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Uber in Africa
- 1. Uber in Africa Nataly Blas, Sayantika Boral, D. Antione Dixon, Amanda Vysel
- 2. Uber Overview Launched in SF in 2010 as UberCAB UberX, UberPOP, UberEATS, UberRUSH Valued at $70 billion 60% of U.S. revenue gained from 5 cities Biggest competitor = Lyft Banned Cities
- 3. Global Expansion 70 countries 614 cities December 2011: Paris, France August 2013: India & Africa July 2014: China April 2015: Barcelona July 2016 Exits Hungary
- 4. What’s Happening in 2017? ● Workplace culture in review ○ 215 reports of sexual harassment, bullying, retaliation, etc. ● Uber CEO gets into argument with driver re: falling prices ● #deleteUber
- 6. “ Wherever there is a car, a decent road and a reliable GPS connection, there is Uber. ” ~ Lynsey Chutel Uber is in 8 countries in Africa and 14cities Uber’s Entry Decision in Africa
- 7. Location Selection: Why Africa? Market size & future growth Infrastructure Openness to testing and adopting new technologies Driver supply Ease of doing business Costs of regulation compliance Costs of labor Political: gov. regulations Legal: taxi companies Competition Strategic “fit” Ability to support Uber in Africa
- 8. Strategic Direction Enter new markets Home Replication Strategy Continue growth in Uganda, Ghana & Tanzania Partnerships Pushing uberPOOL, UberRUSH and UberEATS in South Africa
- 9. Entry Mode, Timing & Scale “Uberfication” First Mover Small-Scale
- 10. Key Operations R & D ● Driver Analytics ● Work-Cations ● Hackathons Marketing ● UberChopper ● UberHealth ● UberYacht ● Brand “Talkability” HR Management ● Driver Strikes
- 11. Standardization vs. Localization One size fits all business model ● Digital App access ● Digital payment system ● Gps and Roads ● Cultural differences ● Security Concerns
- 12. uberMoney Barriers of entry: Lack of Digital Payment System “Try before you buy” Landmarking instead of addresses Infrastructure supplementation
- 14. Successes ❖ Standardized fare ❖ Uber may also help reduce traffic congestion ❖ Uber is creating employment
- 15. Failures ❖ Drivers do not break-even ❖ Drivers do not feel safe with Uber ❖ Declining service levels
- 16. Recommendations Prior to entry, work with local governments to negotiate regulations Install a HELP feature on the Uber app for drivers to utilize during an emergency → increase driver safety Implement driver training covering smartphone usage and city roads knowledge Consider acquisitions to increase reach (e.g., Maramoja)
- 18. Q ESTIONS?
Editor's Notes
- Uber launched in San Francisco in 2010 as UberCAB, a black car service utilizing technology Currently, the company is valued at $70 billion but is often compared to Amazon in terms of making a profit (none). The company is still privately owned, so finances are not advertised Uber gains 60% of its US revenue from New York, San Francisco, Los Angeles, Chicago, and Washington DC Uber’s biggest competitor in the U.S. is Lyft; however, Lyft will be expanding globally and become a bigger threat to Uber as it has made alliances with some of Uber’s biggest international competitors Uber has exited or been banned from numerous cities including Austin, Bulgaria, Denmark, etc. Austin: A ballot initiative failed that would’ve allowed Uber to conduct its own background & fingerprint checks Bulgaria: BANNED! Parliament said “taxi services may only be rendered by registered carriers with certificates of registration.” Denmark: Gov’t made taxi meters a requirement; thus, Uber could not operate there
- Uber currently operates in over 70 countries and 614 cities globally Began international expansion in December of 2011 in Paris, France Expanded to India and Africa in August 2013 In July 2014, Uber launched in Beijing, China after raising $1.2 billion funding round at a $17 billion valuation. Five out of Uber’s ten largest cities are located in China. As Uber would come to find out, their biggest competitor was Didi Chuxing (formerly Kuaidi). Didi held 80% of the country’s market share, resulting in large losses for Uber. After losing $1 billion per year in China, Uber China was bought by Didi in July 2016 with a $35 million merge Why did Uber fail in China? Among China’s political structure, legal system, and regulatory rules, Uber did not enter the market with a partnership - this is something that is key to entering China as local companies have a better handle on the cultural, economic, and political environment January 2015: UberCARGO was launched in Hong Kong as a way to meet moving & delivery needs. Shortly thereafter, UberEATS was launched in Barcelona June 2015: French taxi drivers protested the popular app resulting in violence (cars smashed / overturned) July 2016: After months of protests from Hungarian taxi drivers, Uber leaves Hungary after the local government passed legislation that made it near impossible for Uber to operate there
