MNB3701
May/June
Portfolio Memo |
Due 2 June 202
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
MNB3701 May/June Portfolio Memo | Due 2
June 202 Course
Global Business Management IA (MNB3701)
Institution
University Of South Africa (Unisa)
Book
International Business
MNB3701 May/June Portfolio Memo | Due 2 June 2025. All questions fully
answered.
Question 1 Identify and explain the formal and informal institutions in China
that affect Uber’s operations. Give TWO examples for each institution from
the case study to support the arguments made. (15)
Formal Institutions
Formal institutions refer to laws, regulations, and official policies enforced by authorities or
governments.
1. Government Regulation of Ride-Hailing Services
China had strict regulations around foreign technology and transportation firms. The Chinese
government required all ride-hailing companies to:
Store user data on local servers.
Partner with local firms.
Example 1: Uber China was required to comply with China’s cybersecurity law, which
restricted the flow of data across borders. Uber had to store data within China, which added
operational challenges.
Example 2: The Chinese government demanded ride-hailing drivers and vehicles meet
specific licensing requirements. Many Uber drivers didn’t meet these, resulting in penalties and
restrictions on the service.
Informal Institutions
,Informal institutions refer to cultural norms, values, relationships, and unwritten social rules
that shape behavior.
1. Cultural Preference for Local Brands
Chinese consumers tend to trust local companies over foreign ones, especially in tech and
transport.
Example 1: Didi Chuxing, Uber’s main competitor, was perceived as more culturally aligned
and better connected with local customers and drivers. Uber struggled to gain loyalty.
2. Guanxi (Relationships and Networking)
Business success in China often depends on guanxi — building strong relationships with local
authorities and stakeholders.
Example 2: Didi had better guanxi with government bodies and local taxi unions, giving it a
strategic edge. Uber, as a foreign firm, lacked these connections and faced resistance and
limited support.
Summary Table
Institution
Examples Explanation
Type
1. Cybersecurity laws
Government regulations restricted data use and required
Formal 2. Driver licensing
compliance with transport laws.
rules
1. Preference for local
brands Social and cultural factors influenced consumer behavior
Informal
2. Guanxi and business success.
(relationships)
Total: 15 marks
Clear definition and distinction of formal/informal institutions (4 marks)
Two strong examples for each (8 marks)
Application to Uber’s operations and context in China (3 marks)
Formal Institutions
, Formal institutions are the codified rules, laws, regulations, and government policies that are
enforced by official authorities. In China, Uber faced a complex and often unpredictable formal
institutional environment.
Explanation: Formal institutions provide the legal and regulatory framework within which
businesses operate. They dictate what is permissible, what is prohibited, and the conditions under
which activities can be conducted. For a foreign company like Uber, navigating a different
country's formal institutions, especially one with a strong state presence like China, is critical for
legitimacy and sustained operation. Regulatory uncertainty, local protectionism, and the sheer
power of the central and local governments can pose significant barriers.
Examples from the case study:
1. Regulatory Uncertainty and Police Raids: When Uber entered the Chinese market,
there was no clear national policy or specific regulations for ride-hailing services. This
created a "gray zone" where local authorities often interpreted existing laws in ways that
were unfavorable to Uber. For instance, in early 2015, the Beijing Transportation
Commission declared Uber's services illegal, and law enforcement in Guangzhou
conducted raids that resulted in the confiscation of Uber's equipment and arrests.
These actions demonstrated the direct impact of formal enforcement mechanisms on
Uber's operations, disrupting its business and highlighting its precarious legal status.
2. Introduction of National Ride-Hailing Regulations (July 2016): In July 2016, the
Chinese government introduced national regulations for ride-hailing services. While these
regulations technically legalized ride-hailing, they also imposed strict conditions. These
included requirements for drivers to undergo criminal background checks, possess
adequate driving experience, and register both vehicles and operations with local
authorities. Crucially, these regulations prohibited Uber's strategy of underpricing
rides through heavy subsidies, a core element of its business model for gaining market
share. This formal policy shift directly undermined Uber's competitive strategy and
significantly increased its operating costs, making it harder to compete with local players
like Didi Chuxing.
Informal Institutions
Informal institutions refer to unwritten rules, norms, values, customs, and cultural expectations
that shape behavior and influence business practices. These are often deeply embedded in society
and can be just as powerful, if not more so, than formal laws.
Explanation: Informal institutions influence how businesses are perceived, accepted, and how
they build relationships within a market. In China, concepts like "guanxi" (关系 - personal
connections and networks), emphasis on local relationships, and consumer preferences can
significantly affect a foreign company's success. Ignoring or failing to adapt to these informal
norms can lead to a lack of trust, user adoption issues, and difficulties in building local support.
