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Selected Case

published: 14 Nov 2016

  • Topic: Strategy
  • Industry: Ride-hailing market, taxi
  • Region: Asia

Abstract:
As a result of fast-developing mobile technology, companies must deal with increasing business complexity in a high-velocity environment. The Uber vs. Didi case illustrates a wide range of strategic issues that a company may face when creating a new business model, generating unprecedented value for customers, challenging traditional business and regulatory frameworks, and expanding into an emerging market to compete with local rivals. The case is about Uber’s competition with Didi, its local rival in China. The first part describes the traditional taxi industry, using the illustration of the US taxi medallion system. It explains Uber’s platform-based business model, value innovation, challenge to government regulation, and surge pricing model, as well as associated ethical issues. The second part describes the emergence of Didi in China and how it challenged Uber when it entered China’s ride-hailing market. Unlike its rapid expansion in the US and other countries, Uber had a bumpy ride in China. In June 2015, Didi was reported to have 80.2% of the market, outperforming Uber’s meagre 11.5%. With China’s internet giants joining the battle as strategic investors—Baidu (backing Uber), Alibaba and Tencent (both backing Didi), and from Silicon Valley—Apple (backing Didi), the race between Uber and Didi has far-reaching implications.

Pedagogical Objectives:
The case has proved to be well suited to a discussion of any or all of the following topics: 1. Competitive strategy basics (industry analysis, competitive analysis); 2. Value innovation (Blue Ocean Strategy, ERRC framework, strategy canvas); 3. Fundamentals of a platform business model (analysis of two-sided markets; how to jumpstart adoption) 4. Competition among platform businesses (analysis of strength of “network effects”, potential for “winner-takes-all”, and “platform envelopment” effects) 5. Entry into new international markets (entry mode, country choice and characteristics) 6. Competition with local rivals (replication of business models; standardization vs. localization; dealing with government and local constituencies)

Keywords:
Ride-Hailing Apps, Taxi Industry, Blue Ocean Strategy, Platform Strategy, Two-Sided Market, Global Strategy, Entry into New International Markets, Competition with Local Rivals, Value Innovation, China, Uber, Didi

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