Explain why would it be interesting for an international supply chain student to
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Question
Explain why would it be interesting for an international supply chain student to study this Case Analysis?
UBER: Given its popular appeal and success in the US, Uber had also expanded aggressively overseas.Its global expansion strategy was typical of Uber: it rolled into new cities, offered consumers a better alternative to the incumbent taxi services, and aggressively battled regulations that were restricting Uber's operations. The playbook included a blueprint for expansion that began with three major roles in each new city, mostly fielded by locals: a marketer, a recruiter for drivers, and a general manager who dealt with area authorities. competitors, and reported to Uber's Head of Global Expansion, Austin Geidt Since its first expansion to Paris in 2011. Uber had expanded to many major cities in the world, such as London (2012), Seoul and Bangalore (2013), and Beijing (2014). Uber operated in 527 cities and 77 countries as of July 2016. 2 However, Uber's "success" in these countries was still in question. Each country's unique cultural and regulatory landscape presented a different set of challenges for Uber.
FRANCE
Prior to Uber's entrance in 2011, French taxis faced almost no competition.3 The state tightly regulated the number of medallions issued for licensed taxi operations.This scarcity resulted in the inflation of medallion prices in the secondary market. In Paris,a medallion was priced at approximately €200,000 (US$219,900). The taxi supply remained stagnant for many years at about 17,702 tax.is. Every time the government attempted to increase the taxi supply, irate taxi drivers would protest in strikes called "Operation Escargot", where taxi drivers inched along thoroughfares, stalling traffic all over the capital.
In efforts to increase the supply of private transportation while avoiding a backlash from taxi drivers, the government authorized a new category of transport called Vehicles de Tourisme Avec Chauffeur (VTC ). These vehicles comprised black-car services that could not be hailed from the street, and,as such,they posed little threat to the taxi monopoly.However,when UberBlack entered France on 5 December 2011, the VTC stakeholders were aggrieved, and the taxi drivers who barely tolerated the VTCs were more disgruntled. In January 2014,taxi drivers established blockades at highways and checkpoints;some also vandalized Uber cars, smashing windows and slashing tires, frightening passengers in the process.4 After Uber launched UberPop in Paris,the Directorate-General for Competition, Consumer Affairs, and Product Quality/Safety (DGCCRF) , France's consumer-protection agency, considered banning UberPop on the basis of Uber operating a taxi service and not paying taxes as it should. French authorities repeatedly pushed for new legislation to clampdown on the operations of Uber and other ride-hailing firms.7 For example,in 2014,the French Parliament vo ed to ban UberPop and other similar services. The move promulgated the Thevenoud Law, which was introduced in 2015. The law required all chauffeurs to possess a professional license,and prohibited VTC services from using geolocation software to display the whereabouts of their cars. Seeing it as a clear attack on UberPop, Uber responded by suspending its ride-sharing UberPop service on July 2015.
Even with the suspension of UberPop,its standard ride-hailing service still drew protests from taxi drivers. According to French police,an anti-Uber protest involving 2,800 taxi drivers went out of hand in June 2015. The protest escalated into a situation where taxi drivers burnt cars and attacked Uber drivers. The protest was, by far, the largest in France against the urban transportation company, with taxi drivers in Nice, Marseille, Toulouse, Bordeaux , Lyon, and Lille blocking roads.9 In January 2016, anti-Uber taxi drivers blockaded roads. Of the 1,200 taxi drivers protesting in Paris, BBC reported that at least 20 taxi drivers were arrested for violence, carrying weapons, and starting a fire. Further,drivers who attempted to march on a freeway were pushed back by police officers usi111g tear gas. When Uber executives later protested,saying that UberPop was beyond the new French laws designed to restrict its operations, French prosecutors indicted Uber's top two executives on six charges, including complicity in instigating an illegal taxi-driving activity, illegal stocking of personal information, and the use of deceptive commercial practices on July 2015.Pierre-Dimitri Gore-Coty, Uber's Chief of Western Europe, and Thibaud Simphal, General Manager of France,were fined €30,000 and €20,000, respectively, while the company itself was fined €800,000.11 In 2016, more than 200 UberPop drivers were fined. Uber was further convicted and fined€150,000 (US$170,000) by a court in Paris for deceptive commercial practices.12 In response, Uber contested the constitutionality of the law. Instead of trying to calm down taxis by claiming UberPopis illegal, the government should be pushing new regulations that deal with the underlying demand for this service.
