INDIAN INSTITUTE OF MANAGEMENT SAMBALPUR

Strategic Management
End-Term Exam
Time Allowed – 2.5 hours

Name:
Section: Roll number
Points for each question are in the bracket
• INSTRUCTION: There are total 50 points; Points for each question are in the bracket
• This is an open book exam.
• All your answer will first be screened for plagiarism checks and if found positive
severe penalty will be imposed as per instructor’s discretion.
• Reproducing the case facts would attract no / negative points.
1. What is the competitive advantage of Didi in China? What is
the competitive advantage of Uber? How transferable is
Uber’s competitive advantage to an emerging market such as
China? [10]
Didi has a unique set of business strategies than its competitors, giving
it a competitive advantage over the other service provider and
providing Didi with an exceptional value. They are using the mix of
the business strategy with the technology aspect to deliver higher
value. For booking a taxi, there is no need to call the operator. The
user can book the taxi with a single click. They are also tied up with
various social, mobile app providers and entered into the market to
create a monopoly. However, the joint venture with the mobile social
app provides them a unique value delivery system, and the user is
enjoying the service hassle-free. The partnership includes WeChat and
mobile QQ app. Using the integration of technology with single-click
booking, they have provided the option of digital payment
transactions. Again, the customers used this intensively and helped
Didi become the market leader by taking 99% of the market share in
control.
The competitive advantage of Uber:
uber is having a global presence, and thus it has an excellent
worldwide network and has a large set of customers. In any business,
the customers are the primary source for success and are the reasons
for good revenue. To any driver or taxi owner, Uber is the best
platform as they have many customer pools. The large customer base
of uber gives him a competitive advantage over other service provider.
Also, it eliminates the threat of new entrants for uber. The car used as
can an uber service delivery has no need to pay the insurance or any
other business charges to the government, so this provides the cost
advantage to the taxi driver and creates value for them by giving the
cost advantage. And due to this, it was easy for them to attract new
drivers and customers at new locations also.
Uber entered china despite the fact that the market is dominated by
some of the key players like didi. They used the global expansion
strategy and entered china, and hired various operation managers to
ensure the localization of service. As a global presence, many of the
costumes that have already used the services will be loyal to the
company.
2. How does creating and maintaining competitive advantages in a
platform business like Uber differ from a vertical chain
business like a taxi company? [10]
Uber positioned itself as the technology company and not the taxi
service provider. They provide software and technology as a service
to the riders and drivers and profit from it. The taxi companies that
buy the taxis and then renting are doing the vertical integration, while
uber's strategy is to provide a platform for service operation without
vertical integration in the business model. They are creating the
business's monopoly by using different strategies and trying to control
the global market by having a global presence. The platform business
has the primary source used as the platform's network and the cost of
operations, and the service provider's lack of preference. The strong
use of technology integrates the integration of the internet services
with the extensive network of customers, with the online payment
system and driver network, they are creating values. Uber does not
need to worry about the homing cost as they do not own any cab or
taxis. It's the driver's responsibility for the maintenance of vehicles.
The vertically integrated taxi companies need to have bought the
vehicle and then hire drivers and need to look for the maintenance of
the vehicle, which increases the cost to the company. Also, the
switching cost was low, to customers shift to new service providers.
Talking about uber as they are not hiring any drivers and not owning
the cabs, they have very less operation cost. Also, they charge very
little commission to the drivers that range between 5-20%. They don't
need to hire cabs or drivers. The networking effect helps them grow
their business. The people who own the vertical integration strategy
can use the uber service to earn money as the car may be standing still
in front of the house. So basically, it's providing the opportunity to the
car owner to derive some value out of it rather than letting the car still
in front of the house. This helps uber to lower the fare charges, and
this creates a win-win for both drivers and uber. The popularity has
grown up as they are rarely providing convenience service and are
delivering good values to the customers.

3. Moreover, why do some platform businesses—such as Alibaba,

Facebook, and Airbnb—flourish, while Uber, Didi, and
Meituan, among others, haemorrhage cash? [10+5]
At the time when uber entered the Asian market, GrabTaxi was a
newcomer; at that time, the expert predicted that the taxi behemoth
would throw them out. GrabTaxi was moving slowly, and they were
having the advantage over uber as they were having a better
understanding regarding geographic and cultural awareness. Also, the
business approach of both companies was far different from each
other. Grab taxi is taking a more personalized and welcoming
experience to its customers. They have a higher preference for the
community and value system.
Uber is a cab giant with a global presence. They are committed to
providing the standard service to all the customers across the globe in
every region of the world.

Grabtaxi, adopted on t another hand, has diversified the services they

are providing. It was like they have created the mega app that can be
used to perform various sets of booking. They allowed a variety of
customers' business market to join them, including On-demand
streaming, food service, ticket, grocery, hotels, and many other
services.

