Meng Tao, International Business College Dongbei University of Finance
and Economics China. Email: mengtao@dufe.edu.cn
Guan Yuqiao, IBC, Dongbei University, China. Email: gyuqiao@qq.com
Muhammad Zahid Nawaz, IBC, Dongbei University, China. Email: zahid.n@live.com
Muhammad Nauman Shafique, IBC, Dongbei University, China. Email: shafique.nouman@gmail.com
Abstract. With the development of ‘Internet +’, a new business
model the Sharing Economy is booming which as a revolutionary power to
overthrow the business modes of traditional industries. The development of
sharing economy has unique advantages and urgent reality in China. Therefore,
based on the current situation of sharing economy, this paper analyzes and
contrasts the business models of Uber and the Didi by using Johnson and
Christensen's ‘Four Elements’business model，concludes business model of
sharing economy should have certain characteristics, such as advocated sharing
concept, setting up the Internet platform, providing personalized service,
establishing the trust mechanism, the supply and demand matching reshaped. Finally,
this paper provides comprehensive suggestions for the better development of
Chinese enterprises under the sharing economy: enterprises should know their
own advantages, not blindly copying the world's leading enterprises, and make
effort to build a new model with Chinese characteristics to sharingeconomy;
create "Internet platform+ cooperation partner+ customers” model and seek
cross-border collaboration; In-depth understanding and analysis the macro and
micro-environment of international market, seeking cooperation with foreign
domestic enterprise, to speed up enterprises to "go out"
Keywords: Sharing
Economy, Business Model, Value Proposition
Introduction
In recent years, with the rapid
development and spread of the mobile Internet technology, an increasing number
of online consumers have begun to understand and accept the phenomenon of
"Sharing Economy". People have started using sharing resources to
solve their practical needs in the work, routine life and also in other aspects. Sharing
economy is changing people's lifestyle and consumption patterns, and the
business model of sharing economy has gradually developed into a new business
model that will affect the global economic development under the era of
"Internet+". Moreover, first time the sharing economy has been
announced to upgrade as a national strategy in Chinese "13th Five-Year
Plan". Meanwhile, in China, it has rapidly emerged into a group of sharing
economy models of service enterprises such as Didi Taxi (short for “Didi”),
Xiaozhu etc.
Uber, born at Silicon Valley of the United States in 2009, is the
ancestor of O2O global taxi service application and the representative
enterprise that enlightens and leads the global sharing economy. Didi was born
in Beijing Zhongguancun in 2012, which act as a representative enterprise of
China's "Internet+ convenient transportation". The valuation of Didi
enterprise has reached up to 25 billion dollars in 2016, which has become the
fastest-growing and world's leading platform for sharing economy in the
transportation sector. Therefore, it is necessary to analyze and compare the
business models of the global representative enterprise Uber and the local one
Didi, under the background of accelerating development of sharing economy in
China. Understanding their various macro-environments and reasons, in order to
help sharing economy enterprises, both locally and globally, develop healthy
and rapidly.
Literature Review
Sharing Economy
"Sharing economy" earliest appeared with the word
"Collaborative Consumption" in American
Behavioral Scientist in 1978, referring to the process by which individuals
or individuals join with others together in common activities and consume
economic products or services. In 2010, Botsman and Rogers found that people
began to pay more attention to the use value rather than the private value of a
product, the sharing rather than the exclusiveness characteristic. And
following the publication of “What's Mine is Yours: How collaborative
consumption is changing the world”, points out “Collaborative Consumption
”would revolutionize personal consumption patterns (Botsman &
Rogers, 2010). The dominant idea is that the smart choice is to
“share rather than own”, leading to a sustainable decrease in personal
consumption, ownership and waste (Sheth, Sethia, &
Srinivas, 2011). However, Belk considered it too broad, and limited
“Collaborative Consumption” to only if people pay certain returns to get the
corresponding resources (Belk, 2014). When traditional concept is embedded into the social
networking, "collaborative consumption" under the Web 2.0 era is
defined as through social networking, peers to peers use the way of renting or
exchanging to obtain, give or share the right of using goods and services (Hamari, Sjöklint,
& Ukkonen, 2016). The Web 2.0 has transformed how people can connect
with communities and share information online (Belk, 2009). However, references to collaborative consumption
have been subsequently surpassed by references to the sharing economy,
emphasizing that the sharing economy has become the predominant concept.
