How Didi Fought Uber in China and Won: Next, Taking on the World

How Didi Fought Uber in China and Won: Next, Taking on the World

Entrepreneur.com offers an excellent definition of competition in business, and it said that competition is a battle among firms that offer comparable goods or services and target the same customer to obtain and keep consumers, increase the firm income, and expand market share. This paper will talk about the competition case of Didi and Uber in China and how Didi beat the big and international company, Uber. Also, how it is preparing to do the same in the world.

In order to reveal the whole story, the following questions will be answered. First, why did Uber seek to grow into China, and what made that marketplace so enticing? Second, what kind of capabilities did Didi have that helped to defeat Uber? Third, considering that Didi and Uber -each company - have their business strategy, expanding method, leadership style, and business alliance, and with all these differences, both companies merge, so what are the advantages and disadvantages of that merger for both companies. Fourth, an examination of Uber’s leadership and culture will be conducted. That examination will contain the strength and weaknesses of the Uber management team and the company culture so that Didi can utilize and understand to make it more desirable to customers.

Uber expanding into China

China has immense business potential. Also, it is a market with all the pillars of business success, and Uber expanding into China was a must for the U.S.-based company for eight reasons. First, there is a need for a transportation solution in China since the cities are very crowded and polluted (Singh, Dwesar, & Kumar, 2020). Second, the number of citizens who use cars or own one is very low; for every 1000 people living in China, there are only 113 cars (Dai, 2016), that is showing the need and the demand for ridesharing business. Third, it was mentioned that China was growing to become the world’s biggest ridesharing provider with more than 20.81 billion rides used, which promotes China's position as a significant potential for such companies—not to mention that the business was estimated to be doubled by 2020. Fourth, there is very strong governmental support for the ridesharing business, which gave Uber more cause to enter the market. Sixth, Uber entered China in 2014, and it was already in 60 counties, has more than 40 million monthly users, works in more than 633 cities, and has a mighty brand name and awareness (Liu & Kim, 2018). That means that Uber has all the experience and the needed technology that open any door for it to go to Chian. Seventh, it was mentioned in the case that there is a need to grow Uber's business outside of its main cash generator -the U.S.- and expand internationally since the international marketplace is more encouraging to do so. There is a much higher demand for Uber business in the international market, and by 2025 the industry will be ten times bigger than the one in the U.S. only. Eighth, Chines consumers are inclined to experiment with new products or services and accept technology more than any other nation. That eases Uber's business since there is an option for the locals to try something they have never used before.

Didi’s capabilities helped to defeat Uber

???????????The competition between the two was not an easy one. It was very costly for both companies. Both companies lost billions of dollars in that batter. However, in the end, Didi won, although Uber was trying very hard to win. Didi has many advantages that gave it more leverage and power over Uber, such as government protection, a strong partnership, and the leadership and unique culture of the Chinese people. Additionally, Uber's strategy was not the best when it dealt with China.

When it comes to government protection, it is a struggle for almost all the foreign companies in China. According to Shan (2002), the economic system in China is a hybrid one, which means that some companies are private, some are public, and there are many companies in the mid of that. That means private privet companies receive very strong governmental support and subsidiaries. Didi was not the expiration of that (Liu & Kim, 2018).

???????????The kind of partners that Did has were not a small one. Goldman Sachs, Apple, Morgan Stanley, Alibaba, JPMorgan Chase, China Life Insurance, HSBC, and Citi are all big companies that got Didi’s back when it needed (Ciaccia, 2022; Russell, 2016). Also, these companies’ names add more legitimacy and trust to Didi's way of doing business. Since many of these companies are Western and do not want any ethical issues or business scandals, they give Didi's customers a brighter and better image.

The leadership and the culture of the Chinse people play an essential role in giving Didi a competitive edge. Leadership is equated with commitment and loyalty, and employees are not permitted to criticize senior management (Chen, Tsui, & Farh, 2002). How the Chinese culture works have a substantial impact on how management functions. Also, the Chinese cultures consider that western management, leadership, and business structures are too slack. These leadership disagreements were significant contributors to the early tensions between Didi and Uber. Didi's creative leadership always strived to improve, but Uber's leadership was just interested in winning.

Uber's strategy was not the best when it dealt with China. Uber made many mistakes in its expansion strategy in China, which made Didi win the battle. Uber uses a one-size-fits-all strategy and expands now and plans later. These strategies offer the same product or service for all customers without considering customization or planning of the product or service offering (Habas, 2020). Adding to that, it entered China independently. This strategy is challenging and not for all types of business because there are different customer targets and various locations to serve (Zenke & Braun, 2017; Goossens, Bian, & Hoshida, 2017), especially when entering independently with no substantial support from the local. Uber expanded its business very fast; it was mentioned in that case that in two years, the company expanded internationally, and two years after that, it expanded into much more countries. That shows that Uber did not study each market very well; even though this strategy might work in some countries like North America or Europe, it did not work in many countries like China. Also, Uber competes in price and cuts the prices a lot, making it operate at a loss, resulting in losing over one billion dollars in China. Uber indeed got a good market share, but it was not able to continue like this in the long run, and it created unrealistic demand, which let Didi obtain more advantages than Uber. These strategies are the opposite of Didi’s. Didi focused on the slow growth, not on the fast one