Though UberPop operations were under threat of being stalled by legal challenges, Uber instructed its drivers to continue working, a move which ultimately provoked the Boer police to crackdown on them. Speaking to the New York Times, a police officer castigated: "Uber will pay for this ticket They pay for all these tickets.That's how they operate.... 'Stop me if you can' is Uber's strategy."14 Reflecting this view was Nicolas Rousselet, Chairman and Chief Executive of French taxi firm Groupe G7, which owned two of France's biggest taxi companies. Rousselet insisted that his issue was not new competition but "the philosophy of the California company. Do we want to live in a libertarian fantasy, where all we have is the law of the jungle? That is barbarism."15 Rousselet personally lobbied to France's Interior Minister to expedite the enforcement of the Thevenoud Law and increase penalties for ride-hailing companies that employed non-professional drivers like UberPop. Yet, in the midst of anti-Uber aggression by incumbents and regulators, the people of France had been welcoming the slick alternative to traditional taxi services. Florent, a 25-year-old pharmacist, opined: "I believe only in Uber. It is a super system,it has changed life for consumers and for the taxis in France. And UberPop is even cheaper. There's no way I'm going to stop using it."
ENGLAND
On 2 July 2012, Uber entered its next major city - London. To Kalanick, London was the "Champions League of transportation", and he had spent two years planning Uber's entry into the city. The city was well equipped, with its scale and system similar to that of New York City and also having complex regulations like other European cities. London was also served by a formidable private transport market by the well recognized Black Cabs services.While services were of high quality,the taxi industry had failed to adapt to the changing times . Between 1986 and 2015, London's population had increased by 2 million people while the number of Black Cabs only rose from 19,000 to 22,500. Black Cabs drivers were mostly traditionalists who took pride in their "Knowledge of London" (i.e., taxi drivers typically were required to possess a Knowledge of London before getting their licenses) and favored picking up passengers from the roadside.Most resisted innovations adopted by taxi drivers in other parts of the world, such as GPS aided navigation and card payments. Derek O'Reilly, a taxi driver, said of the traditional mentality: "You perceived the way your marketplace was,was going to be like that forever."16
Although the regulatory challenges were similar to those in France,Uber's push to establish itself in London was not laced with the same aggression that it had taced from the French authorities. Prior to imposing regulations on Uber, the Transport for London (TfL), the governing body for London's transport system, carried out a public consultation in September 2015 to seek public opinion on private-hire services. The proposals made by taxi unions, such as the London Taxi Drivers Association (LTOA), included propositions which would haemorrhage Uber's growth. The proposals included "a five-minute period wait between booking and pick up", "operators must not show vehicles available for immediate hire", and "fare must be specified at time of booking"19 In response, Uber rallied user support by looping them in as lobbyists to help petition against TfL targeting Uber's operations and destroying the Uber that "you [Londoners] know you love".20
The public consultation concluded with watered-down requirements for the private-hire industry. 21 According to TfL Chief Operating Officer Garrett Emmerson, the consultation elucidated Londoners'visions of what they wanted for the future of the private-hire industry loud and clear: "We had an overwhelming response to the consultation with 16,000 responses and allof the proposals we are taking forward received majority support."22 As such,in January 2016, Tfl ordained a proposal that included providing guaranteed fare estimates before a trip, maintaining good record-keeping practices, and language requirements for taxi drivers to speak and to pass a £200 exam. This is good news for Londoners and a victory for common sense. We're pleased Transport for London has listened to the views of passengers and drivers, dropping the bonkers ideas proposed last year like compulsory five minutes wait times and banning showing cars in apps. It means Uber can continue to keep London moving with a convenient, safe, and affordable ride at the push of a button.
