MNB3701 May/June Portfolio Memo | Due 2 June
2025
ALL QUESTIONS ANSWERED
MULLAH _DES
, Question 1: Formal and Informal Institutions in China Affecting Uber’s Operations
Formal Institutions:
1. Regulatory Environment:
China's stringent regulatory framework posed significant challenges for Uber. The government
imposed restrictions on foreign ride-hailing services, requiring compliance with local laws and
regulations. Uber faced difficulties in navigating these regulations, which hindered its ability to
operate smoothly.
2. Partnership with Baidu:
To adapt to the local market, Uber partnered with Baidu, a Chinese tech giant, for mapping services.
This collaboration allowed Uber to integrate Baidu Maps into its app, aligning with China's "Great
Firewall" policy that restricts access to foreign services like Google Maps. This partnership was
crucial for Uber's localization strategy.
Informal Institutions:
1. Guanxi (Personal Networks):
In China, business success often relies on personal relationships, known as guanxi. Uber's lack of
deep local connections made it challenging to establish trust and navigate the business landscape
effectively. This informal institution significantly impacted Uber's operations.
2. Consumer Behaviour and Subsidy Expectations:
Chinese consumers exhibited a strong preference for subsidies and discounts. Uber's strategy of
offering significant subsidies to attract users led to financial losses, as users would switch to other
services once the promotions ended. This consumer behaviour, influenced by informal cultural
expectations, affected Uber's sustainability in the market.
Question 2: National Competitive Advantage Theory Applied to Uber in China
1. Factor Conditions:
China's large population provided a vast labor pool for Uber's driver-partners, facilitating scalability.
Additionally, the country's rapid technological advancements supported the development of Uber's
app and services.
2. Demand Conditions:
The growing urban middle class in China created a substantial demand for convenient transportation
options, aligning with Uber's service offerings.
3. Related and Supporting Industries:
China's robust tech industry, including companies like Baidu and Alibaba, provided essential support
for Uber's operations, from mapping services to payment solutions.
4. Firm Strategy, Structure, and Rivalry:
The intense competition from local firms like Didi Chuxing created a challenging environment for
Uber. Didi's deep understanding of local market dynamics and consumer preferences gave it a
competitive edge.
5. Government Role:
The Chinese government's policies favoured local companies, providing them with advantages over
foreign competitors like Uber. This institutional support played a significant role in shaping the
competitive landscape.
2025
ALL QUESTIONS ANSWERED
MULLAH _DES
, Question 1: Formal and Informal Institutions in China Affecting Uber’s Operations
Formal Institutions:
1. Regulatory Environment:
China's stringent regulatory framework posed significant challenges for Uber. The government
imposed restrictions on foreign ride-hailing services, requiring compliance with local laws and
regulations. Uber faced difficulties in navigating these regulations, which hindered its ability to
operate smoothly.
2. Partnership with Baidu:
To adapt to the local market, Uber partnered with Baidu, a Chinese tech giant, for mapping services.
This collaboration allowed Uber to integrate Baidu Maps into its app, aligning with China's "Great
Firewall" policy that restricts access to foreign services like Google Maps. This partnership was
crucial for Uber's localization strategy.
Informal Institutions:
1. Guanxi (Personal Networks):
In China, business success often relies on personal relationships, known as guanxi. Uber's lack of
deep local connections made it challenging to establish trust and navigate the business landscape
effectively. This informal institution significantly impacted Uber's operations.
2. Consumer Behaviour and Subsidy Expectations:
Chinese consumers exhibited a strong preference for subsidies and discounts. Uber's strategy of
offering significant subsidies to attract users led to financial losses, as users would switch to other
services once the promotions ended. This consumer behaviour, influenced by informal cultural
expectations, affected Uber's sustainability in the market.
Question 2: National Competitive Advantage Theory Applied to Uber in China
1. Factor Conditions:
China's large population provided a vast labor pool for Uber's driver-partners, facilitating scalability.
Additionally, the country's rapid technological advancements supported the development of Uber's
app and services.
2. Demand Conditions:
The growing urban middle class in China created a substantial demand for convenient transportation
options, aligning with Uber's service offerings.
3. Related and Supporting Industries:
China's robust tech industry, including companies like Baidu and Alibaba, provided essential support
for Uber's operations, from mapping services to payment solutions.
4. Firm Strategy, Structure, and Rivalry:
The intense competition from local firms like Didi Chuxing created a challenging environment for
Uber. Didi's deep understanding of local market dynamics and consumer preferences gave it a
competitive edge.
5. Government Role:
The Chinese government's policies favoured local companies, providing them with advantages over
foreign competitors like Uber. This institutional support played a significant role in shaping the
competitive landscape.
