Saturday, April 29, 2017

Why is Uber Struggling to Enter Indonesian Market?

Uber began its business in San Francisco with a vision to be one of transportation options, replacing traditional taxi cab [1]. Sophisticated algorithms, GPS, and mapping technology are some Uber competitive advantages to provide more convenience service for passengers. Even though facing legal issues in many cities, Uber are growing rapidly, especially in the United States. Uber also profitable in some other countries in North America, Australia, Europe, the Middle East and Africa [2].

Being profitable in some countries does not guarantee Uber’s success in other places. In the first half of 2016, Uber lost more than $1 billion when trying to beat the local competitor in China [3]. Besides China, Uber decided to enter countries in Southeast Asia, including Indonesia. Uber has started its operation in Indonesia since 2014 [4]. However, up until now, Uber still cannot gain a substantial market share in this country. In my observation, at least three things impede Uber business in Indonesia:

1. Pressure from traditional taxi cab

Indonesia has Blue Bird Group as its largest taxi company that operates more than 30.000 vehicles and gain about 50% market share in Indonesia [5]. Blue Bird has a good reputation as a convenience and reliable taxi cab. It also has Silver Bird as a premium taxi cab to serve high-end customers.

Blue Bird realized the threats from online ride-hailing companies. To compete with these new entrants, Blue Bird launched a mobile application. It also forced Indonesian government to ban online ride-hailing that do not have a legal permit as a commercial transportation. The tensions got into climax when Blue Bird and other taxi drivers lined the streets in Jakarta to protest tech firms that “stole” their customers.

2. Indonesian are not familiar with credit card

When entering Indonesian market, Uber only allowed credit card payment; while credit card user in Indonesia is few. This payment option also becomes one factor for other multinational online businesses cannot compete in Indonesia. To deal with it, Uber started to allow cash payment in 2016 [4].

3. Intense competition from local players

Like other countries in Southeast Asia, Grab is popular in Indonesia. Grab is a Singapore-based ride-hailing company with about 95% of the ride-sharing market in Southeast Asia [2]. In Indonesia, Grab has a tough competition with Go-Jek, especially in motorbike taxi (or "ojek" in Indonesian). Since motorcycles are more popular than cars, Uber introduced UberMotor in April 2016 [6].  

Uber seems to start to adapt its strategy with the Indonesian business model by providing a cash payment and motorbike taxi service. However, it was too late since Grab and Go-Jek has dominated the market. It seems there is still a long way for Uber to attract Indonesian market.


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