Uber vs. Didi: The Race for China's Ride-hailing Market SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Uber vs. Didi: The Race for China's Ride-hailing Market
As a result of fast-developing mobile technology, companies must deal with increasing business complexity in a high-velocity environment. The Uber vs. Didi case illustrates a wide range of strategic issues that a company may face when creating a new business model, generating unprecedented value for customers, challenging traditional business and regulatory frameworks, and expanding into an emerging market to compete with local rivals. The case is about Uber's competition with Didi, its local rival in China. The first part describes the traditional taxi industry, using the illustration of the US taxi medallion system. It explains Uber's platform-based business model, value innovation, challenge to government regulation, and surge pricing model, as well as associated ethical issues. The second part describes the emergence of Didi in China and how it challenged Uber when it entered China's ride-hailing market. Unlike its rapid expansion in the US and other countries, Uber had a bumpy ride in China. In June 2015, Didi was reported to have 80.2% of the market, outperforming Uber's meagre 11.5%. With China's internet giants joining the battle as strategic investors-Baidu (backing Uber), Alibaba and Tencent (both backing Didi), and from Silicon Valley-Apple (backing Didi), the race between Uber and Didi has far-reaching implications.
Authors :: Guoli Chen, Kuangzhen Wu, Tony Tong, Xiaohua Su
Swot Analysis of "Uber vs. Didi: The Race for China's Ride-hailing Market" written by Guoli Chen, Kuangzhen Wu, Tony Tong, Xiaohua Su includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Didi Uber facing as an external strategic factors. Some of the topics covered in Uber vs. Didi: The Race for China's Ride-hailing Market case study are - Strategic Management Strategies, Competitive strategy, IT, Marketing and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Uber vs. Didi: The Race for China's Ride-hailing Market casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, geopolitical disruptions, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
increasing household debt because of falling income levels, technology disruption, etc
Introduction to SWOT Analysis of Uber vs. Didi: The Race for China's Ride-hailing Market
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Uber vs. Didi: The Race for China's Ride-hailing Market case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Didi Uber, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Didi Uber operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Uber vs. Didi: The Race for China's Ride-hailing Market can be done for the following purposes –
1. Strategic planning using facts provided in Uber vs. Didi: The Race for China's Ride-hailing Market case study
2. Improving business portfolio management of Didi Uber
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Didi Uber
Strengths Uber vs. Didi: The Race for China's Ride-hailing Market | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Didi Uber in Uber vs. Didi: The Race for China's Ride-hailing Market Harvard Business Review case study are -
Successful track record of launching new products
– Didi Uber has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Didi Uber has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Didi Uber is one of the most innovative firm in sector. Manager in Uber vs. Didi: The Race for China's Ride-hailing Market Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Didi Uber in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Didi Uber has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Didi Uber is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Didi Uber is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Uber vs. Didi: The Race for China's Ride-hailing Market Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Strategy & Execution field
– Didi Uber is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Didi Uber in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Didi Uber digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Didi Uber has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Didi Uber has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Uber vs. Didi: The Race for China's Ride-hailing Market HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Didi Uber has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Uber vs. Didi: The Race for China's Ride-hailing Market - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Didi Uber is present in almost all the verticals within the industry. This has provided firm in Uber vs. Didi: The Race for China's Ride-hailing Market case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Didi Uber in the sector have low bargaining power. Uber vs. Didi: The Race for China's Ride-hailing Market has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Didi Uber to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Didi Uber is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Guoli Chen, Kuangzhen Wu, Tony Tong, Xiaohua Su can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Uber vs. Didi: The Race for China's Ride-hailing Market | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Uber vs. Didi: The Race for China's Ride-hailing Market are -
High bargaining power of channel partners
– Because of the regulatory requirements, Guoli Chen, Kuangzhen Wu, Tony Tong, Xiaohua Su suggests that, Didi Uber is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Didi Uber has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Didi Uber needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Didi Uber has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Didi Uber products
– To increase the profitability and margins on the products, Didi Uber needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Didi Uber has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Uber vs. Didi: The Race for China's Ride-hailing Market HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Didi Uber has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Uber vs. Didi: The Race for China's Ride-hailing Market, in the dynamic environment Didi Uber has struggled to respond to the nimble upstart competition. Didi Uber has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Uber vs. Didi: The Race for China's Ride-hailing Market, is just above the industry average. Didi Uber needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Uber vs. Didi: The Race for China's Ride-hailing Market, it seems that the employees of Didi Uber don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Didi Uber is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Uber vs. Didi: The Race for China's Ride-hailing Market can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Uber vs. Didi: The Race for China's Ride-hailing Market | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Uber vs. Didi: The Race for China's Ride-hailing Market are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Didi Uber to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Didi Uber can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Uber vs. Didi: The Race for China's Ride-hailing Market suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Didi Uber can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Didi Uber to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Didi Uber in the consumer business. Now Didi Uber can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Didi Uber to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Didi Uber to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Didi Uber can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Didi Uber can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Didi Uber to increase its market reach. Didi Uber will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Didi Uber can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Didi Uber has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at Didi Uber can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Didi Uber can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Didi Uber is facing challenges because of the dominance of functional experts in the organization. Uber vs. Didi: The Race for China's Ride-hailing Market case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Uber vs. Didi: The Race for China's Ride-hailing Market External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Uber vs. Didi: The Race for China's Ride-hailing Market are -
Shortening product life cycle
– it is one of the major threat that Didi Uber is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Didi Uber high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Didi Uber can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Didi Uber in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Didi Uber will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Didi Uber needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Didi Uber needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Didi Uber can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Didi Uber with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Didi Uber needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Didi Uber in the Strategy & Execution sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Didi Uber.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Didi Uber business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Uber vs. Didi: The Race for China's Ride-hailing Market Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Uber vs. Didi: The Race for China's Ride-hailing Market needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Uber vs. Didi: The Race for China's Ride-hailing Market is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Uber vs. Didi: The Race for China's Ride-hailing Market is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Uber vs. Didi: The Race for China's Ride-hailing Market is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Didi Uber needs to make to build a sustainable competitive advantage.
