#117 Uber’s global uber-problems
In a recent article, Fortune magazine questions Uber’s approach to global markets. Apparently, Uber has recently announced that it is loosing more than $ 1 billion in China annually, which is not a small sum to loose even for a unicorn valued more than $60 billion. One could easily attribute the losses to the fact that Uber is still engaged in a battle over market share with local competitor Didi Kuaidi. However, as the Fortune article correctly points out, local competition may just be one factor. There are also regulatory hurdles, friction with taxi drivers and unions, and challenges with consumer adoption – in China, and in other markets from “Rio to Rome“, as the Voice of America recently remarked. Similar troubles are reported in a recent online article by TechCrunch, which reports of Uber’s trouble with “aggression, legislation and government opposition” in Colombia. On the one hand, Uber has been remarkably sensitive to local conditions. For instance, they added motorbike service in India and auto-rickshaw serve in Pakistan, which is a smart way to localize its service offering. On the other hand, it seems as if Uber has often ignored the basics of international business that every student worldwide learns from standard textbooks. These basics include the necessity of a sound analysis of the external environment in foreign target markets. There is an abundance of simple analytical tools such as the PEST framework, the CAGE model or Porter’s Five Forces that can assist in these matters. Such analyses would probably have revealed to Uber that next to economic conditions (such as local competition) there are also political-administrative factors such as the regulatory environment, or socio-cultural factors (such as the importance of networks) that would pose serious questions for their market entry strategies. When it comes to regulation, rather than its aggressive John Wayne-style approach of shooting first and asking later, asking for permission first may have been better in some countries. For the same countries, a longer-term approach of building relationships first before executing on a strategy might also have been advisable. Then again, Uber is successful in many markets, and ignoring local conditions for the sake of a more or less standardized model may have been part of a deliberate strategy. There is, however, also the option that Uber is still a young company that will learn and get better overtime. Sometimes, learning from mistakes is the best way to learn.
March 17, 2016 @ 3:07 pm
From my “Innovation Manger and Business Developer view” I nearly always advocate new business ideas and business models. After having done some research on Ubers way how they enter new markets and how to implement their business model, I’m a bit skeptical. Especially UberPop seems to be heavily criticized due to a never ending list of legal disputes. Nevertheless, really highly fascinating to immerse myself into the interesting story and background information of Uber.
I fully agree that the usage of an analytic tool like the PEST framework, the CAGE model or Porter’s Five Forces could have assisted some situation, where Uber had gone into problems in different market-entry situations. What came to my mind is that it might be inter-cultural issues within Uber which cause this little bit confusing internationalization-approach. Confusing in that sense that on the one hand they obviously try to empathy with local conditions but on the other hand it seems that they simply ignore basic homework which should be done before entering new markets, especially international markets. Maybe different responsibilities within the company cause that varying picture. Apparently especially legal aspects are those which are often more or less ignored and solved via the John Wayne-style.
Despite their amazing expansion history for me there remains a bitter aftertaste concerning all protests, criticisms and legal issues Uber is confronted with.
March 19, 2016 @ 11:33 am
In principle, I agree with the assertions Salomon (2016) makes about the prevalent situation at Uber. The California-based company, which turned from a small startup into a multinational online transportation network in just about seven years, is currently facing strong headwinds due to nascent competition in all of their markets. In addition to the battle over market share on several fronts, the firm is still trying to figure out how to attract new customers, a challenge every newcomer is very familiar with. Furthermore, Uber has to deal with more serious issues such as lawsuits and bans in various countries due to disputes with local taxi companies and governments and starting difficulties in new, unknown markets with unfamiliar cultures (e.g. China, India).
Defining Uber’s strategy as a “John Wayne-style approach of shooting first and asking later” is actually quite fitting. However, this approach is typical for startups from California, which strive to enter the market first and attempt to gain a competitive advantage as a first mover. As with so many things in life, being a first mover works out in some cases, while it fails in others. In case of Uber, as Salomon (2016) acknowledges, this tactic helped the young firm to achieve unprecedented growth in product and geographic scope.
Uber was founded in 2010 in San Francisco in response to the city’s taxi problem. What started out as a ride sharing model to offer an alternative to busy taxi providers soon turned into a fast growing network of drivers that was supported by a clever smartphone app. The fact that Uber did not need to comply with regulations for conventional taxi companies helped the firm to grow extensively and spread across cities in the US. Today, Uber can be seen as the epitome of a disruptive technology (Ingham, 2014). The decision to go global was only logical. In 2011, Paris was the first market abroad that the firm attempted to conquer. Since then, Uber has pursued an aggressive launch strategy across the globe. In 2014, operations were launched in a new city every two days. While the firm’s intention to be everywhere lead to success in certain regions, it failed in others (Milian, 2014).
In my opinion, Uber, despite its very impressive success story so far, is still in its identification stage. There certainly is an abundance of simple analytical tools that enable a firm to study potential foreign target markets. However, just like a student, Uber still has an awful lot to learn. Their first mover strategy through which they attempt to be present in as many places as possible is deeply rooted within the firm’s culture. At the moment, they are taking a lot of risk and are learning the hard way. However, as it is stated in the post above, sometimes learning from mistakes is the best way to learn. The next months will show if Uber can handle the issues at hand and is willing and able to adapt and develop further. The potential to do so is certainly there.
