What did Make the Chinese Market Attractive to Uber

The untapped potential of the Chinese market appeared ideal for a ride share company such as Uber. Not only was it the largest commuter market in the world, there was an underserved need of those commuters for better transportation back and forth from work. This need was not being satisfied by the current offerings of taxis, and a considerable number of commuters did not own their own vehicles. This meant that Chinese business people were already sharing their commute, comfortable with the sacrifices needed to schedule a ride, and were willing to pay to be transported to and from their place of work. The threat of buyer power was already low in this market because commuters had no choice but to pay to be transported. The market potential was significant for Uber; the number of prospective customers high. The data was also readily available on the specifics of the customers, with online sources available that provide detailed information on the Chinese commuter market demographics, geographic distribution, and psychographics. Also, the growth rate potential was moderate, with the opportunity for Uber to expand outside of business centers, into urban and rural areas of China as well. This growth could possibly expand into related geographic segments with large commuter populations, but few personal vehicles, such as India, Korea, South America, and Taiwan. All these factors play into a high market attractiveness.

Competitively, Uber would have a unique stance against substitute competitors for traveling: taxis and public transportation. Both taxis and public transportation have proven to be ineffective and inefficient, with taxis refusing to operate short distances or during rush hour. Bicycles are a moderate threat, though most middle-class business people do not want to ride a bicycle back and forth with their briefcase, and bicycles are limited by the distance that one person can pedal on them. Uber is also an established company that would have no problem supporting this new venture with management and financing. Furthermore, the infrastructure needed for ride sharing apps to be successful in China is already in place, with roads, personal vehicles, and cell phones already established and proliferated in most areas with commuters. Lastly, the threat of new entrants in the market is low due to the government restrictions placed on ride sharing apps. If Uber were to enter the market, it would have to be with governmental approval, which will restrict a significant quantity of competitors also entering. The only moderate threat would be supplier power since Uber depends on the few citizens that own personal vehicles to sign up as drivers for their company. There is always the threat that only a limited number of people would sign up and then the app would be unsuccessful. The other threat that Uber had was the incumbent ride sharing apps, which Uber probably foresaw as equal competitors, but not dominant in the market. This seemed like a minimal threat though when evaluating all the possible potential, so the future competitive position of Uber was strong?In the end, Uber China spent $2 billion on promotions and incentives for drivers and riders even though the company was only valued $8 billion?? Uber could not achieve a sustainable competitive advantage in China?

What positioning option could Uber China have pursued as a standalone company in China? Do you believe it could have succeeded on its own with your suggested positioning strategy?

Before Uber entered the market in China, there was an existing competitor that had been already establishing their brand for a year. Similar to Uber, with even more options available, Didi Dache created a name for itself and lead the ride-hailing market in China. This would be a tough environment for Uber to come into with a competitor that was not just successful already but had made important partnerships that enhanced their brand. In order to succeed, Uber would have had to have differentiated itself from Didi.

What kind of strategy should Uber have used when entering into the Chinese market? Uber saw an opportunity because of the need for ride-hailing but would need to be able to differentiate itself from the customer base that was already familiar with companies like Didi Dache and prove that they had competitive advantage. First, they would need to decide how they wanted to differentiate themselves, whether that be through employee differentiation, channel, image, or services. In this case, they may want to focus on services. Didi was using the WePay app, but was that the most used method of electronic pay in China or were others more popular? Uber could have survey users for what they believed to be most important to them in a hailing app and focused developments on areas where their competitors lagged. Second Uber could investigate partnering with other successful online businesses for a rewards program. Instead of receiving $10 off for a ride, maybe they received points that would build up to some of China's more popular restaurants for delivery services. If they did not have cars to travel in, this may be a way to engage in both ride hailing as well as partner with an already established brand.

Regardless of the choice Uber made when entering the market, I think they had a big challenge ahead of themselves with an already successful hailing company existing in the market. I don't believe they had a chance without investing a significant amount of budget into R&D into what may improve/differentiate their service.

Reference :

1. http://fortune.com/2016/03/07/uber-china-2/

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