Point 1: Didi is winning almost everywhere.

Per my previous points, Didi is winning. There are lots of reasons for this, but here
are three to consider.

 Didi had a better strategy at home and abroad. They merged up fast at home and got a
monopoly position. They didn’t have to do this. They could have kept fighting with
Kuaidi and Uber. But they decided to merge and focus their time and capital
elsewhere.
 They went international – but they did not go direct into foreign markets with a
standardized product from home. Instead, they identified local champions with
localized services and local management. And they gave them capital, Chinese
consumers, best practices, and technical support (sometimes). Ride-sharing is mostly
a local business and this was a smart approach.
 They used a team approach. They partnered with Softbank, which greatly amplified
their capital. They are in partnership with Alibaba, Tencent, and others. When you are
looking at Didi, you are basically looking at China’s top digital companies.
Point 2: Didi is going to completely dwarf Uber in
scale – and probably value.
Didi is already around 75% of all ride shares globally, by virtue of their dominance of
China. They have massive scale in terms of activity (20M? rides per day). As they
continue to add the rest of the world’s geographies, this operational scale is going to
increase even more.

And the value of all this activity is also going to increase and increase. Similar to e-
commerce, entertainment, auto and other industries, China is going to be the largest
ride-sharing market world by spending (not just volume). Didi will likely soon surpass
Uber in terms of revenue and valuation. Just look at Tencent, JD and Alibaba’s
numbers for comparison. Note the “valuation” of Didi and its partners now surpasses
Uber at around $80B.

Point 3: Didi has better management – and

emphasizes cooperation not conflict.
Didi’s management are seasoned deal-makers. Jean Liu is a former Goldman Sachs
M&A banker. And her fellow managers at Tencent and Alibaba make a new
investment approximately every 10 days. This is the A Team of digital China.

DIdi has also shown a cooperative approach to partners and governments. They do
not approach as a disruptor. Don’t underestimate the importance of this approach in
countries where government is active in industry. Note this is most everywhere
outside of the USA.

Point 4: Fighting usually costs more than merging

or partnering.
Didi’s rise presents Uber with a question: Do you want this company as your partner
or your enemy? And this is an enemy that will dwarf you in size and probably
resources. And this is an enemy that is coming to North America soon.

Fighting is expensive. And using capital this way is a problem because the ride-
sharing leaders are going to be disrupted themselves. Which leads to my next point.

Point 5: Didi and Uber both face a disruptive threat

in autonomous vehicles – and a new set of daunting
competitors, including Google and Tesla.
The economic and competitive power of ride-sharing follows from the two-sided
network that connects drivers with riders. They have other services like taxi-hailing
but it is the two-sided network that is the big engine of the platform. It is why ride-
sharing collapsed to 1-2 players so quickly in each geography.

And, unfortunately, autonomous cars are self-driving. They don’t need drivers. So a
significant portion of ride-sharing’s competitive power is going to get disrupted, if not
wiped out.

Certainly, ride sharing is going to continue as a popular service. And Didi is actively
developing their ride-sharing business.

 They are adding security features for drivers and riders

 They are working on AI to optimize their network and improve efficiency.
 They are even working with auto OEMs to develop sharing-specific cars.
All of this is good, but losing say 50% of the core driver-rider platform is a big deal.
Their biggest challenge after international expansion is to get into autonomous
vehicles.

And self-driving vehicles also mean that Didi and Uber will have to go head-to-head
with Google, Tesla, Baidu, GM, Toyota, BYD, and others. There are a lot of very big
and very well-funded companies entering this space from automotive, technology
and other sectors.

Point 6: Softbank CEO Masayoshi Son will probably

push a merger.
If Cheng Wei is the Bill Gates of ride-sharing, then Masayoshi Son is its godfather.
Softbank owns stakes in Didi, Ola, Grab, 99 and others (basically the entire anti-
Uber alliance). And they recently purchased 15% of Uber.

I expect Softbank to start pressuring these companies to stop spending money

fighting, merge up (or partner) and focus on other threats, like autonomous
vehicles. A first move in this would be a discussion about Didi buying a minority
ownership of Uber.
 ***

One question I like to ask when looking at companies is “does this company control
its destiny?” In the case of Didi, that is clearly the case.

So this may all come down to what Cheng Wei and Jean Liu want. Is the priority
expansion into every geography? Is their focus more on technology
advancements? Or is their ambition to take on Uber in its home market?

We’ll see. It’s going to be fascinating to watch.

 Uber is monopolistic competive industry with few firms, some pricing power, differentiated
product and high entry barriers.

Power of Supplier – Tend to capture part of economic value created by the firm by higher prices of
inputs or lowering service level

Power of Buyer – Threat to firms because they reduce firms potential profit by capturing part of
value created by demanding better quality or reduce cost

Power of substitutes – threat from outside industry will come close to meeting the needs of present
customer. Attractive price and low switching cost.

Threat of noew entry -

Rivaslry – Industtries within same jockey for market share and profitability.

- Competitve industry structure -

- Industry Growth
- Stratergic commitments
- Exit Barriers

Role of Complements -Partner with local alliance .

Stronger forces, stronger is competitive industry and limits profit potential.