International Challenges for Uber's Expansion

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12th Feb 2019 International Business Reference this

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Uber’s future depends on international growth, but currently they are experiencing international challenges within their non-U.S. markets. I will introduce their brief history, explain their current challenges, international expansion plans, their strategy plans, and a few insights on how they can achieve greater success in international markets. Predominantly, Uber has brutally underestimated the challenges of operating in countries that embody totally different economic, political, and cultural environments. Their definitive goal is to become one of the only international ride-hailing company, however they didn’t realize all the major setbacks they would come across internationally.

Quick Uber History

Uber headquarters is “located in San Francisco, California and operates in 632 other cities worldwide” (Uber Technologies Inc., 2017). In conjunction, “Uber has expanded to more than 80 countries since its June 2010 initial launch in San Francisco, California” (Hyder, 2014).  Uber was “founded March of 2009 by Travis Kalanick and Garrett Camp” (Uber Technologies Inc., 2017).  Uber Technologies, Inc. “provides e-commerce services for car hire and the company offers a website which develops applications that allow users to request a car for hire from any mobile device text message while serving customers worldwide” (Bloomberg, 2017). Moreover, the company was originally an idea that Travis Kalanick and Garrett Camp originated, while encountering some trouble attaining a cab. Their idea was to simply invent something that with the tap of a button you could get a cab/ride and not have to struggle like they did. Stated on the Uber website, “What started as an app to request premium black cars in a few metropolitan areas is now changing the logistical fabric of cities around the world. Whether it’s a ride, a sandwich, or a package, we use technology to give people what they want, when they want it” (Uber Technologies Inc., 2017). Uber not only provides rides to their customers, but they also provide men and women a way to earn money by letting them use their own vehicle to give their clienteles rides. Also, noted on the Uber website, “for the women and men who drive with Uber, our app represents a flexible new way to earn money. For cities, we help strengthen local economies, improve access to transportation as reliable as running water, everyone benefits” (Uber Technologies Inc., 2017).

Current Challenges

Uber was the first major ride-hailing company with mobile on-demand transportation. As competition started to intensify, Uber strategized on how to remain number one in this market area. They realized in recognition of the risk posed by these followers into the market, they needed to rapidly and aggressively grow both domestically and internationally. However, along the way “Uber’s expansion was met with both excitement and major blocks resulting from lawsuits, technological limitations, and government regulation” (Hyder, 2014).

Ubers expensive push into china ended abruptly in 2016, when its domestic rival Didi Chuxing announced it had acquired Uber China and more recently Uber merged with Yandex, marking its exit from another major international market, Russia. Governments, drivers, and passengers launched a seemingly endless stream of lawsuits and taxi firms organized protests in Europe and South America as they recognized their business were under threat. Ubers legal and ethical conduct was put under further scrutiny when their drivers argued that they were being exploited as part of the sharing economy.

Additionally, I will list some initial challenges Uber faced within these following countries. As mentioned in Recode article written by Johana Bhuiyan, “in Russia, it was a fierce opponent willing to play the subsidy game that drove the company out, while it was regulatory issues that has stymied it in Europe” (Bhuiyan, 2017). Also, in Denmark, where “Uber announced it was leaving in March, it was new regulations that required it to act more like a taxi company, requiring that drivers install things like meters in their cars. The company said it plans to revive its operation in Denmark when laws change” (Bhuiyan, 2017). Following in Spain, “the company had been previously banned in cities across the country, Uber has continued to face protests from taxi drivers in these cities” (Bhuiyan, 2017). France currently had legal disagreements with Uber regarding they should be treated as a taxi service hence controlled like one too which then charged Uber for being an illegal taxi service (Bhuiyan, 2017). In many more places like, Southeast Asia, Hong Kong, Taiwan, and Thailand they have all charged Uber penalties for operating on their land illegally. In regard to India and China, “they are similar markets in terms of both size and the cost of undercutting prices to maintain or grow demand. Expansion within the region on its own would require significant capital” (Bhuiyan, 2017). These are just a few of the many different challenges Uber has been faced with since branching out internationally.

International Expansion and Strategy Plans

Astonishingly, in less than eight years Uber has accomplished expansion in more than 450+ markets all over the world and is continuously growing. As stated in an article, “expanding internationally has involved a series of changes to the mobile application and business model in order to localize it to the market and culture. Uber has had to make changes to accommodate different languages, currencies, and distance measures (e.g. miles vs. kilometers)” (Hyder, 2014). As cited by Hyder she mentioned, “Travis Kalanick wrote about Uber’s international expansion in a blog posting: as we started expanding, it became clear that individual cities were the unique factor in our launches. Each city is unique in its transportation pain points, its density, its transportation alternatives, regulation, even its transportation culture” (2014).