References:
Ingham, E. (2014, December 5). Start-ups Take Note: Uber Made It Big, But Did They Get It Right? Forbes. Retrieved March 19, 2016, from http://www.forbes.com/sites/edmundingham/2014/12/05/start-ups-take-note-uber-made-it-big-but-did-they-get-it-right/#7604ec627e4d
Milian, M. (2014, November 20). Uber’s International ‘Launch Playbook’ Includes Some Tough Lessons. Bloomberg. Retrieved March 19, 2016, from http://www.bloomberg.com/news/articles/2014-11-20/ubers-international-launch-playbook-includes-some-tough-lessons
Salomon, R. (2016, March 7). The Real Reason Uber Is Losing In China. Fortune. Retrieved March 19, 2016, from http://fortune.com/2016/03/07/uber-china-2/
March 19, 2016 @ 9:10 pm
From my point of view there’s no doubt in the fact that even from the international business perspective Uber is focusing step by step on a pro-active market segmentation. Uber´s conscious choice is to “find the markets” and therefore the fast expanding company recognized an ongoing problem in each big city in regard to booking a taxi. Additionally, Uber brought a revolution through its technological solution and innovation of a mobile app. According to the industry-level (meso) and the firm-level (micro) of pro-active target market segmentation Uber did a great job in the past (especially in America) and their international business model where business reach out to serve customers directly at their location, accompanied by a minimum waiting time and where prices are lesser than the normal taxi fares is on the one hand side an outstanding value proposition for the customers and on the other side a revolution as taxi company. But from the perspective of the country-level (macro) such as e.g. using analytical tools like the PESTEL/Step framework it must be considered that Uber goes the risky mentioned John Wayne-style way and ignores at the very first beginning by entering new markets, especially the political and legal frameworks of various countries such as e.g. implementation of laws, tariff and taxes, partners are employers, and many more. Furthermore, in my opinion Uber deals with the coming political differences and they prefer asking for forgiveness instead of permission, but for me it seems that this is a conscious part of their business model strategy – one reason could be that they know that their business idea can be easily imitated and nothing will prevent competition from presenting the same product. Therefore, Uber wants to expand their business model as fast as possible and it´s part of their strategy to approach to global markets because they succeeded with this strategy in the past and naively assumed or overestimated that their market approach could be translated seamlessly to other countries. Nevertheless, they have to overthink a true principle of management that one size fits nobody – maybe their well-documented troubles in China and the huge losses will change Uber´s international business strategy for further market entries when they additionally implement a country level-readiness which includes the right business strategy for a different economic, political, and cultural environment.
March 21, 2016 @ 1:40 pm
After doing a bit of research about the history of Uber, I completely agree with what Matthias says above – I guess part of the reason why they caused so much uphieval when they expanded abroad, was because they started off in California, which was going really really well. I kind of suspect, that in their strategy (if there was one at all) globalization was not considered at all. There were just a bunch of guys who developed a software which solved San Francisco’s taxi problem. So I see 2 main factors; their company was not ready to expand easily outside the US and secondly; their product was not ready to be taken outside. They started as a software, but soon encountered problems with the taxi industry as it was taking off quicker than they expected. Their unpreparedness for the Uber-Hype was also shown that they have had not any insurances or other services for their then contractors (now officially employees).
With China, they hoped to transfer the hype to another continent; which kind of did not work out. In my opinion – in addition to the flaws mentioned above – was that they did not analyze the Chinese taxi market, country and culture at all.
But overall; I really like the concept of Uber – there are a lot of stories where people finally find some sort of sense in their lives again through Uber and are able to finance their dreams. I think, this is the most honourable thing to do – just the strategy and product needed a tiny bit of adaptation.
March 23, 2016 @ 2:29 pm
The story of how Uber has evolved from a small start-up company in into one of the leading transportation services in the world, worth close to $62.5 billion USD is indeed quite impressive. Today, Uber provides over a million rides every day for people in 400 cities in 65 countries.
Many argue that it was their “just do it!” strategy, which has led the company to this great success – and I completely agree. As mentioned by my colleagues, this corporate mindset provided them with a distinct competitive advantage. However, this strategy also involves certain risks – especially concerning their global expansion plans.
A lot has already been said about the weaknesses of their approach to international markets and I fully agree to all those statements. In addition to that, I would like to look at the case from a slightly different view – the design perspective.
Just recently, Uber was the subject of intense debate among my colleagues. I work as a graphic designer in the media industry, so naturally I keep a very close eye on current industry trends. When we heard the news that Uber has launched a new visual identity in February, the excitement was great! Well, excitement is probably not the appropriate word since not all reactions were positive.
Uber´s localized design strategy
In short, the company has updated its logo. New rider- and partner-app icons reflect the individuality of Uber’s local markets. Each of 65 launch countries received a toolbox of new brand assets that include tailored colors and patterns, representing the countries in which the company operates. According to Uber´s brand guidelines: “These colors and patterns are authentic expressions of the real world’s diversity, and they afford flexibility in our communications.” As stated by qordoba (2016), this intensely local design is a direct result of Uber’s intensely local expansion strategy. With their new look, Uber hopes to develop a more flexible brand that can grow with the company as it develops new products and attracts new customers.
It remains to be seen if this new localized design strategy will have the desired effect in all regions and countries – it does of course depend on how well the various designs are received by customers. Well to be honest, I´m very skeptical due to the following reasons.
I firmly believe that when it comes to logos and their colors, the simpler, the better is a winning formula in most cases. As correctly stated by qordoba (2016), the majority of the top 50 global brands only use 1 or 2 colors that have the most universally positive associations in their logos. Why? Because color increases brand recognition by 80%.
So what does that mean for Uber´s new multicolor logo? Here, I completely agree to the statement that without a single color or two that customers can associate with Uber globally, the company could face difficulties expanding brand recognition based solely on the “bit element” in the logo. Even for existing users, it will be a while before we re-associate Uber with the multicultural, grounded palette of the redesign from the elitist black-and-steel palette of today.
