Exploring Uber’s Two Sided Networks In Chinaâ€™s Ride Hailing Market
The business model of Uber and Didi involves the implementation of the two sided network. This involves connecting two parties to each other. In case of both of these companies, the two parties involve the drivers and the customers. When Uber decided to compete in the Chinese market, it did not consider the effects of Didi. Due to the loss of market expansion in China for Uber, Didi made it very clear for the introduction of their businesses in China. author)
Feedback loop: Analysis and Discussion
The increase in the valuation of Uber resulted in the formation of criticism in the market which resulted in various reviews from investors and experts. This was denoted in the form of a feedback loop which gave rise to the cross side and the same side network effect.
Uber can be terManagementManagementmed as a two-sided network place. This mainly involves connecting two different sides of the network. In case of Uber, the two sides include drivers and users. Their activities together make up the two-sided network (Eisenmann, Parker and Van Alstyne 2006). For an increase in the number of cars and drivers, the number of awareness related to it in the market will increase leading to an increase in the number of customers opting for the services. Increased number of drivers will lead to decrease the pickup time of drivers which in turn will lead to higher brand awareness in the market.
There are two types of groupings in the two-sided networks which include the same sided threats and the cross sided threats. In case of the same sided network, groups of same people interact with each other. The type of impact can be termed as positive or negative based on the impact of their consequences. In case of the cross sided networks, people from different group interact with each other that forms a consequence. There can also be positive or negative consequences in the cross sided networks. Similarly, word of mouth promotions of the services offered by Uber are termed to be a same sided network interaction where the users interact by saying the effectiveness of the services.
In case of the two sided network in Uber, the same side network includes the users or the customers which makes up one group. The drivers also make up another group and in this way all the associated stakeholders make up their own groups. In same sided network, they interact with each other. For example, the incentive networks offered by Uber in case of new entries by users are an example of same sided networks. These helped in the company get positive consequences by getting more users.
Information systems strategy
In case of the cross sided effects, the interaction between different groups are allowed. In case of Uber, the interaction among the drivers and the users can fall under this category. According to the feedback loop of the business activities of Uber, increase in the number of drivers will lead to the lesser pickup time for consumers which in turn will lead to increase in customer base. This cross sided effects denotes the interaction that terms as beneficial for the company due to increased revenue.
Uber follows fair and nuanced feedback loop and it encourages positive feedback loop aligned with certain factors. Appropriate feedback loop being fuelled up and built creates network effects and identification of the factors can strengthen the network effects.
In modern world of sharing economy, two-sided network effects concept is applied for most of the marketplace strategies. Briefly, the concept is considered as powerful abstraction of simple producer-customer relationship and simple demand-supply curve in economics (Hall, Palsson and Price 2017). Google, Uber, Credit Card, and other organizations are part of the two-sided network effects.
As per context of Uber, two types of market exist for drivers and the passengers. Uber acts as a platform for reducing gaps between these two markets. Now, in this two-sided marketplace, most daunting task is to adopt one side of market with another side (Eisenmann, Parker and Van Alstyne 2006). Most importantly in two-sided market or network effects, if one side is moved than another side is automatically attracted to it. Now, in context of Uber, the passenger expects to see nearby driver’s availability and that is why commuters use Uber app for faster pickup and arrival to destination (Ng 2016; Gong, Greenwood and Song 2017). On the other hand, the driver expects to have enough rides available nearby, otherwise drivers cannot sustain with their earning in this market. A classic dilemma emerges while bringing each side to the platform first. This is the type of technological advancement that is used by Uber for meeting the demands of business.
In case of the two sided network in Uber, there are two sides to it. One is the money side and other is the subsidy side. In case of the money side, the stakeholders falling into this side is responsible for making money for the company. However, in case of the subsidy side, the responsible stakeholder group are associated to utilizing the subsidies of the company so that the business is enhanced. In the two sided network of Uber, the money side is associated with the customers where smaller and profitable customer base is responsible for generating revenue by availing the services necessary. On the other hand, the large and subsidized user base comprising of the drivers are responsible for use of the services of Uber to get to the customers.
