Examining The Issues With Bike-Sharing Companies In China: A Business Integration Report

The Issue with Bike-Sharing Companies in China

Question:

How Can OFO Succeed in Long Term?

This business integration report had been designed to explain the issues that pertain to bike-sharing business in China. This business integration report explains about company named as Ofo that operates in transportation industry in China (Ofo. 2017). Ofo is one of the Beijing-based bicycles sharing company that was founded in the year 2014. By the year 2017, the company received funding of $450 million and 62.7 million active users.

This selection of the topic on sharing business in China was one of the interesting topics that need to be reported and bring awareness among the public as well. The company even decided to expand their operations in countries like Melbourne and Sydney by the year 2018. The current segment highlights the problem with bicycle share riding in China and how far it had negatively affected mindset of Chinese residents. To solve the existing problem, it is now important to understand whether Ofo can succeed in long-term in profit generating activities. The business report need to answer the question on whether Ofo has the ability to succeed in long-term and for that main focus is on Chinese market as it can be understood from there the existence of Ofo in this current marketplace. Ofo has 2.2 million bikes that are operating in 43 mainland cities (Zhang et al., 2015).

In this report, firstly the issue will be highlighted and then explain the main aim of the report that will help the reader to connect to the story as a whole. The academic sources used in the study is websites, books and journal papers that need to be evaluated with an in-depth analysis and carry out to determine the issue and then arrive at conclusions from the analysis.

The integrated report identifies the issue that need to be solved in the upcoming years. The issue that is identified in the current report is problem with the bike-sharing companies to the local residents who are suffering the issue on daily basis.

The business question for this assignment is how Ofo can succeed in long-term. The issues that can be identified from the business question is whether Ofo can actually attain success rate in recent years where people are more concerned to drive cars, motorcycles or avail public transport in China (Yu, de Jong & Dijkema, 2014).

Figure: “A group of volunteers in Beijing returning trapped and scratched shared bicycles to more central locations”

Can Ofo Succeed in the Long-Term?

(Source: Hernández, J. (2017)

The above article was published in New York Times recently where it is noted that companies in China have emerged in the city where they are providing shared bikes to the individuals but they are just living the anywhere and everywhere without even thinking about other local population. According to source, more than 16 million shared bicycles are on the road in China. The issues that have questions are about sustainability actions of bike-sharing boom in China. Even most of the Chinese people have given proper justifications about social decay as well as slowdown of decorum and principles in the country. In most of the cities, it is noted that supply of bicycles far exceeds the demand that brings chaos to sidewalks and prompts complain that actually exceeds competiveness. In some of the places, the government authorities have even impounded tens of thousands of bicycles as well as imposed parking restrictions. Furthermore, news outlets have even recognized the waste with several astonishing images of mountains of candy-colored bicycles that represents different bike-sharing companies.

Even the technology management who is working in the so-called sharing financial system as well as depends on revenue generating activities is included as more prominent critics. The problem faced by the bike-sharing companies was that the bicycles were stolen from the streets in small cities. Bike-sharing actually have been criticized because of vandalism as well as theft issues. The constant cost need more bikes because there is increase in the user base. On comparing it with ride sharing services, it permits individuals to make use of own cars when driving customers as well as bike sharing need more ongoing capital investment in case of bike that have life span of 2 to 3 years. There are several regulations designed to bring a check over the problems of this ride-sharing business but still this industry faces major challenges in performing the business activities in smoother ways in long run (Phys.org. 2017).

Figure: “The bikes pictured belong to Ofo- one of the fast growing bike-sharing companies in China”

(Source: Ofo. 2017)

The above article is published in BBC news recently where it explains how Chine bike-sharing firms go bust after losing 90% of their bikes that went missing in the initial 5 months (Ofo.2017). Ofo Company like most of the rival firms did not put GPS systems on their bikes and that was the issue that made it difficult to track the stolen bicycles. These stolen bicycles are the first bankruptcy case in the booming bike-sharing industry in China (Rode et al., 2017).

Academic Sources and Analysis

The bike-sharing applications used by the individuals are convenient for them but the industry is a reason for trouble among the local governments on daily basis. Some of the problems that take place because of ride-sharing companies are illegal parking that is needs to be answered on urgent basis. For more than 20 years of time span, it is noted that China had turned its automobile industry into a pillar industry. Recently, Chinese cities are built for convenience of cars and very unfriendly for bikes. There are several bike-sharing problems where there is absence of dock like means where bikes are parked carelessly by the rider anywhere and everywhere (Ruan, Hang & Wang, 2014).

The main aim of the report is to evaluate out whether Ofo can succeed in long-term or not. This topic had been selected for the business report because bike-sharing is recent trend that are adopted by most parts of the world but also come with certain disadvantage situation that are mentioned in the problem statement (Sauvé, Bernard & Sloan, 2016).