Jo Bertram,UK Head,Uber2 Despite the regulators' receptiveness, Uber faced its share of protests in London. In June 2014, approximately 10,000 taxi drivers congregated outside Trafalgar Square for an anti-Uber rally. According to LTOA,the purpose of the protest was to call attention to the legality of how the app worked against its traditional taxi framework. Typically,only Black Cabs were entitled to use taxi metres, and taxi drivers were required to undergo 4 to 7 years of training to acquire the Knowledge of London before getting their licenses.24 According to Steve McNamara from LTOA, incumbents were not against new competition and technology but rather Uber's legality: It is nothing to do with technology, some of the taxis have been using apps for years. The difference is all taxis have to operate legally, they [Uber] should have to apply for the same rules as everyone else.2s Jo Bertram,Uber's UK Head,while expressing sympathy to the protests, also noted that Uber's case was unarguable based on the numbers: Everything about Uber is very data-driven and logical. It is bringing that to a world where a lot of the arguments against are not necessary. They [protesters] are more on sentiment. It is almost like these two people arguing in very different languages.26
Moreover, Uber also faced competition from other ride-hailing rivals, which included Gett, Hailo, Karhoo, Kabbee, Minicabster, and CabGuru.Of these, Gett led the competition against Uber. Gett was a Tel-Aviv based company that operated in 60 cities in 2016,27 with a network of at least 6,000 black cabbies in London, and 2,000 across Edinburgh, Birmingham, Liverpool, Manchester, Leeds, and Glasgow.28 In 2016, Gett received a $300 million financial boost by German car giant Volkswagen.
SOUTH KOREA
In June 2013, without prior regulatory approval,Uber quietly rolled out UberBlack in South Korea. This was followed by UberX and UberTaxi a year later. "Uber basically came in with a set strategy that involved them operating illegally," a source told Tech in Asia. To the South Koreans, Uber's ride-hailing service was not new. For years, South Korea's daeri unjeon (t:Jl i!.1;9.- ."substitute driver") phone service had been bringing home alcohol-intoxicated businessmen in their own cars after souju-swilling company dinners. Additionally, South Koreans could dial a "call taxi" number to hitch onto a licensed cab or book a taxi through one of the daeri unjeon apps. Chauffeur services were strictly regulated in South Korea, where even the sending of hotel guests to an airport by non-professional operators was considered illegal. The Seoul government slammed Uber for denying its responsibility to undertake a safety clause in the event of an UberX accident, and allowing non professional drivers to use its system,which was in violation of the Passenger Transport Business Act. Uber,in response, argued that the city was "out of touch" and risked "getting left behind" in the global shift to the sharing economy.
In December 2014, Kalanick was indicted by the Seoul municipal government. Seoul prosecutors charged Kalanick and almost 30 other Uber employees for running an illegal firm.When Kalanick refused to stand trial, Seoul City set a bounty of KRW1 million (US$870) as a reward to anyone who reported an Uber driver. On March 2015,Uber bowed to the mounting pressure and suspended UberX in South Korea.But this was just a way for Uber to make changes to a country's law."Uber's whole style was to go to market, break the law, cause a big ruckus...and the law gets changed," the source close to Uber said."In a way,they got their comeuppance in Korea." Apart from facing the incumbent daeri unjeon and taxi companies, Uber faced competition from local copycats, such as Limo Taxi and Baek Gisa. However , none could compete on the scale of Korea's homegrown rival app,Kakao Taxi by KaokaoTalk.In March 2015, the maker of Korea's top messaging app KakaoTalk entered the burgeoning taxi industry. Riding on its popularity and reputation in Korea's business community, the web giant launched Kakao Taxi, an app that allows mobile users to hail a cab and pay via Kaokao Pay or credit cards. Although it too encountered some resistance from chauffeurs, KakaoTaxi quickly surpassed Uber, boasting 180,000 drivers and 500,000 ride requests per day.
