Business Expansion of Didi Chuxing and Uber Technologies in Brazil

2021-07-28 20:06:06
3 pages
738 words
University/College: 
Vanderbilt University
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Essay
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The presence of the fifth-largest population in the world and endowment of large resources translates to huge growth in Brazil economy. The growth transforms the country into a land of opportunity attracting multinationals from Asia Pacific and Europe battling for presence and dominance in Latin America. The entry of multinationals into the Brazil market yields mixed results with failure and success experiences revealed in Didi Chuxing and Uber respectively.

Didi Chuxing reveals a remarkable story of a Chinese-founded transport company since its entry into the Brazil market. Its entry occurred through the progressive funding of 99Taxis to help it overcome Uber and Cabify rivalry. The Chinese company embraced funding rounds to purchase a stake in 99 Taxis assisted by SoftBank Group Corp., loans. Didi Kaudi through 99Taxis positioned itself as a ride-hail operator through simple intermediation between drivers and riders. The subsidiary founded in 2012, has survived the stiff competition from Uber through its affordable, convenient and consistent efficiency in service delivery. The selection of 99Taxis as its investment vehicle to penetrate the Brazil market has allowed Didi easier stake in the competitive market. The company began by pooling resources and committing them to 99Taxis to make friendly partnership (Shu, 2017). It saved the Chinese company from experiencing the limits imposed on the commercial operation capping private vehicles and lower-smartphone penetration in Brazil cities.

Unlike Uber that initiated lobbying for the legalization of peer-to-peer transportation, making friendship with the locally established firm 99Taxis allowed Didi access to seventy percent of taxi-hailing market share in the country. The Didi Chuxing expansion into Brazil emerged through investments in 99Taxis backed by SoftBank injections and finally acquired the entire company (Lunden, 2018). It embarked on building alliances on local heroes unlike Uber Technologies Inc., entry through stepping on the local toes and muscling the transport territories solo (Culpan, 2018). The Chinese company embraced indirect entry through investment rounds to 99Taxis expansion and gaining access to the firms board (Culpan, 2018).

The entry of Uber into Brazil as a solo operator found its flush wallet unable to replicate the success it experienced in other territories. The company failed to understand the cyclic collapse and booms of the countrys GDP patterns. Failure to match the affordability philosophy of dominant local brands eroded its footing in the majority of Brazil cities. Secondly, Uber stepped on legal toes resulting in conflict with the stringent commercial transportation regulations (Bhuiyan, 2016; 2017). This made it difficult for Uber to win the Brazil market for replicating their penetration strategy that worked in other territories.

Didis approach featured a must-win strategy through prioritized partnership with local heroes compared to Uber approach to peanut-butter its regional operations. The company stayed away from providing services still riddled with legal gray areas such as private car-hailing. Instead, it experimented on UberBlack-like offers within the commercially licensed black-car service (Bhuiyan, 2016). Also, 99Taxis influenced the government to consider licensing for black cars it regards as the legally licensed vehicle. The ability to influence the government engineer legislation supporting its version of services has given 99Taxis an edge over Uber currently struggling with lobbying for lenient policies on transportation regulations to survive (Bhuiyan, 2016). Didis owned 99Taxis black vehicles are permitted to use the lanes reserved for buses, hence allowing its drivers and rides circumvent the congestion and huge traffic that often plagues major towns.

The introduction of company-issued debit cards allows drivers receive immediate payment. Besides, it offers short-term loans to drivers hence yielding trust and loyalty to its employees. The drivers repay such loans through more rides (Bhuiyan, 2016). Conversely the decision by Uber to replicate their global strategy in Brazil, Didi uses the hyperlocal approach in 99Taxis hence making it uniquely suited to overcome market mismatch.

 

References

Bhuiyan, J. (2016, April 04). Meet the Companies Trying to Dominate the Latin-American Ride-Hail Industry -- And Edge Out Uber. Recode. Retrieved January 04, 2018, from https://www.recode.net/2016/4/4/11585804/meet-the-companies-trying-to-dominate-the-latin-american-ride-hail

Bhuiyan, J. (2017, July 23). Didi and SoftBank are investing $2 billion in ride-hail company Grab. Recode. Retrieved January 04, 2018, from https://www.recode.net/2017/7/23/16018112/didi-softbank-grab-southeast-asia-funding-2-billion-dollars

Culpan, T. (2018, January 14). Didi's Got 99 Taxis. Brazil's Just One of Them. Bloomberg Businessweek. Retrieved January 04, 2018, from https://www.bloomberg.com/news/articles/2018-01-04/didi-s-got-99-taxis-brazil-s-just-one-of-them

Lunden, I. (2018, January 03). Didi confirms it has acquired 99 in Brazil to expand in Latin America. Tech Crunch. Retrieved January 04, 2018, from https://techcrunch.com/2018/01/03/didi-confirms-it-has-acquired-99-in-brazil-to-expand-in-latin-america/

Shu, C. (2017, May 14). SoftBank adds Brazils 99 to its ridesharing portfolio with a $100 million investment. Tech Crunch. Retrieved January 04, 2018, from https://techcrunch.com/2017/05/24/softbank-adds-brazils-99-to-its-ridesharing-portfolio-with-a-100-million-investment/

 

 

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