Strategic Management Report: Uber's Failed China Market Entry Strategy

This report analyzes Uber's strategic management approach to entering the Chinese market, highlighting the strategies employed, such as creating a separate legal entity (Uber China) and utilizing the Hambrick & Fredrickson Strategy Model. Despite initial efforts, Uber faced significant challenges, including intense competition from local companies like Didi Chuxing, political scrutiny, and financial losses. The report recommends that Uber should have focused on partnering with local authorities and taxi drivers, understanding local market preferences, and adapting payment methods to suit Chinese consumers. Ultimately, Uber's failure underscores the importance of thorough market research, cultural sensitivity, and strategic partnerships when expanding into international markets, particularly in a complex environment like China. Desklib offers a wealth of resources, including similar case studies and solved assignments, to aid students in their academic pursuits.

Running Head: Strategic Management
Uber
Strategic Management

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Executive Summary
Strategic Question
My Boss has entrusted me with the responsibility of understanding the dynamics of the Chinese
market and create a way for smooth execution of Uber Business Model in China. The scope of the
report here is to work on understanding the strategy Uber can use to enter into the China market.
Uber is a US MNC, which has been doing extremely well in the home country, Europe, India,
Singapore and other markets. However, China, which is the biggest market, owing to the highest
world population and absolutely different dynamics, this makes market study extremely critical for
the entry. China has strong cultural values and they prefer to boast the domestic companies in lieu
for international companies. The onus is here on Uber to understand the dynamics of China market
and come up with a formidable strategy to not hurt the sentiments of the Chinese and ensure
business sustainability of its business model. The company has to find a way to click with the Chinese
local authorities and the local taxi unions and benefit from their understanding of the China market.
Uber forayed into the China market in the early 2014 with the launch of luxury car services in
Shenzhen, Shanghai & Guangzhou. Uber’s strategy to enter the Chinese market was by creating a
separate legal entity by the name of Uber China to give maximum attention to the world’s most
populous country. Uber’s expansion strategy was to think local to expand global; however the same
was not applied in the Chinese market. According to the Fredrickson & Hambrick strategy model the
company was very much clear with its Arenas, Differentiator, Staging & Pacing, Vehicles and
economic logic, however the company failed to implement the strategy it lay down to create success
ripple in the Chinese waters. Uber faced a lot of competition from the local taxi hailing services of
China; certain companies like Didi CHuxing and Kuaidi were smart enough to tie up with the local
authorities and capturing a larger market share in comparison to Uber. Uber faced a lot of financial
and political challenges and was bearing a loss worth 1 Billion dollar to keep its business running in
China. Even though company offered many subsidies to the drivers and the consumers, it was still
not enough to penetrate the price and culture sensitive Chinese market. Another major challenge
which the company faced was its inability to partner with the local taxi service providers, which
made them angry and created further troubles for the US Company. It has been advised that in order
to succeed in a market like China, it is extremely important to partner with local authorities to
support them in their business, also one cannot compete in the China market on the basis of Price.
Understanding the market dynamics thus becomes fairly important. Another advice to Uber is to
understand the payment preference of the Chinese people and their sentiments when building trust
with the drivers.

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Table of Content
Uber Strategy........................................................................................................................................3
Hambrick & Fredrickson Strategy Model...............................................................................................4
Arenas...............................................................................................................................................4
Differentiators...................................................................................................................................4
Vehicles.............................................................................................................................................5
Staging and Pacing.............................................................................................................................5
Economic Logic..................................................................................................................................5
Challenges.............................................................................................................................................6
Recommendation..................................................................................................................................6
References.............................................................................................................................................7

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Uber Strategy
Uber was found in the year 2009 by Garrett Camp and Travis Kalanick and it soon became one of the
finest and the fastest start-ups of the Silicon Valley. The county is offering its services in more than
60 countries and over 650 cities across the globe. Uber maintained consistency in its expansion
model and went with the strategy of “Think local to expand global”, the strategy implies that the
company will understand the local culture and then evaluate its business strategy. The model has
been working really well for the company as it has maintained business sustainability with its
business model.
China with a population of 137 crore is the largest country by population, it is one of the largest
economies of the world which has great industries and business driving the momentum of the
country. China for Uber was a good market to choose, with the largest population and handful of
competitors, Uber wanted to create a difference in the Chinese market by providing highly efficient
services. Hambrick and Fredrickson strategy model will further help in analysing the strategy of Uber
with respect to the Chinese market.