After suspending its service in 2015, Uber re-entered into Korea with a softer approach. Accord ing to Tech in Asia, a source claimed,"The change in Korea was part of the change happening globally.They're [Uber] no longer a snappy startup -they're worth US$50 billion.So they've got to behave a little more corporate." Local taxi unions added that Uber would not be an issue as long as the American company abide by the rules. However,drivers still did not trust Uber,and had no reason to switch from the explosively popular KakaoTaxi app. Under a change of leadership in Uber South Korea,the company worked with authorities to revise taxi laws. As a result,Seoul created a new category of taxi to encompass high-end, unmarked limo services that was available to anyone, and fares that could be set independently as long it cannot be hailed from the streets. After multiple consultations and attaining the backing of the government, Uber relaunched UberBlack in 2016 with Hyundai cars. It strategically partnered with Hyundai as a display of respect for Korea's automotive pride.Through its partnership with Seoul City on its "Taxi Happy Zone" initiative, Uber could contribute by providing transportation on Friday andl Saturday nights around Gangnam Station, a zone notorious for fussy taxi drivers during high-traffic periods.They [Seoul and Korean governments] recognised the ability of serv ces like Uber to benefit citizens and provide a reliable transportation option across the whole city, at any time of the day. They've really helped us further understand local needs and requirements, and we're really excited that their forward-thinking regulatory approach will enable us to better serve Seoul and its residents. Uber Spokesperson to Tech in Asia
In addition,Uber also entered into a deal with homegrown carmaker giant Hyundai Motor Group to utilise the Kia K9,their luxury sedan model,for its UberBlack service, contrasting KakaoTaxi Black, which used the foreign-imported Mercedes-Benz. The taxi industry in India was governed by the Motor Vehicles Act of 1988. The Act provided a framework for regulating the taxi industry,empowering states to establish stringent rules for taxi permits,the maximum and minimum fares, working hours for drivers ,and more. Contrary to its purpose, these rules had enabled taxi operators like Mega Cabs and Meru Cabs to prosper.In September 2014, Uber launched in Bangalore, and later brought its service to 18 cities in India, including Delhi, Hyderabad, Chennai, Mumbai, Pune, Ahemdbad, Chandigarh, Jaipur, and Kolkata. Private transport industry then comprised three players: unorganised taxis (also known as Kalee Pee/i taxis), auto-rickshaws, and organised taxi services (tourist taxis, car rental services, and radio taxi operators) .34 Across India's top 10 cities that provided taxiservices, the network encompassed 550,000 registered commercial taxis, almost 5 million auto-rickshaws that catered to an estimated 50 million people every day, and a dozen major radio taxi firms operating primarily in the bigger cities.Dominant market players included Ola Cabs,TaxiForSure, Meru Cabs, and EasyCabs.
The emergence of taxi aggregators like Uber and Ola had led to strikes by taxi drivers .Yet,despite taxi drivers' unhappiness over the rise of taxi aggregators,taxi unions were more fearful of speaking up about the salary crunch Uber had caused.For example, in Mumbai,taxi unions annually asked for fare hikes of 1 rupee a year to cope with inflation. However,with Uber and Ola's entrance, these unions were fearful that a raise in their base fares would drive customers to Uber and Ola instead.35 After strikes and protests occurring in Delhi,Mumbai,and Bangalore,the Ministry of Road Transport and Highways eventually made provisions in the Motor Vehicles Act to provide a level playing field for taxi drivers and their app-based taxi haiIing competitors.
Nevertheless, prior to provisions made by the government, Uber met with regulatory challenges that included the lack of proper regulatory licenses, compl ance with payment modes, and appropriate payment of service taxes.For ride-hailing companies suchas Uber,who operated in the grey areas of taxiregulations, India did not have a regulatory framework that covered the governance of businesses like Uber.To avoid being deemed as illegal operators by the Motor Vehicles Act of 1988, Uber and local taxi aggregators insisted that they were technology companies - as opposed to taxi operators - that were to be governed by the less stringent Information Technology (IT) Act of 2000.