Rifkin (2014), an economist who
wrote The Zero Marginal Cost Society
points out that sharing economy is a new type of economy that gradually moves
towards the world stage. However, the term of sharing economy still now has not
been proposed a great number of definitions in academic literature. Stephany (2015) defines sharing
economy as the process of weakening ownership by providing access to
underutilized products over the Internet to other users. It refers to economic
issues and goes beyond renting goods at lower costs, or with lower
transactional overhead, than buying or renting through a traditional provider (Zervas, Proserpio,
& Byers, 2015). Coehn argued that "sharing economy" refers
to a system of direct exchange of goods and services between individuals that
covers all aspects of life, including car sharing, housing sharing, the
exchange of unused goods, etc., which all carried out via the Internet (Richardson &
Lizzie, 2015). At present, there are also two representative
definitions of sharing economy in China. One has been from "China's Sharing Economic Development Report
2016" published by the State Information Center is defined “Sharing
Economy” as the sum of economic activities that utilizes the modern information
technologies such as the Internet to integrate and share the vast amount of
decentralized spare resources, in order to meet diversified needs. The other
one, Tencent Institute defines it as an economic phenomenon in which the public
share their spare resources with others via social platforms to earn income (Ma huateng, Zhang
xiaolong, Sun yi, & xiongshan, 2016).
Still now, there is not a unified standard for the classification of
the application of "sharing economy". The recognition and application
by many scholars are the division of economic categories by Botsman and Rogers (2011): The first
category is product service, which is based on a brand new " Use
"concept that only pay for the value of the product, without regard to
ownership of the product, such as Uber, Didi and Airbnb; and the second
category is based on the circulation of second-hand items such as Swaptree; The
third category is based on assets, skills, time sharing of economic lifestyles,
such as P2P lending.
Business Models
Business Model & Innovation
Business model is a conceptual tool built on a variety of components
and relationships, which illustrates the particular business logic of an
enterprise. Zott and Amit (2010) defined that
business model is a series of interdependent activities that consist of
customer value proposition, value creation, and value acquisition. The purpose
of the business model is to jointly create value and share value, which covers
the enterprise to meet the customer value proposition and value creation,
finally obtain the value of conceptual model. Under the Big Data era of
"Internet +," the success of an enterprise depends not only on new
technologies but also on new thinking about how the Big Data era has evolved.
At present, scholars from various countries demonstrate the importance
of business model innovation in strategic, technical, marketing and business
model perspectives. From the business strategy point of view, Markides (2006) emphasized the
disruptiveness of business model innovation: business model innovation is, to
some extent, is the subversion of the existing assumptions and conventions to
the industry. Technically, Chesbrough (2006)proposed an open
innovation theory and pointed out that companies must create business models
that match their core technologies. (Xie, 2012) argued that business model innovation does not
originate from the invention of technology itself, but from insight into customer
needs and a redefinition of value propositions. From the aspect of marketing,
marketing scholars mainly define the concept of business model innovation from
the perspective of orientation. Aspara, Hietanen, and Tikkanen (2010) pointed out that
business model innovation is driven by the proactive market rather than the
reactive market. From a business model perspective, Casadesus-Masanell and Ricart (2010) saw the business
model as "the behavioral logic of business," arguing that business
model innovation is the business that creates and delivers value to
stakeholders based on new behavioral logic, focusing primarily on exploring new
revenue models and redefining the value propositions of customers, suppliers,
and partners.
‘Four Elements’ Business Model
Figure 1 Johnson
& Christensen’s ‘Four Elements ‘Business Mode
The four elements model is a representative model of business model
proposed by Johnson and Christensen (see
Figure 1), which is composed of and interacts with four elements: customer value
proposition, profit model, key resources and key processes (Johnson, et al,
2008). Specifically, the element of customer value proposition aims at
explaining and analyzing how enterprises help customers achieve important goals
from three aspects: the target customer, the task to be fulfilled and the
offering. The profit model element discusses how enterprises create value for
themselves including income model, cost structure, profit model, etc.
The key resource element is an indispensable
linkin the process of delivering value propositions to the target market
segments. It involves the utilization of resources by personnel, technology,
products, services, information, channels, brands, partners and alliances and
their interactions; Key process elements are tied to successful business
operations and management, which are
the key to an organization's
ability to repeat
operations and manage activities and increase sales revenue, including
processes such as design, development, manufacturing, marketing, employment and
training. The four-factor model of Johnson and Christensen regains Hamel's
values (Hamel, 2000) and takes customer value propositions as the primary
and starting point for business models. In their view, the operation of
isolated elements does not lead to business model innovation, while the
successful business model cannot do without the coordination, interaction and
development of the four elements.
The distinct features of four-element model are technical tendencies,
practice-oriented, systematic and structured (XD Wang, 2013), which similarities with the sharing economic
business models developed in the context of "Internet +" with the
development of Didi and Uber. Therefore, this research adopts the four elements
model of business model of Johnson and Christensen to elaborate and contrast
the business model innovation of Didi and Uber under the background of sharing
economy from four aspects: customer value proposition, profit model, key
resources and key processes.
Comparative Analysis of The Business Models of Uber and
Didi
This paper analyzes and contrasts the business model of Uber and the
Didi by using Johnson and Christensen's ‘Four Elements ‘business model in order
to comparative analysis of the differences from Customer value proposition,
profit model, key resources and key processes four aspects. And on this basis,
concludes certain common characteristics of business model of sharing economy.
Differential analysis of business model
Customer Value Proposition
The research compare Uber’s and Didi’s customer value proposition from
the following three aspects: the target customers, the task to be complete and
the offering.
"Uber for Everything" is the strategic goal of Uber, who
wants to tell consumers that Uber can not only provide them with taxi services,
but also can enter other area to provide a full range of life services.
Meanwhile, Uber designs a series of cross-brand marketing approach to appeal
customers. Therefore, Uber's target customers are not only consumers who need
taxi services, but also industries in all fields that require daily
transportation. Uber takes full advantages of technologies such as big data
analytics, emphasizing the availability of car service anywhere and anytime,
and will distribute the nearest vehicles to customers.
Compared with Uber, the version of Didi is simple "To Redefine the
Future of Mobility", in order to provide more convenient car travel
services for consumers. Clearly, the target customers of Didi is the one based
on transport-demand. Therefore, in order to meet diversified travel demands of
consumers under different scenarios, Didi has launched a series of new
products, such as Didi Express, Didi Premier and Didi Bus, which gradually
extend services from providing personal travel to public travel. Thus, although
the offerings of Uber and Didi are slightly different in detail, they have
similar customer value proposition that is providing consumers with more
convenient daily travel services.
Profit Model
Profit model is the core competitiveness of a business model.
Therefore, this section mainly from two aspects of revenue streams and cost
structures to analyze and compare the profit model of Uber and Didi (see Table
1).
Uber (U.S) has clear and definite profit model, taking full advantages
of “high time sensitivity”, the characteristic of taxi services, and implement
pricing. Specifically, Uber makes a good combination with "premium pricing"
and "automatic matching positioning" to improve the taxi pricing when
meet in rush hour or high-demand required. It is more than solving the problem
of transport tension, but also increasing the profit margin of Uber. On the
other hand, Uber gains certain commission fee from drivers as platform service
and maintenance supported. Meanwhile, at least a week of "stable cash
pool", which comes from fare clearing, the taxi fee directly from the
consumer's credit card to the Uber platform, maintained at least one week, then
the driver can receive operating revenue from the platform account. In
addition, cross-border life services have also brought considerable benefits to
Uber.
Cultivating the customers’ habit with subsidy strategy and developing
customer’s data in car market are at the top agenda of Didi to occupy the
market share at the early stage. Therefore, Didi had no profit at first and the
latter part of the profit model comes mainly from the following aspects: APP
interface advertising revenue; information mining and processing services;
charge platform service fee; to seize the payment market, as well as enter into
the Internet finance.
Cost structure refers to various elements of the business model produce
cost during the process of operation, which runs through the whole part of the
product, such as guarantee of resource accessibility, the development of the
business activities, as well as the establishment of the partnership and other
activities (Liou, Tang & Huang，2008).
Except for less Uber Black, the numbers of car services of Uber have come from
owners’ car-sharing, while Didi, on this basis, and has additionally invested
several products such as Didi Bus, Didi Bus station, in order to solve the
public travel problems at rush hours. Therefore, in terms of cost structure,
the fixed cost of Uber is relatively lower than Didi.
Table 1 Comparison
of profit model in Uber & Didi\
|
Profit
Model |
Uber (US) |
Didi
(China) |
|
Revenue Stream |
Platform Service Fee Daily Life Service Premium Algorithm Flexible Pricing Stable Cash Pool |
Platform Service Fee Interface Advertising
Investment Information Data Mining
Services Dynamic Pricing |
|
Cost Structure |
Less Uber Black |
Certain Primium Car, Didi Bus, Didi Station etc. |
Key Resources
This section will illustrate and comparative analysis the key resources
of Uber and Didi by technology, services, and cooperation partners (see Table
2).
According to technology aspect, both Uber and Didi considered itself as
a technology company, rather than a simple transportation company. Under the “Internet+”
environment, Sharing economy platform enterprises, connect two or more groups,
providing an interactive mechanism between two or more parties to meet the
needs of all groups and gain the profit from them. As typical business models
for sharing economic platforms, Uber and Didi take profits by providing
consumers and drivers with an effective interactive mechanism and meeting the
needs of both parties. Therefore, both of them focus on the utilization of
information technology and construction of enterprise platforms. Initially, the
information technology level of Uber’s enterprise platform is far ahead of
Didi, which take full advantages of big data analytics to schedule vehicles,
enabling the availability of car-using for customers as quickly as possible,
even in rush hours and tension areas. The principle behind Uber's processing of
data is to rely on the economics, which is a more extensive manual operation,
that is to say, based on price changes to draw the area. However, Didi, at first,
was a smart phone APP based on LBS, GIS and other positioning technology. By
learning from Uber’s platform construction and operating machine learning
methods, Didi acquires hidden, effective, understandable knowledge from
accumulated huge amount of travel Data and put it into practice, such as using
ETA system to reduce reply time. Therefore, today’s Didi has analyzed and
predicted data by using a series of technologies such as artificial
intelligence and machine learning, so as to uniformly dispatch all the drivers
in the entire city. Gradually, the technology development trend of Didi has
shown a process of catching up with Uber.
In terms of services, in order to meet the needs of different groups in
Ride-sharing services, Uber provides them with differentiated services based on
the income levels. Uber X, for example, is "cheaper, faster and
better" for lower- and middle-income people who are price-sensitive and do
not have too much demand for services; By contrast, Uber Black serves high-income
people who emphasize comfort and identity. Meanwhile, Uber also provides
consumers with a full range of life services, such as Uber Eats, Uber Essential
and Uber Rush services in the United States, which refer to delivery of daily
necessities and meals. Similarly, Didi provides various products and services
based on market segments, including Didi Taxi, Didi Express, Didi Premier, Didi
Bus services etc. Until now, Didi focus on improving the travel products
straightly to solve travel problems, and not to refer too much in other aspects
of life services.
In terms of partners and alliances, although Uber reached strategic
cooperation with certain Chinese enterprises such as Baidu and Hainan Airlines,
and supported by Internet finance (Alipay payment services), when it entered
into the Chinese market, its main partner is still focused on technology, that
is, working with Carnegie Mellon University to develop driverless technology.
Similarly, Didi has made a good cooperation with Wechat platform, supporting
Wechat payment services. According to development of international business,
compared with Uber "Fight alone, hands-on" Didi has chosen the way of
cooperation and investment when it enter the overseas market, that is, respect
the local entrepreneurs and share Didi’s technology, experience and capital.
For instance, cooperation with Lyft in U.S, Grab Taxi in Southeast Asia and
India's OLA to open up products for the four countries and regions to provide
seamless travel services for international passenger groups. At present, the
bike-sharing platform of also officially accesses to Didi. Customers can
directly open the Didi’s App to use of, which contributes to promote the
seamless connection.
Table 2 Comparison of Key Resources in Uber &
Didi
|
Key
Resources |
Uber (US) |
Didi
(China) |
|
Technology |
· Big Data · Economic Principle · Manual Operation · Flexible Pricing · Stable Cash Pool |
· Positioning Technology · Cloud Computing · Big Data · Machine Learning |
|
Services |
· A Series of Car-Sharing Services i.e., UberX,
UberBlack · Cross-brand Dailylife Services: UberRush; UberEats |
· Multiple business of Car-Sharing, inlcudeing Didi
Taxi, Didi Express, Didi Premier, Didi Bus, etc. |
|
Partners and Alliances |
· Payment: Alipay · Technology: Carnegie Mellon University · Strategic Cooperation with Chinese Enterprises, such
as Baidu, Hainan Airlines, etc. |
· Payment: Wechat · International Business: Cooperation with Lyft,
GrabTaxi and OLA · OfO Seamless Travel Services. |
Key Processes
This section will be mainly from four aspects of key processes,
including car-sharing services, payment method, promotion mode and future
planning and development, to analyze and compare Uber and Didi (see Table 3).
Firstly, according to the car-sharing services, the reasons why Uber is
quickly welcomed by customers when it entered into the global market, is
because it can provide customers with higher quality service experience based
on technology. In this regard, it is far more than Didi and other domestic taxi
APP. For customers, they do not have to enter the destination, waiting for the
system to automatically match the surrounding vehicles, which can be reached
destination in very narrow time. What’s more, Uber APP is available in most
countries and regions in the world when they are in business trip. For drivers,
they cannot pick up customers who they want to carry, which can provide
thoughtful and high-quality car-sharing experience for customers. Meanwhile,
Uber can not only track and select high-level drivers, but also records
consumer behavior, which creating a mutual rating system between the company,
drivers and customers. Inversely, regardless of services and technology
aspects, Didi was far behind Uber at first. It was quite common that Didi
drivers selected or grabbed orders even refused customers, which provided worst
travel experiences. Subsequently, Didi learned from Uber, changing the
operating way from drivers grab orders to system sent orders, and now to by
automatic. Then, with the maturity of big data forecasting technology, Didi’s
cloud scheduling provides a "round-carpooling" service, which not
only enables drivers to seamlessly receive orders but also expands the service
capacity.