I would like to emphasize that I am not against localized design strategies but I question and doubt the degree of variation as it might decrease the level of brand awareness and recognition. From my point of view, such a highly diversified logo design clearly works for really well established brands such as Google; who´s logo is constantly changing and presenting new design alternatives on a daily basis. As far as I can see, it only works because people all over the world are already familiar with the brand and their original logo. And from my point of view, Uber is still far from being globally recognized in such a dimension.
I close with the words of Mr. Uber himself, Travis Kalanik “…I don’t know what’s going to happen,” he tells Jessi Hempel from Wired (2016), five days before launch of the new design. It can take time for people to come around to something so new, he says, “but I feel that it’s going to be good.”
References:
Hempel, J. (2016). The inside story of Uber´s radical rebranding. Wired. Retrieved March 23, 2016, from http://www.wired.com/2016/02/the-inside-story-behind-ubers-colorful-redesign/
Qordoba (2016). Localizing a brand: Uber breaks new ground to grow, again. The Global Access Blog. Retrieved March 23, 2016, from https://www.qordoba.com/blog/2016/02/localizing-a-brand-uber-breaks-new-ground-to-grow-again/
March 27, 2016 @ 3:31 pm
When I read Ubers story here, I instantly had to think about Brills quote in the movie „The Enemy of the State“ when he says: „You’re either very smart… or incredibly stupid“.
It could be that Uber put some actual thought in its international strategy. Assuming that Ubers business is not really rocket science, it can be expected that they wanted to be quick about it because a big amount of copycats could shows up on the market. They also could have thought that their best shot is to attack, because what they are actually doing is revolutionizing the way people use transportation and their only leverage is the increasing customer acceptance, which would eventually break governmental barriers really fast.
However, I see four plot holes in their strategy:
1.) The fact that Uber enters a certain country could lead to an increase of unemployed taxi drivers, and this is something that no government can accept, ate least not if they want to win the next election (1).
2.) The change of laws that are necessary to implement every product of Uber are in some countries so comprehensive that it would take forever to make a large step forward.
3.) When an American company enters the domestic market and tries to jeopardize the income of the government in some countries, the political barriers are not measureable and unpredictable.
4.) People are creatures of habit, accepting the UberPop produc for instance means changing cultural characteristics and practices. Stepping into the car of a stranger who’s driving capabilities and personal qualification is not regularly checked by the government is a big psychological barrier (2)(3).
I see companies such as Uber and Apple acting as pioneers in terms of governmental issues. Both companies face to many to old laws interfering with their business approach. Every barrier they are able to break will enable others to follow with less effort. The whole market as well as the customers should be happy that there is somebody ready to change deadlocked situations. The existing market members are of course not amused, which is logical, nobody wants to change a system that is running well for them.
Ubers approach is maybe foolish but in the end, it could lead to a more efficient society.
(1) Reuters, R. (2015, September 03). Uber increases unemployment and needs regulation, says Brazil’s president. Retrieved March 27, 2016, from http://www.theguardian.com/technology/2015/sep/03/uber-increases-unemployment-and-needs-regulation-says-brazils-president
(2) Laura M. Holson, To Delete or Not to Delete: That’s the Uber Question (NY Times Nov 21, 2014), online at http://www.nytimes.com/2014/11/23/fashion/uber-delete-emil-michael-scand… (visited Feb 26, 2015).
(3) Bob Egelko, Obama Administration Takes Sides in Disability Suit against Uber (SFGate.com Dec 23, 2014), at http://www.sfgate.com/bayarea/article/Obama-administration-takes-sides-i… (visited Feb 26, 2015).
(4) Erickson, K. (2016, February 8). Uber pushes for change in state taxi law. Retrieved March 27, 2016, from http://www.stltoday.com/news/local/govt-and-politics/uber-pushes-for-change-in-state-taxi-law/article_b9f5b07d-a596-5563-a476-94b11ba6770d.html
March 27, 2016 @ 9:29 pm
Interesting to read (and also fully true) is that Uber is successful in many markets with a more or less standardized model. But, apparently Uber has a completely different strategy in Asia. About five month ago the Singapore-based strategic finance manager of Uber, Vidit Agrawal, for Asian Pacific region gave an Interview in which he didn’t get tired to emphasize that localization is a key ingredient of Uber’s Asia Pacific (APAC) marketing strategy as it battles to stay ahead of regional competition [1].
The Asian Pacific region has so many different countries, so many different cultures, each country is different, laws are different, the media is different, the people are different and the requirements are different. Thus, Uber customize its product and then customize the marketing to the needs of each city! That means localization strategy for a single country is not deep enough, so Uber started to localize its product for several cities. For example in the China market Uber has a presence in 18 cities and Vidit Agrawal said in an Interview: “It’s not just marketing to China. It’s marketing to a city. You break it down to a city.”
In the last five years Uber went through an exponential growth into 63 countries, across more than 300 cities, (around 20 percent of them in APAC) [1]. But in the beginning in the Asian Pacific region, Uber had the problem that they didn’t make a good job in branding their product. Now Uber has a more open strategy to engage media.
Uber says that localization begins with hiring local people. “We understand that India is a market which requires its own people, you need to think like an Indian. And it’s the same for China. Being local is very important and as a company we understand and respect that”, Vidit Agrawal, Uber’s Singapore-based strategic finance manager for APAC said.
Uber also localized its payment services, for example in China Uber has partnered with Alibaba’s Alipay system – the preferred payment method of Chinese consumers [1].