New bike-sharing system in China

As rightly put forward by South China Morning Post (2017), China is now initiating a new bike-share system in most of the cities in and across the world but not everyone is thrilled to know this. In order to rent a bike in China, individual just need a phone application and any of the million of bicycles that are spread on sidewalks everywhere can be theirs. There is no proper bike stand, no drop-off point. The individual need to scan a code, then ride, can leave and lock the bike anywhere and whenever they feel like.

Convenience and lower cost bike-sharing to the users

The bike-sharing companies allow users to leave their bikes in public bike stands rather than any of the specific locations (Stephany, 2015). Most of the Chinese bike-sharing companies have become popular in China and are ready to enter Western markets because of convenience and lower cost to the users. In order to improve in the level of safety, the Ministry of Transport had recently issued guidelines after requesting Local governments for regulating bicycle as well as traffic standards. According to this regulation, individuals will be punished if they park the bicycles outside of permitted areas or in that case vandalize the bikes. It is properly mentioned in the guidelines that local government should be informed about how many bicycles are distributed in and across the cities as well as encourage more companies to set up electronic fences for corral bikes. The rules are made by the Government to protect both bike-sharing firms as well as riders at the same time (Channel NewsAsia. 2017).

Recent News on Bike-Sharing in China

Initially, it was the taxi-hailing wars took place in different parts of world. And now it is the on-demand service wards (Techinasia.com. 2017). Recently, the internet industry of China is looking for another money-burning battle that unfolds between different rival start-ups. It is noted from the past year figures that most of the undertaking capital business enterprise have poured hundreds of millions of dollars into rival enterprise where all the competing to occupy the topmost position. The problem is with widespread customer negligence as well as razor-thin margins that make it difficult for the ride-sharing companies to succeed in the long run. There are various factors that had even made ride-sharing services in China so convenient and these factors are low prices as well as easy to use. The bike-sharing business model or the concept overall is not new but Chinese start-ups have actually reinvented the theory in order to make it work efficiently (Timmins, 2017).

Currently, billion-dollar bike-sharing revolution in China had already transformed the look as well as feel of cities in and across the country with more than 100 million application downloads and billion of rides taken on many million bikes at the same time. Presently, this act is going global (World Economic Forum. 2017). Recently, China had issued bike sharing regulations for addressing the complaints of residents about annoyances as well as dangers those results from this emerging industry. The bike sharing business model used in China allows users to find as well as unlock a shared bike that is near then and to drop the bike off in a public location at a affordable budget rate. The new government rules are quite interesting to look at but there are several challenges faced by these companies who operate in this sector.

Currently, there are an estimated 10 million shared bikes on the streets of China as well as major Chinese bike-sharing companies have even received large amounts of venture capital funding (Murray, Skene & Haynes, 2017). Some of the reputable investors like Alibaba, Didi as well as Tencent and Softbank had shown interest to invest in the top two-biking sharing firms. Even the Senior Executive of Didi had even joined Ofo Company.  Most of the bike-sharing schemes need bikes to be parked in selected docks when not in use. It is important to understand or track the bikes to know the locations so that the riders can plan out the routes in advance (CNBC. (2017). The bike-sharing companies in China actually allows their vehicles to be placed anywhere in the city. These applications are developed by best-in-class engineers as it is GPS-based applications that permit people to locate nearby bikes as well as charges are made on how much time riders spend on them. It is noted that the bullish venture industrialist have funded for this rapid growth that help companies who have plenty of cash to purchase bikes as well as make them available on the streets (Nakamura & Abe, 2014).

Sustainability and Regulations

On analysis, it is found that Chinese Company named as Ofo made its first foray into the United States where they delivered more than 1000 bicycles to the streets of Seattle. The Ofo Company is one of the main Chinese bicycle company that are on a breakneck race and willing to expand in and across the globe (McCarthy, 2017).

In countries like China, most of the investors are spending huge capital currently to a new twist on an old of transport (bicycle). More investors are showing interest towards this new plan. Here, two of the biggest players (Mobike and Ofo) had raised a combined $1.3 billion for this new funding. These companies believe that one day this plan will bring trade to the United States and many other countries in and across the world (Geissdoerfer et al., 2017).

Ofo is a major player in the China market where they are trying their best to disrupt traditional bike-sharing programs and launch new services that benefit the society as a whole. It is important to understand investor excitement about the companies as they can provide massive scale of operations. Companies like Ofo recently can entire a combined 50 million rides per day. With this figure, the company can boast or get access to more than 100 million registered users that offer services in 100 cities as well as operates more than 12 million bicycles (Liu et al., 2013).

