is no need to export this kind of goods.
Economic Distance
China had a GDP per capita of $15,184 (PPP in 2015)10, and this index has been
growing over the years. This fact is reducing distance in order to implement
From this analysis we can conclude that the expansion plan of Uber within the Chinese
market is a viable strategy given the conditions offered by this country to the claims of
the company. China offers great growth opportunities in niche applications for the
transport of people, despite the current scenario where Uber is distant third player
with a 8,4% of market share, following to Yidao with 10,9% in a second place and Didi
Kuaidi with 78,3% in first place as the largest Chinese online chauffeur player (See
Exhibit 4)
What`s
Next?
gain market share to its competitors such as Didi Kuadi and Yidao. Some of them are:
In order gain confidence from the government, Uber should partner with local
agreements.
This can result in adding more services or products to the actual mix. For
example, it can add compact city cars in large cities and motorcycles in rural
areas with cheap fares, or can be extended to another dimension like delivery
attention and loyalty. Through this strategy Uber also can gain public support
and reduce the public negative concerns of possible future problems with
regulators. This last topic is one of the main reasons why Uber is having
gain visibility within customers that are causing reduction in profit margins in
the short term. To solve this issue, they need to find a well-balanced strategy
that allows them on the one hand to gain market share and awareness from
EXHIBIT
3:
ONLINE/MOBILE
MARKET
IN
CHINA,
20102013,
AND
ESTIMATES
FOR
20142017
EXHIBIT
5:
UBER`S
TROUBLE
SPOT
Source:
http://mashable.com/2014/12/17/uber-map/#4jbWnMHwLGqu
ENDNOTES
1
Uber
official
site,
Our
Cities
-
Uber
https://www.uber.com/cities
2
Uber
seen
reaching
$10.8
billion
in
bookings
in
2015:
fundraising
presentation
http://www.reuters.com/article/us-uber-tech-fundraising-idUSKCN0QQ0G320150821
3
Uber
Charged
4
Times
Its
Usual
Rate
During
Sydney
Hostage
Siege,
Time
Inc.
http://time.com/3633304/uber-sydney-hostage-surge-pricing/
4
Uber
cab
service
banned
in
Delhi,
accused
sent
to
3-day
police
custody
http://indianexpress.com/article/cities/delhi/uber-cab-driver-a-repeat-offender-
jailed-earlier-in-a-rape-case/
5
Xiaoke Xu, Xin Wang and Neil Bendle. UBER: MANAGING A RIDE IN CHINA Case
http://www.techinvestingdaily.com/articles/waiting-on-the-uber-ipo/463
7
UBER
TECHNOLOGIES,
INC.
Patent
Owner
http://www.patentbuddy.com/Company/Profile/UBER-TECHNOLOGIES-
INC./1957650
8
Uber Is Logging 1 Million Daily Rides in China as Many as the Rest of the World,
Combined
http://qz.com/426561/uber-is-logging-1-million-daily-rides-in-china-as-many-as-the-rest-of-
the-world-combined/
9
Behind the Price Cut, Sohu News,
http://auto.sohu.com/20150324/n410251796.shtml
10 Economy of China
https://en.wikipedia.org/wiki/Economy_of_China