How Uber can Improve its Market Share in China: An Analysis Using Flower of Service, Wheel of Loyalt

 

This assignment is based upon Case Study 4 in the core text: “Uber: Competing as Market Leader in the US versus Being a Distant Second in China” (pls. see case study attached). Read the case and answer the following question: Using the Flower of Service, the Wheel of Loyalty, and market positioning (STP) suggest how Uber might adapt further to improve its market share in China. Learning Outcomes:

 

1) Provide a detailed understanding of the theoretical concepts and frameworks that are specific to services marketing and discuss their practical applications, both online and offline.

2) Distinguish and review the role of employees, customers and technology in the design and cocreation of services that are satisfactory and profitable.

3) Explore and analyse value propositions from a customer, management and societal perspective, and critically examine ethical and sustainable aspects related to relevant stakeholders.

4) Devise and implement appropriate processes to manage critical events between an organisation and a customer.

 

Abstract
Uber allowed people to book and share rides in private cars via their smartphones. With its headquarters in the US, it operates in 60 countries and has a strong presence in the Asia–Pacific region. This case study explores Uber’s development and growth, first in the US, then its global expansion and subsequent foray into China. Despite enjoying international success with deep penetration in major cities, Uber flopped in the Chinese market. What were the reasons for its
failure in China, given its spectacular performance in many other countries?

 

Introduction
Uber was founded in 2009 by Travis Kalanick (current Chief Executive Officer) and Garrett Camp (CoFounder) in San Francisco. Its business model rested on the use of an app to call for a driver at any time and location (Exhibit 1). Uber managed to build a spectacular network of drivers and passengers in just three years, thriving in what some people term as an “instant-gratification economy”, powered by the smartphone as the remote control for life. “If we can get you a car in five minutes, we can get you anything in five minutes,” Kalanick said1.

 

Expanding outside of the US, Uber was a threat to taxi services in Europe and Asia, triggering protests in France, Germany, and India. Despite resulting government scrutiny, tighter regulations and disputes with local taxi companies, Uber’s disruptive business model successfully posed an effective challenge to taxi monopolies in the countries it operated in. As of August 2015, Uber clinched the title of the most valuable startup in the world, valued at $51 billion.

 

Enjoying first mover advantage in app-enabled transportation services and ridesharing, Uber was far more successful in its number of users and drivers than its main American competitor, Lyft. Lyft positioned itself as a more informal, community-centered way to travel, with the expectation that drivers and shotgun-riding passengers would strike up a conversation during the ride. By being a late entrant to the market entering three years after Uber, Lyft managed to operate in only 65 American  cities by the end of 2015. In contrast, Uber had been operating in a total of 300 large cities in 60 countries. Both companies offered a myriad of services at different price points (Exhibit 2).

Ubers Growth
The first conceptualization of Uber’s business model started in Paris in 2008, when founders Kalanick and Camp could not get a cab after returning from a conference. The two discussed solving the problem with a mobile app — push a button and get a car.

In 2009, UberCab was born. After downloading its app, registering and entering credit-card information, customers could summon a car with the press of a button. G.P.S. took care of the location, and the cost was automatically charged to the customer’s credit card, with tips included. It did not take long for the company to run into regulatory issues when the San Francisco Municipal Transportation Agency objected to the use of “cab” in UberCab’s name a few months after its launch, given its operation without a taxi license. After changing its name to Uber, things went on an upward trajectory. Valued at $60 million after
only six months of operation, Uber received support not just from angel investors and venture capitalists, but also from prominent celebrities like Ashton Kutcher (founder of A-Grade Investments), Jay Z (co-founder of Roc-A-Fella Records), and Jeff Bezos (founder of Amazon).

 

Lyfts Rise and Rivalry
Lyft was founded in 2012 by John Zimmer and Logan Green, launched primarily as a low-cost competitor to Uber. Its focus was on short, urban rides. Lyft logged an impressive 2.2 million rides in December 2014, with revenues for that year estimated at $130 million. In May 2015, Lyft was valued at $2.5 billion4, its promising growth bolstered by estimates of 2015 revenues to be $796 million, an impressive 512% jump from 2014.