Explain TWO types of organizational change as discussed in the course. Relevant examples for each type of change must be incorporated that links to the case. Suggest ONE type of change for Uber, which does not already exist. Provide full details on the three dimensions of the suggested change. Provide relevant information from the case to justify your suggestion.
Explain TWO types of organizational change as discussed in the course. Relevant examples for each type of change must be incorporated that links to the case. Suggest ONE type of change for Uber, which does not already exist. Provide full details on the three dimensions of the suggested change. Provide relevant information from the case to justify your suggestion.
Chapter13: Leadership
Section13.8: Transformational, Visionary, And Charismatic Leadership
Problem 3DQ: Despite Ubers apparent success in launching in multiple markets, it continues to post quarterly...
Related questions
Question
Explain TWO types of organizational change as discussed in the course. Relevant examples for each type of change must be incorporated that links to the case. Suggest ONE type of change for Uber, which does not already exist. Provide full details on the three dimensions of the suggested change. Provide relevant information from the case to justify your suggestion.
Transcribed Image Text:5
6
Seattle
UberX: $13.17
Lyft: $11.21
San Francisco
UberX: $14.65
Lyft: $13.42
Dallas
UberX: $11.45
Lyft $11.19
Exhibit 4 Average Income of Uber and Lyft Drivers per Trip in Selected Cities.
round-it raised $1 billion in July 2015 while Lyft raised
only half the amount in the same year. This helped sustain
any losses in operations in an era of price cuts.
Finally, Lyft tried to expand fast-it raised $250 million
in 2014 and another $530 million in March 2015, with
the main goal of expanding internationally and entering
less competitive markets without already entrenched
competitors.
idUSKBNOLI04420150214
Miami
UberX: $14.38
Lyft: $12.30
9 Gerry Shih (2015), "China taxi apps Didi Dache and Kuaidi Dache
announce $6 billion tie-up", Reuters. Retrieved from http://
www.reuters.com/article/2015/02/14/us-china-taxi-merger-
DIDI
In China, Uber found itself in the position of the much
smaller late entrant. Here, Didi was the clear leader. Didi-
Kuaidi, referred to as Didi by the public, was the product
of a merger between Didi Dache and Kuaidi Dache, two
Didi
Uber
Others
of China's leading taxi-hailing apps. In February 2015, the
merged entity was valued at $6 billion, and doubled to Exhibit 5 Market Share of App-Based Car-Hire Services in China
$12 billion by September in the same year. Didi's services
covered 80% of China's huge market of 800 million city
dwellers (Exhibit 5), being a deep-pocketed dominant
player reaping the network-leveraging dividends of
having drivers and customers hooked on to its product
early.
Didi was also far more successful than Uber in the
aspect of legal legitimacy, acquired from its local
connections". Didi enjoyed backing from powerful
Chinese government investors, the most notable one
being the China Investment Corporation, China's
sovereign fand in charge of managing foreign exchange
reserves. These well-connected investors opened up
opportunities for Didi at the expense of its competitors
which included working with regulators. A success was
commemorated in October 2015, when Didi became the
first car-hailing app to be awarded an official license in
Shanghai. This authorization was hailed as a landmark
decision, allowing Didi to operate its ride-hailing business
in the city without any fear of legal infringements". It
assuaged concerns among taxi drivers, as one revealed
in September 2015, "I worry all the time about being
caught and fined by the government. My biggest concern
is policy uncertainties. With this formal recognition,
more drivers were certain to sign on with Didi vis-à-vis
its competitors, which could not provide the same level
of regulatory security
New York City
UberX: $29.34
Lyft: $28.62
10 Deborah Finding 2015 "What stands between Uber and
success in China, CNBC. Retrieved from http://www.cbc
com/2015/06/15/what stands between aber and success in
11 in the race for legal legitimacy" (2015) Wall Street Joumal
Retrieved from http://www.wsj.com/articles/chinas did
kuidgets-license to ride in shanghai-1444298507-
From the beginning, Didi pursued an aggressive strategy
to lure as many drivers to its app as possible. Didi spent
$700 million on rewards to taxi drivers between 2013 and
2014, attracting both new drivers and switching drivers
from existing taxi companies with monetary incentives.
