Uber and its global strategy

Think local to expand global will that work!

Suhas Manangi 12/10/2016
Abstract: Not to prejudice the thought process but Think local to expand
global is not Ubers global expansion strategy. Through this paper, I am
investigating Ubers global expansion strategy and comparing it with Think
local to expand global. Would we consider Ubers global expansion strategy
a success, will it sustain, and how relevant is think local to expand global
approach to problem solving in startup world.

Brief history
Silicon Valley entrepreneurs Garrett Camp and Travis Kalanick had a big year
in 2007. Garrett Camp had completed the sale of StumbleUpon to eBay and
Travis Kalanick had sold Red Swoosh to Akamai Technologies. In December
2008, the two met in Paris for the annual LeWeb conference for startups and
web entrepreneurs.
The initial vision to address the taxi problem involved connecting
passengers with drivers using mobile technology. Over the next several
months, Garrett worked with a small team on a prototype for a mobile
application. Travis joined in 2009 to assist in guiding the initial product
launch, which involved building up a network of drivers and refining the
business model. In June 2010, 18 months after the founders began
discussing the idea in Paris, Uber officially launched in the San Francisco

market as a disruptive, mobile technology enabled alternative to the

traditional taxi and transportation options available.

Take off
Since it was founded in 2009, Uber has become one of the fastest growing
start-ups in Silicon Valley, with a reported $1.5 billion annual revenue and
an estimated worth of USD $62.5 billion, consistent exponential revenue
growth.
With its services now offered in more than 65 countries and over 450 cities
worldwide, Uber has been undergoing one of the mobile app industrys
fastest global expansions. Only 3 years after launching their first non-US city
in Paris in December 2011, Uber was reaching a growth rate of launching a
new city per day by the end of 2014.

Global expansion plans

No doubt Uber was global to begin with. Uber took up a problem to solve that
is truly global, came up with the idea in Paris, launched it in the San
Francisco market, and 7 years later they are in 450+ markets all over the
world. In fewer than seven years, Uber has managed to expand from North
America to every populated continent Europe, Asia, South America, Africa,
and Australia.
And if that werent enough, Uber recently expanded its offerings in markets
like Thailand and India with a rickshaw and motorbike service. That kind of

growth in product and geographic scope is unprecedented. No technology

company

has

experienced

these

challenges

and

turned

them

into

opportunities more acutely than Uber. Uber moved faster than any other
company going international.
And because of money that is earmarked for foreign clones of successful U.S.
companies, if you dont move quickly, the clones will pop up fast. This is a
well-known and adopted business models around the globe by local startups
and companies going after successful business ideas from elsewhere. Few of
the well-known ones to call out that forced Uber to rapidly expand globally to
be early movers in the market and not lose the market for local clones.
1. Lyft in US that launched around the same time as Uber could have
beaten Uber and gone global sooner
2. Curb is now available in more than 60 U.S. cities, Curb is a taxi-hailing
app that works directly with licensed taxi drivers, and allows payment
within the app, with cash or in any other method available in the
specific car (e.g., if the taxi takes credit cards). One benefit of Curb is
that you can schedule rides up to 24 hours in advance.
3. 99taxis is popular in Rio (and throughout Brazil), and is expanding into
Europe. The service connects riders with taxi drivers, and uses Paypal
inside the app to process payments.
4. Careem is available in many cities across northern Africa and the
Middle East, and offers multiple levels of service as well as the ability
to book in advance. Careem is a pretty robust service, and has some

features of more traditional travel companies, including the ability to

earn air miles
5. Didi Chuxing or Didi Dache is now covering hundreds of cities, with
drivers numbering in the millions, Didi Chuxing is often called the
"Uber of China." In addition to hailing cars, you can use the service to
set up a carpool, hire a designated driver or find a car tailored to
people with disabilities. After a long, fierce price war between the two
companies, Uber China recently decided to sell itself to Didi Chuxing.
6. EasyTaxi appears to be the biggest service/app for hailing licensed
taxis in the world, and works especially well in places that have banned
Uber and similar services (Buenos Aires, Rio). Founded in Brazil, the
company has expanded beyond South and Central America to include
cities in Africa, the Middle East and Asia.
7. Gett offers service in Israel, Russia and London, as well as Manhattan,
where it has an interesting twist: a flat $10 fare for anywhere you want
to go, so long as your pick-up and drop-off are in Manhattan south of
110th Street.
8. In Indonesia, a market that's among the most social-media-savvy in
the world, Uber's main rival is a motorcycle taxi service call Go-Jek
9. GrabTaxi is widely available in Southeast Asia, with more than 75,000
drivers and almost 4 million users in Indonesia, Malaysia (where it is
known as MyTeksi), the Philippines, Singapore, Thailand and Vietnam.
While Grab is mainly a licensed taxi app, the company also offers
GrabCar, which uses a peer-to-peer approach, and GrabBike, a
motorcycle version of the service. The latter is a good option to