Further, Uber was plagued with difficulties in complying with the Reserve Bank of India's (RBI) regulation regarding its mode of payment (accepting only credit and debit cards) and service tax. Brought to light by taxi radio unions, Uber was accused of remitting foreign exchange from India, thereby bypassing RBl's regulations against online payments. According to RBl's regulations, each onlinetransaction should require a multi-layered authentication process; Uber,however,only had a single-stage authentication for its credit and debit transactions.To overcome this, Uber linked its app with Paytm, an Indian payment gateway,to comply with RBI directives. In April 2015,Uber launched its new auto-rickshaw service,UberAuto, enabling cash payments in addition to credit and debit cards.Thus, the service provided more options to customers who did not have credit or debit cards.
A second regulatory issue Uber faced was regarding service tax. According to the authorities, all services were taxed at the rate of 12% unless they were specifically exempted by the government. Taxi services were liable to pay the 2% service tax.As such, Uber was required to pay service tax as it was delivering a taxable service. Although service tax was only imposed on revenues above Rs 10 lakh ($15,000), which may not be applicable to the individual Uber driver, tax authorities took into account Uber's combined revenue. In October 2014 , the authorities contemplated taking action against Uber for not paying service taxes. However, the fact that Uber India was operating through its Netherlands arm, Uber BV, complicated things for the authorities. This was the first time Indian authorities had to deal with a case involving an overseas technology company providing services to Indians. With no Indian representative in the country, the task was made even more difficult for the Indian Service Tax authorities.
In December 2014, news of an Uber driver's sexual assault on a passenger in India sent shockwaves around the world.37 Following the outcry on the rape charge in Delhi, Uber issued a statement on its website in India stating that its "thoughts were with the woman" and that Uber was "cooperating with the police". Uber's operations were banned in Delhi for operating1 without a proper license.Internet Service Providers (ISPs) were also advised to block access to these app-based services under the Information Technology Act of 2000. However,due to encryption, ISPs stated that they would not be able to block URLs of these firms, and that itwould be pointless as consumers co1Uld still make bookings through the apps.After facing flak from the media, Uber introduced two new safety features for its cars in India.The first feature was a "panic button" which allowed passengers to notify the police in case of an emergency.The second was a "safety net" which allowed customers to share information about their trip and location with up to five more persons. These moves,however,did not significantly improve the company's image in the Indian market. In 2015, Uber entered a strategic partnership with Tata Opportunities Fund to tap on its network and the wider Tata Group to expand Uber'sservices and solutions9 by allowing Uber drivers to purchase cars from Tata Motors using flexible financing solutions from Tata Capital Financial Services and Tata Motors Services,as well as allowing these drivers to purchase auto insurance from Tata AIG.40 Additionally, Uber partnered with India's largest wireless carrier Bharti Airtel to provide free wifi in Uber cars that afforded customers the convenience to pay their fares using the carrier's eWallet, Airtel Money.41
In May 2015, the Ministry of Road Transport and Highways made provisions in the Motor Vehicles Act to register and operate app-based taxi hailing services,thus providing a legal basis for ride-sharing companies' operations in India. In the same month, the Delhi authority insisted that Uber, Ola,and other app-based taxi services furnish all relevant data about drivers registered with them and to register any taxis operating for them in thecity. They were informed that their applications for licensing would be considered only after they had furnished further affidavits agreeing to the government's safety standards with particular attention paid to female passengers. These companies were also asked to conform to the rules framed for radio taxi operators.
As of May 2015,Uber's gross revenue in India was nearly $63 million and was expected to cross $157.55 million by the end of 2015. In contrast, competitors Ola and TaxiForSure combined gross revenue was $441.14 to $496.28 million. Uber was said to have about 20,000 vehicles operating in India, compared to Ola's nearly 150,000 vehicles (including 40,000 auto-rickshaws). To Uber, Ola was a force to be reckoned with in India. By the end of 2015, Ola operated in 100 cities in India, with plans to expand to another 200 cities. With 40,000 auto-rickshaws and 6,000 black-and-yellow cabs in its network, Ola continued its business expansion;it added nearly 1,000 vehicles a day, and planned to start providing product delivery and mobile-based navigation services in India. Since its inception in 2011, Ola was valued at $2.5 billion, raising $800 million,and backed by Japanese conglomerate Soft Bank. In March 2015, Ola claimed market dominance when it acquired TaxiForSure in a deal worth $200 million.