In a first view their localization strategy sounds really great and as Gerhard mentioned in its initial post Uber has been remarkably sensitive to local conditions. But to be sensitive to local conditions do not guarantee a success in foreign markets. But on the other hand Uber simply ignore legal issues in some countries and in my opinion force its business more on a trial and error base. There are now so many other issues and problems (see PESTEL framework) Uber has to deal because they were not prepared very well when they entered new markets (legal issues, societal issues, political issues). It seems to me Uber expanded faster as they could run and now the company faces a lot of problems and so they do more troubleshooting while developing a solid and sustainable business model. As Mariella mentioned in her post and I am the same opinion but in a more general form that I also question and doubt the degree of variation Uber has in its company and as it might decrease the level of brand awareness and recognition and finally this can lead to really big problems. I think the founder and the small group of Uber developer were not prepared for the huge and rapid success of their App (therefore they maybe hadn’t any time for researches how to enter the global market) and when they expanded globally they forgot so many points which now drop back very hard. The company story looks like riding a wild horse: You never know if you can control it or if you fly away! The future will show the answer.
Reference:
Loras, S., (2015, October 28) How Uber thinks locally to expand globally. Clickz.com. Retrieved March 26, 2016, from https://www.clickz.com/clickz/conference/2432344/how-uber-thinks-locally-to-expand-globally
March 29, 2016 @ 8:51 pm
Uber is expanding very fast. Uber is operating in 58 countries & 290 cities [1]. In recent times, Uber launched in around 30 cities in the last 30 days.
As Uber goes global, some of their managers are well aware of the fact that all markets are different. [2]
On the one hand, Uber is trying different things in order to adapt to local markets.
On the other Hand, Uber is facing bans in India, Spain, Belgium, the Netherlands, Thailand and more. [3]
So what goes wrong?
I think Uber Managers do not select the countries depending on their ability to go there, but rather just focus on the business opportunity. Furthermore, the market entry is not done carefully and well prepared.
The risks are not really considered and therefore no measures to omit them are prepared.
As a consequence Uber faces critical resistance from legislation, local taxi drivers and politics.
This ongoing troubles shadow all efforts to increase the brand awareness.
This is particularly dangerous, because the brand is the only real discrimination of Uber to apps from local competitors.
I would not bet on Uber that it exists in 10 years from now.
[1]
Uber´s Global Reach & Statistics, Retrieved March 29, 2016, from
http://uberexpansion.com/uber-global-statistics/
[2]
Loras, S., (2015, October 28) How Uber thinks locally to expand globally. Clickz.com. Retrieved March 29, 2016, from https://www.clickz.com/clickz/conference/2432344/how-uber-thinks-locally-to-expand-globally
[3]
Uber’s Global Expansion In Five Seconds, Retrieved March 29, 2016, from
http://www.forbes.com/sites/ellenhuet/2014/12/11/ubers-global-expansion/#6601cc987a7a
July 4, 2016 @ 4:14 am
According to the case and the information of Uber, I think Uber did well in corporate readiness. Although Uber was founded in 2009, it began expending into foreign markets in 2012 and tried many countries such as France, Canada, England, China, and so on. Thus, Uber had much international experience and various resources. Uber tended to be very active and had good strategies such as the strategy in India.
However, Uber’s global problems were the product readiness and the target market selection. I agree Uber could apply PEST framework so that it could know whether the Uber’s product suit for target market. Take the Chinese market as an example, if Uber applied the PEST framework, it could found out that there were political, economic, and societal risks in Chinese market. Firstly, as I knew, Uber’s business model was in the Chinese legal gray area. The business model was not illegal but Chinese industrial and commercial bureau did not allow private vehicles to be used for commercial purposes. This fact could be a political problem of Uber’s product and price. Secondly, in the case, the competition from Didi and Kuaidi could be the economic issue of Uber’s price. Thirdly, Uber’s product also had societal problem in China. Based on my personal experience, only my generation would like to use Uber, but my parent’s generation did not likely to use it. Certainly, Chinese market was attractive because of potential purchasing power.
In short, I deem Uber should focus on the product readiness and the target market selection.
July 6, 2016 @ 12:53 am
Unlike many technology companies, Uber is not zero marginal cost effect. Although the company’s business model has eliminated many traditional taxi business related costs, such as vehicles, vehicle maintenance, licenses, insurance, gasoline, and the driver’s salary, benefits. However marginal cost is still there.
Here is Uber’s disclosure of financial data, we found that, in the second season of 2014, they “cost of sales” and “operation and support” a combined $49 million, and the corresponding income is $58 million. Traditional accountant will take these as a variable cost, and this extra meter for the fixed costs of $115 million marketing costs, research and development and the general overhead is separated. Although this file doesn’t show ranks to the cost in detail, but it’s easy to speculate that a large part of these costs are directly related to their service product development. For example, in each new city starts, it must create a local team to deal with specific political, regulatory and consumer preferences. Uber is also likely to spend a lot of money for new drivers, including marketing, incentives and bonuses, screening and background checks. Finally, Uber provide insurance for the driver, this is also marginal cost.
March 4, 2017 @ 8:59 am
To me the strength of Uber being, act fast and ask for permission later, is also their biggest weakness. To illustrate that weakness I want to use the example of Uber entering France. Uber is accused in France of bypassing national labour protection standards and shunning collective negotiation with drivers who work on freelance terms (Williams, 2016). That created huge trouble for Uber in France and eventually lead to the payment of an 800.000 € fine to the France government do to the offering of illegal transportation services and their CEO Pierre-Dimitri Gore-Coty and Thibaud Simphal had to pay 50.000 €. That outcome was not even the worst-case scenario, because the France prosecution wanted to enforce a ban of Uber from the market. This unfavorable case for Uber shows that it is not always wise to act fast and ask later. The conviction of Uber in France created a huge echo in the European media landscape and the possible ban of Uber in France would have been a political disaster for Uber. In addition, other highly regulated European countries regarding labour law followed the example of France and placed additional tax rules and regulations on Uber. The case of Uber shows that a sound analysis of the marked that a company is about to enter can help to avoid many problems and that the strategy of act firs and ask later exposes a company to a lot of possible threat. In order to avoid such business threatening cases in de future Uber would be well advised to perform a quick analysis of new markets before they enter them. A good tool to use would be the mentioned CAGE Distance Framework. In the case of Uber they should focus especially on the “ADMINISTRATIVE” field using the CAGE analysis. Some research in this area before entering a new market would help Uber to identify markets with rigid labor law and strong unions. For those markets, they can adjust their strategy to meet local law and avoid fines and possible market bans. Additionally respecting local law will improve the image of Uber in the public.
