HBS Case Discussion

Uber in China: Driving in the Gray Zone

06/28/2020 Merged MMZG611 1

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Discussion Points
1. Why did Uber decide to enter the Chinese market?
2. What are the challenges that Uber faced globally?
3. What are the challenges that Uber faced in China?
4. What strategies has Uber employed to overcome the market-
specific challenges in China?
5. What lessons can Uber teach other foreign companies?

06/28/2020 Merged MMZG611 2

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Learning Outcome

• To understand challenges of doing business in foreign

companies;
• To understand doing business in China;
• To understand dynamics of local and non-local companies

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Uber
• Founded in 2009 , with rapid subsequent
global expansion.
• It was one of the first ride-hailing service
provider.
• It started disrupting what is a highly
regulated industry in many countries.
• It is facing legal hurdles in many of the
consumer markets for varied reasons.
• Despite its challenges it has been valued
around $60 billion by investors.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Why China?
• 800-million person urban transportation market.
• Strong customer base of 900 million smart phone
users.
• Even before Uber’s expansion in China there were
already 18 million taxi app users.
• Inadequate transportation options for a growing
urban population has led to high customer
demand.
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Uber: US V/S Chinese Market
• Similarities:
– Inadequate transportation options (Positive)
– Strong customer base of smartphone users (Positive)
– Entrenched taxi industry with heavy lobbying power (Negative)
• Differences:
– DDKD, a hugely strong local competitor (Negative)
– Lack of credit card use meant that Uber needed to integrate a new payment system
(Negative)
– Government has unusually strong regulatory capacity (Negative)
– Government control of internet necessitated change of the core Uber product (Negative)
– Huge number of large urban areas (Positive)
– Partnership with Baidu Maps allowed it to connect with one of the three most powerful
players in internet-technology sector in China (Positive)
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Challenges in China
• Strong government regulatory capacity.
– Dearth of laws addressing services like Uber and an opaque
lawmaking process.
• Lack of credit card users.
– No credit rating system makes credit card issuance risky and
difficult.
• Initial mapping system was problematic as Google Maps is
banned in China.
– Uber partnered with Baidu Maps and integrated their systems with
it.
• Fraud: Large amount of subsidies are offered to drivers in
order to attract them to the Uber platform, drivers have
come up with very creative ways to defraud Uber.
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Challenges in China cont.
• A hugely strong local competitor in Didi-Kuaidi (DDKD).
– Didi Dache, backed by Chinese Internet giant Tencent
Holdings Limited and Kuaidi Dache, backed by Alibaba
Group started out as two separate taxi-hailing services
that later merged in 2015.
– Didi-Kuaidi has a huge market share (around 80%).
– Offers diversified services including bus services as well.
– DDKD received first special license from Shanghai Govt.
to legalize their operations in municipality;
– Didi-Kuaidi has started expanding into Uber markets also.
Partnered with Lyft in US, invested in GrabTaxi (an Uber
competitor in Southeast Asia) and Ola (Uber’s main
competition in India). BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Strategies that Uber employing in China
• Uber set up a new corporate entity, Shanghai Wubo, registered in Shanghai
Trade Free Zone.
• Set-up its first non-U.S.-based data center in Wuhan and attempted to localize
not just the product but the operations as well by working with sub-national
or even sub-provincial governments.
• Partnered with local players, such as Guangzhou Automobile Group and HNA.
• It continues to invest money even though it is making losses believing that
Uber is in China for the long haul.
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
What lessons can Uber teach to other
companies?

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

 Please note-Case discussion is solely for understanding and
applying theoretical frameworks for class learning; this can not
be used as a source of endorsement, sources of primary data,
and illustration of effective or ineffective management

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BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956