So important were taxi companies as a source of growth
that the sales team in Didi even went to the streets to
promote their app to cabbies. By allowing its mobile
apps to be used by taxi drivers as an additional channel
to attract more passengers, Didi sought to convert these
drivers to work for them exclusively during peak hours by
UBER'S RESPONSE TO DIDI'S
offering more attractive rates and bonuses. This method
of attracting and converting drivers with the use of MULTIPLE SERVICE OFFERINGS
incentives allowed Didi to swiftly convert a large number
of taxi drivers, quickly scalling their operations in other
cities. It also highlights the main difference between Did
and Uber's business model-Didi started out with taxi
drivers adopting its app, before adding non-traditional
transport services to its portfolio while Uber started out
with the intention of disrupting the taxi industry itself
by replacing its services.
Source
Adapted from http://time.com/
money/3959091/uber-lyft-price-
per trip accessed October 27, 2015
Source
Adapted from http://fortune.com/2015/09/30/will-china-be-ubers-
waterloo, accessed October 10, 2015.
Part of Didi's fast growth was also due to tweaking and
expanding its business model to meet unique local
demands. For example, urban dwellers frequently
looked for a compromise between overcrowded public
transportation and the high cost of driving to work
themselves, which led Didi to introduce Hitch as a
service offering in its app, which was a group ride-sharing
service along preset routes. Hitch was for casual drivers
who wanted to recoup some gas money and toll fees on
their daily commute-by inputting their start and end
points into the app. Hitch connected them with nearby
passengers heading in the same direction, allowing
them to share the ride. This was different from the more
traditional taxi-type service as drivers had control over
where the ride ended, and they did not make a profit off
the service - passengers only paid for the cost of gas
and tolls. This allowed for fares that were 30-40% lower
than those of regular taxis. For Didi, Hitch encouraged
consumers to try Didis services at a low cost, therefore,
opening a pathway for them to convert to the more
expensive for-profit taxi service eventually
Clearly, Didi understood the local market's needs well
enough to carry out effective customer segmentation to
target the differentiated needs in its product development.
This allowed for the building of customer loyalty to the
main corporate brand, and the greater willingness to try
and switch between Didi's various services, depending
on the occasion of travel.
Uber had prioritized China as a key market for expansion
and it was befuddling to the company to be in a distantly
second position. Uber to Didi in China was like lyft to
Uber in the US. In a cruel twist of fate. Didi recently
invested $100 million in Lyft in September 2015, forming
an international ride-sharing partnership
Uber managed to capture only 11.5% of the Chinese
market, but experts did not find it surprising given
at CrossPacific Capital, commented. "When you have
China's unique institutional structures. Greg Tart partner
great technology and a great business model but don't
understand some of those local business premises.. West
Coast aggressiveness will only get you so far. China is
such a different animal in terms of dealing with the local
culture, the protectionism and the fact that you don't
have local investors." This demonstrated the need for
Case Studies 631
PART
7
8
Uber to better understand the Chinese market, rather
than merely transplanting its San Francisco model of
attracting American drivers and dealing with local
regulations. Uber thus attempted to work closely with
China's Ministry of Transport by setting up servers in
China, in an effort to obtain an internet service company
license by sharing data with local transport authorities.
Reformation in Uber's marketing strategy in China was
a priority, and steps were taken to set up local teams
to localize logistics, including language and support
services. At consumers' requests, Uber strategically
partnered with Chinese search giant Baidu, ditching
Google Maps for Baidu maps into its app. Baidu also
prominently advertised Uber on its main page with a
prominent "Get a Car" button, linking it to Uber's app.
Partnerships with Alibaba also allowed Uber to use the
simpler and non-credit card-based payment mechanism
of Alipay". This was important as many Chinese residents
did not own credit cards.
Uber competed vigorously with Didi on many other
fronts to attract drivers to sign on with their companies.
Both offered bonuses for drivers who hit ride targets, in
a bid to extend geographical coverage and reduce wait
times. This was based on an industry-wide understanding
12 The Market Mogul covers Didi's triumph over Uber in the
Chinese market in a short read: http://themarketmogul.com/
didi-kuaidi-crushes-uber-in-the-chinese-market
Ⓒ
Study Questions
1.
How could Uber retain its dominant position in the US market? Are there services and/or geographic
niche markets where Uber should accommodate Lyft?
Suitable for
Polytechnic Students
Undergraduate Students
2. How could Uber effectively compete with Didi? Should it compete head-on in China, or should it side-
step competition by focusing on niche markets through service innovation, and geographic expansion
within China?