Link:
Williams, R. (16. 12 2016). https://www.ft.com. Von https://www.ft.com: https://www.ft.com/content/5bb6139a-436f-11e6-9b66-0712b3873ae1 abgerufen
April 1, 2017 @ 8:09 am
Whenever I see a big and successful company making such huge losses in a specific country or region, I assume that they didn’t take into account the “rules” of international business. As you described there are several models like CAGE, STAP or porters five forces but also PRISM. In the case of Uber, we can agree on the fact that they wouldn’t forget about these rules and the respective ananlysis models. – A company as big as Uber would not forget about performing the basic steps when they are going to invest a huge amount of money in order to enter one of the most important markets on this globe, right!?
So…. did they just don’t know about it? Could it be that Uber didn’t know which steps you have to go thruogh if you want to “copy” your business model to a new culture? To be honest, I think that is a possibility. As you mentioned Uber is one of these few unicorns, whose history is a classic success story. This said we have to consider the rapid development and growth the company went through. One of the most challenging, if not the most challenging tasks in for such companies is organizational development. It is really tough for an organization to keep up with this kind of speed of business development. Therefore it might be the case that the right processes or even the right people in order to prepare the market entry in China just weren’t in place yet.
However, I think it would be arrogant to think that Uber forgot about the basics of business ad well as it would be to think they didn’t know. Therefore, I truly believe they didn’t follow these rules on purpose. – Ok, but why?
One aspect we have to keep in mind is that people and companies tend to overestimate themselves and their successful business concepts. We’ve seen that with Walmart in Germany and Uber in China might be a similar case. Which means they knew about the rules of international business in general but they kind of thought they wouldn’t apply for them as they are one of the named unicorns.
Another aspect and I think we have to assume this one as the most realistic one is, that neglecting the basic principles was part of their strategy. As described already shooting first, being quick and look at the consequences afterwards seems to be a core concept of Ubers strategy. If a company goes for such a radical strategy, they have to consider failure as a part of their business. As Uber showed in Pakistan and India, they did adapt their business model to some degree in some countries, so I assume they are perfectly aware of the business principles, but they always wanted to stick to being fast and aggressive. By doing so they most probably expected to fail in some areas, but to be successful in most regions. Their global success proves them right.
Nevertheless I’m eager to see who Uber is going to deal with the situation in China. Just because of the enormous value of this market Uber has to have an interest in making their concept work there. In order to do so they definitely need to adapt it.
May 28, 2017 @ 8:15 am
Uber was founded in San Francisco, California. I would say that Uber is very necessary for me when I came to the United States. Many people suggested me to take the Uber from the airport to my host family in the US. It was my first time that Uber rode me to home and I felt its very convenient and cheaper than I took a local taxi.
From my point of view, I absolutely agree that Uber company has applied analytical tools such as the PEST framework, the CAGE model or Porter’s Five Forces. Those tools can assist the company matters and analyze themselves to become more profitable. According to John Wayne-style(n.d.), he approaches shooting first and asking later, asking for permission first may have been better in some countries. Uber’s globalization strategies tried to reach to target as soon as possible to make their firm known in many places. Additionally, Uber used the best strategy which brings a new technology and innovation of mobile application that people can easily to request a ride everywhere they want.
On the other hand, Uber is still a young company that must learn and do more research about that area to serve the best service to customers. For instance, culture, location, weather, market, etc. Some countries especially in Thailand, there are many problems that impact the way to approach or start Uber’s international business in the local area because Uber was obstructed and threaten by local taxi.
Therefore, I would recommend Uber to do more research before they are going to expand their business to international countries and might hire a professional or consulting firm to encourage their business. Moreover, to be unique business is a very crucial point to reach the right target and better than other competitors.
Reference:
ZUORA, T. (2016). Uber’s $2.4 billion strategy and it’s not self-driving cars. Retrieved May 28, 2017, from https://venturebeat.com/2016/09/06/ubers-2-4b-strategy-and-its-not-self-driving-cars/.
July 6, 2017 @ 7:14 pm
I personally like uber. It’s uncomplicated and in cities like Paris a much more efficient and economic way to get from A to B. The problem that causes their insane loss in China and in many other regions is caused by the fact that they have an huge estimated worth and that there are so many unbelievable strong investors behind uber that they do not need to be careful whether they are financially successfullor not. The John Wayne appearance in some regions might also be caused by that. They are overly convinced that they reinvented the wheel and have the financial power in the background that they just don’t do their homework and appear as if everyone else has to adopt to how they consider the game to be played.
