Uber's challenging expansion in China

Uber's challenging expansion in China

Uber is a ride-sharing service headquartered in San Francisco, United States, which operates in multiple international cities. The company uses a smartphone application to arrange rides between riders and drivers. Customers use the app to request rides and track their reserved vehicle's location.

Uber's Asian expansion plan runs deep, the company finally announced its official entering in China on July 14, who has the largest smartphone market. It's transportation services has a big future in China, market for taxi services has never been bigger in Chinese cities.

Uber has a number of challenges to overcome in China. As a foreign company who wants to share this big market, it has to face their national powerful rivals such as Didi Taxi(backed by the Chinese e-commerce giant Aribaba) and Kuaidi( a taxi-hailing app, backed by Tencent Holdings) who had already a very large customer base and had transformed the Chinese taxi services industry. Uber will have a hard time gaining its appeal.

As a technology-driven foreign company but offers offline services, Uber's primary task is to to figure out whether it can offer its services in China. Uber is very popular in American and European markets, but building up a Chinese user base is very difficult.

Uber's expansion strategy is to establish a local team who helps to operate on the market, this strategy was to ensure their localisation of services. Although Uber provides a on line car booking service but the actual service is offered by their local teams from domestic car service companies. When Uber entered in China, it partnered with Chinese car rental companies to avoid legal risks. It also had a test run in Shanghai before the official entering, this test run allowed the company to test its success through trial and error. Later on, Uber expanded its services in Guangzhou, Shenzhen and Beijing.

Besides its localisation strategy, Uber also focuses on brand it-self as a lifestyle and offer a great car service. The company uses its foreign identity as a competitive advantage as well, offer its services to Chinese customers when they travel abroad. Even though internationalization is a competitive advantage for foreign companies but it hardly helps the company to succeed in China.

As Uber goes further in the Chinese market, more and more companies are setting their sights on this prize, taxi car-calling companies become hugely popular over the past two years. More intense market competitions come up. For example, Kuaidi announced it self a partnership with taxi car service companies to launch a new app called Kuaidi ONE which could be seen as an improved version of Kuaidi that uses luxury cars such as Audi A6 etc.

Both Didi and Kuaidi have acquired lots of users, and initiated rounds of price wars which heavily impacted the market . Compare to them, Uber has better users experiences but it charges higher fees.

In order to face the '' crazy cheap '' market, Uber has launched a less expensive service – Uber X. It offers a ride-sharing service allows private individuals to pick up passengers.

For now, Uber has done just fine, it has offered its services in six Chinese cities.

But when other company catches up with a positive outlook, a new round of the price war will be in progress. In order to have an ultimately sustainable business in China, offering reliable rides with the cheapest price is inevitable.

Peining L.