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The Race for China’s Ride-hailing Market Case Solution & Answer

The Race for China’s Ride-hailing Market Case Solution

Executive Summary

UBER is the US based platform that provides vehicle services to its customers. UBER has connections in more than nine hundred areas throughout the world. It has more than 110 million users in the world. It is a very important and useful platform that serves as a cost-saving method to its users, because high-level algorithms are used in it, which connects the users (passengers) with the car owners who have empty seats in their vehicle and who are going both in the same direction. (WIKIPEDIA). Didi is a Chinese platform that provides vehicles (cab) services,which has 550 million active users and has 10 million drivers. Didi provides app-based vehicle services. This case discusses the issues that are being faced by the Uber after the arrival of a new business (Didi) in the market. This case discusses the competition between UBER and Didi.In the first part of the case; the traditional methods of taxi drivers and all the issues that are associated with it, are discussed. And in the second part, the case discusses the entry of Didi in the Chinese market and the challenges that UBER is facing in the Chinese market.(WIKIPEDIA).

Industry Analysis

UBER has two million rides per day and the amount of its net debts is 2.75 billion dollars.The transportation services charge 10 dollars per ride, and some businesses are charging 12 dollars plus for a ride. Whereas; Didi has ten million rides per day and has the net debt of 3 billion dollars. Both the companies are using unique techniques for increasing their customers and drivers, well-designed models are used by both the companies, both have digital payment methods, the cash payment is not allowed because only digital channels are introduced in the app. (ALPERT, 2020).

Competitor Analysis OR Competitive Advantage

Didi uses extensive techniques for increasing its customers.It has forty-five million active users per month, with an inclusion of 3.1 million users who use both UBER and Didi. Except for it, UBER has a total of 22.2 million active users per month. So, the total number of users is 67.2 million. And, both the businesses are finding new ways for increasing the size of their market (Table 3). Didi has a very large market in comparison to UBER. The users of both are distributed in three-classes, named: Tier 1, Tier 2, and Tier 3. It has been observed that Didi has covered a very large area in Tier 3,but in Tier 1 and in Tier 2; UBER has covered a large part and Didi has a lower area in these two tiers. In July 2016; UBER had 33% vehicle users whereas Didi had 43% users in Tier 3. In Tier 1 and 2; UBER has more users than Didi; with 25% and 42% users in tier 1 and 2, respectively; whereas Didi has 21% users in tier 1 and 36% users in tier 2.

UBER platform requires service fee and it provides services on a daily basis, has a premium algorithm, flexible pricing and stable cash pool, which in a combination, are playing key roles in generating higher revenue for UBER, and UBER uses a ‘less UBER black’ cost structure. Didi also requires a platform service fee, it also invests in advertising and has a dynamic pricing structure, which in combination, boosts the Didi’s revenue strategies.

Protecting /Sustainable Advantage

UBER is an online to offline business (O2O).Both the businesses (UBER and Didi) are growing well, because both have a huge number of customers in the market. Both are adopting new technical methods in their businesses for their growth and for competing against each other. UBER rides are very affordable, provide an ease to the customer in booking the rides because UBER provides a user-friendly platform. It is a very smart service provider that connects the passengers to the car owners by tracing their location.  Moreover, Didi also provides the same services in the market. So, both are trying to find new ways for increasing their market size, considering which Didi should decide to collaborate with UBER. In that way, both businesses would achieve their goal and the revenue or profit for both the businesses will increase.

Corporate Strategy or Test of Diversification

In early 2016, Didi had three times higher active users as compared to UBER. But in the mid of the year; the gap between the active users of both the companies changed to almost twice. In order to compete with each other, both the businesses have done many efforts to find a way regarding how they can attract users towards them more efficiently. Both the companies have invested a large sum of money for the satisfaction of their customers. Both have given an increased value to their drivers and passengers, and both tend to resolve the issues that occur with customers and drivers. So due to this, huge growth is observed in the level of businesses, in February (BLYSTONE, 2019). According to the analysis of BDA China; both the businesses have paid 5 Yuan per ride, which splits between passenger and the driver………………….

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