Essentials of
Services Marketing
Published by Pearson Education
that spending cash to build an operational base as
quickly as possible leveraging on economies of scale was
the only way to win in China. As Didi's President, Jean
Liu, revealed. "By using subsidies to get more cars on
the road... waiting times were shortened, fares became
cheaper, more users were drawn on to the platform and
drivers on the platform. We have already created such a
virtuous circle of increased orders, customer retention."
To try and respond more effectively to Didi's diversification
of services, Uber looked beyond its typical car-ordering
model that worked so well in other international markets.
In August 2014, Uber announced the implementation of
People's Uber, where drivers offered "non-profit" rides
to carpooling passengers who only paid for the cost of
gas and maintenance. This was Uber's version of Didi's
Hitch, competing directly to attract people who wanted
low cost rides.
632 Case 4 - Uber: Competing as Market Leader in the US versus Being a Distant Second in China
Available in the following formats:
Paperback
• E-book
Uber seemed to be playing catch-up rather than setting
trends in the China market. The race to grab market share
was critical because it was understood that whoever got
ahead first would remain the dominant player for a long
time. Uber had to decide how to effectively compete with
a much larger competitor, where to side-step competition
and innovate new services, and where and how to go
head-on with Didi.
Services Markding
13 Financial Times reports on the intensive cash buming on
subsidies in the China market by Didi and Uber in http://www.
ft.com/intl/cms/s/0/e85cc5fa-5473-11e5-8642-453585/2cfcd.
This case is published in:
Jochen Wirtz and Christopher Lovelock (2016),
Services Marketing: People, Technology,
Strategy, 8th edition, World Scientific.
html#axzz3oUkNed
Services Marketing is available for various audiences:
Services Marketing:
People, Technology, Strategy
Click book covers for links to Amazon:
Suitable for:
Advanced Undergraduate Students
• Master's-Level MBA Students
Available in the following format
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SERVICES
MARKETING
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Bundle of Paperback & E-book
Rental 6 months
Services Marketing Series
The content in terms of core theory, models and frameworks is largely the same
across these publications. However, they are presented and designed to fit their
particular target audiences.
• Services Marketing is available in some 26 languages and adaptations for key
markets around the world
Winning
Service
Markets
Contact
For orders of individual copies, course adoptions, bulk purchases: sales@wspe.com
For orders for individual chapters, customized course packs:sales@wp.com
For adaptions or translation rights, permissions to reprint rights@wspc.com
For further information see: www.JochenWirts.com
For questions regarding contents: Jochen Wirtz, jochen@nus.edu.sg
Winning in Service Markets:
Success Through People,
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Vol 1: Understanding Service
Consumin
• Vol. 2 Positioning Services in
Competive Markets
• Vol. 3: Developing Service Products
& Brands
& Brands
• Vol. 4 Pricing Services & Revenue
Management
Vol S Service Marketing
Communications
Vol & Designing Customer Service
Processes
•
Vol 7 Balancing Demand & Capacity
in Service Operations
Vol. & Crafting the Service
Entronic
Vol & Managing People for
Advantage
V 10: Managing Customer
Relationships & Building
UN
• Vol. 11: Designing Complaint Handling
Recovery
Vol 12 Service Quality & Productivity
Management
• Vol. 12: Building a World Class
Service Organization
(Assessment Tool)
het's
Transcribed Image Text:1
2
CASE
Uber: Competing as Market Leader
04 in the US versus Being a Distant
Second in China
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 (Co-Founder)
in San Francisco. Its business model rested on the use
of an app to call for a driver at any time and location
(Exhibit I). 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 said.
The authors thank Chia En Celeste for her excellent assistance with
the data collection, analysis, and writing of this case study
1 Vanity Fair covered an interview with Travis Kalanick in December
2014; this article's insights can be found throughout the Uber
case study: http://www.vanityfair.com/news/2014/12/uber
travis kalanick controversy
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-
swould strike up a conversation during
2016 by Jochen Wirtz and Christopher Tang Jochen Wirtz is Exhibit 1 Uber's Business Model
Professor of Marketing at the National University of Singapore, and
Christopher Tang is a UCLA Distinguished Professor and the holder
of the Edward W. Carter Chain in Business Administration.