Business information systems
In case of the subsidy side, Uber has decided to make better adoptions so that the drivers will also be able to utilize and expand. Uber has decided to make a separate interface for drivers where more incentives are given to them. This helps in promotions of the services and increased number of drivers joins the network. In addition, they have also made a dedicated website for this so that the subsidized side of the network will be able to expand which in turn will lead to decreased pickup time.
According to concept, two separate ways exist for resolving this classic dilemma; the ways are either subsidizing or incentivizing. Next aspect is to be considered as moving one side separately or moving them at the same time; Uber decided to move each side separately and together both at same time (Wyman 2017). Uber implemented location-based service offering to passengers; they considered riders as subsidy side and passengers as money side. They offered drivers £25 per hour as incentives whether they are getting job or not. However, Uber can provide alternatives as different ride options at different demand circumstances (Zhang 2016; Qian 2016). From rider perspective, the incentive is lower rate than other perspective offering. Uber fare is half of other transportation causing better amount of subsidy to the riders. They can avail ride £1.75 per mile that is half of £3.5 to £4 for car companies charging.
In winner-take-all dynamic, to deal with competition, the organization needs to consider the three different aspects for market acquisition.
- The first consideration that has to be adopted is that whether there are any strong positive effects of the network in the market. This helps to denote the efficiency of the business processes. The Chinese market is to be analyzed for adopting such considerations.
- The next consideration is that the company needs to decide whether the cost involved with multiple products are high or not.
- Lastly, the company needs to decide whether their services can provide unique features in the market to get more redundancy.
For the Chinese market, the introduction of Uber was responsible for changing many controversies related to it. According to many critics, it was considered that the government of china would not be able to accept the business of an outsider company. This was unable to offer any hindrance to the company due to the effective interface of the company which did not even provide any problem to non-native users as well. On the other hand, the rival company known as Didi was not able to provide any competition due to their problems with languages. After this, the company merged with other companies like Alibaba and Tencent along with Kuaisi Dache. This led to the takeover of the Chinese market which was responsible for the downfall of Uber from the Chinese market.
However, in context of Uber, the Winner-take-all is considered to be a flawed model. The inventors looked at Amazon, Google, and Facebook; first mover in these scenarios is large group of users attracted with suppliers (Moon 2015). Uber customer needs faster pickup and cheaper ride fare while drivers need higher wages; therefore, theoretically, the app offered both at higher level. The service was first to market and attracted most of the drivers and customers. However, rivals exist everywhere; while Uber expanded globally, the firm spent $2 billion in Chinese market while being under pressure from local competitor Didi Chuxing (Chen et al. 2016). Uber has lost US$1 billion being in competition with Didi Chuxing in China within a year; then Uber had to adopt Uber China localized service to stay in competition.
Uber’s Strategy Analysis
Uber is a samrtphone based application that is used for reaching out to the potential customers. As it involves the two sided networks, the various entities are the drivers and the customers. For addressing the requirements of the business, Uber has decided to adopt their own business model for this reason. The first considerations are that any taxi driver can apply for services by registering with a driver’s license. The passengers or the customers need to install the Uber app and call any available cab through these applications. Moreover, the fare of the ride is decided on the basis of the multiplier set by the company (Laudon and Laudon 2016). 80% of the fare i allocated to the driver and 20% is allocated to Uber. This is the business model of the company which has made them to stay successfully in the market.
For the conventional taxi or Limousine Company, the business model involves the drivers and the passengers. The drivers drive the vehicles in the streets while the passengers take their service. The business model involves the company to get clients who would avail their services. In return their drivers will drive them to destinations (Wirtz and Tang 2016). The fare of the ride would be split so that the company gets much more than the driver. In case of the taxi company, similar rule is given to the drivers and their customers.