counter the extreme congestion in many cities it serves, as motorbikes

can thread through traffic much more quickly than cars.
10.
Ola is India's biggest ridesharing company and offers almost
every type of ride imaginable, from luxury cars and licensed cabs to
Uber-type drivers and even rickshaw rides. Ola Cabs is one of the
biggest ride-hailing app and closest competitor of Uber in India. Having
bought TaxiForSure, one of the other bigger ride-haling services in
India, Ola Cabs has easily one of the biggest fleet of vehicles and
covers over 80 cities across all of India. Ola Cabs offer one of the
lowest fare prices among the different ride-hailing services currently
active in India.
11.
Takkun is Tokyo's largest taxi-dispatching system, including a
total of about 12,000 cars. Tokyo's taxis cost less than Uber.
12.
Ingogo is another one of the popular taxi-hailing app in Australia.
Ingogo allows users to pre-book a ride up to 48 hours in advance and
users can live-track their ride using the mobile applications. A fixed
rate system and cashless payment methods make Ingogo another one
of the most popular taxi-hailing services in Australia.

Global expansion insights

What made the startup successful in the U.S. wont work elsewhere. Startups
must drastically adapt for Asia markets. When companies expand abroad,
they face unfamiliar cultural, political, and economic environments that put
additional, unforeseen pressures on their domestic business models. They

also face competitors who understand the local environment far better than
they do.
Asia is a different market compared to US, Canada or Europe. Challenges are
different and culture is different, expectations are different, everything is
different. Only thing common is the transportation problem to solve.
Localization is a key ingredient of Ubers Asia Pacific (APAC) marketing
strategy as it battles to stay ahead of regional competition. However
localization goes beyond services. It might include cash payments for some
emerging markets where credit cards are not feasible, or in China, where
Uber has partnered with Alibabas Alipay system the preferred payment
method of Chinese consumers. Uber calls its globalization strategy launch
playbook, a list of business strategies and operating guidelines that have
been compiled by an internal team of about 40 employees. At the same
time, Uber is smart to have flexibility in different markets that local Uber
leaders can adapt and not have the same features everywhere: For example:
1. Lion City Rentals, the Uber subsidiary, has about 300 cars. Within two
to three years it will be by far the biggest car rental company
in Singapore. This is quite far from Uber core business value of not
owning cars.
2. Uber offers different products for different cities, such as UberAUTO,
which was launched in New Delhi in April to accommodate autorickshaw users.
3. The business has launched UberBOATS in Istanbul
4. UberCHOPPER in Shanghai.

Uber has not been so lucky outside the US. Beyond its well-documented
troubles in China, it is also struggling in Europe. The young tech company
has committed a classic globalization mistake: it naively assumed that its
business model and market approach, which ultimately solidified its marketleading position in the U.S., could translate just as seamlessly to other
countries. It severely underestimated the challenges of operating in
countries that embody totally different economic, political, and cultural
environments.
Political: When it comes to political differences, Ubers devil-may-care
approach of asking for forgiveness (instead of for permission) works better in
countries with legal systems based in common law. In common law countries
like the US, Canada and the UK, laws and regulations are more flexible and
subject to judicial interpretation. Uber is therefore afforded greater latitude
when arguing the legality of its case in the courts of law. In the U.S., Uber
has maneuvered to generate consumer enthusiasm for its service and then
bring pressure on local politicians to develop rules that allow it to operate.
Such an entry approach is difficult, however, in civil law countries like China,
France, Germany, Spain, and much of continental Europe. Civil law systems
have their foundation in Roman Law and are based on doctrine, core
principles, and codified rules. As a result, laws are more rigid and the role of
the judicial system is to enforce, rather than interpret, the law. In that sense,
an adversarial stance toward Ubers less-than-by-the-book adherence to the
law should have been expected.

Cultural: Critically, Uber also failed to properly acknowledge the subtle and
nuanced cultural differences between the US and foreign countries, thereby
failing to win in the court of public opinion. The US has a particularly strong
emphasis on individualist principles: individuals are encouraged to take
chances to assert their individuality and pursue their individual self-interests.
But in Asia, and in European countries like France and Spain, group harmony
and societal order are stressed over individual achievement. There is a
greater concern for others, a greater emphasis placed on personal
relationships, and a greater sense of kinship and solidarity built into each
countrys social compact. It is therefore not surprising that local consumers
are skeptical of Ubers aggressive entry tactics, lack of consideration for local
authorities, and inability to foster genuine and trusting local relationships
Because of misreading political and cultural environments and adopting a
flawed approach to global expansion, not only is Uber losing more than $1
billion in China, but it is at a distinct disadvantage to local companies like
Didi Kuadi and Ola in many of the foreign markets it operates. It has been
banned from operating in parts of France, Germany, Spain, the Netherlands,
and Belgium. It has been accused of willfully ignoring and breaking the law,
placing both drivers and riders in peril. And its presence in various countries
has generated an incredible backlash protests, riots, clashes with angry
labor unions, and an endless litany of customer complaints.
A brief international public-relations crisis ensued in October, when the Lyon
(France) office ran a promotion offering customers a ride with an incredibly

hot chick. The trouble blew over after executives from San Francisco
stepped in to stop the ad campaign. In India, Ubers biggest market outside
the U.S., the central bank threatened to shut it down for skirting
cybersecurity regulations by routing payments through a foreign subsidiary.
The company announced in a Nov. 12 blog post that it would comply with
Indian laws by hiring Paytm, a local mobile payments business, to set up
virtual wallets for Indian users.
Its been tougher for Uber to deal with local regulators and labor groups
complaining that the company operates as an unlicensed taxi service and
drains money from their transportation markets. Taxi drivers organized antiUber protests this summer that blocked streets in London and Western
European cities. In the past six months, governments in Australia, Belgium,
Germany, and the Philippines have instituted short-lived bans on the service
or levied stiff fines on its drivers. Cabbies barricaded the door at the party
celebrating Ubers Milan debut.

How is Uber doing globally:

Countries/Re
gions

Details of market penetrations and challenges

US and

Bloomberg reports Uber lost $1.27 billion in the first half

Canada

of this year, which is unprecedented, even for a tech

company. Uber is clearly playing by the same grow first,
make money later edict of Silicon Valley, so it should be
no surprise the companys costs have increased as its
operations expand into new cities. Ubers market gain in
US and Canada is paying for the operational losses for all
the global expansion mishaps.

South America

Uber sees Latin America as the Promised Land:

somewhere it can grow rapidly facing weak, under-funded
competition. Thats not how the rest of the world looks.
India remains expensive and competitive, as Uber dukes it
out with Ola, backed by Softbank. Europe has a lot of
regulations to contend with. Even in the U.S., Uber burned
through $100 million in the second three months of this
year, fending off rival Lyft. In Latin America, however,
Ubers primary ride-hailing competitors are less
established and just dont have enough money right now
to make Ubers life too difficult. The company is already
doing about twice as many trips a month in Latin America
as it is in India.
Uber to win over Latin America, it will need to navigate

disparate regulations and cultures in dozens of countries.

Buenos Aires, the most populous city in Argentina, has
issued Uber multiple notices that it should stop operating
since it is not registered as a taxi service. Uber has said
that since it isnt a taxi service, the company has the right
to operate there. In Bogota, Colombia, the countrys taxi
unions have campaigned vehemently against Uber.
Europe

Uber which launched in Europe five years ago, has faced

fierce opposition from regular taxi companies and some
local authorities, who fear it creates unfair competition
because it is not bound by strict local licensing and safety
rules. Uber Pop is now banned in France, Germany, Italy
and Spain, and the company is appealing pending bans in
the Netherlands and Belgium

Middle East

Since launching in the UAE in 2013, Uber is now available

in nine countries and 15 cities in the region, including
Cairo, Amman, Beirut, Manama and Doha. Business is
especially brisk in Saudi Arabia, where on June 1 the
Public Investment Fund announced it was investing
$3.5bn in the company.

Africa

Uber entered South Africa in 2013, Nigeria in 2014. Ubers

march across Africa might also be because of fewer
regulations for taxis across the continent. While Uber has

inspired a series of new players in the market, none of

them have made much of a dent in Ubers expansion in
Africa. It remains the most ubiquitous hailing app and has
both Kenyan and South African government officials on its
side in clashes with metered cabs. It also had incredibly
deep pocketsthis week it just received its largest ever
single cash infusion of $3.5 billion from Saudi Arabia.
Ultimately, Ubers adaptation to regional markets, like the
introduction of cash payments, gives it local flexibility
with global clout. For both investors and drivers, Uber is
the most reliable ride-hailing app in Africa.
Uber recently revealed that it is losing more than $1
China
billion per year in China. This is a colossal sum of money
for any company, let alone one that has been in business
for less than a decade. Despite the eye-popping headline
number, Uber claims that its losses in China are nothing
to be concerned about. Per its chief executive and founder
Travis Kalanick, Uber is in a much better market position
than its chief Chinese rival, Didi Kuadi, and he believes
Uber can weather its early stumbles there by subsidizing
losses with profits from other operations. As a private
company, Uber discloses little about its spending but one
indicator of the scale is its $1.2 billion funding for its

China unit in September. Leaked financial documents

show Uber overall lost more than $100 million in the 2nd
quarter of 2014.
On Aug. 1, Uber agreed to leave China after losing more
than $2 billion in two years doing war with its ride-hailing
rival Didi

Chuxing.

