After Uber sold its China operation to rival Didi Chuxing, Uber is now shifting its focus away from China to other overseas markets. Will they make it this time?

Grab

Just last week, Grab CEO Anthony Tan, which plays the role of being the biggest competitor of Uber, had  sent a memo to all his employees, saying “Uber lost once, and we will make them lose again.” It’s about the triumph of Didi showing that localised solutions can probably beat offshore companies like Uber in Southeast Asia.

In the same week, Uber also said that they will rearrange their engineers from China to Southeast Asia. The transaction simultaneously makes Uber reorganise internal resources to revise the focus market. This leads to the entrepreneur networks in Asia being curious and predicting which of them will prevail in the SEA market?

Also Read: Uber has lost once, and we’ll make them lose again: Grab CEO tells in a leaked email to staff, post Uber-Didi merger

In order to investigate the winning possibility of each company, we’re going to compare them in different aspects:

Internal and external situation

In general, the ride-hailing market in Southeast Asia is forecast to grow to US$13.1 billion by 2025 from US$2.5 billion in 2015, which will be over six times growth.

Both Uber and Grab have bumped into authorities regulation restrictions in several Asia countries, and have already stopped motorbike services temporarily in Thailand.

Separately, Uber is now operating their services in over 58 countries, across 16 cities in SEA, and is valued over US$50 Billion. Since the last few years it has been quietly expanding its transportation business across Southeast Asia by first entering Asia via Singapore in October 2012.

Also Read: Doesn’t get any crazier than this: A wrap of an astonishing week in Asia’s ride-hailing industry

Grab was launched in 2012 and now offers private-car, taxi and motorcycle rides, operates in 30 Southeast Asian cities across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, with seven bookings per second.

It’s the best of external situation, but also the worst. To Uber, there’s still a lot of things to be developed, although they might be “wealthy” enough to redeem themselves, it’s under the premise that they can deeply understand the market. To Grab, though now it’s winning on city numbers, the following market strategy plays the vital role to ensure sustain advantage.

Pros & cons

Uber：Pros

  1. Allow users to pay in cash recently
  2. Savings on local booking charges and extra charges in the CBD or evening fares
  3. Free ride promotions

Uber：Cons

  1. Competition from cheap and safe taxi services, making Uber one of the many option, not the go-to option.
  2. Car renting fees significantly eats in the driver’s profits
  3. More drivers because of the unexpected workload
  4. Surging pricing policy to ensure supply and demand, but creates a frustration among customers
  5. Inaccurate maps also create confusion about best routes to estimates of distances of drivers

Grab：Pros

  1. Allow users to pay in cash in the very beginning
  2. More reliable and knowledgeable taxi drivers than independent drivers
  3. Fixed fares: after setting pickup and drop-off routes, it shows you a set price for the ride

Grab：Cons

  1. Less optimal algorithm creates inefficiency
  2. Accessibility or car renting costs cut into the driver’s profits
  3. Inferior technology than Uber with inaccurate problems

To summarise, Uber owns more capital and R&D resources to utilise and Grab do well on customer experience optimising. On the other hand, Uber and Grab both do not do well on drivers’ treatment and map accuracy, plus, Uber’s surge price often causes confusion.

Businessmodels

Uber

photo from Juggernaut: http://nextjuggernaut.com/blog/how-uber-works-business-model-revenue-uber-insights/

Revenue generation model

  1. Different cab models to meet different people’s needs
  2. Surge pricing technology to balance supply & demand
  3. New kinds of transportation or service provided

Customer growth model

  1. Lots of money for giving both drivers and customers incentives
  2. Already known brand that gets early, curious adopters

Key issue facing now

  1. Chicken & egg problem (new city launch): It’s talking about “acquisition of customers and partnering with new drivers.” It can be solved by first reaching out to professional drivers in the new city and give discounts to woo customers
  2. Passenger Safety: Especially for female riders

Grab

Photo credit: Google+: https://plus.google.com/117525976935389859942/posts/aJBLEUAGLq8

Revenue generation model

  1. Advertising
  2. Profit share
  3. Sale big data & information

Customer growth model 

  1. Money for giving both drivers and customers incentives
  2. Being popular in Asian cities, word-of-mouth works a lot

Key issue facing now 

  1. Passenger Safety: Especially for female riders

Expansion strategy

Uber: from San Francisco to all over the world

  1. Brand the product and tell inspiring story
  2. Sex is in the product: Uber not only invests heavily in technology to maintain its competitive edge, but also tries new kinds of transportation, food delivery services, etc.
  3. Localisation: Begins with hiring local people
  4. Growth Hack: Uber uses data to be familiar with target audience’s behaviour and needs

For example, in India, Uber develops events related to the cricket, which is the pulse of the country. Furthermore, when developing new markets, Uber invites local celebrity to be ‘rider zero’ for that city.

Grab: localised in SEA and being part of Didi’s global strategy

  1. Qualified Customer Service: By improving data transparency, it will not only set passengers’ mind at rest, but also build up customer loyalty
  2. Tap into a large pool of customers: With market share in six countries (Singapore, Malaysia, Philippines, Thailand, Vietnam and Indonesia) and integrated Apps designed, Grab maximised its current customer base
  3. Meet individual needs with different levels of vehicles
  4. Deeply understands and focuses on the market: SoftBank invested in Grab. Partnering with consumer brands also brings local reputation

 Obviously, Uber focused more on product & technology, but Grab cultivated deeper in the SEA markets with different tonality and combination of customers. The former created a product to spread globally, while the latter planned to root in local market for being the most suitable solution.

 Relationship between main ride-hailing companies

Photo credit: Wall Street Journal http://www.wsj.com/articles/uber-rival-grab-set-to-raise-1-billion-147021243

  1. Didi bought Uber’s China business while taking a minority stake
  2. Uber is taking an 18 per cent stake in Didi
  3. Didi owns a minority stake in Grab, and is participating in the US$1 billion fundraising round
  4. Didi owns a minority stake in Ola (India)
  5. Didi owns a minority stake in Lyft (US)
  6. Biggest competitor

The deal with Uber “does change the dynamics” between Didi and its existing ride-sharing partners such as Grab and Ola, according to a Didi investor.

Grab owns the higher probability of winning

To sum it up, Grab owns the higher probability of winning. If Uber tries to increase its market share by giving more discounts as incentive, it’ll become a price competition, which is basically repeating what had already happened in China before.

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