Ofo Company is not only dedicated to produce their own bikes that have slim yellow bodies as well as cost around 250 yuan (Geng, Sarkis & Ulgiati, 2016). This ride-sharing company connects with the existing bikes to its network where the philosophy harkens back to the formation of the company. Ofo bikes themselves are offline where the locations can be tracked by using cell phones of users. It is then when the users can find a free bike and enter the license plate number into their allocation as well as receive the bike lock combination. These rides cost 1 yuan for an hour as well as deposit around 99 yuan (Larsen, 2013).

It is evaluated that viability of bike-sharing business models will last long-term as it far from settled but recently it impact of the bikes in urban centres of China that is highly visible by nature. Most of the cities such as Shanghai and Beijing, it is noted that the bikes can be seen everywhere. However the bike-rising companies such as Ofo has the ability to develop a real community that comprises of loyal and dedicated users. Most of the users when asked about these bike-sharing rides used the word convenient and cheap rides to describe the services (He et al., 2017).

Conclusion

On analysis, it is found that bike-sharing would help in eliminating the issue of loss of stolen bikes as well as offer users with transport facilities to and from public transportation. In case of Ofo bikes, there are no docking stations and can be left anywhere that is not safe always. There are more than 10 million users in China and it is still counting. The services provided by Ofo Company are cheap as well as help users to share their own bicycles on the applications that give them the contact to all the Ofo bikes nearby (Horwitz, 2017).

The bike-sharing companies have attained success till date but according to some of the analysts, they actually fear that the bike-sharing business model does not make fiscal sense (Ofo. 2017). It is the companies who find difficulty to turn out this problem into a profit. The companies face intense competition with each other where the market share between the bike-sharing companies results in lower fees for bike rides as well as lower profits at the same time. It is the investors who are not agreeing but Ofo Company looks ways for increasing its value all over again by putting the worth of the company at $3 billion. There is even value present in the data that can be assessed by GPS trackers on the bikes. This feature will help business enterprise to target their products used by the riders as well as municipal authorities to plan out better city layouts (Hernández, 2017).

Conclusion

At the end of the study, it is concluded that Ofo has the ability to attain success in the long-term irrespective of several challenges in the bike-sharing industry. This industry faces challenges currently but has a scope where individuals will get convenient options to avail these services when they need. Oyo currently has a fleet of more than 6 million little yellow bikes in and across the world and the application users are 25 million trips per day. By the year 2018, the CEO of Ofo Company expects to break-even this year and start earning a profit by next year. The business model of bike-sharing company success rate has attracted reputed investors such as Alibaba and Didi Chuxing. Ofo Company had raised more than $700 million for funding purpose. The success of Ofo Company is part of the global bike-sharing boom in current years. In countries like China, there are 6 major bike-sharing companies present and operating in the same sector. Ofo should be like android. It is a known fact that bike-sharing business enterprise are facing pushback and some even look at the sheer number of bikes on the streets as a public nuisance. Ofo Company is therefore working with a local bike-sharing business named as Qibei.  Most of the people who reside in China make use of Ofo applications to scan as well as unlock bikes of Qibei.

The company actually believes in developing the user experience as it is the main key to achievement by including or adding GPS to the bikes for tracking the location as well as changing the tyres to make them sturdier. The company wants to make the world better by solving the environmental issues and traffic jams and bring healthy as well as green lifestyle for the riders and individuals based in China. As bike-sharing start-ups in China are enjoying surging expansion, it will be easy for a well-established Ofo to get success in long-term. It is recommended to Ofo Company for investing more money on market research as that will help in understanding the viewpoint, preferences and attitudes towards using bicycles as their transportation medium. After understanding the need, the company should make the application easy to use where each individual can have access to demand for a bicycle at any point of time. Users of this Ofo company should be allowed to download an application by using their smartphones and this even help in locating and unlocking a nearby bike. The Ofo Company should provide the service available to the user at cheaper prices so that all users can make maximum use of this transportation medium. The user should charge for a time span. There is a need for such kind of plan in future where Ofo Company can easily help the younger generation to use this bicycle as it is good for heath and lead to solve most of the diseases. It is known that bicycle is one of the best forms of exercise and when individual can avail at cheaper and easily, then all will surely avail these services and that will lead to generate revenue for Ofo. Promotion is important for this kind of bike sharing companies and they can promote by saying that by using bicycles, it will help in reductions in carbon emissions as well as improvements in traffic.

In order to solve the problem, it is recommended that the company should provide cash or credit rewards to users who are hiring these bikes in the hope that they will end up somewhere more accessible. The company should even plan for expansion and launch the same scheme in Cambridge in the UK.

Countries like China have come out with strategies where they are offering bikes to customers for reasonable prices and this act are actually good for environment. It will help in reducing carbon emissions as well as offer valuable first or last mile transport for bridging the gaps in a commute by train or subway. Countries like China leads the world in bike-sharing schemes as mentioned in Financial Times. The bike-sharing problems can be solved if there are increased regulations by City Authorities and extra costs should be incurred for the bike companies to recover the bikes.

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