CHINA
Unlike the previous markets it had entered,Uber was considered a latecomer to the Chinese market. When Uber entered China in July 2014, the market had already been dominated by several local ride-hailing startups, such as Didi Dache (owned by Tencents Holdings) and Kuaidi Dache (backed by Alibaba Group). where taxis and vehicles-for-hire could be hailed through a smartphone application.A study published in December 2013 by Analysis International,cited by Reuters,estimated Didi Dache to hold approximately 55% of the smartphone-based ride-hailing market (estimated to be used by 150 million people) in China, with Kuaidi holding nearly all of the rest.
For an innovative startup entering a new market, Uber was stubborn with regards to some of its technologicalapproaches. The biggest challenges to them were navigation and payment. For a long period of time,Uberwas persistent in using Google Maps for navigation , eventhough it did not work well in China. After multiple attempts to improve its gee-spatial accuracy, a strategic partnership with China's search engine and mapping technology giant Baidu enabled Uber to switch to using the local mapping service in 2014.42 Uber China also installed servers on Chinese soil to prevent its operations from being disrupted by China's firewall.43 In December 2014, Baidu made a strategic investment in Uber China.44 As part of the deal, Baidu integrated Uber's "request a ride" buttons with its mobile search and maps apps - similar to how Google Maps integrated with Uber - in addition to integrating Baidu maps with Uber's navigation interface. This enabled Baidu users to connect to Uber more seamlessly. Other strategic partnerships involved car dealer Yongda Auto and China Telecom, which provided telecommunication solutions and advertising resources to Uber.
In China, WeChat and A/ipay were the primary modes of e-transactions. However, Uber was persistent in using a credit-card-based payment system, even though credit cards were not widely adopted. Uber's business was also "sabotaged" by WeChat, whose owner Tencent,was an investor in Didi. WeChat blocked Uber from integrating with the superapp for payment. Recognising its disadvantaged position, Uber added Alipay as one of its payment options in February 2014. Others felt that the Chinese government would be reluctant to let American companies such as Uber hold the reins on Chinese consumers'data. Accord ing tola n Bremmer,President and Founder of Eurasia Group, "I think the Chinese government really feels like, for what will soon be the most important consumer market in the world,they would much rather control the data. They would like to control the filters."
Despite the Chinese government's proclivity to favor its homegrown competitors,it had technically never banned Uber. Rather, in Premier Li Keqiang's 2015 "Internet Plus" policy, Internet businesses like Uber and Didi were encouraged as they helped to absorb unemployment amidst the slowing economic growth in China. Indeed, Kalanick stated, "China has been one of the most welcoming places we do business."
Rather than clamping down on Uber,51 the government took the opportunity to write a new regulatory scheme for Internet transport businesses. On 28 July 2016, Xinhua News officially announced the acceptance of ride-hailing services: "China Grants Legal Status to Ride-hailing Services".52 Under the new regulations, data collected by Uber wou ld come under the purview of the government, and market price will prevail,"except when [the] municipal government officials believe it is necessary to implement government guided pricing."53 Uber would be required to apply for provincial and national regulatory approval, whereas the local governments would be responsible for issuing "ride-hailing service driver's licenses" and to determine who is eligible to be a driver and what kinds of cars can be driven.
Although several strikes by taxi drivers in Nanjing, Chengdu, and Dongguan occurred in January 2016, 55 they did not pose a big challenge to Uber's expansion when compared to strikes in France and England. One major factor behind the weak responses from these taxi unions could be attributed to the disorganization between taxi drivers in some states. According to a taxi driver, Li, taxi drivers were not united enough to place any real pressure on taxi com[panies and the government: I was on strike and went to the transport bureau to protest with the others, but on the next day some of my colleagues ridiculed us, called us fools because they made a nice profit while we were on strike. Weare like a heap of loose sand here, there is little solidarity.
Explanation / Answer
Supply chain management (SCM) is the active streamlining of a business' supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production, to product development, to the information systems needed to direct these undertakings.
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