This taxi transport is considered as one of the largest of its kind in America. In response to postponed plan of New York’s, Uber disclosed service information in New York that are recorded during last six weeks along with sharing total active drivers available count and daily number of rides completed. Then, Taxi and Limousine Commission (TLC) has released yellow taxi journey facts and figures from 2014 to 2016 (Seifert 2016; Ng 2016). New statistics allowed the preliminary answers for debated question to choose Uber or TLC regulated taxis (Hall, Palsson and Price 2017). The dilemma arises as whether Uber is filling gap of superficial and under-served market with company claims or part-time drivers are filling full-time ones declining TLC regulated taxi industry.
As Uber expanded with approximate ten times within last two years; reaching 3.5m in June 2015 from 300,000 rides in June 2013. On the contrary, Seifert (2016) claimed that the yellow-cab hail volume fell by 2.1m during the same interval. Complete analysis can be accounted for estimating the growth trend for Uber and changes expected in demand for impact of Citi Bike and boro taxis (Hall, Palsson and Price 2017). Further indication is found out that Uber can bear significant drop in cab hailing during midnight and at daytime passengers provide better value to transport comfort and convenience. The advantage of the traditional competitors is that they do not need to manage their own digital businesses. This gives them a specific advantage as they will not be charged for any associated problems regarding the digital innovations in the market. As Uber invests heavily in digital marketing and their website maintenance, this is not present in the traditional taxi or limousine companies.
Feedback loop: Analysis and Discussion
Uber has invested heavily in their inputs. This has made them to get a return to scale that has been evident from their growth. Due to the increase in their inputs, the increase in operational output has been also the cause for the company to capture many markets (Hassan and Parves 2013). The cash flow implication of Uber implies that the decision makers need to slow down their cash exhaustion on subsidizing the drivers for training and other services. As the number of cities Uber operates is increasing, the cash flow is also increasing. In a similar manner, the advertising media for these are also increasing for targeting the customers.
The industry’s economics could become tough with Lyft, Didi Chuxing, and others. Lyft already started its journey in NY and Lyft left the price war with Uber in San Francisco (Chen 2018). Taxi companies across US waged high-profile and bitter fight for keeping Uber and Lyft away from bringing shared economy in cabs (Wirtz and Tang 2016). The taxi companies lost the fight and they adopted ‘if-you-can’t-beat-them, join-them-strategy’ as per latest economists review. Pittsburgh Yellow cab rebranded in last year as zTrip with launching an app for payment, pricing, hailing taxis, and credit card acceptance. Uber and Lyft have spent millions of dollars for approving their web-based business model in 50 states (Moon 2015). Multiple cases state that they are allowed to escape from other regulations putting cab companies without background checks.
In this context, a comparative case study is chosen in which adoption of customer relationship management is investigated regarding a retail organization known as Tesco.
Tesco Organizational Background
In UK, Tesco is considered as popular retail giant with chain stores across countries. Tesco takes third place in list of world’s largest retailer; after Wal-Mart being in first place from USA and Carrefour of France being in second place in the same list. Tesco initiated retailing business and provided their store services to fourteen countries including Europe, Asia, and North America with occupying 30% of UK retail market (Hassan and Parves 2013). Tesco offers club card scheme with unique service benefits provided to customers. The club card information was utilized on certain areas of business such as pricing, customer service, promotions, media effectiveness, communications, and market research. Tesco had aimed for expanding customer loyalty for their business lifetime and set standards for earning more (Christopher 2016). Tesco was termed as best practitioner of Customer Relationship Management regarding utilization of knowledge on customers’ thoughts, use of customer impression, and feelings about grocery shopping.
