A caveat is given to all management professionals and the companies which are not aware of India – ‘doing business in this country is drastically different from any western country’. The western theories of ‘management’ could not be applied to India. One needs to understand ‘ground realities’ of country, study the people, government, and institutions to succeed and run a successful business in the country.
A good example of a company’s failure despite having resources and technological efficiency is American giant- Uber. The company is losing the cab-sharing market war to homegrown Ola which earlier used to be dubbed as a copycat of the American giant. Together both companies account for more than 95 percent of the Indian market. But the share of Ola grew to double that of Uber, as per latest reports.
Bhavish Aggarwal, CEO of Ola said that it tackled Uber’s entry with a guerrilla-like plan and will “fight the nooks and corners” to win the war against the American giant. “We did not have a huge head start against them in India … [however], we were clear about our strengths… we know India better, we ended up building our business model customized around Indian reality in every aspect,” said Agrawal while speaking at IIT Bay Area Alumni meet in California.
According to Agrawal when the competition between Ola and Uber was at the peak, the cash-rich American giant used to outspend 5:1 and still had not been able to get a dominant position in the market.
Uber entered the Indian market in 2013, two years after Ola. At the time Ola operated only in two cities and had ‘half a million dollars in the bank’. On the other hand, Uber has top class managers with years of experience around the globe, deep pockets, and pre-established technological infrastructure.
So, what went wrong? Why Ola won the race despite all odds? Ola understood the Indian ethos and built the business to suit Indian consumer preferences while Uber tried to expand using western managerial techniques.
Ola’s management understood the behavior of Indian consumer very well, accepted cash payments right since inception, on the other hand, Uber took two years to offer services in cash. Some other smart moves by Ola was to offer the booking services through text messages and support nine regional languages for cab and auto drivers, as the majority of them do not understand the English language.
Ola raced ahead in terms of expansion and got first mover advantage in many tier 2 and tier 3 cities. As of 2018, Ola services are available in 110 Indian cities compared to only 31 by Uber. Given the sheer expansion, Ola has more than 10 lakh drivers compared to 4.5 lakh of Uber. The reach of Ola among Indian smartphone users is double-digit more than Uber in all cities.
Ola operates through different services (premium (prime, lux, rentals), low-cost (including autorickshaws), and car-pooling) and auto-rickshaw business is expanding exponentially. “We see a lot of growth coming from these three buckets,” a company spokesperson told Quartz. “Auto rickshaws are doing really good in tier-2 cities where distances are shorter,” he added.
The market share of Ola expanded from 53 percent in July 2017 to 56.2 percent in December while Uber’s share declined from 40 percent to 39.6 percent. In term of downloads, more than 40 percent of people had Ola app compared to 28.7 percent of Uber.
Uber has not lost the game only in India but across the Asian markets. The company sold its Southeast Asian business to rival Grab. The company exited from the Chinese market and surrendered the business to Didi Chuxing. “Having already surrendered China to Didi Chuxing, beating a retreat from Southeast Asia is a precursor to perhaps losing India, the lone remaining jewel in Uber’s once-flourishing Asian empire,” wrote Bloomberg columnist Andy Mukerjee in 2018.
“Even though the service itself is inspired by Uber, Ola hasn’t constantly been looking over Uber’s shoulders to build its playbook for India,” said Kartik Hosanagar, a professor of technology and digital business at University of Pennsylvania’s Wharton School.
As Uber exits from many Asian markets, Ola is expanding to the international market. It has already established an international outpost in Australia and would expand to other Asia-Pacific countries very soon.
“Expanding into new geographies where people have a higher paying capacity will definitely help Ola generate better revenues,” said Vaibhav Arora, associate general manager at consulting firm RedSeer.
The case of Uber could be a case study for academicians and management professionals on what not to do when doing business in a country which has altogether different cultural dynamics.