NO PLAGIARISM
[Pick the date]
[TYPE THE COMPANY NAME]
MNB3701 MAY JUNE
PORTFILIO (COMPLETE
ANSWERS) Semester 1 2025
- DUE 2 June 2025
NO PLAGIARISM
[Pick the date]
[Type the abstract of the document here. The abstract is typically a short summary of the contents of
the document. Type the abstract of the document here. The abstract is typically a short summary of
the contents of the document.]
,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)
Definition of Institutions
Formal institutions are rules, laws, and regulations that are officially established by
governments or governing bodies. These include laws, policies, licensing requirements,
and legal enforcement mechanisms.
Informal institutions are unwritten rules that arise from culture, traditions, values, and
social norms. They influence behavior through expectations, reputation, and societal
pressures.
Formal Institutions in China Affecting Uber’s Operations
1. Government Regulations and Licensing Requirements
China’s government imposed strict regulatory requirements on ride-hailing platforms, such as
driver licensing, data storage laws, and foreign ownership restrictions.
🔹 Example 1: The Chinese government required that all ride-hailing companies store their data
locally. This policy created compliance difficulties for foreign companies like Uber, which were
not initially equipped to manage data in China.
🔹 Example 2: Uber faced challenges in getting legal approval for its operations because the
government favored local firms and imposed barriers for foreign competitors. For example, Uber
drivers had to be licensed under Chinese laws, and many did not meet the criteria, leading to
service disruptions.
,Informal Institutions in China Affecting Uber’s Operations
1. Guanxi (Relationship Networks)
In China, strong business relationships and networks (guanxi) are critical for navigating
bureaucratic hurdles and gaining market access.
🔹 Example 1: Uber lacked strong local partnerships and networks initially, which made it
harder for them to establish influence with government officials and local stakeholders. This
contrasted with local competitors like Didi Chuxing, which had deeper guanxi.
2. Consumer Preferences and Nationalism
Chinese consumers often prefer domestic brands and companies, especially when there's a strong
sense of nationalism.
🔹 Example 2: Uber struggled to gain the trust and loyalty of Chinese consumers who preferred
to use Didi, the local ride-hailing app, which they viewed as more in tune with local needs and
culture.
Summary
Type of
Explanation Examples from Case Study
Institution
1. Data localization law
Formal Government laws and regulations
2. Licensing and compliance issues
1. Lack of guanxi (business
Cultural norms, business practices, relationships)
Informal
societal values 2. Consumer preference for local
brand (Didi)
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:
1. Cultural Discomfort with Credit Card Use and Preference for Local Payment
Methods: Initially, Uber required users to register credit card details for transactions.
However, many Chinese consumers were culturally hesitant to share such sensitive
information online due to trust issues and privacy concerns, as well as a strong preference
for local digital payment solutions. This reluctance to use credit cards for online
transactions acted as a significant informal barrier to user adoption for Uber. In
[Pick the date]
[TYPE THE COMPANY NAME]
MNB3701 MAY JUNE
PORTFILIO (COMPLETE
ANSWERS) Semester 1 2025
- DUE 2 June 2025
NO PLAGIARISM
[Pick the date]
[Type the abstract of the document here. The abstract is typically a short summary of the contents of
the document. Type the abstract of the document here. The abstract is typically a short summary of
the contents of the document.]
,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)
Definition of Institutions
Formal institutions are rules, laws, and regulations that are officially established by
governments or governing bodies. These include laws, policies, licensing requirements,
and legal enforcement mechanisms.
Informal institutions are unwritten rules that arise from culture, traditions, values, and
social norms. They influence behavior through expectations, reputation, and societal
pressures.
Formal Institutions in China Affecting Uber’s Operations
1. Government Regulations and Licensing Requirements
China’s government imposed strict regulatory requirements on ride-hailing platforms, such as
driver licensing, data storage laws, and foreign ownership restrictions.
🔹 Example 1: The Chinese government required that all ride-hailing companies store their data
locally. This policy created compliance difficulties for foreign companies like Uber, which were
not initially equipped to manage data in China.
🔹 Example 2: Uber faced challenges in getting legal approval for its operations because the
government favored local firms and imposed barriers for foreign competitors. For example, Uber
drivers had to be licensed under Chinese laws, and many did not meet the criteria, leading to
service disruptions.
,Informal Institutions in China Affecting Uber’s Operations
1. Guanxi (Relationship Networks)
In China, strong business relationships and networks (guanxi) are critical for navigating
bureaucratic hurdles and gaining market access.
🔹 Example 1: Uber lacked strong local partnerships and networks initially, which made it
harder for them to establish influence with government officials and local stakeholders. This
contrasted with local competitors like Didi Chuxing, which had deeper guanxi.
2. Consumer Preferences and Nationalism
Chinese consumers often prefer domestic brands and companies, especially when there's a strong
sense of nationalism.
🔹 Example 2: Uber struggled to gain the trust and loyalty of Chinese consumers who preferred
to use Didi, the local ride-hailing app, which they viewed as more in tune with local needs and
culture.
Summary
Type of
Explanation Examples from Case Study
Institution
1. Data localization law
Formal Government laws and regulations
2. Licensing and compliance issues
1. Lack of guanxi (business
Cultural norms, business practices, relationships)
Informal
societal values 2. Consumer preference for local
brand (Didi)
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:
1. Cultural Discomfort with Credit Card Use and Preference for Local Payment
Methods: Initially, Uber required users to register credit card details for transactions.
However, many Chinese consumers were culturally hesitant to share such sensitive
information online due to trust issues and privacy concerns, as well as a strong preference
for local digital payment solutions. This reluctance to use credit cards for online
transactions acted as a significant informal barrier to user adoption for Uber. In