They are basically providing all the services under the same app. it
was like the umbrella business model. The digital market is the major
market where entry is easy and gaining customers and earning
revenue is easy compared to the other market segment and to get to
the top, but it's hard to maintain the position. there are some key
success factors involves in the industry.:
• Network
• Clustering
• Risk of disintermediation
• Vulnerability to multihoming
• multiple networks bridging

Uber uses the clustering model, and this makes the cluster of the
drivers in a particular locality. This makes the drivers from the
different clusters that what ios happening into te another cluster as
there are various subgroups on the network. This seems good as a
business strategy, but the loopholes in this model can be used by the
competitor to capture the unseen market share, and this is what
exactly happened. GrabTaxi, as a competitive advantage is having
experience of local culture and is having complex network without a
cluster and hence it can make uber go out of the market in upcoming
years.
Some digital networks are broken into small groups. In uber case, the
local people and customers interact with the different sets o people on
the network and not with the people of their household locality. There
are many other companies that are using the network effect, and on an
industrial scale, there are very few networks of this much size. So it
makes the new competitor enter this market and fight with these
giantwith global networks. This was the issue with uber.

4. What is Uber’s value innovation? How did Uber create a blue

ocean? [10]
Uber created the value by connecting the people needing the cab
service with the peoples tat are having cabs and are ready to serve as
the cab service.Uber adopted the blue ocean strategy as they do not
fall in the copetition with the player in the red marjet, the red ocean
players are havinf the vertical integration of the business from owning
the cab to maintaining entire process in service and thus the operation
cost for these companies was high,. while the startegy of uber of not
owing the vehicle or hiring the drivers. there zre various conflicts that
are arising in the verticl integrated traditional business models. By
eliminating the conficts they are creating the convenience to the
costumers. Uber also enhances the business by lowering the time for
pick-up and providing quick matching with the nearby drivers to drop
to the desired location.
they initially started as the taxi app provider but as the business runs
and time passes the business startegy also get changed. After growing
and gaining the competitive advantage, they analysed the market
potential to gain the profits.they focused on value delivery by
enhancing the satisfaction level, they expanded aggressively
throughout the globe. they positioned themself as reliable and
convenient service provider and hence they adopted the blue ocean
strategy by differentiating themselves from the red ocean companies.
They provide the low-cost service and generating theb profits for the
company and drivers they suceeded in the market.
The ERRC framework provided them the value creation area.
Eliminate: various transaction and operational cost are eliminated in
uber service. Also the mediatior cost like tipping and argument issues,
cancellation issues were eliminated.
Raise:they are raised the chances of getting better serbvice with the
additional service of live location, before hand fair prices,chances of
getting cab at any time at any location. they are basically raised the
productivity, value and convenient level to the costumers.also raised
the employment rates.
Reduce: they have reduced the pickup time and the useless time for
drivers and cab owners is also reduced. they also reduceds the time
required in transactionnof payment bt providing th eonline payment
service.
Create: they have create dthe platform to costumers abn ddrivers by
the netwprking effect and has creted value for userd and a source of
additional income to the cab owners.

5. What should Uber do regarding its surge pricing model?

Would you keep the surge pricing model? Why/why not? [5]

uber uses the surging price model. by using this model uber chnages
the fare of the cab based ion the demand and supply of the cabs
during that time for the desired location. so baiscally its the demand
and suplly pf th ecan. ss the riders are more nad the cab available are
less thay increases the fare prices and vice versa, but the fare prices
are capped by upper limit to avind the costomers from paying higher
prices for the sevice.this situation happens generally during peak
times as there are sudden increase of travellers uring the festival
season. so the number iof traveller is also increased and tus the fare
prices are seems to be higher than usual.
I personally will not use the price surge model as this may sometimes
creates the costumer dissac=tisfaction as in case of price sensiotive
marjet the main reason for tyhe costumers using our service would be
the prices pf the service amnd if we remove that value from the
costumer then we will be facing the chnaces of costumers shifthing to
other serv9ice [providers. So, better than this we can try to ibcred ethe
number of cabs at that particular time at that partiular location adn try
ro lower doen the fare sto normal level or to not much increade in the
fare proices.
fill th eextra demand with extra suppily as te competition i tough and
wr may lose the costomer.

Uber can take the following actions to solve the price surge proble
• cap prioce on upper limit: there is a factor that major the
demand and suppily and then according multipy the fare to
increase the prices so we can capped the upper limit for this
multiplier and set the limit to tackel the high increase of the
prices.

• the prices fluctuates very frequently as the algoritm chnages the

fare based on demand nad suppily. this is iorritating sometimes
so thay can reduce the frequenbcy of changung fares.