The advantages and disadvantages of that merger for both companies

???????????After Uber admitted defeat, Uber and Didi merged to minimize the losses. This merger gave both companies advantages and disadvantages. First, the advantage and disadvantages of Uber. The most significant advantage is that Uber was able to stop losing money in China. Uber did not need to provide incentives to drivers and customers. Now it can use that money to expand into a new market, as with Uber's aggressive expansion strategy. Now it has the chance to focus more on more prosperous countries (Hook, 2016), and it learned the lesson of not entering any big country independently. Therefore, making an alliance is a must to minimize the risk. Moreover, Uber became a stakeholder in Didi, which is a very profitable company. Even though this merge makes Uber China “only” worth more than 8 billion dollars (Manjoo, 2016). However, Uber must be careful not to disturb the leadership strategy of Didi since their way has proved to be effective in China. Also, according to the merger contract, Didi will invest one billion dollars in Uber globally. That will boost Uber's operation a lot. On the other hand, Uber has a disadvantage from this merger. Uber lost a very profitable market and handed it over to Didi. If Uber had planned its entrance carefully, it would be much more profitable without this merger. Also, Uber needs Didi to be profitable, so it needs to teach Didi some of its operational strategies, and there is a high chance that Didi would use this against Uber outside of China, and Mexico is a good example of that. Moreover, Uber would give up some technology secrets to Didi, which will be used later as well against Uber. Also, giving up China froze Uber and made it much more difficult for it to operate profitably in Southeast Asia like Thailand and Malaysia?since there is a very high Chines population there?(Dent, 2017)

???????????Didi as well has many advantages and disadvantages of this merger. First, Didi will get to learn from Uber its international experience since it had no experience at that time since it operated only in China. Moreover, with Uber exiting China, Didi became the biggest player (Kirby, 2016). That will make it much more difficult for any new company -locally or internationally- to compete with it. Also, Didi will have much more time and space to improve its service offerings in China and add more services. In addition to that, Didi gained international recognition. It was mentioned in the case that Didi was ranked 53 in the Fortun Magazine as companies that changed the world. Also, it was recognized in Forbes Asia and CNBC Disruptor list. None of that will happen if Didi imitates Uber's strategy, management, or leadership style. On the other hand, Didi's merger with Uber has disadvantages, such as it opened a legal issue in China that it never had before. China Ministry of Commerce opened an investigation regarding Didi's monopolistic authority. Also, Didi will indeed learn a lot from Uber's expansion strategy, but that will shift the focus of Didi from China, where other competitors will have a window to attack Didi in its home country. Additionally, Didi will struggle internationally since the Chines culture is unique; it is challenging to change Didi’s management leadership style according to each country it enters. Therefore, similar to Uber, it needs to study the market very well and have a local company help to learn and adapt to the local culture, values, and tradition. Last, since Didi merges with Uber, many international media will focus on the company. Therefore, its maneuver and agility might become much slower.

An examination of Uber’s leadership team and the company culture.

???????????In general, Uber is a very successful company; otherwise, it would not be in more than 60 countries around the globe (Liu & Kim, 2018). However, some strengths and weaknesses of Uber culture leadership team management contributed to success or slowed it down. Therefore, Didi can utilize the strength and avoid the weakness. One of the strengths of Uber -the Chines did not like it- is the fact that Uber's leadership is more relaxed. That gave Uber’s employees more freedom to be creative and develop new ideas that benefit the company. This type of leadership empowers the employees and gives them tremendous trust (Harmon, n.d.). Also, after the resignation of Travis Kalanick and the new CEO, Dara Khosrowshahi, took over, the company culture and leadership became more open to word the employees' needs; the company even hosted an event to make the employee choose the company's new principles and organizational culture (Dudovskiy, 2021). Therefore, Didi needs to be more relaxed, loosen its tough Chines leadership style and culture, and listen to the employees if needed. That is a must since Didi is becoming a global brand, and what works in China may not work somewhere.

Uber had leadership and cultural weaknesses that Didi could avoid to be more appealing to customers. Uber used to maintain a work culture that allowed bias and sexual harassment. According to Wong (2019) from The Guardian, all of that happened because Uber's business culture and its leadership focused outside of Uber’s walls and concentrated on an aggressive expansion and intense competition, which failed to see and focus on what was going on inside. Also, the company failed to prioritize compliance and has an absence of internal transparency, causing isolated teams that did not coordinate and share knowledge with each other. Legal battles and poor expansion plans have resulted from corrupt leadership and poisonous workplace culture. It was mentioned in the case that whatever was happening in other countries thousands of miles away from all affected Uber in China due to globalization. That resulted in customers leaving Uber for other companies since many customers believe that if a company does not respect its employee, it will not respect its customer. Therefore, avoiding these issues is a must for Didi, and it might capitalize on Uber's failure in any future marking campaign.

Conclusion

This paper reviewed the Didi and Uber rivalry case in China and how Didi defeated the large and multinational corporation, Uber. Also, how it plans to do the same in the rest of the globe. The following questions were answered in order to uncover the entire tale. First, why did Uber want to expand into China, and what made that market so appealing? Second, what qualities did Didi possess that enabled it to overcome Uber? Third, given that Didi and Uber each have their own business strategy, expansion technique, leadership style, and business alliance, and that both firms are merging, what are the benefits and drawbacks of that merger for both organizations? Fourth, an investigation into Uber's leadership and culture was carried out. That investigation revealed the strengths and weaknesses of the Uber management team and the business culture, which Didi can use and comprehend to make it more appealing to consumers.

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