Exhibit 2 A Comparison of Uber and Lyft's Services in the US
Uber
Jochen Wirtz and Christopher Tang
UberX
The least expensive Uber service. Seats four riders. Drivers use
everyday cars that are 2,000 or newer
Based on distance, car type
demand period
Local companies may be acquired
to gain a foothold ink
626 Case 4 - Uber: Competing as Market Leader in the US versus Being a Distant Second in China
UberPOOL
Share your ride with another person and split the cost
Uber sets prices
for rides
To grow, Uber invests in
R&D and acquisitions
Fundraising from
investors conducted
occasionally
UberPlus/UberSelect
A luxury sedan that seats up to four riders. Expect a BMW,
Mercedes, Audi, etc., with a leather interior
Regulatory and legal issues
Uber uses revenues
to cover expenses,
customer acquisition,
tech development,
infrastructure, etc.
Uber reduces this percentage in
cities with strong competition
Uber splits ride
receipts with drivers,
keeping an average
of 20%
riding being a late entrant to the market entering in 360 cities in China, whereas Uber only had about
the ride.
three years after Uber, Lyft managed to operate in only 100,000 drivers in 20 cities.
65 American cities by the end of 2015. In contrast, Uber
Customers pay less for
Uber than traditional
Drivers have access to
more income.
Source
Forbes: http://www.forbes.com/swahdamodaran/2014/06/10/
dup-b-de-to-nches the ther-papo, accessed or 27, 2015
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).
China, with a projection of 221 cities containing a
population of one million or more, was a highly attractive
market for any internationally-minded taxi company.
Uber pioneered its taxi service in Shanghai in 2013.
Entering difficult markets was not new to Uber, which
had previously successfully navigated diverse markets
in the UK, India, and South Africa. Nevertheless, Uber
encountered unique roadblocks in China - strong
competitors, existing low-cost taxi services, and a lack of
know-how to navigate around local regulations and even
corrupt officials. Uber also faced tough competition from
a much larger local player, Didi-Kuaidi (known locally as
4). Didi boasted more than one million drivers
UberXL
Lyft Plus
Seats at least six passengers. An UberXL car will be an SUV or a A car that seats six or more passengers. Slightly more expensive
Minivan, Higher fare price than Uberk
than Lyft
Lyft
Lyft
The lowest cost service. A request for a Lyft will send to you a
four-seater car
Lyft Line
A ridesharing service that pairs you with other passengers who
are traveling along the same route. Similar to a carpool
UberBLACK
Uber's executive luxury service. Commercially registered and
insured livery vehicles, typically a black SUV or luxury sedan
Services are sorted according to fares in ascending order. Information adapted from http://www.ridesharingdriver.com
PART
3
4
UBER'S 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).
Uber faced many obstacles and criticism in its early years
One criticism was directed at the "surge pricing" model,
which referred to the practice of charging customers
higher prices at peak hours. It garnered a lot of attention
during a snowstorm in New York in December 2013,
when rates increased up to eight times its standard rates,
attracting a flood of negative publicity. Kalanick defended
this practice with economics-it reflected demand and
supply at any given point in time, and effectively allocated
capacity to customers who were willing to pay even
during super-peak periods. To ameliorate public outrage,
Uber eventually tweaked its pricing model and limited
fare hikes to a maximum of 2.8 times the normal fares
in the face of snowstorms in New York. Uber proudly
announced in January 2015 that it had more than 160,000
active drivers in the US who provided more than a million
rides a day.
Uber's operations covered 75% of the US population,
and even as it sets its sights on international markets, it
remained focused on growth at home. Its efforts were
surge pricing new-york-snowstorm
were successful in positioning Lyft differently, Lyff's top
management announced plans to tone down the carstache
and scrap the fist bump practice in January 2015. This
decision was made with the realization that what worked
in t the West Coast would not work in Lyft's plans to
expand to other cities in the US, or even internationally.
lyft-2015-5/VicRavke N
2 The Guardian covered the revision in surge pricing by Uber in 5 Wired Magazine reports on the changing of Lyff's most prominent
http://www.theguardian.com/technology/2015/jan/26/uber- quirks in January 2015, with reasons: http://www.wired.
com/2015/01/lyft-finally ditching furry pink mustache
Regardless of Lyft toning down its practices, it still prided
itself on its friendliness and laidback driving experience
when compared to Uber. An internal presentation from
March 2015 that was leaked to Bloomberg revealed its
criticisms of Uber for its "top-down model", "exclusive
mentality", and "anti-social culture". On the other hand,
Lyft claimed its growth to be bottom-up and led by
drivers through positive word-of-mouth marketing, 32%
of whom were female. All in all, Lyft believed itself to be
a "trusted brand" delivering a "social experience with
memorable quirks -- the carstache being one of them.