July 29, 2017 @ 1:17 am
Five Forces and PESTEL analysis are worth to be consider for Uber when developing their global business strategies. Apparently, it is not easy for global companies to penetrate into new international markets and gain market share due to the existence of local competitors who already well established, well known, have local market knowledge and dominate local market. For example, Uber has to compete with Didi Kuaidi in China. 5. Therefore, conducting Five Forces analysis would help Uber know it competitive position compared to other competitors in the same industry. The model includes the analysis of industry rivalry, potential of new entrants, suppliers, buyers, and substitutes services. The company could use the result from 5 Forces to formulate the suitable global competitive strategies to penetrate and compete with other competitors. Moreover, other environment such as political, economic, social, technology, legal and regulation are needed to be carefully considers when expanding to international markets. Uber currently faces with many problems such as regulatory problems, local competitors (Taxi and Unions), and consumer problems. However, good news is that it seems like Uber know when to adapt or standardize it services to suite local consumer preference. For example, it offers motorbike service in India and auto-rickshaw serve in Pakistan. Maybe partnering with local related companies would help Uber gain markets knowledges and become global leader position in the industry.
July 31, 2017 @ 5:46 am
The starting of Uber was a revolutionary idea that helped to ease transport and show how much technology is helpful in the modern world. Ten years ago, it was impossible to imagine that one day it would be possible to call a cab from the mobile phone and keep records of your travel. It showed how business ideas could bring changes to an industry and its model is copied in some countries that are now giving the company competition. The fact that it loses more than one billion dollars in China annually shows that there is a problem in the business model, especially when it comes to entering new markets. The company is likely to be losing more money in other countries too.
Many companies are going international because they seek to expand and have a larger market share and make more revenue too. If we use the PEST model to analyze the behavior of Uber into China, we can easily get some results. For example, in the Political part, Uber did not estimate the particularity of the Chinese region. In the case of taxi market competition, the Chinese government chose to support the taxi industry. So that Uber’s business becomes more and more difficult in China. Although China is a democratic country, Uber does not seem to be entirely fair treatment. Uber underestimated the importance of political factors.
Secondly, in the Social aspect, Uber did not take into account the habits of Chinese, ignoring the cultural differences and social openness. Chinese people have a strong sense of foreign brands. They want to try new products, however, accompanied by anxiety. As we know, it is important to have an excellent analysis of the intended market to understand the hurdles the business is likely to encounter. It is important to learn about the culture of the people in the country and the business culture too to know the ease of doing business. If Uber did a market analysis on China before its entry, it would have known that there are market hurdles and it would have sought the best way to overcome them or to find a market in a different country. It would have known about the difficulties in regulations for international businesses in China.
The good thing is that it is still a new company and is growing. Therefore, it still has the potential to reach other markets and exploit different methods of transport. However, the experience in China should act as a lesson to the company on the importance of understanding the basics of international business. It should also be an example to other companies that seek to enter international markets without enough information on their target markets.
August 2, 2017 @ 11:41 pm
Based on Uber’s history, we can see that Uber has developed from a small star-up company to be one of the world’s leading transportation services. Uber’s executives have focused on rapid expansion in as many countries as possible. Growth has been so rapid that Uber was entering one new city per day at the height of its growth. However, Uber has had difficulty adapting to cultural, political, and economic differences in Asia because they enter new cities and countries before working out the legal ramifications, resulting in widespread legal troubles. Although, Uber’s executives have attempted to adapt by offering rickshaw and motorbike rides in some Asian countries, company executives still made a major mistake when assuming that the U.S. model would like just as well in Europe and Asia. In my opinion, the service of Uber is extremely sensitive to local conditions. Uber just have developed a software to solve the problem of American taxis, but it does not guarantee a success in foreign markets.
I really agree with that PEST framework and CAGE model are good analytical tools to analyze the internationalization issues of Uber. Take the Chinese market of Uber as an example, Taxi companies are lobbying against Uber, and some cities even have banned Uber’s service in China, but I found that despite previous difficulties, China is still an attractive market for Uber. Uber already has the technology needed to operate in China, as they have a fully functional ride-sharing app. Uber’s services do not affect the national or cultural identity of Chinese consumers, and making them more appealing. The main concern is that many Chinese consumers are unwilling to use a credit card to pay for the service. Also, the company offers a service that is highly regulated in China. So, for my point of view, Uber should focus on recruiting Chinese drivers with vehicles that meet the new standards, and provide a more convenient payment method for Chinese consumers.
To sum up, despite Uber is a successful company in the United States, it doesn’t mean that they can make success in anywhere by using a common strategy. They should analyze the culture, political, economic, social and technological before trying to enter a new city or country.
References
Downes, L. (2016). Uber’s defeat reveals China’s strength and weakness in global innovation. Retrieved from: https://www.nytimes.com/2017/06/21/technology/uber-ceo- travis-kalanick.html
Salamon, R. (2016). The real reason Uber is losing in China. Retrieved from: http://fortune.com/2016/03/07/uber-china-2/
August 6, 2017 @ 9:40 pm
According to Uber’s case, crossing an international border has a lot of obstacles such as political structure, economic, legal system, and regulatory to fully understand and overcome. The analytical tools such as the PEST framework, the CAGE model or Porter’s Five Forces would be helpful for Uber to analyze the market and adapt their product to fit into local tastes. Even though they might not do some powerful analytical tools, they still localized their core product and service to market needs. The company accepted the option of local payment through Alibaba’s Alipay system which is preferred used for Chinese consumers. Moreover, Uber also did a strategic partnership with Baidu to improve their map service due to the inaccurate of Google maps in China. Plus, they acted locally by hiring local management.
However, Uber lacked the first-mover advantage in ride-sharing business in the Chinese market. They competed with the competitive competitor that is Didi Kuaidi, has already gained a huge presence in China, and be partner with Alibaba and Tencent. Moreover, Tencent Company blocked Uber from WeChat application which allows the users to hail a taxi. This made Uber experience difficulties because they lost the best channel of marketing communication. Plus, with the legislation to provide private car services for Chinese passenger services, it is forbidden to offer services at a below cost. This made Uber loss the strength to compete with Didi Kuaidi.
