History

Lyft, a ride-sharing company and smartphone application with a business model very similar to Uber’s, was founded in 2012 and by 2015 operated in 65 cities with no international presence.63 The key difference between Uber and Lyft was the company culture; Uber was more of an upscale professional service, while Lyft focused on providing casual and friendly service. For example, Lyft riders were encouraged to sit in the front seat and greet their drivers with a “fist bump.”64

Uber grew six to seven times faster than Lyft in terms of ride numbers and 10 to 11 times faster in terms of revenue (see Exhibits 5 and 6).65

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Uber and the Sharing Economy: Global Market Expansion and Reception W04C79

Exhibit 5 Uber vs. Lyft in Revenue Growth Rate

Source: Nicholson, Chris. “Study: Uber Pulls Ahead of Lyft in Riders and Revenue with 12x Lead in U.S.” 11 Sep. 2014. Future Advisor. Accessed 8 Dec. 2015. <http://blog.futureadvisor.com/study-uber-pulls-ahead-of-lyft-in-riders-and-revenue-with-12x-lead-in-u-s/>.

Exhibit 6 Uber vs. Lyft in Rides Growth Rate

Source: Nicholson, Chris. “Study: Uber Pulls Ahead of Lyft in Riders and Revenue with 12x Lead in U.S.” 11 Sep. 2014. Future Advisor. Accessed 8 Dec. 2015. <http://blog.futureadvisor.com/study-uber-pulls-ahead-of-lyft-in-riders-and-revenue-with-12x-lead-in-u-s/>.

Zipcar

Zipcar, a car-sharing company, was founded in 2000 and acquired in 2013 by Avis for $500 million. Its business model was fundamentally different from that of Uber in that the customer was the driver rather than a passenger. Cars were parked in designated spots and users gained access from a card reader on the windshield. The car had to be reserved ahead of time in order for it to unlock and the user was then billed by the hour or day for the allotted reservation time. Customers paid an annual subscription fee for the service while the company covered insurance and gas.66

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Uber and the Sharing Economy: Global Market Expansion and Reception W04C79

As a move to better compete with ride-sharing services like Uber, Zipcar introduced “One>Way” service in late 2014, which allowed users to pick up a car from one location and return it at another. The company operated across the nation and more than doubled its customer base in the span of 3.5 years (see Exhibit 7).67 Zipcar also operated in Austria, Canada, France, Germany, Spain, the United Kingdom, and Turkey.68

Exhibit 7 Zipcar Membership Size

N u m b e r o f p e o p le i n m

ill io n s

0.37 0.4

0.42

0.47

0.54 0.54

0.72

0.8

Zipcar customers: Number of people using Zipcar as car rental company

within the last 12 months in the United States (USA) from spring 2008 to

spring 2015 (in millions)

Autumn 2011

Spring 2012

Autumn 2012

Spring 2013

Autumn 2013

Spring 2014

Autumn 2014

Spring 2015

Source:

© Statista 2015

0

0.2

0.4

0.6

0.8

1

Additional Information:

United States; approx. 204,000; 18 years and older

Source: Statista. “Customers of Zipcar in the USA, 2015.” Accessed 8 Dec. 2015. <http://www.statista.com/statistics/295919/zipcar-customers-usa/>.

Taxis

Since its introduction, Uber had become the largest competitor to the taxi industry.69 A study on the share of total paid car rides shows that business people are increasingly shifting toward Uber as an alternative to taxis (see Exhibit 8).70 A major Uber advantage was its lower cost compared to taxis (see Exhibit 9)71 although the taxi industry still maintained a leading market share.72

One advantage for taxis was that they were perceived to be safer than Uber.73 It was reported that an Uber driver ran over and killed a 6-year-old girl in San Francisco.74 Royale Simms, a business agent for the Washington, D.C., Taxi Drivers Association, was quoted by US News & World Report as saying “People with criminal histories have been approved as drivers for these companies. You can’t do that as a taxi in the city.”75 Taxi drivers had to go through a rigorous licensing process that Uber drivers could bypass.

International

Europe

Due to heavily regulated markets in Europe and the strong presence of trade unions, Uber did not grow there as quickly as it did in the U.S.76 Taxi drivers, seeing lost business, accused Uber of bypassing local licensing and safety laws. Protests against the ridesharing service were staged across Europe and Uber’s budget service, UberX, was banned in most of Western Europe as a result.77 Competing with Europe’s trade unions therefore proved to be a daunting task for Uber and significantly hindered its growth on the continent.

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Uber and the Sharing Economy: Global Market Expansion and Reception W04C79

Competitors in Europe included GetTaxi and Hailo, both of which used a slightly different business model than Uber’s. As opposed to connecting passengers with pre-approved drivers, the competitor apps connected passengers specifically with taxi drivers.78 This allowed customers to request a ride with a click of a button while still benefiting the local taxi drivers and avoiding challenges with local regulations.

Exhibit 8 Uber’s Market Growth in the U.S.

Source: Certify. “Sharing the Road: Business Travelers Increasingly Choose Uber.” Accessed 7 Dec. 2015. <http://www.certify.com/infograph-sharing-the-road.aspx>.

Exhibit 9 Cost of Uber vs. Taxi Service

Source: Certify. “Sharing the Road: Business Travelers Increasingly Choose Uber.” Accessed 7 Dec. 2015. <http://www.certify.com/infograph-sharing-the-road.aspx>.