Secondly, In terms of payment method, Uber relies on digital technology
to provide customers with a transparent quality and price of service through a
credit card cashless system. When customers get off, the cash will be automatic
deductions from credit card or Alipay, which they already bond before, the bill
will be sent directly via email to the customers. However, Didi can payment by
cash or online Wechat platform. It is worthy to mention that Wechat payment
needs to be confirmed by the customers before they pay the bill. For pricing,
although both of them have similar basic price, Uber still has certain
advantages in flexible pricing by "premium algorithm" at rush hour or
on crowded road, and high frequency discount activities.
According to the promotion mode, cultivating customers’ habit is at the
top agenda of companies to occupy the market share at the early stage.
Therefore, both of them develop the number of drivers through subsidies, in
order to gain bigger market shares in a short period of time. In addition, Uber
has used the cross-border marketing to develop lifestyle businesses, which can
be applied to all aspects of transportation, to promote its market. While，it
is seem more popularization that Didi pushed local teams to taxi companies to
introduce its APP. However, the propaganda of its television and online media
not only passed the effective information to the target population intuitively,
but also strengthened the brand relevance, which created a new way of
"online + offline" in-depth cooperation. It is can be seen that, Uber
focus more on the development of marginal life business to attract and serve
customers, while Didi relied on social media.
In the future planning and development of enterprises, Uber (U.S) has
paid more attention to the development of technology, more exactly, that is
driverless. And Didi has sequentially devoted to solve the problem of travel
for Customers, so that it gradually shift focus from personal to public
transportation, such as Didi Bus. At the same time, with the development of
Didi, it has started to expand international business when it entered in global
market. What’s more, the scope of its services tend to be covered more
commercial products and services derived from travel, which cooperation with
other industries.
Table 3 Comparison of Key Processes in Uber & Didi
|
Key
Processes |
Uber (US) |
Didi
(China) |
|
|
Design & Explore |
Payment Method |
A credit card cashless system Automatic deduction |
Cash or Wechcat Need to be confirmed |
|
Car-sharing Services |
· Automatically match the surrounding vehicles · Thoughtful and high quality services · Available if go abroad travel · Mutual rating system |
· Automatic orders · Round carpooling service · Expand international business |
|
|
Promotion Model |
· Cultivating customers’ habits (by subsides) · Focus on daily life services (Cross-border
marketing) |
· Cultivating customers’ habits (by subsides) · Local teams to taxi companies · Created new way of “online + offline” in-depth
cooperation |
|
|
Future Planning & Development |
Driverless
Technology |
· Public travel (Didi Bus) · Cooperation with other industries |
|
Common characteristics of sharing
economy
There are certain common characteristics of sharing economy business
model innovation between Uber and Didi including advocated sharing concept,
setting up the Internet platform, providing personalized service, establishing
the trust mechanism, the supply and demand matching reshapedwhich form the
rudimentary framework of a new business model under a sharing economy.
Advocated Sharing Concept
To promote the concept of sharing, that is, both the community and
individuals are willing to share their spare resources (including idle items,
spare space, fragment time, etc.) with others in need. The surplus of resources
or production capacity is the premise of sharing. Therefore, the essence of
sharing economy is to share spare goods and excess productivity. For instance,
Uber’s drivers share their vehicles to give convenience for those who need to
travel.
Setting up the internet platform
In the "Internet +" context, the new business model should
take full advantages of internet platform to optimal allocation of social
resources for better supporting and serving sharing economy. The platform
strengthens the ability of arrangement for the business models under the
information and communication technologies, eliminates the asymmetry of
information, breaks the trade barriers caused by it in traditional business
models and creates the conditions for cross-border business, such as Uber, Didi
as representatives of car-sharing platforms and Airbnb, Xiaozhu as
representatives of housing-sharing platforms. Internet technology makes the
business model of sharing economy platform have the characteristics of breaking
through the physical space-time constraints, and making it subvert the
traditional business model in terms of value creation and value realization.
However, the technology here refers to not only based on information-based and
data-driven technology, such as cloud computing and big data, but also refers
to with higher prediction and intelligence. Compared with the traditional
business model, enterprises in the sharing economy are more inclined to light
assets by providing technical support and services to gain revenue. Furthermore,
no-intermediaries is another characteristics of business model under the
sharing economy, which can complete the delivery of products and services
through a platform without any restrictions.
Providing
personalized service
The service come from the business model of sharing economy tend to be
reflected in a higher quality and all-round personalized service. Traditional
business models have struggled to meet the increasing demand for personalized
service from customers, while it is more likely to providing them with flexible
matching under the sharing economy platforms. As a kind of experience economy,
sharing economy focus more on customers’ experience and value, thus providing
higher quality service for customers is the fundamental ability of sharing
economy’s business model.
Establishment
of Trust Mechanism
Trust is a very lacking in today's society. Sharing economy as a new
business model encouraged to establishing an effective trust mechanism to solve
the problem of information asymmetry. Several sharing economic enterprises such
as Uber, Didi, and Airbnb all support the contents of mutual evaluation are
visible to other users. It is not only effectively restrains the behavior of
service providers and users, but also enhances the brand perception of service
providers, which is easily acquired from WOM in traditional business model.
Meanwhile, the payment security of the network platform is also the key point
of establishing a trust mechanism. For example, Didi through the cooperation
with Ping An Insurance, has provided the safeguard for both drivers and
passengers. It can be seen that a good trust mechanism has brought people
closer together, made consumers develop good credit habits and provided data
support for establishing a credit social system in China.
Reshape the supply and Demand Matching
The platform of enterprises under the sharing economy has made a large
number of people who master the technology get together, and utilizes the
existing technologies to integrate the scattered and massive excess resources.
Then, match the supply and demand effectively, and set standards and simplify
the participation processes, in order to reduce the cost of people obtaining
excess resources. Under the Internet era, the role of value creation and resource
coordination distribution channels in the traditional business model is
gradually weakened, while sharing economy business model makes it easier to
utilize the platform to realize the optimal matching supply and demand, so as
to achieve effective integration of resources. Uber and Didi platform are the
applications of sharing economy in the field of transportation and as an
important part of supply-side structural reform.
The Causal Analysis
of Differential Business Model
The differences in business models between Uber and Didi, to some
extent, attribute to the cross-cultural background conditions and the
macroeconomic environments behind the operations and production of enterprises.
As a framework-based analysis method, PEST analysis can analyze the differences
of business model under the cross-cultural background from the aspects of
political, economic, social and technical environment. Therefore, the research
uses PEST analysis to understand the different macro-environmental backgrounds
of Uber and Didi, to analyze the environmental factors that generate new
business models of sharing economy and the reasons why the differences in
business models.
Policy environment
The development of new business model of sharing economy cannot be
separated from the support of national policies. In the implementation of
federalism in the United States, the attitudes of state governments towards
sharing economy are diversification, or even lukewarm, that is also the reason
why Uber in some states well developed (such as California), some were
boycotted (such as Kansas). Until August 2015, there were 54 cities and states
in the United States that the car-sharing services had legalized. Some of them
have begun to work out policies and regulatory plans that will gradually reduce
Uber's resistance development in the United States.
Initially, the development of Didi was in poor condition in China. It
was quite common that drivers protest strike and strict restrictions on
government control. These two years, Didi develop rapidly with relying on good
policy environment. In 2015, the Fifth Plenary Session of the 18th CPC Central
Committee stressed: "During the 13th Five-Year Plan period, we must firmly
establish and effectively implement the development concept of innovation, openness
and sharing, implement the strategy of strengthening the nation by network and
sharing economy." That is the first time promotes sharing economy as
national strategy. On July 28, 2016, the General Office of the State Council
issued the “Guiding Opinions on Deepening
Reform and Promoting the Healthy Development of Taxi Industry”, and the
ministry of transport and other seven departments jointly issued "Interim measures for Internet booking taxi
service management" formally introduced, which as the symbol of the
legalization of car-sharing online..
The reasons why the differences development between Uber and Didi in
domestic country, it is rooted in different policy environment of the United
States and China. Due to various attitudes and management styles of the states
in U.S, it is necessary for Uber to deal with the problems that occur in each
state according to the local conditions. On the contrary, China has promulgated
a series of policy supported and encouraged to develop sharing economy, to some
extent, which help the rapid development of Didi in China.
Economic environment
The economic environment consists of various factors that affect
customer purchasing power and spending patterns so that managers should pay
close attention to the major economic trends and changes of customers spending
patterns in global markets. The economic recession of United States during
2008-2009 made U.S. consumers had to accept simple, low-key lifestyle and ways
of spending. The rise of the sharing economy business model, represented by
Uber, was primarily due to the desperation of a deep economic crisis, where
people had to find other ways to make money (sharing their spare cars) to raise
household income.
