MNB3701
EXAM PORTFOLIO
DUE DATE: 2 JUNE 2025
,MNB3701 Exam Portfolio 2025
Due: 2 June 2025
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.
(Chapter 2 formal institutions: political, economic and legal systems)
Formal Institutions
Formal institutions refer to rules, laws, and regulations officially established by
governments or authorities. In Uber’s case in China, these institutions significantly
influenced how the company operated.
Example 1 Government Regulations on Ride-Hailing Services
The Chinese government had strict rules regulating foreign ride-hailing companies.
Uber struggled because it was not fully compliant with Chinese laws, such as
needing a local partner or license to operate legally. These legal requirements
were major obstacles for Uber and made it difficult to compete with domestic rivals.
Example 2 Legal Preference for Local Firms
Chinese formal institutions often favor domestic companies through policies and
regulations. For example, Didi Chuxing had government support, giving it an
advantage over Uber. The state encouraged local innovation and protected it,
which meant that Uber faced legal and policy challenges not faced by its local
competitor.
Informal Institutions
Informal institutions are the unwritten rules, cultural norms, and social values that
shape behavior in a society. These also impacted Uber’s operations in China.
13
, Example 1 Consumer Loyalty to Local Brands
Chinese customers showed more trust and preference for local companies, like Didi,
which understood their needs better. Didi’s services were more culturally adapted,
such as offering WeChat payment integration and better language support, which Uber
struggled to match.
Example 2 Guanxi (Relationships and Networks)
In China, business success often depends on guanxi, which refers to building strong
personal relationships and trust within networks. Didi had stronger connections with
local regulators and stakeholders, giving it a strategic edge. Uber, being a foreign
company, lacked these relationships, making it harder to navigate the local business
environment.
Question 2
Apply the national competitive advantage theory to the case. Provide FIVE
examples from the case study.
Michael Porter’s diamond model, which includes four key elements:
Factor conditions (resource endowments)
Demand conditions (domestic demand)
Related and supporting industries
Firm strategy, structure, and rivalry
Factor Conditions – Human Resources and Local Knowledge
Uber lacked deep local knowledge and networks in China, while its local rival Didi
Chuxing had better access to local resources, such as understanding Chinese
consumer preferences, local laws, and driver networks.
China’s competitive advantage came from its skilled domestic workforce familiar
with local systems, giving Didi the edge.
Demand Conditions – Unique Local Consumer Demands
14
EXAM PORTFOLIO
DUE DATE: 2 JUNE 2025
,MNB3701 Exam Portfolio 2025
Due: 2 June 2025
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.
(Chapter 2 formal institutions: political, economic and legal systems)
Formal Institutions
Formal institutions refer to rules, laws, and regulations officially established by
governments or authorities. In Uber’s case in China, these institutions significantly
influenced how the company operated.
Example 1 Government Regulations on Ride-Hailing Services
The Chinese government had strict rules regulating foreign ride-hailing companies.
Uber struggled because it was not fully compliant with Chinese laws, such as
needing a local partner or license to operate legally. These legal requirements
were major obstacles for Uber and made it difficult to compete with domestic rivals.
Example 2 Legal Preference for Local Firms
Chinese formal institutions often favor domestic companies through policies and
regulations. For example, Didi Chuxing had government support, giving it an
advantage over Uber. The state encouraged local innovation and protected it,
which meant that Uber faced legal and policy challenges not faced by its local
competitor.
Informal Institutions
Informal institutions are the unwritten rules, cultural norms, and social values that
shape behavior in a society. These also impacted Uber’s operations in China.
13
, Example 1 Consumer Loyalty to Local Brands
Chinese customers showed more trust and preference for local companies, like Didi,
which understood their needs better. Didi’s services were more culturally adapted,
such as offering WeChat payment integration and better language support, which Uber
struggled to match.
Example 2 Guanxi (Relationships and Networks)
In China, business success often depends on guanxi, which refers to building strong
personal relationships and trust within networks. Didi had stronger connections with
local regulators and stakeholders, giving it a strategic edge. Uber, being a foreign
company, lacked these relationships, making it harder to navigate the local business
environment.
Question 2
Apply the national competitive advantage theory to the case. Provide FIVE
examples from the case study.
Michael Porter’s diamond model, which includes four key elements:
Factor conditions (resource endowments)
Demand conditions (domestic demand)
Related and supporting industries
Firm strategy, structure, and rivalry
Factor Conditions – Human Resources and Local Knowledge
Uber lacked deep local knowledge and networks in China, while its local rival Didi
Chuxing had better access to local resources, such as understanding Chinese
consumer preferences, local laws, and driver networks.
China’s competitive advantage came from its skilled domestic workforce familiar
with local systems, giving Didi the edge.
Demand Conditions – Unique Local Consumer Demands
14