Mobilization of Feedback Dynamics: Design of Two-sided network for Uber
Customer Relationship Management and Challenges
Customer Relationship Management (CRM) is known and emerged as powerful marketing tool in current trend. In retailing sector, the CRM was utilized for massive increase in sales and maximizing profits. CRM (Customer Relationship Management) is considered as vital element of any business process and strategic tool in modern world, the competitions among entrepreneurs are fiercer now (Hassan and Parves 2013). The organizations required concentrating on customers for themselves to exist in the competition and strengthening their presence in the market. The retailers engage themselves into competition for retaining customer’s loyalty and adding diversification to their business (Kumaradeepan and Pathmini 2017). The diversification increases usage of innovative ideas and new concepts for Customer Relationship Management processes. The CRM passed through several changes for different reasons.
The consideration of current market position and trend, the reputation and easy access to information collection; the study can be conducted with choosing Tesco. This retailer has started utilizing CRM as their potential business tool along with modern framework (Nicoletti 2018; Molenaar 2016). This retailer has enhanced their business coverage within and beyond UK. Due to changing patterns in market dynamics, the CRM is considered as primary tool for representing business area. The formulation of successful business and marketing strategy depend on appropriate performance of customer and retailer analysis (Filimonau and Gherbin 2017). The study should be considered as cross-comparison viewpoint for exploring influential aspects of CRM and discussing current trends of CRM adoption.
While considering core strategies of business; CRM is considered as one of them making it more integrated with business processes in organizational internal functions. Customer Relationship Management is considered as an approach to maintain and enhance relationship with customers (Jones, Comfort and Hillier 2016). For creating and maintaining relationship values along with customer base, income, and sales; CRM can cover them properly with an appropriate framework. The relationship values are enhanced with services and products grounds (Hassan and Parves 2013). The direct or indirect pattern of sales was managed with services and products marketing. CRM approaches are dependent on customers and suppliers of products or services. These concepts are considered and there were no argument against the theory (Laffy and Walters 2016). However, core content and focus was altered to technological innovation and in last decades, companies adopted more innovative and technology-based solutions.
Primarily, CRM poses some major challenges in operations and later, these issues should be resolved for bigger benefits to driving organizations. The challenges are:
- Collection of consumer data and storing these huge sets of data appropriately is part of a challenge.
- The analysis of the customer behaviour is a challenging task.
- Increasing customer experience and integrating product sales and marketing procedures into business efficiently are another challenge of CRM.
This section includes the mitigation strategies for addressing the challenges faced by Tesco. The first challenge is the need for storing the data that is being collected in the organization. The data needs to be safely stored so that hacking or breaches into the system is mitigated which will help in protecting against data loss. This can be mitigated by reducing the amount of data that is being collected. This can also be mitigated by reducing user access to the information. Moreover, the adoption of strong security protocol will help in safe collection of data involved. Furthermore, data storage can be improved either by using better storage facilities like dedicated hardware or by using cloud technologies.
Setting core target as gender and age group for customers; CRM challenge incorporates process complication and employees require switching between several applications for continuing progress (Kew and Stredwick 2017). Instead of building a broad target for CRM to meet, the organization should set clear objectives and the objectives should be achieved through CRM. The objectives should be listed and defined as per some measurement aspects. The collected data must be successfully analyzed so that it can be effectively measured. This will help in the company to target their audiences based on their preferences and based on the amount of demographics needed.
The third challenge involves identification of the user behaviour. This can be done by successfully capturing the engagement of the users on the interface so that the analytical information can be measured and successfully applied to meet the demands of the company. This helps in identifying the changes required and showing relevant posts or media related to the products. This increases the chances of success for the products which in turn leads to increase in the revenue generated by the company. Once, the CRM is activated in any organization; the essential part of work is to re-align the working process and culture of the team (Gaurav and Dixit 2017). Business operation should be mapped with CRM application; the users should perform daily operations through the CRM tool as setting the work default and not making it optional. The CRM solution helps to serve the business entrepreneurs in order to increase sales, effective marketing and driving customer satisfaction to streamlining business processes.
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