For China, one of the biggest problems for economic and social development
of China should be faced that is the structural imbalance, which manifests in
different fields and levels. For instance, the imbalance between the quantity
and quality of growth, the imbalance between powerful manufacturing
capabilities and innovative capabilities, the structural imbalance between
supply and demand and industrial structure imbalances etc. A great deal of
spare social resource urgently needs a new type of business model to promote
supply-side structural reforms. Sharing economic platform now is trying to use
low-cost way to maximize the utility of social resources, driven by technology
to optimize the urban transport
Social environment
According to the statistics released by Didi, at the end of 2015, China
had an average of 31 private cars per 100 households, of which over 60 in big
cities such as Beijing and Guangzhou, while over 200 cars per 100 households
owned by the United States. By contrast, there far exceeds three times as the
number of private cars in every hundred households in China. However, it is
still in urgent need to solve transportation problems in China, due to a huge
bottleneck of car market occurred, such as Beijing, Shanghai and other big
cities are beginning to limit the quantity of private cars. Therefore, the products
exploration of Didi is more focus on the diversity of travel, that is, from
personal car-sharing services to public ones, in order to meet the mass.
Conversely, the relatively abundant private car market makes Uber cannot only
to do the transportation business, but also refers to other areas of traffic,
such as express delivery, food delivery, to provide better quality of life for
American customers. Meanwhile, innovative thinking and respect for high
technology have prompted Uber to focus its products on new driverless
technologies.
It is can be seen that the influence of different social environment
for the enterprise under the international business extension. The independence
personality of Americans makes Uber more dependent on the new business model
and technical services of the enterprise when it expands globally. However,
Didi shows the “win-win cooperation” characteristics of Chinese, promoting the
business with other foreign travel companies such to promote the business as
Lyft.
Technology environment
The rapid development of information and communication technology in
recent years has brought a new reality that has continuously linked and
interacted information, people, organizations, logistics and finance globally.
The development of network platforms has significantly stimulated the economic
growth of personal capital, asset and service exchange, enabling people to
reasonably make full use of the resource and trade transaction cost sharing(Avital et al., 2014). Majority of new P2P-based service models undermines
the economics paradigm of traditional business, on which Uber and Didi are
based.
Different technical environment background makes the fundamental ideas
of Uber and Didi are not same. Economic principles are utilized by Uber to
solve traffic problems, while Didi use artificial intelligence and machine
learning to solve problems such as dynamic pricing and scheduling adjustment.
For instance, Uber has developed vehicle automated driving technology, in order
to all idle self-driving cars can become Uber’s integration of resources in the
future. However, Didi will gradually shift the focus t to public travel, such
as Didi Bus.
Table 4 PEST Analysis of Uber and Didi
|
Key
Processes |
Uber (US) |
Didi
(China) |
|
Policy Environment (P) |
Various attitudes of states |
Govt. issue policies to support sharing economy |
|
Economic Environment (E) |
Financial crisis Simple, low-key lifestyle Raise household income |
Structural imbalance Supply-side structural reforms |
|
Social Environment (S) |
Better life quality Innovative thinking Independent personality |
Urgent need to solve transportation problems Win-win cooperation |
|
Technology Environment (T) |
Economic principle Automated driving technology |
Machine learning Pubic travel |
Conclusions and Recommendations
Based on the Johnson and Christensen’s four elements model of business
model, this research analyzes and contrasts the business model innovation of
Uber in the United States and Didi in China, and finds that:
In terms of customer value proposition, although both Uber and Didi
offer different things, they are all aimed at providing customers with more
convenient daily travel services. For profit model, in addition to charging
platform service fees, Uber focuses on the benefits of its "stable cash
pool" and cross-border services, while Didi focuses on the benefits behind
data mining; Technology development, service innovation and active cooperation
are very essential for both of them in key resources. It is shows own
characteristics when Uber offers "cross-border life services" and
Didi makes cooperation to enter into overseas markets; and finally, in terms of
key processes, it is worth mentioning the future planning—— Uber is committed
to the technology innovation and development of driverless technology, while
Didi is devoted to improving the overall travel services.
Based on this, the research summarizes the basic characteristics of
sharing economic business models (advocating sharing concepts, setting up an
internet platform, providing personalized service, establishing trust mechanism
and reshaping supply and demand matching) and differences in business model
innovation due to various cross-cultural macro backgrounds.
Overall, the research summarizes the references of business model
innovation of Uber and Didi, and puts forward the overall proposal for local
enterprises to better develop under the sharing economy context.
References
of Business Model Innovations from Didi & Uber
The business model innovation of Uber is mainly manifested in providing
consumers with high quality service experience to the extreme, that are
personal service and on-demand. Specifically, "personal service" is
mainly reflected in the cross-brand marketing approach to provide users with a
full range of life services, and "on-demand" performance at any time,
any place can provide the car service. Uber's high-quality service should all
businesses borrowed from under the sharing economic background. Compared with
Didi, Uber prefers to cooperate with marginalized products and services to
create a new mode of "cross-border marketing", which not only
broadens the scope of business, but also provides enterprises with new
profit-making points and lowers the operating costs of enterprises. Moreover,
Uber's business model innovation is also reflected in technological innovation,
that is, take full advantage of technologies such as big data analysis, the
implementation of "automatic matching" and "premium
algorithm" to improve efficiency to meet on-demand. This is also the first
references to Didi to learn from when Uber entry into the Chinese market. Thus,
Uber's innovation is reflected in the innovation of services and technologies
provided, such as Omni-directional living services, promotion of
"cross-border marketing" and research and development of driverless
technologies.