In my view, it is still undeniable that what works in one market may not work in other market. Each market has different rules, patterns, and cultures. It requires a lot of time and effort to do more research before entering the market. Companies need to make sure that all the relevant information about the target markets is available on their hands. Even though Uber learned from other US companies that failed in China, it was still not easy to crack the market. There would be some potential issues like political issue that impacted severely to Uber or threats that might occur in the future without company’s expectations. It is necessary to analyze themselves, the market, be aware about the issues, or even have a backup plan. If Uber did the PEST framework and product readiness, they would be able to prepare, change and adapt their strategic strategies to fit more local needs or find a better solution to deal with problems.
January 7, 2022 @ 3:30 am
I think this post makes a lot of good points about how Uber may have been ill-prepared to take on certain foreign markets. However, I also remember a time when people did not think Uber’s business model would ever work. I like to think that if Uber can gain popularity in New York that it can gain popularity almost anywhere. This being said different countries have different cultures and different regulations that may be more resistant than that of New York. Regardless, if Uber plans to be successful in the middle east or China, for example, I agree that they are going to have to do more research. They need to determine if going into this market is necessary, who their target market is, what the culture is like, and how regulation or politics is going to affect them. As the article mentions, learning from mistakes is a good thing, and as successful as they have been, Uber is young. Regardless, losing $1 billion is going to be hard to explain to share holders. More research in the global markets they plan to enter will help them perform better down the line.
January 18, 2022 @ 9:47 am
When ridesharing companies like Uber and Lyft slowly started gaining popularity in the early 2010s, at the time, I did not believe they would be able to gain or even potentially surpass the popularity and market share that taxi/cab companies had gained up to that point. Looking back now, I believed I may have leaned towards this mentality primarily due to the various reasons listed within the article as these types of companies have had to overcome various regulatory, political-administrative, legislative, economic, and social-cultural hurdles, but they would have had to also face major challenges with taxi drivers, unions, local competition, and general consumer adoption as taxis and cabs had become a major part of a country’s culture and traditional norms, such as the United States, specifically New York. However, after seeing how ridesharing companies have become adopted around the world, I can now see how ridesharing companies could penetrate the ridesharing industry and differentiate themselves as they recognized traditional taxi companies and car services did not meet or provide specific needs that today’s consumers would need; according to Deborah Brody Marketing Communications, these needs include requesting rides from anywhere and at anytime, riding with style and convenience, and hassle-free and ease-of-use payment methods.
While Uber has been heavily adopted within the United States, it may still face hurdles when entering foreign markets not only because of the various factors I listed above, but also because it still may not conduct the necessary research to gain a better understanding of the markets it wishes to enter. For example, rather than utilizing basic tools to analyze a foreign market like the PESTEL framework and Porter’s Five Forces, Uber decided to somewhat blindly enter into foreign markets, but then tweak and adjust its business model and services in order to adapt to the country’s culture and meet the needs of these specific types of consumers. This type of strategy, referred to as the John Wayne approach where one shoots first and asks questions later in the article, may work in certain and very lucky situations for local startup companies who may wish to quickly enter their market and adopt as they go. However, for companies who wish to go international, I believe it would better to first conduct analysis frameworks in order to better understand the market they wish to enter as it would not only be better to be safe than sorry, but it would be better to enter the market knowing exactly they will have to face and what they can immediately do to make their presence known, such as creating unique products and services catered towards that country’s consumers’ needs like Uber’s incorporation of the motorbike service in India as well as implementing necessary rules and regulations all Uber employees within certain countries will have to adhere to in order to avoid legal disputes. Ultimately, while Uber has seen much success in both its domestic market as well as various foreign markets without the usage of analytical tools by focusing on developing themselves as quickly as possible in order to avoid as much competition and imitation as possible, conducting these types of assessments would have allowed Uber to gain a better understanding of what countries they should enter, a country’s culture, and various factors as mentioned in the previous paragraph, such as China, as Uber could have not only determined the kinds of products and services that would differentiate itself from strong, local competition within these foreign markets, but could have also potentially avoided the many legal disputes and criticisms it still continues to face in the many countries it has entered and failed in thus far.
Source:
Brody, Deborah. Deborah Brody Marketing Communications, https://deborahbrody.com/2013/07/why-uber-is-successful/.
January 27, 2022 @ 5:30 am
Uber, A well-known brand in America is not having too much success in other countries primarily because they lack to follow ” simple international business models that MBA studies learn in their international business classes. What many Americans love, Paying for an upscale service to get from one place to another at a relatively cheap coast, which many other countries are not supporting. This is an interesting concept that taxi drivers and cab services are more successful than Uber in other countries. They even went to the extent of Adding a “motorbike service in India and auto-rickshaw serve in Pakistan, which is a smart way to localize its service offering” However paying more for an uber rather than paying for a taxi service has not been successful in other countries. Uber needs to find why these countries they are entering need their services.
January 27, 2022 @ 5:32 am
Uber, A well-known brand in America is not having too much success in other countries primarily because they lack to follow ” simple international business models that MBA studies learn in their international business classes. What many Americans love, Paying for an upscale service to get from one place to another at a relatively cheap coast, which many other countries are not supporting. This is an interesting concept that taxi drivers and cab services are more successful than Uber in other countries. They even went to the extent of Adding a “motorbike service in India and auto-rickshaw serve in Pakistan, which is a smart way to localize its service offering” However paying more for an uber rather than paying for a taxi service has not been successful in other countries. Uber needs to find why these countries they are entering need their services.