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Uber and the Sharing Economy: Global Market Expansion and Reception W04C79

China

In China, Didi Dache and Kuaidi Dache shared the same business concept and service model as Uber. The two companies together controlled more than 99% of China’s ridesharing market in 2014.79 By the end of that year, the market surged to 154 million users.80 The companies were both heavily funded, with $700 million of Didi Dache coming from Temasek and others and $600 million of Kuaidi Dache raised by SoftBank.81 They developed a series of strategies to prevent Uber from significantly slicing into their market. The two companies tried to give large discounts to maintain the market share. In just the first half of 2014, they spent more than $400 million offering discounts to users.82 In early 2014, people who used their apps could get free rides.83

In 2015, Didi Dache and Kuaidi Dache agreed to merge to deal with Uber, the cash-rich invader.84 After the merger, the new company, Didi Kuaidi, received $2 billion in private equity investment from companies including Capital International Private Equity Fund, Ping An Ventures, Alibaba, Tencent, Temasek, Coatue Management and other existing shareholders.85 By collaborating with WeChat, the most popular messaging app in China with almost 650 million monthly active users by the third quarter of 2015,86 Didi Kuaidi received an average of 700,000 bookings per day via the service.87 Additionally, Didi Kuaidi heavily invested in Uber’s competitors in other markets, including $680 million to Uber’s biggest rival in the U.S., Lyft, and $500 million to the India ridesharing company Ola.88 The Wall Street Journal reported that Lyft “discussed ways to work with its Chinese investors to compete strategically with Uber, including sharing product plans.”89 Didi Kuaidi was the first company legally allowed to provide online private-booking ride-sharing service in Shanghai, one of China’s biggest markets.90 Meanwhile, Uber’s operation in Hong Kong was facing charges of providing illegal private rides. In 2015, Didi Kuaidi was providing 13 million rides per day in comparison with 1 million rides per day from Uber China (see Exhibit 10).91

Exhibit 10 Uber’s Daily Rides Far Behind Didi Kuaidi’s in China

Daily completed rides (approximate), Uber China vs. Didi Kuaidi

Didi Kuaidi (total) Didi Kuaidi (taxi) Didi Kuaidi (private cars) Uber China

7 million 3 3

1

Daily completed rides

Source: Horwitz, Josh. “Uber’s Biggest Asian Competitors Have Already Raised about $7 Billion–and Could Soon Merge.” Quartz. 28 Sep. 2015. Accessed 4 Jan. 2016. <http://qz.com/509913/ubers-%E2%80%8Bbiggest%E2%80%8B-asian-competitors-have-already-raised-about-7-billion-and-could-soon-merge/>.

India

In India, OlaCab, also known as Ola, was the most popular mobile app that provided a similar service to Uber. With seven rounds of investments, Ola raised $1.18 billion from 19 investors, including Didi Kuaidi, DST Global, Falcon Edge Capita, SoftBank, and Tiger Global Management.92

While Uber poured resources into India’s market, Ola was building strategies to defend its turf in India. Ola did not plan to expand globally.93 With 33,000 cabs in 19 cities, Ola’s main focus was to recruit more drivers.94 Ola, together with leading financial institutions, provided financial support to prospective drivers

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Uber and the Sharing Economy: Global Market Expansion and Reception W04C79

to purchase their cars, and training to ensure drivers were able to deliver a quality and safe experience for passengers.95 Culturally, Ola addressed the various needs of the Indian population by providing three tiers of car services to suit different budgets — luxury sedans, mid-range, and Ola Mini, which was priced on the same level as the humble auto rickshaw.96 Ola also extended its service into delivering goods such as sweets during the Diwali holiday.97 Besides offering price flexibility, Ola addressed the issue of payment service by allowing cash payments, and encouraged use of its standalone in-app payment service, Ola Money.98 The company also provided carpooling services, mobile wallets, and more.99 With all the strategies implemented, Ola sold 750,000 rides per day while Uber sold only 280,000 (see Exhibit 11).100

Exhibit 11 Uber’s Daily Rides Trailed Ola’s in India

Daily completed rides in India (approximate), Uber vs Ola

Uber Ola (includes auto rickshaws)

280,000 750,000

Daily completed rides

Source: Horwitz, Josh. “Uber’s Biggest Asian Competitors Have Already Raised about $7 Billion — and Could Soon Merge.” Quartz. 28 Sep. 2015. Accessed 4 Jan. 2016. <http://qz.com/509913/ubers-%E2%80%8Bbiggest%E2%80%8B-asian-competitors-have-already-raised-about-7-billion-and-could-soon-merge/>.

Conclusion

Cooper knew that Kalanick and Graves wanted answers and insights for the company’s next move. Cooper knew Uber’s business model, core competencies, and objectives inside and out. He also understood the benefits of and challenges to the expansion of the sharing economy. Ultimately, he wanted Uber to lead the push for expanding that economy, but he had his doubts about whether he and his team could accomplish this task with financial success. What should Cooper suggest? How could Cooper, Kalanick, and Graves ensure that Uber is successful in Hong Kong? What did they need to do to ensure their success in China and India? How would their Asian methods vary from Uber’s approach in Europe or in the U.S.? Should Uber work with governments or work around them as it expands? What are the pros and cons of each approach? How should Uber protect its business model? Will patents be enough? How should it handle competitors and imitators in international markets?

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