2-3 After merger, how can DiDi Chuxing become profitable? Where is the revenue from?

Pre merger, the two players, competed in the online ride hailing service industry with other smaller
players and many other potential large investors looking to enter. However, the merger lead to the
two players monopolizing the market.

Monopolizing meant that the former oligopoly players did not need to compete with each other. The
subsidy war had taken a financial toll on both companies, with both trying to gain market share. Post
merger, DiDi did not need to indulge in such a war and got an opportunity to focus on maximizing its
revenue.

It created barriers to entry for possible entrants such as Baidu, as the merger created a synergy that
would be hard to beat: from financial backing to number of cities they operated in DiDi became a
behemoth that raised the costs to entry in the market significantly.

Smaller players that were troubling the two companies pre merger became insignificant post merger.
With a 98% market share, companies such Shenzhou and Yidao no longer threatened DiDi in the
market and companies that possible posed a threat were simply acquired like Uber.

In conclusion, after the merger, DiDi became profitable by being able to avoid the financially
burdening subsidy war and then benefiting from the synergies of the merger.

2-4 WeChat Pay seized the market share from Alipay by launching the red packet campaign. What
can you learn from this event?

There are few important highlights that can be noted from the Red Packet Campaign.

Firstly, it shows the ease of substitutability between the two e-payment methods that customers benefit
from. Since switching from one product to other has very little or no costs, consumers can be attracted
through a simple, innovative marketing campaign.

Secondly, it also proves that first mover advantage does not persist through a product’s lifecycle. Even
though a company, in this case Alipay, might benefit from first mover’s advantage in a market, second
mover’s can benefit from studying customer’s response as well as market conditions and move with an
innovative product to gain market share.

WeChat Pay seizing the market through an innovative form of strategy campaign followed the Stackelberg
Competition model which suggests that Oligopolys with homogenous products behave in a similar
fashion: short term wins through competition in quantity rather than price in the sequential game.