Moreover, Uber first tried implementing what worked in the U.S. and applied some of those techniques to respective countries however, they were one of the companies that learned the hard way, realizing that what may have worked in the U.S. wouldn’t work elsewhere. Stated in an article written by Suhas Manangi, “the young tech company has committed a classic globalization mistake: it naively assumed that its business model and market approach, which ultimately solidified its market-leading position in the U.S., could translate just as seamlessly to other countries. It severely underestimated the challenges of operating in countries that embody totally different economic, political, and cultural environments” (2017).

What Uber predominantly saw was the common transportation problem within many countries that required a solution. As specified in an article, “localization is a key ingredient of Uber’s Asia Pacific (APAC) marketing strategy as it battles to stay ahead of regional competition. However, localization goes beyond services which might include cash payments for some emerging markets where credit cards are not feasible, or in China, where Uber has partnered with Alibaba’s Ali-pay system – the preferred payment method of Chinese consumers” (Manangi, 2017). Correspondingly, this article mentions “Uber calls its globalization strategy “launch playbook,” a list of business strategies and operating guidelines that have been complied by an internal team of about forty employees. At the same time, Uber is smart to have flexibility in different markets that local Uber leaders can adapt and not have the same features everywhere” (Manangi, 2017). Examples of this include, UberCHOPPER in Shanghai, UberBOATS in Istanbul, and UberAUTO in New Delhi, India.

Recommendations for Greater Success Internationally

Following the six quick rules of thumb for doing business across cultures is a strategy Uber should incorporate. They need to be prepared, be considerate of time, establish trust, understand the importance of language, respect the culture, and understand components of the culture they are in.  As stated by Ball and Geringer, “knowing your customer is just as important in the world as it is in your hometown. Each culture has its logic, and within that logic are real, sensible reasons for the way they do things” (2013). Uber needs a “businessperson who can figure out the basic pattern of the culture which in turn will be increasingly effective interacting with foreign clients” (Ball & Geringer, 2013).

Furthermore, for greater success internationally, Uber should be more careful in looking at its practice and policies therefore, considering if they are appropriate to incorporate in each specific country. China, India, and Europe differ in many ways from their home country, Uber will have greater success if they ask for permission to operate in specific countries instead of just intruding and then consequently finding out they were doing business illegally. Doing so will then convey respect to those countries regulations and organizations. As mentioned previously, aggressive entry tactics should be eliminated and instead Uber should initially invest time building solid relationships with the various unions within the country.

Another tactic Uber should integrate is preparation and planning. Uber generally did not produce a plan before going international they just learned and adapted as they went resulting in cost inefficiency. Which, reverts back to the six quick rules of thumb, rule number one, being prepared is key. In order to help Uber with better preparation with planning, they should follow the global strategic planning process as referenced by Ball and Geringer, “global strategic planning provides a formal structure in which managers (1) analyze the company’s external environment, (2) analyze the company’s internal environment, (3) define the company’s business and mission, (4) set corporate objectives, (5) quantify goals, (6) formulate strategies, and (7) make tactical plans” (2013). Lastly, instead of withdrawing from the countries that already have a big advantage over Uber, because of their already existing taxi companies within the local country, they should instead try partnering with its local rivals. Simply because trying to do everything on their own is a strategically challenging, hence the reason why they have backed out of multiple countries.

Conclusion

To conclude, Uber has had to overcome many challenging obstacles along the way of becoming an international business. Failing to plan, failure to fit local market objectives, and learning from their mistakes are all topics resulting from expanding internationally. Uber needs to respectively appreciate and keep in mind while operating in different countries, their different economic, political, and cultural environments. Also, “providing customization to local markets is an expensive task requiring significant financial backing and of the mind share from the senior executives, hence the need for a carefully thought out strategy for global expansion is required” (Manangi, 2017). Their goal is to maintain number one within international ride-hailing companies, but with all the competition and challenges in today’s world there is potential in them losing this sustainability if a new direction in strategic planning is not met.

References

Ball, D. A. (2013). International Business: The Challenge of Global Competition (13th ed.).New York: McGraw-Hill/Irwin.

Bhuiyan, J. (2017, July 14). It’s a Hard World After all in Uber’s Path to Global Domination. Retrieved February 13, 2018, from https://www.recode.net/2017/7/14/15964808/uber-global-domination-yandex-didi

Bloomberg L.P. (2017). Uber Technologies Inc: Company Profile – Bloomberg. Retrieved from https://www.bloomberg.com/profiles/companies/0084207D:US-uber-technologies-inc

Hyder, Y. (2014, February 7). Case: Uber. Retrieved February 13, 2018, from http://soumyasen.com/IDSC6050/Case15/Group15_index.html

Manangi, S. (2017, August 1). Uber’s Global Expansion Strategy – “Think Local to Expand

Global” – Will it Work for Startups? Retrieved February 13, 2018, from https://www.linkedin.com/pulse/ubers-global-expansion-strategy-think-local-expand-work-manangi

Uber Technologies Inc. (2017). The Uber Story. Retrieved from https://www.uber.com/our-story/

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