Apart from its more relaxed brand image, Lyft mainly
positioned itself as a lower-cost alternative to Uber. Since
2014, the company announced big price cuts-they first
cut prices by 20% in early 2014 and then reduced them
again by 10% in May. Lyft also used a surge-pricing
mainly channeled towards building a strong network of
drivers and improving service for consumers. These efforts
paid off-40,000 US drivers joined Uber in December
2014 alone; service efficiency saw improvements with
91% of UberX rides arriving in less than 10 minutes in
Philadelphia; and the demand for Uber peaked when
people celebrate and consume alcohol, testifying to Uber's
position as a "better late-night option". Uber also started
to pay more attention to corporate social responsibility.
For example, its program UberMILITARY led to the
hiring of 10,000 veterans-ex-military personnel - as
drivers, while the use of UberPOOL was calculated to
save more than 13,000 gallons of fuel each month in San
Francisco alone. By stretching its network of drivers
to different demographic segments in society, offering
alternative ridesharing options and reducing waiting
time. Uber was able to build on network effects for drivers
and loyalty among consumers, making it difficult for
competitors to enter and grow in its markets.
628 Case 4- Uber: Competing as Market Leader in the US versus Being a Distant Second in China
6 Eric Newcomer and Leslie Picker (2015). "Leaked Lyft Document
Reveals a Costly Battle With Uber, Bloomberg Businessweek
Retrieved from http://www.bloomberg.com/news/articles/2015-
04-30/leaked lyft-document reveals a costly battle with uber
LYFT'S 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 billion, its promising
growth bolstered by estimates of 2015 revenues to be $796
million, an impressive 512% jump from 2014.
The original version of the carstache. Retrieved from http://cdn Lyft's now moustache, tomed a "glowstache". Retrieved from http://
arstechnica.net/wp-content/uploads/2012/07/Pinkout1-640x426.jpg www.autontanews.com/c_images/hews-ft-moustache.jpg
Exhibit 3 Lyft's Pink Carstaches
7 Vator talks about Lyft's model with respect to prices and Uber's
response in 2 article written in 2014: http://vatort/news/2014.
04-24-lyft takes off-hits-24-new-cities-in-one-day and http://
vator.tv/news/2014-03-18-lyft-counters-surge-pricing-by-
While Uber touted its iconic black cars to differentiate its
luxury services for professionals (Exhibit 2), Lyft adorned
its cars with a pink moustache (Exhibit 3), which had
become an identifying factor for the company when
driving down the streets of San Francisco. This was
accompanied by the greeting of all Lyft passengers with a
fist bump. While these tongue-in-cheek communications
reducing off peak-fares
3 Uber Expansion, not officially affiliated with Uber, provides a
range of statistics pertaining to Uber's expansion in this page:
http://uberexpansion.com/2015-uber-data-stats
4 Business Insider website reported on the $2.5 billion valuation
on 15 May 2015; the whole article can be found here: http://
www.businessinsider.sg/carl-icahn-invests-150-million-in-
model; to ward off potential criticism, it provided
discounts of 10-15% during off-peak hours. While both
companies engaged in aggressive price cutting strategies
whenever they operated in the same city. Lyft drivers
typically charged- and earned-less than Uber drivers
(Exhibit 4), which was consistent with Lyft's positioning
of being a lower cost alternative.
While Lyft enjoyed strong branding and was expected to
spend a generous 60.5% of its revenue on marketing in
December 2015, its operations were not as entrenched
as Uber's. One example can be seen in its attempts to
break into New York's tight network of taxis in July
2014, where Uber had already operated for three years.
A public exposé occurred, in which the company was
issued a cease-and-desist letter by the New York State
Department of Financial Services just days before it
planned to open operations, for non-compliance with
safety requirements and licensing criteria. Uber also
aggressively cut the price of its UberX service by 20% that
week, to price itself significantly lower than regular taxis
just before Lyft entered the market. The bottom line of
Lyft and Uber's rivalry was that the latter enjoyed a first-
mover advantage and, having established a presence in
major cities beforehand, benefited from network effects
and sufficient margins which allowed it to cut prices when
needed, to erect barriers to entry and slow down the
growth of competitors. Uber's significantly higher market
valuation also helped to raise more capital each funding
8 To follow Lyft's saga in New York City in July 2014, the time period
it decided to offer its services to Hong Kong, read Bloomberg
Businessweek's exposé on the issue: http://www.bloomberg
com/news/articles/2014-07-10/lyft not authorized for new york
days before start due
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