Management in Action The Growth and Stall of Didi Chuxing Chinese ridesharing company Didi Chuxing was formed from the 2015 merger of rival firms Didi Dache and Kuaidi Dache. The company currently provides transportation services for more than 450 million users across 400 cities in China, and it was valued at US $28 billion in 2016. Didi employs more than 7,000 people, of whom 40 percent are female. Its mission is to provide “services including taxi hailing, private car hailing, Hitch (social ride-sharing), DiDi Chauffeur, DiDi Bus, DiDi Test Drive, DiDi Car Rental, DIDI Enterprise Solutions, DIDI Minibus, DIDI Luxe and bike-sharing to users in China via a smartphone application."130 99 Didi Chuxing outmaneuvered Uber in China, finally purchasing Uber's Chinese business in 2016. Didi is now the dominant player in China, but the market is saturated and the company's growth has slowed. Cheng Wei, CEO of Didi Chuxing since the 2015 merger, is implementing a new strategy aimed at increasing growth. A company spokesperson described this strategy to Forbes as one in which "we will put more energy and resources in the international market to explore the frontier technology, innovate new models of »131 The question is whether the company can achieve its strategy by expanding outside business, and seek like-minded partners." mainland China into territory dominated by its rival Uber. DIDI'S EXPANSION OUTSIDE CHINA Things have not been going well for Uber, the world's most valuable start-up (valued at $70 billion). Its controversial founder, Travis Kalanick, was sacked after a series of scandals. The company suffered from the leak of 57 million rider and driver records, was 132 Didi is capitalizing on accused of spying on competitors, and has been enmeshed in costly litigation in several different countries. Uber's setbacks while implementing its own growth strategies. Didi's growth strategy focuses on expanding across multiple continents at the same time. This is risky because of the cost and risk associated with expanding overseas, especially when you have entrenched competitors like Uber in North America, South America, and Europe. According to an analyst with Bloomberg News, Didi should start its overseas expansion in Southeast Asian markets like Vietnam and Malaysia, which don't have as much entrenched competition. 133 However, the company seems to want to Page 154 make a bigger splash by expanding across multiple continents at once via different expansion models. The expansion outside China is starting with a partnership in the island neighbor of Taiwan. Didi is planning to start operations there with the help of a Taiwanese partner named LEDI Technology, which will be Didi's authorized franchisee in the country. Taiwan is a tricky market to enter because its lawmakers and its taxi industry have been successful in forcing organizations to conform to its transportation rules. Fines for illegally transporting passengers can be as high as $834,000 per infraction, and Uber reportedly racked up more than $30 million in fines in one month alone, causing the company to briefly suspend service across the country. Didi is trying to avoid making the same mistake. The company states that LEDI "is conducting market research and exploring extensive community partnerships in Taiwan" in addition to support for recruiting drivers.134 Didi is using another model of expansion in South America by purchasing existing companies. As Fortune reports, in 2018 Didi acquired Uber's largest Brazilian rival, 99, "potentially creating a formidable rival to Uber in Latin America's largest economy." Cheng Wei stated that “globalization is a top strategic priority for Didi."135 Globalization is not easy in the ridesharing industry because of competition from Uber. An analyst told The Wall Street Journal that "It's a fight for brand," and Didi doesn't “have a global brand name that probably has a same recognition level as Uber."136 Didi has not been shy about expanding north of Brazil, even without significant brand recognition in the Americas. As Reuters reports, the company hopes to enter the Mexican market next year without the assistance of a Mexican partner. This would be the first overseas operation outside China without local partner management or the purchase of an existing organization. It would also allow Didi to utilize its own smartphone app and recruit local drivers to its platform.137 This is especially significant in Mexico City, one of Uber's busiest markets in the world.130 And the move would mark Didi's debut in North America, which puts it right on the United States's doorstep. Trying to enter an Uber-dominated market that also includes Cabify (a Spanish rideshare company) without local partner support could be quite costly and risky. Consider what happened to Uber when it challenged Didi in China: It lost billions of dollars subsidizing drivers to keep its prices low, and in the end it still had to bow out." Is Didi ready for another price war in order to gain market share? FOR DISCUSSION Problem-Solving Perspective 1. What is the underlying problem in this case from CEO Cheng Wei's perspective? 2. What obstacles remain for Didi as it challenges Uber's control of the ride-sharing industry? Application of Chapter Content 1. Didi's CEO Cheng Wei stated that globalization is a top strategic priority for the organization. Explain how Didi is utilizing major developments in globalization to its advantage. 2. If you were leading Didi's expansion into the Americas, what type of international manager would you want to be-ethnocentric, polycentric, or geocentric? Explain your decision. 3. Based on L Figure 4.1, which ways of expanding internationally has Didi employed? Provide specific examples. 4. Didi is based in China and looking to expand to Brazil; China and Brazil are BRICS nations. Why is this significant? 5. Assume Didi is planning on entering the U.S. ride-sharing market. Based on GLOBE cultural dimensions, the United States scores lower than China on power distance, in-group collectivism, and uncertainty avoidance. With this in mind, how would you advise Didi, a Chinese company, to modify its practices if it plans on entering the U.S. market?