Uber. In Germany, Do Business the Way Germans Do
In this part of the blog, we have talked a lot about importance of studying foreign culture and local customer´s mindset before expanding your business. Puma, eBay, Groupon and many others have learned this lesson the hard way.
Whenever you decide to enter a foreign country it is important to not only learn about its cultural specifics, but also to know how business is done there. This includes: legislation, customs and other written and unwritten rules.
Uber – a prime example of Silicon Valley start-up that is build around a sharing-economy model and threatens to disrupt industry in which it operates. Without going into details, Uber can be described by three sentences:
- It is valued at $62.5 billion
- It has millions of followers
- It has millions of enemies
In the world conquering quest to revolutionize taxicab industry, Uber stumbled upon tons of legislative difficulties as it uses unlicensed drivers (independent contractors) to transport its passengers. Although, Uber has services that employ legal drivers, the business mostly revolves around contractors. Such business model was said to be brilliant as Uber doesn’t have to maintain fleet of cars, apply for taxi driving licenses and recruit employees, which saves money. However, since Uber operates in the gray and uses legislative loopholes to expand the business, many would argue that its way of doing business is not strictly legal, if not downright illegal.
Although Uber has problems with local authorities almost in every country, its German conquest has received a lot attention from the media as Uber (service called UberPop) was banned from Frankfurt, Hamburg and Düsseldorf. So what did exactly happen? Lets find out.
Germany is not America
It might sound hilariously obvious, but countries differ and laws differ too. Uber has achieved tremendous success in the US. It did so by bending rules in a true Silicon Valley fashion. Even though, there was resistance from local authorities, US government was quite reluctant to intervene. Otherwise there wouldn’t be Uber, Airbnb and other start-ups benefiting from the sharing economy. After receiving billions from the venture capital, Uber thought it could go to any country and simply force the way in, like it did in the US.
What did they forget about is that Germany plays by different rules.
“If you want to be successful in Germany, you have to understand the regulation,” said Martin Fassnacht, a professor at the Otto Beisheim School of Management in Vallendar, Germany. “Uber should have taken that more seriously.”
Uber didn’t take into account the fact that the Germans are quite meticulous when it comes to upholding the law. Health exams, security checks, state-issued licenses – all of it are precisely checked upon by local transportation institutions. And it couldn’t turn a blind eye on the company that was violating all of the rules.
Uber may be huge and powerful but it doesn’t mean that there is no one to challenge it. Competitors (like Mytaxi) benefit from knowledge of local market. Moreover, they employ licensed drivers, which means that they don’t break the rules or “piss” off regulators. After being banned in Germany, Uber tried to do everything by law and hire legal drivers but after its aggressive low-cost tactics there were not many volunteers.
According to industry statistics, Germany has a low level of credit card users. Although this was not a decisive factor, passengers were forced to pay for their journeys by card, which in a country where people were not accustomed to card payments, might be quite challenging.
Lets take a look at the Hofstede’s analysis of German culture. it ranks quite high on the scale of Uncertainty avoidance (64). As you have probably guessed it means that Germans are risk averse. It also means that they are not eager to jump on the bandwagon of creative disruption and test radical business models. Take a ride in a unlicensed taxi where driver is not liable for his actions? Sounds quite radical not to say dangerous. Could have this small bar chart saved Uber from the disaster in Germany? Certainly not. But it would have been useful to take a look at it to see how Germany is different from the US and refer to it whenever making a call.
— IconicLondonTaxi (@TaxidriverLon) February 18, 2016
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