- Investigation is being conducted into Uber’s workplace culture after 215 reports of sexual harassment, bullying, retaliation, and inappropriate behavior was filed.U.S. Attorney General, Eric Holder, is conducting the investigation. So far, 20 employees have been fired. (February 2017) Uber CEO, Travis Kalanick, got into an argument with a driver regarding falling wages with a less than sympathetic response to the driver’s comment that he went bankrupt because Kalanick dropped pricing on Uber Black (February 2017) Over 200,000 people deleted their Uber accounts in protest of Uber CEO’s perceived support of Donald Trump. Taxi drivers in NY protested Trump’s travel ban by refusing service at JFK. Uber responded by turning off surge pricing and was said to be trying to make a profit off of the situation. This spurred the #deleteUBER hashtag, encouraging users to delete accounts. On the other hand, Uber’s competitor Lyft pledged $1 million to the ACLU (American Civil Liberties Union) (May 2017) Uber recently fired Anthony Levandowski, a former engineer for Uber’s self-driving program, based on the allegations that he stole knowledge (trade secrets) from Google’s self-driving program
- “Wherever there is a car, a decent road and a reliable GPS connection, there is Uber” (quote from Lynsey Chutel) Uber is currently in 8 countries in Africa and 14 cities First launched in Johannesburg in 2013, simultaneous launch in Pretoria and Cape Town Africa is currently Uber’s expansion priority
- Location Selection - Why Africa? Market Opportunities Size of market & future market growth: rider demand Market openness to testing and adopting new technologies Driver supply: ready labor force and supply of vehicles Infrastructure (communication and transportation): Smartphone penetration and network quality, the existence of a supply of vehicles that meet the Uber brand, and reliable roadways Cost Factors Ease of doing business Costs of regulation compliance - Uber has a “ask later” approach Costs of labor Risk Factors Political: government regulations Ghana becomes the first African country to sign a Standard of Understanding (SOU) with Uber. Under the SOU, Uber will partner with Ghana’s Ministry of Transport to produce a regulatory framework that allows for ride-sharing technology and also regulates its use and adoption by riders, drivers and companies that use it to find business. Legal: i.e. battles with incumbent taxi operators in Kenya and South Africa Competition: i.e. Taxify in South Africa Organizational structure Strategic “fit” Ability to support international expansion
- Strategic Direction - What is Uber’s main purpose for international expansion? Profit Growth -> Enter New Markets Strategy: Home Replication Strategy o Uber services are viewed as an opportunity to generate incremental sales o Uber has limited competition abroad Strategic Initiatives: Continue growth in Uganda, Ghana, and Tanzania o Pushing uberPOOL, UberRUSH and UberEATS in South Africa o Partnering with mobile payments companies, i.e. Paga in Nigeria
- Entry Mode Choice Entry Mode: Uber does not fit the traditional entry model. Some analysts have used the term, “Uberfication” effect when describing Uber’s rapid expansion - Uber’s approach has been to leverage mobile technology to disrupt the industry. Timing and Scale Timing: First Mover While Uber faces competition from traditional taxi operators, it is typically the first firm to offer “ride-sharing service” Advantage in attracting riders, gaining brand recognition and creating switching costs Opportunity to shape industry Uber continues to outpace competitors in terms of size, revenue generation and market expansion Scale: Small Scale Entry Uber’s approach is to enter urban and populous cities. Yet, when entering a market, Uber enters a single city. Africa was a bit unique, Uber launched in Johannesburg, Pretoria and Cape Town (South Africa). Allows for less risk and more flexibility Allows Uber to learn about the country, government regulations and rider preferences
- Taxify launched in Cape Town in April and expanded to Johannesburg in May. Their rates are higher than Uber, but Taxify believes it has a winning strategy: Be nice to drivers. In April, when Uber South Africa announced a nearly 20% cut in its tariffs, drivers went on strike, marching to the company’s local headquarters. In South Africa where labor law is in the employee’s favor, Uber drivers’ working conditions have come under scrutiny.
- “Kenya doesn’t have a taxi market, it has a taxi culture. And Kenyans aren’t a consumer group, they are a community” – Maramoja app Afro app The homegrown app’s smartest feature is that it literally haggles—tapping into the shopping culture of Nigerians. A prospective user and driver negotiate a price using the plus and minus signs on either side of a proposed price, until they agree on the fare. It’s a nod to a market practice that many Africans are proud of.
