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Uber vs Didi The Race for Chinas Ride hailing Market Case Solution

Solution Id Length Case Author Case Publisher
2780 1511 Words (6 Pages) Guoli Chen, Kuangzhen Wu, Tony Tong, Xiaohua Su INSEAD : IN1306
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This case scenario is related to the case study of Uber versus Didi taxi service providers, also known as the race for China's ride-hailing market. It all began in the early 17th century when people used to hail taxis, and the horse-drawn hackney coach was the primary mode of transportation in London. However, the control was in the hands of a group. People wanted a situation in which a cab could be summoned with the click of a button on their phone. It was in 2009 that Uber Technologies developed an Uber app in San Francisco. Customers can just order a cab whenever and wherever they want to go. However, existing market players did pose tough competition to uber. In this transportation industry, the key players are Uber and Didi, service providers. Their primary roles are to provide dependable services to customers via their online platforms, with Uber operating in the United States and Didi operating in China and developed by Xiaoju Technologies.

Following questions are answered in this case study solution

  1. How attractive was the taxi industry before Uber and other ride-hailing players entered the market? (Hint: Use Porter's five force model to answer this question)

  2. What kind of business model innovation has Uber achieved? Does Uber's business strategy qualify as a blue ocean strategy?

  3. What is the competitive advantage of Uber? How transferable is Uber's competitive advantage to an emerging market such as China?

Case Analysis for Uber vs Didi The Race for Chinas Ride hailing Market Case Solution

1. How attractive were the taxi industry before Uber and other ride-hailing players entered the market? (Hint: Use Porter's five force model to answer this question)

The demand for riding hailing was much greater than the supply. The bargaining power for customers was less due to lesser ride-hailing options. There were some competitive rivals in the market. However, none of them were really dominating the market, which means that the barrier to entry for new market players was not high. Substitute products were present, but customers were moving towards the overall ride-hailing concept meaning the use of public transport and other options were not really considered by customers. There were numerous suppliers present for raw materials and other stuff, meaning there was no strong power from them. However, as the concept of this service was new, they were exercising some control. There has been a continuous increase in the number of Uber customers as a result of their high level of satisfaction with the consistent pick-up time as well as their degree of convenience. However, before the arrival of Uber, there had been a fall in the number of prices imposed on taxicab permits as well as medallions in most locations across the world. During this time, taxicabs were required to have a permit in order to avoid concerns connected to overinflating the already overcrowded driver market. This was a method of controlling the market as well as the number of taxis, which improved safety while maintaining a stable demand for drivers. This meant that even those involved in travel services, such as drivers, benefited from their efforts because no other parties from outside could take over their enterprises. The drivers of the independent class of medallions benefited from an extra income for their labor because they used to lease their cabs to some private drivers after they had halted operations. As a result, Taxicabs, in operation at the time, wielded considerable power in the sector, with considerable control over pricing.

However, with the introduction of new entrants, such as Uber taxis, the number of rides delivered by each taxicab decreased. This resulted in a decrease in the overall profitability of taxicab licenses. As a result of the current heightened competition, the influence of some taxicabs has diminished, and the majority of taxicab enterprises have gone out of business after losing consumers to Uber. Due to the danger of new entrants, many clientele, such as tourists, chose the shared option of ride-by cabs rather than the taxi cabs that were available at the time. This was owing to Uber's emphasis on efficiency. As a result, the average compensation for drivers in Los Angeles had dropped to about half of what it was before the operations were improved.

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