Examples from the case study:
May/June
Portfolio Memo |
Due 2 June 202
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
MNB3701 May/June Portfolio Memo | Due 2
June 202 Course
Global Business Management IA (MNB3701)
Institution
University Of South Africa (Unisa)
Book
International Business
MNB3701 May/June Portfolio Memo | Due 2 June 2025. All questions fully
answered.
Question 1 Identify and explain the formal and informal institutions in China
that affect Uber’s operations. Give TWO examples for each institution from
the case study to support the arguments made. (15)
Formal Institutions
Formal institutions refer to laws, regulations, and official policies enforced by authorities or
governments.
1. Government Regulation of Ride-Hailing Services
China had strict regulations around foreign technology and transportation firms. The Chinese
government required all ride-hailing companies to:
Store user data on local servers.
Partner with local firms.
Example 1: Uber China was required to comply with China’s cybersecurity law, which
restricted the flow of data across borders. Uber had to store data within China, which added
operational challenges.
Example 2: The Chinese government demanded ride-hailing drivers and vehicles meet
specific licensing requirements. Many Uber drivers didn’t meet these, resulting in penalties and
restrictions on the service.
Informal Institutions
,Informal institutions refer to cultural norms, values, relationships, and unwritten social rules
that shape behavior.
1. Cultural Preference for Local Brands
Chinese consumers tend to trust local companies over foreign ones, especially in tech and
transport.
Example 1: Didi Chuxing, Uber’s main competitor, was perceived as more culturally aligned
and better connected with local customers and drivers. Uber struggled to gain loyalty.
2. Guanxi (Relationships and Networking)
Business success in China often depends on guanxi — building strong relationships with local
authorities and stakeholders.
Example 2: Didi had better guanxi with government bodies and local taxi unions, giving it a
strategic edge. Uber, as a foreign firm, lacked these connections and faced resistance and
limited support.
Summary Table
Institution
Examples Explanation
Type
1. Cybersecurity laws
Government regulations restricted data use and required
Formal 2. Driver licensing
compliance with transport laws.
rules
1. Preference for local
brands Social and cultural factors influenced consumer behavior
Informal
2. Guanxi and business success.
(relationships)
Total: 15 marks
Clear definition and distinction of formal/informal institutions (4 marks)
Two strong examples for each (8 marks)
Application to Uber’s operations and context in China (3 marks)
Formal Institutions
, Formal institutions are the codified rules, laws, regulations, and government policies that are
enforced by official authorities. In China, Uber faced a complex and often unpredictable formal
institutional environment.
Explanation: Formal institutions provide the legal and regulatory framework within which
businesses operate. They dictate what is permissible, what is prohibited, and the conditions under
which activities can be conducted. For a foreign company like Uber, navigating a different
country's formal institutions, especially one with a strong state presence like China, is critical for
legitimacy and sustained operation. Regulatory uncertainty, local protectionism, and the sheer
power of the central and local governments can pose significant barriers.
Examples from the case study:
1. Regulatory Uncertainty and Police Raids: When Uber entered the Chinese market,
there was no clear national policy or specific regulations for ride-hailing services. This
created a "gray zone" where local authorities often interpreted existing laws in ways that
were unfavorable to Uber. For instance, in early 2015, the Beijing Transportation
Commission declared Uber's services illegal, and law enforcement in Guangzhou
conducted raids that resulted in the confiscation of Uber's equipment and arrests.
These actions demonstrated the direct impact of formal enforcement mechanisms on
Uber's operations, disrupting its business and highlighting its precarious legal status.
2. Introduction of National Ride-Hailing Regulations (July 2016): In July 2016, the
Chinese government introduced national regulations for ride-hailing services. While these
regulations technically legalized ride-hailing, they also imposed strict conditions. These
included requirements for drivers to undergo criminal background checks, possess
adequate driving experience, and register both vehicles and operations with local
authorities. Crucially, these regulations prohibited Uber's strategy of underpricing
rides through heavy subsidies, a core element of its business model for gaining market
share. This formal policy shift directly undermined Uber's competitive strategy and
significantly increased its operating costs, making it harder to compete with local players
like Didi Chuxing.
Informal Institutions
Informal institutions refer to unwritten rules, norms, values, customs, and cultural expectations
that shape behavior and influence business practices. These are often deeply embedded in society
and can be just as powerful, if not more so, than formal laws.
Explanation: Informal institutions influence how businesses are perceived, accepted, and how
they build relationships within a market. In China, concepts like "guanxi" (关系 - personal
connections and networks), emphasis on local relationships, and consumer preferences can
significantly affect a foreign company's success. Ignoring or failing to adapt to these informal
norms can lead to a lack of trust, user adoption issues, and difficulties in building local support.
Examples from the case study:
