The bloody competition of taxi-hailing apps can be won by Uber, argues business analyst Andy Mok on this page in LinkedIn. While many foreign tech firms have lost their struggle to enter the China market, Andy Mok sees five reasons why Uber might actually win this war. Here is two of them.
1.hailing is not a winner take all business
For companies commanding a certain level of resources, there are few obvious barriers to entry and the business is essentially a city-level local one. As such, each market of a certain size (e.g. 北上广深, etc.) should be able to support at least a handful of competitors – the end state is not a monopoly but most likely an oligopoly. Also, because capital requirements for market entry in any particular city is very low, even “small” cites in China can be economically viable markets for ride hailing businesses.
Next, switching costs are low to non-existent. Unlike Facebook or even Twitter, the ride hailing business has no network effects. In fact, adding more users actually degrades system performance so there is a sort of negative network effect at work. It’s also worth noting that because of low switching costs current market share is not that valuable an indicator of future or continued dominance. Aggressive pricing or new product features can result in rapid shifts in market share.
Given this, on its own and barring oligopolistic price fixing or (unlikely) government intervention, the ride hailing business would be a marginally profitable business at best.Uber is also in the business of overcoming entrenched political and special interests
2.Uber has been masterful at mobilizing public opinion and aiming it at entrenched political interests, especially local ones, and this has now become an indispensable part of its toolkit. The hiring of David Plouffe, former Obama senior political operative, and Bradley Tusk, former Michael Bloomberg campaign manager, not only legitimizes Uber’s ability in this area but also underscores its strategic importance.
What remains to be seen is how transferable these skills are to China.
Are you looking for more e-commerce experts at the China Speakers Bureau? Do check out this list.