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Uber in China

S I T I FAUZI YAH E R I KO T I M OTHY


I R E NA AUL I A R I ZKI FATAKHI
R E X Y DWI
Criteria
Product Market
Labor Market
Capital Market
Macro Context
Product Market - Weak
Improper strategy in identifying China’s market culture (not using google map,
unfamiliar with credit card) and existing competitor (which already well
established).
◦ “Didi Kuadi are native companies with a keen understanding of China customers. For Uber,
China is an unfamiliar market with cultures, customs and industry regulation that differ
from than US market to with Uber is accustomed. For Uber, breaking through the Chinese
market and rolling out its business model is not likely to go as smoothly as it did in ts
home country”
◦ “Didi Kuadi offer payment with cash and credit card (but Uber only credit card) and
promote their services on social platforms that Chineese customers are very familiar with
such as Wechat and Sina Weibo. The use of many western apps and social platforms (e.g.
Twitter, Whatsapp and Facebook) is forbidden in Chine, so Uber is not familiar brand to
Chineese customers”
◦ “Product localization: Alibaba wallet system and Baidu maps”
Labor Markets - Weak
Lack of Ethics Educations
◦ Drivers earned up to three times the amount that customers paid
for each trip. It triggered:
◦ As soon as Uber began offering subsidies, labor began exploiting loopholes in the
company’s software.
◦ 30-40% of all billed rides for Uber China were actually faked trips.

Labor regulations
◦ Drivers as independent contractors => no regulations in China =>
labor risk
Capital Markets - Weak
Venture Capital (VC) and investors exist, but the major players
(Alibaba and Tenzen) already signed a deal with competitors,
which leaves only Baidu to support Uber financing activities.
Uber should secure investment deal with those investors
beforehand (Alibaba and Tenzen)
◦ Or maybe Uber already approach them, but they see Didi and Kuadi
business more sustainable
◦ Or maybe Didi and Kuadi support more local instead of foreign
investment
Macro Context - Weak
Public Safety
◦ To mitigate personal safety concern, Uber performed what it claimed were stringent
background checks on all driver partners. But, there will still a number of high profile cases
about individuals with serious criminal records. And China is the grey area that you can’t
make everything legal to do.

Labor Regulation
◦ Treat the driver partners as independent contractors which is they can enjoy the flexibility of
the on-demand work model, many benefits. But, this treatment is not follow the rules, the
lawyer (Liss-Riordian) argued that illegal and unfair for Uber to classify its driver as contractor
but they control many aspect of their work.
Macro Context – Weak (Cont)
Legal Gray Ares
◦ Is it transportation company or Internet company? Uber did not own its own fleet of vehicles.
Opposition from entrenched, local player
◦ Licensed taxi in China complained that Uber promoted unfair competition by enable their user to evade
local tax and regulation. Offered low fares
◦ Law-enforcing vigilantes seeking to expose drivers operating private cars for profit.
National regulation
◦ Govern support, but they do not follow.
Subsidies and subversions
◦ Uber spent massively on subsidies to attract Chinese drivers and consumers.
◦ Fake trips with fake customers.

Bottom Line Judgment
Product Market - Weak
Labor Market - Weak
Capital Market - Weak
Macro Context - Weak
Qualifications
Uber will not sustainable, the cost to maintain its position
(loss of $1 bil) much bigger than the benefit received (11%
of market share)
◦ The major cause of this downfall: improper strategy in Product
Markets and Macro Context
Follow up actions:
In current situation, there are no way for Uber to improve its
condition on Product, Labor, and Macro Markets context. Which
leaves 2 options for Uber to survive (which relates to Product
Markets), either:
Uber join/have partnership with Didi-Kuaidi
Pull out from China’s market
End

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