Uber & Careem merger: How the emerging taxi hailing services will affect in MENA region?
Managing your competition is an important skill that you need to have as a company. The management of competition can either be done by letting go of a market because it is too much to handle. You can also consider either selling yourself to a competition in a particular local market or acquiring them. Different companies adopted varied strategies according to the moment’s and the market’s demands.
Focus on Uber
Uber needs no introduction as a corporate or as a service provider. It has become synonymous with on-demand cab services and is slowly progressing towards providing many other services in the same fashion.
The phrase ‘Let's book an Uber’ has become common. In a decade, Uber has gained the status of a monopoly and has marked a prominent presence in more than 70 countries ever since its inception in 2009. However, it hasn't always been a bed of roses for Uber.
Uber has faced a lot of legal issues, some of them because of the legislature of the country, local drivers and passengers.
Its Local Competitors
Uber might be a global leader today but it does not mean the service giant does not have local competitions. Some of the competitors have been so influential, that Uber had to take extreme measures.
In 2016, Uber sold its China business to arch-rival Didi Chuxing for a deal worth $35 billion. Given the Chinese affinity for homegrown brands, Uber found it difficult to survive in the market. Didi Chuxing is also giving a tough time in Brazil, the second biggest market for Uber.
In Southeast Asia, Uber has had its fair share of competition as well. The biggest competitors are GRAB and Go-Jek. While GRAB operates out of Singapore, Go-Jek is the first Unicorn from Indonesia. Uber exited the southeast Asian Market by acquiring a 27.5% stake in GRAB.
Even in India, there have been talks about Uber merging with local competition, Ola. Though, it is still in the drawing stage.
In United States, Uber’s key market, the on-demand giant has also faced its fair share of competition. Its biggest competitor, Lyft has grown from 15 % to 22% in market share while Uber has dropped from 83 % to 74%.
Careem — The Uber of the Middle East
There have been a few ride-hailing service providers who have managed to carve a market for themselves based on certain unique prepositions. Careem is one among them. It is a taxi service-providing app based out of Dubai and it has a strong presence in the Middle East. It operates in more than 100 cities out of countries like the United Arab Emirates, Saudi Arabia, Kuwait, Jordan, Palestine, Iraq, Pakistan, Lebanon, and Bahrain. The company has a driver strength of more than a million and it was the first venture to cross the $1 billion valuation mark in the MENA region. Uber decided to merge with Careem and enter the Middle East market.
The merger is in the advanced stages of talks right now. The ministry at the United Arab Emirates has made it clear that the merger will happen soon. The progress towards the merger is happening at a slow-yet-steady pace.
What has Uber Got to Gain?
An acquisition of this magnitude is expected to benefit both the parties. There are a couple of benefits that Uber gains by merging with Careem.
Uber went public early this year. One of the biggest requirements of an IPO is that you will need to have exhibited continuous growth as a company. However, with all the legal hassles and the handling of local competition, it hasn't been a smooth ride for Uber. The acquisition of Careem would have been expected to help in showcasing their consistency.
The Middle East regions are known to be traditionally rooted. They have an affinity towards their homegrown brands. It might not be easy for an international player to penetrate the Middle Eastern market.
With this acquisition, Uber is capitalizing on the popularity and the brand value that Careem has built over the years. The merger will help Uber in getting better revenues, market share and above everything, probably in creating an open culture towards accepting international brands in the Middle East.
What Does it Mean for The Market?
The merger will be nothing less than a union of two different worlds and cultures. It will create a situation where companies with two different backgrounds can exchange ideas and cultures. The merging of Uber and Careem will pave way for future collaborations between companies that have been hesitant to do so because of cultural differences.
This will also help in improving the connectivity in the MENA region. Since the best brains from both companies will work together, we can also expect delightful innovations for the customers.
What Does it Mean for the Employees?
The employees of both companies will be brought close to understanding the work cultures of each other. They will have a lot to learn from each other, especially in technology, marketing and customer service.
True to the statement that many hands make light work, a lot of operations can be expected to become smooth and efficient. This will increase the appeal of the workplace and the satisfaction of the employees.
What Does it Mean for the Market?
There might be a few aspiring entrepreneurs who would want to explore the possibility of creating a new ride-hailing application. The void left by this merger will give a lot of room for another business to enter and prosper.
The merger of Uber and Careem is expected to create a massive impact on the taxi-hailing ecosystem of the MENA region. This will also serve as a major testbed for Uber when it comes to handling mergers and acquisitions.
However, the biggest impact can be expected where new local competitions sprout. With the availability of Uber like app development, it is not a big hassle for competitors to enter the market guns blazing.