Compared with the horizontal development of "cross-border"
life services, Didi focused on solving the travel problems of customers, that
is, integrating all the off-line vehicles resources, rely on the Didi platform,
to provide customers with more convenient travel services. In the meantime,
Didi have steadily expanded their business - from personal travel to public
travel. Except that, Didi carefully study a series of documents issued by the
state, attach importance to communication with the government and assist in the
introduction of relevant policies, which makes Didi faster and better develop
under the government policy support. Just as Zhu Jingshi, vice president of
Didi Travel, said: "There are two indispensable factors for developing a
shared economy in the field of travel. One is the existence of a capable
consumer group and the other is government support." It can be seen that
if Chinese enterprises desire to develop business faster and foster, it cannot
without government's support and guidance under the background of sharing
economy. Although Uber's large-scale overseas expansion enables customers to
use Uber's car service in many countries and regions, it has been impeded by
local governments and enterprises in its development of international
businesses. In this regard, the strategy of Didi’s overseas expansion is more
appropriate, that is, by cooperation and investment with local travel business
in overseas markets to achieve win-win situation.
Management
Recommendations
Not blindly
copying the world's leading enterprises, and make effort to build a new model
with Chinese characteristics to share economy
Based on the active cooperation with the state in planning for sharing
economic development, Chinese sharing economic enterprises are requested to
understand how to truly innovate business model. When Uber first entered the
Chinese market, Didi learned its advanced technology and services during the
competition with Uber, which enhanced the service experience of customers and
the management of big data platform. However, Didi did not blindly follow the
trend and extend the products to other life services. Instead, they focus on
expanding travel services based on the background of China's urgent need to
solve the travel problems. Therefore, Chinese enterprises should earnestly
understand the concept of sharing the economy and the specific conditions in
China, and strive to create a new model of sharing economy with Chinese
characteristics so as to promote the economic restructuring and industrial
upgrading of Chinese enterprises.
Create
"Internet platform+ cooperation partner+ customers” model and seek
cross-border collaboration
Not only the concept, logic and mode of sharing economy are applicable
to the sharing economic enterprises, the traditional enterprise also can learn
and draw lessons from. How to use the Internet platform to seek cooperation
with related sharing economic industry, so as to accelerate the transformation
and upgrading of enterprises is an urgent need for traditional enterprises in
the background of sharing economy. Additionally, "Internet +" era,
breakthrough innovation often comes from cross-border development, Uber is a
more successful example, which provides more than taxi service, also with car
manufacturers, logistics companies, courier services to compete and cooperate
to satisfy customers’ diversified lifestyle services. At present, Didi also
began to seek a good opportunity for cross-border cooperation, starting from
the test drive. Didi has utilized its open platform for cooperation with the
car manufacturers, and let drivers to share their own experience to the
potential users to buy a car. In return, customers can gain lower price to buy
the car through Didi platform. Thus, for an enterprise, a good entry point of
cross-border is equally important.
In-depth
understanding and analysis the macro and micro-environment of international
markets, to speed up local enterprises to "go out"
Environment has a far-reaching influence on enterprise production and
operation activities. Therefore, in order to "go out", enterprises
should understand and analyze the macro-and micro-environment in the
international market in depth. Except Didi in the field of travel, a number of
sharing economy start-ups have emerged in other area, such as Xiaozhu rent
(housing), leisure fish (used goods transactions), etc. China's sharing
economic enterprises should learn from the world's leading companies such as
Uber, Airbnb, and as references, when face overseas expansion in different market
environment problems and obstacles how to deal with the solution. Meanwhile,
how to promote products, except for technical data support, seeking cooperation
with foreign domestic enterprise is also a good choice.
References
Belk, R. (2009). Sharing. Journal of Consumer Research, 36(5),
715-734.
Belk, R. (2014). Sharing versus
pseudo-sharing in Web 2.0. The
Anthropologist, 18(1), 7-23.
Hamel, G. (2000). Leading the Revolution [M]. Boston:
Harvard Business School Press.
Richardson, & Lizzie.
(2015). Performing the sharing economy. Geoforum,
67, 121-129.
Stephany, A. (2015). The Business of Sharing: Making it in the New
Sharing Economy: Springer.