Both

companies

were

heavily

subsidizing rides, burning through cash. Uber didnt walk

away empty-handed. The company took a 17.5 percent
stake in Didis business in exchange for an exit.
Before Uber arrived in India though, another company
India
could implement a similar model here, and today, Ola is
one of the most well-funded tech startups in India. It
raised over $900 million in 2015 alone, valued at over $5
billion. Uber's launch playbook hasn't seen it take a
position of dominance in India, where Ola is providing real
competition. Uber is leading in marketing innovation in
India but still lacks market share compared to Ola:
1. On the eve of Independence Day (15th August
2016 - India) - they turned all the Uber cabs to
Indian flag (Tri color)
2. Olympic 2016 winner P.V. Sindhu won a silver
medal and they turned all the cabs into shuttles.
3. UberPatang - One of Ubers localized marketing
campaigns in India featured on-demand kites for

Makar Sankranti, a Hindu festival that uses them

South East

In Singapore, by contrast, the government strictly controls

Asia

the number of cars on the road--and thus Uber's problem

is not too many cars, but too few.
Uber faces increasing competition in Southeast Asia, such
as from Gojek in Indonesia.
Uber is only active in 15 Southeast Asian cities and the
region hasn't previously been a huge priority for the
company although it says it's already profitable in the
Philippines and Singapore. Post to China exit Uber may go
more active in South East Asia regions.

Australia

Uber launched in Australia in October 2012. Since then

Uber has become major player in Australia with little to no
resistance. Market reception and adoption is in similar
lines of US and Canada.

Strategy mistake from the start

CEO Travis Kalanick was scheduled to give a keynote presentation at LeWeb,
the annual European tech conference, in December 2011. When he casually
mentioned that it would be great to launch Uber Paris at the conference,
Mina and the rest of their team got right on board and started planning. They
were set to launch in 30 days. With no prior international launch experience.

Yikes. In the end, the Uber team hit their target date and launched Paris at
the LeWeb Conference in December 2011. However, then they spent the
next 6 months completely revamping the whole system: rewriting,
refactoring, rebuilding, redesigning their original launch. You dont turn on
every corner of the world overnight. Rather, you work your way through
different geographies in some priority order.
Uber has exited from China market, not find success in Europe market, not
able to penetrate South East Asia market, tough competition in India.
Although Uber has seen significant success in US, Canada, Latin America,
Africa and Middle East. Its global expansion strategy is not sustainable unless
Uber makes serious changes to its launch playbook.
So how could Uber have avoided this mess and what to change?
1. The

young,

talented,

and

well-endowed

company

should

have

recognized that China, India, and Europe, though rife with economic
potential, differ in meaningful ways from the US.
2. It should have taken a careful look at its practices and policies to
consider whether they were appropriate to each specific country. Uber
would have fared better asking for permission to operate from the
proper authorities and thus conveying its respect for established
regulations and institutions, no matter how time consuming it may
seem.

3. It also should have invested time in building relationships with the

various unions that represent taxi drivers rather than foment hostile
reactions with aggressive entry tactics.
4. Good planning and fast execution are a delicate balance. A good plan
today is better than a perfect plan tomorrow. Uber seem to have no
plan at all but learning and adapting on the go, which is fine but is
costly. Three main things to take care in the globalization planning are:
Firstly, Pre-planning - defining your geographic expansion strategy.
Secondly, Content - marketing, communication and design. And Lastly,
Operations - payments and legal.
5. Uber has never acquired or partnered with any of its local rivals, it is
trying to do everything on its own which is a strategic mistake and a
challenge.
6. Uber has significantly adapted over last 2 years to cater to local
market demands and aspirations. This is summary of what Uber has
done and should continue to bet harder on this:

Strategically plan your localization by country and timeline

Ready your code for internationalization

Build tools and frameworks that help automate and optimize the
translation and update processes

Prioritize high-quality translated and visual content that speak to

your local market while staying true to your brand

Local problems are often global, often same solutions that work locally can
work globally. The key is in the localization and execution of solution that fits

the local market aspirations, economic, political and cultural values. Uber has
realized this after very expensive experiments, not all companies let alone
startups will have the capital strength for such expensive experiments but an
learn from Ubers evolution.