- Standardized Fare About 33% of the total population use taxis in South Africa. Services like Uber could provide mechanisms for user-based self-regulation in the areas of pricing and safety. In cities like Kampala and Nairobi, the price of a taxi trip is usually determined ex-ante and is the result of a combination of factors, including the bargaining power between the driver and passenger, the type of car as well as the weather. Even in cities with decent competition between private providers, there are still variations in the price of a trip to the same destination. With Uber, pricing is becoming standardized and increasingly transparent with the introduction of meters. Uber may also help reduce congestion. As the economy and the middle class grow, more vehicles are coming into the country. Yet the road network cannot keep up, which leads to increasing congestion. Uber could help mitigate this connectivity challenge by providing better transportation. Uber may also help reduce congestion. By having up-to-date traffic information via smartphone apps and from other cars en route, Uber drivers are able to avoid congested routes. Their pricing structure, which includes surge pricing during peak time, may also discourage movement when routes are gridlocked. Uber encourages carpooling, as the newly launched UberPOOL has shown in some cities. Uber is creating employment The business offered a lifeline in a city where the unemployment rate is about 30 per cent. Uber is a service that uses technology to empower any owner of a vehicle to take part in commercial ride-sharing ventures. It has revolutionized the transport industry in many European and US cities and created jobs. They are using similar techniques to create jobs in the developing region like Africa. One simply needs a car and a smartphone to register. Customers can easily order the service via a smartphone app. Therefore, in many places, it has provided cheaper and more reliable transport than the traditional taxis. While Uber has inspired a series of new players in the market, none of them have made much of a dent in Uber’s expansion in Africa. Uber has quickly expanded across parts of Africa, where it is seen by those signing up as drivers — or “partners” in the Uber lingo — as a rare job opportunity on a continent with stubbornly high levels of unemployment.
- Drivers do not even break even Example: James Njoroge, an Uber driver in Nairobi, earns barely $5 at the end of a exhausting 10-hour workday. Now a new competitor is in town, threatening to undercut even these negligible earnings. Drivers say they’re bearing the brunt of the price cuts. In February, drivers went on strike to protest fare cuts that they said made it difficult for them to break even. The company has faced a series of strikes from South Africa to Lagos. Drivers in Lagos, Nigeria’s biggest city, went on strike after fares were slashed by 40%. In February, a series of strikes by an informal union of Uber drivers forced the company to raise the minimum fare to $2.90 from about $2. A South African Uber driver had claimed that his weekly fare income was between 8000 Rand to 10000 Rand two years ago. Now it is just 5000 Rand. The income is too low to demand the driver’s loyalty. Uber drivers feel that the company is not just losing customers but the drivers are failing to pay their car loans— loans that Uber helped them secure in the first place and that require drivers to stay with the company until they’re paid off. Driver do not feel safe with Uber Like elsewhere around the world, Uber’s disruption of the local metered cab industry has been met with resistance and regulation disputes. In Egypt, South Africa and Kenya, Uber’s presence has sometimes led to violent protests by rival local taxi drivers. In Nairobi, Kenya at least two Uber cars have been attacked and set alight, one with the driver still inside. Uber drivers have also been attacked in Johannesburg, with one such incident leading to Uber temporarily suspending its service in the Sandton neighborhood. In March 2016, taxi drivers in South Africa mounted a protest against the company by blocking airport roads. Similar incidents have been witnessed in Gauteng and nothing was done about that. In fact‚ from eyewitnesses claim that the police ignore these crimes even when they occur in their locality. The spokesperson also claimed that when about 200 Uber drivers operating around Eastgate Mall had protested against ongoing intimidation and attacks‚ allegedly by metered taxi drivers‚ Uber had called the mall management and told them they don’t recognize the drivers. Declining service levels Many local users have taken to social media to complain about their bad experiences with Uber. One of the problems, which was confirmed by MyBroadband, is that pickups are often problematic. When a trip is canceled more than 5 minutes after a driver accepts, or if the driver has to cancel after waiting more than 5 minutes at the pickup location, a 70.00 Rand cancellation fee is charged. Uber could not figure out whether there is anything wrong with the technology or with the drivers in South Africa. They said each case is different and need to be evaluated on individual basis. Uber also feel that trips can be impacted by network connection which can impact GPS and things like traffic can impact ETAs. Take Taxify, for example, the Estonian ride service that spotted an opportunity among disgruntled drivers in South Africa. Taxify rates are higher than Uber but their strategy is being nice to drivers. Uber’s rivals in Africa promise happier drivers, traffic jam deals and even price haggling. This is making Uber less competitive.
- Ghana - Standard of Understanding Help Feature - Press button. It will automatically connect to the local police and start recording via the phone’s camera. Apply this new feature throughout all 14 cities in Africa where Uber operates. Kenya’s Maramoja launched a year ago with the promise of a deeper understanding of the country they operate in, because it’s their own. Claiming an intimate knowledge of Nairobi’s grinding traffic, Maramoja charges according to zones. The app also tries to tap into users existing networks, recommending drivers through social media favorites via friends or followers.