THIS CLASS IS: INTERNATIONAL BUSINESS http://money.cnn.com/2017/10/05/technology

Question

THIS CLASS IS: INTERNATIONAL BUSINESS

http://money.cnn.com/2017/10/05/technology/business/softbank-investments-uber/index.html

https://www.cnbc.com/video/2015/03/12/grabtaxi-heres-why-softbank-invested-in-us.html

https://www.cnbc.com/video/2017/08/25/uber-striving-for-profitability.html

Well, this week we have Masayoshi Son on a buying spree! He has bought his way into all of the ride sharing companies around – except Uber, which is now in his sights. Some of the investments – like Grabtaxi – seem to fit together well. But Uber might seem like quite a risk – given some of the craziness at the Board Meetings! But Son considers himself to be a crazy tycoon. So, maybe Kalanick’s style doesn’t bother him. Or maybe he likes it.

1.      Do you think this alliance between Softbank and Uber has a future?

2.      Does it make “good business” sense?

3.      Do you think the dominant personalities involved can work together?

Explanation / Answer

Alliance between Softbank and Uber makes a sense. Currently all taxi hailing apps business are running on a "below cost" model. Softbank is investing huge amounts in a few companies for two reasons: It will deter competitve investors to fund similar business and second, having an owndership share in all major taxi hailing apps will in future help to influence the pricing issues looking at a broader perspective. Right now, if one does deep discounting, other does the same, then the third will do and then the fourth. BY investing in top two players in each market- softbank can help in bringing a certain pricing discipline in the system. Now, the question comes- what if another taxi hailing app comes which against starts "deep discounting". This is a theoretical possibility. However, the headstart, the type of investments made by softbank as well as pre existing eco system of taxis with Uber and one or two rivals, a new rival is unlikely to sustain. Hence, it makes sense. Refer 1 above. It includes answer to 2 too. Yes, they can work. Clear cut responsibilities, no compromise on certain values in business and a hands off approach by board unless the company do poor operationally or has a serious crisis at hand- it is quite possible for strong personalities to work together.

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