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Hambrick & Fredrickson Strategy Model
The model has been widely used by organizations to ensure that all the strategies to move forward
are clearly listed. The model is divided into 5 pieces which completes the diamond.
Arenas
As the name suggest, the understanding of Arenas is to determine which market the company is
going to compete for the market share. In the case of Uber it is China, its major competitors in China
are Didi Kuaidi and Didi CHuxing. Uber’s model is internet based; it offers its services in China
through its mobile application (Grant, 2016)
Differentiators
These are the key differentiators which the organizations use in order to compete in the market.
Majority of the differentiators are based on quality and price, and the company has to consider the

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best possible option to find its differentiation strategy. China is a price sensitive market and Uber
wanted the people to perceive them as a low cost taxi hailing quality service provider. The company
eventually launched all of its services in the Chinese market to put up a great show in front of its
competitors. Uber launched People service to cut down the price of the taxi services, and after
conducting a background check allowed the people to use their car of taxi services. Uber was the
first one to launch car pool services in China and also offered multiple subsidies in a bid to attract
more and more customers and drivers (Wirtz & Tang, 2016).
Vehicles
After answering two most important questions related to choosing the market to compete and the
differentiation strategy to compete in a highly competitive market. The next question which follows
is how the company will develop its product and services in the market; it can choose from
partnership model, tying up with the local service providers and use their expertise to drive the
business. Uber wanted to play alone; it launched Uber China as a separate entity to stay away from
legal bodies of China. However, the company’s strategy of not involving the local players did not go
well with the Chinese population (Grosse, 2011).
Staging and Pacing
Business planning is the first and foremost thing every business undergoes to determine the path to
move forward in the future. The company has to identify where it has to go from the present
situation to future, thus staging and pacing comes into the picture. Working from one logical step
and moving to the other step is the aim of the business. Many businesses in the past have failed due
to their inability to determine their future strategy or implement it. Uber’s strategy was to go
forward with penetration pricing and hook people to its application. The company spend millions of
Yuan in the market to create great market awareness. The company’s plan was to capture at least
half of the Chinese market and become the leader in the taxi hailing service. The company had even
thought of diversification in its business by launching Uber Eats in the Chinese market (Hambrick &
Lovelace, 2018).
Economic Logic
The underlying purpose behind any business is to earn revenue and take the organization into
profitability. All the strategies used in the business are designed to secure the future of the company
by ensuring sustainability in its business model. Uber is no different; it wanted to earn money from

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the highest populated country in the world. Less competition in the Chinese market was an add on
to the success of its business model .Company was spending a lot of money in subsidies and
marketing campaigns to pull the customers towards the company. However, the company was losing
1 Billion dollars in this process every year in the Chinese market (Gao & Zhang, 2016).
Challenges
Big competition from the local companies- Uber was launched with great fanfare in the Chinese
market and the company was sure of its success in the largest market of the world. However, it did
not work as the leadership at Uber thought the way it would. The local companies started forming a
cartel to give tough competition to China, and the population of China in order to boast the Chinese
economy went ahead with local taxi services in comparison to Uber (Nie, 2017).
Political Scrutiny- Uber was under a lot of political scrutiny because of its business model, the
government had asked Uber to get servers to store data in China, because of its creation of a
separate legal entity in China, “Uber China”. Hence, the challenges were not only limited to finance,
but also to the political necessities (Mozur & Issac, 2016)
Recommendation
Tie up with local authorities/ Taxi Drivers- Uber did not think it through when it decided to take
individual car owners on board, it completely forgot about the taxi drivers who were driving taxis in
China since a long time. This did not go down well with the Chinese drivers and they started creating
troubles for the US Company. Hence, in order to perform well in international markets, one has to
tie up with the local authorities and involve them in pushing the envelope of services (Abkowitz &
Carew, 2016)
Understand the local market/ Payment preferences and trust profiles- To many it seemed that Uber
forayed in the Chinese market with less market research; the company should have never competed
on Price in a country like China. Moreover, Chinese people prefer to pay in Cash over card. To top it,
people feel comfortable with the taxi drivers than individuals driving cars. Keeping all this point in
mind, Understanding the local market and doing a situational analysis is one of the fundamental
things to do before entering into a new market.

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References
Abkowitz, A. and Carew, R (2016). Uber Sells China Operations to Didi Chuxing. The Wall Street
Journal, 1.
Gao, S. and Zhang, X (2016), September. Understanding business models in the sharing economy in
China: a case study. In Conference on e-Business, e-Services and e-Society(pp. 661-672). Springer,
Cham.
Grant, R.M (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Grosse, C.U (2011). Global managers’ perceptions of cultural competence. Business Horizons, 54(4),
pp.307-314.
Hambrick, D.C. and Lovelace, J.B. (2018). The Role of Executive Symbolism in Advancing New
Strategic Themes in Organizations: A Social Influence Perspective. Academy of Management
Review, 43(1), pp.110-131.
Mozur, P. and Isaac, M (2016). Uber to Sell to Rival Didi Chuxing and Create New Businesses in
China. New York Times, 1.
Nie, Y.M (2017). How can the taxi industry survive the tide of ridesourcing? Evidence from Shenzhen,
China. Transportation Research Part C: Emerging Technologies, 79, pp.242-256.
Wirtz, J. and Tang, C (2016). Uber: Competing as market leader in the US versus being a distant
second in China. SERVICES MARKETING: People Technology Strategy, pp.626-632.