January 28, 2022 @ 7:28 am
As Uber attempted to march into global domination with its rapid expansion in connecting drivers and riders via its ride-hailing model it has done a lot in a short amount of time. In 11 short years since connecting drivers and riders – Uber is now in over 80 countries and 10,000 cities across the globe. Ubers path to global expansion has not been an easy one as very early on it faced backlash from government regulations, the entrenched taxi industry and cultural differences in every new country it considered into entering.
Uber may not have done thorough research and analysis on external foreign markets, such as PEST, CAGE of Porter’s Five Forces to get insight on local culture and infrastructure prior to launching its app and business model, but it seems that its biggest challenge has been complying with local standard laws and understanding its competition. Uber in the US has been relatively successful and is considered popular as an alternative from getting from point A to point B as most US cities are designed for cars and have underinvested public transportation and the other alternative being taxis is heavily supply regulated. In cites outside of the US you have public transportation that is better funded as people are discouraged to drive as there and there are other alternatives such as taxi services that can be hailed via an app, metro, buses, mini buses, colectivos, bicycles, motorbikes and auto rickshaw. Ubers global expansion model was to use the same US model and technology into all of its global markets and it quickly learner that was not going to work in foreign markets such as China, where there was already stiff competition from Didi a company supported by the Chinese government and two of the largest telecommunications companies in China Alibaba and Tencet. Also, Didi was developed with the Chinese consumer in mind and who had also been first to market launching 2 years prior to Uber. Uber in China struggled both financially paying large amounts of subsidies that would result in Uber losing $2 billion dollars in China. On top of pouring an insane amount of money into China, Uber on occasion would be blocked from the China equivalent to Google – WeChat, which made the censorship difficult for Uber to get connected and being hidden from the Chinese people. Also, Uber in China felt victim to fraud in which “scammers created entire circuit boards with rows of SIM card slots, each simulating a fake phone” (Lydia, 2021). All the while Uber was offering free promotional rides to new riders but still paying the driver a full fare. The fraud was so massive that “over 30,000 fake rides were taken every day in the summer of 2015, just in China” (Lydia, 2021). Uber lost a lot, but it also learned a lot about working in global market during its time in China that is why when it looked into expanding into Russia it decided to merge with Russia’s search engine giant Yandex also referred to as the Google of Russia who just so happen to own a taxi business. So rather than fighting over market share as they did in China Uber decided that its best approach was a merger. But not all was lost for Uber in China as in 2016 – 2 short years after launching in China it decided to sell its business to Didi, its fierce competitor for 20% stakes in the company which ended up a profitable deal for Uber.
Reference:
Lydia, L. (2021). Why Uber failed in China?. Ask Everything About China-Tellmechina.com. Retrieved January 28, 2022, from https://www.tellmechina.com/why-uber-failed-in-china-update.html
February 3, 2022 @ 4:39 am
Any American company that want to enter into the Chinese market, they struggle. When comparing the lifestyle habits and cultures, it is completely different. There are many obstacles and factors that need to be considered when expanding international including — a countries government regulations, economic status, politics, etc. Like the article touched on, for a company that is successful as Uber in America, they should have spent more time doing their analysis research to learn about the culture they are entering into because when going to the Chinese market specifically, it can be a make of break moment for your company. Even by partnering or acquiring one of their local companies, if you do not have an understanding of their culture and business environment, it will have a negative impact overall.
February 6, 2022 @ 12:25 am
Uber has gone to great lengths to make itself a better and more diverse company in the global market. It has not been an easy process for them though because they have not been able to customize their service enough to please the lifestyle of other customers in different markets. They have been a great success in the American market however they are one of those companies that Americans love but many other countries do not. People would rather take taxies in other countries than pay for a ludurgary ride. In my view, uber has done some great things by offering other services than rides from drivers in cars. They have made changes to adapt but these changes can come at great risk to both the driver and passengers in the ride. This can cause issues with local government regulations and even lead to legal issues internally
February 12, 2022 @ 8:14 am
I totally agree with what the article shows. Uber is a new unicorn and not ready to start the international markets. Uber has announced that it is losing more than $1 billion in China in 2015. Nowadays, Uber has left the Chinese market. It could not adapt the Chinese market. Local competitor, Didi Kuaidi, is the main reason resulting into failure. On the other hand, before Uber entered into the Chinese market, it did not understand the Chinese market and did not research for the Chinese market. It is easy to get success in American market, so it simply thought that it would be successful in China. However, when Uber entered the Chinese market, it was in a lot of trouble. First, there was a strong local competitor, Didi Kuaidi. Didi is a local company and operates the similar service, so Didi is more familiar with the Chinese customers and markets. China is the bureaucracy country. Didi has stronger and wider relationship with the Chinese government. Therefore, with increasing problems with hurdles, friction with taxi drivers and unions, it is easier for Didi to deal with the problems. The Chinese government is more willing to support Didi. Therefore, Uber has to leave the Chinese market.
February 13, 2022 @ 6:18 am
After reading the article, any business losing significant sums of money (1 billion) in a specific region or country means they did not due enough research and development when expanding their operations to that area. Although Uber is valued at 60 Billion, when expanding to China, Uber should have done more research in their competition, regulations and have a secure strategy plan on how to win market share over Didi. In my opinion, Uber should understand the services offered by Didi and how current riders pay, and how divers receive payment and offered a better solution to their services. In order to win additional marketshare, Uber should entice clients to ride with them by offering lower introduction rates and slowly increase as they gain popularity, be national sponsors for the Olympics and offer discounted rates for their patrons who want rides from events to events. There’s a lot of different tactics Uber could have taken when entering China, but the fact that they lost 1Billion is not a good look for the investors.