Summit Global Education Winter Brazil 2015

Group Project International Business

Flavio Mattos, Gabriela Moreira,

Jack Slomsky and Paula Tulio
January 21, 2015
Rio de Janeiro
1. Introduction
When I first heard of Uber, my initial thought was Wow. Finally an alternative to those
creepy yellow taxis. When we initial presented our ideas to the Brazilian students they
thought quite the opposite, their faces and words immediately jumped to safety concerns
regarding the service. However, as our introduction presentation went on their faces
seemed to lighten up and think about the potential the product has in the area. The idea
when implementing a company or service like that of Uber here in Brazil would be very
similar to how it began in the United States.
A service industry, Taxis, as they currently stand are hesitant to possibly even avoiding
desperately needed changes and improvements in their industry. However, if a service
industry or any industry in general waits around and pushes off innovation the beauty of
the free world is the ability for others to step in and do it for them. Just as Uber has done
in the taxi industry in America, and now as they move forward and try to expand
globally. Since their inception in 2009 Uber has absolutely exploded from what was a
service/technology start up to a business that is now available in over 200 cities across
the globe and has been valued at 41 billion dollars. They are the new leaders in
transportation in cities and pushing the limits on a peer to peer industry like the service
they offer. After a background and driving check any individual wanting to work for
Uber, can work for Uber.
The market objectives are simply to gain control of the travel of inhabitants and
travelers alike in Brazilian cities like Rio de Janeiro and Sao Paulo. Public
transportation and taxis are such a highly demanded service, but aren't the most
efficient, in both cost and time. With the press of a button on your smartphone a driver
will be to you within minutes with your destination in their phone immediately ready to
get going. While this is the case in a number of cities across America it is not the case in
Brazil, but is ultimately the end goal of a company like Uber.

The most important attribute of Uber is their target consumer. Simply because they
target every consumer. Anyone who takes taxis or public transportation alike can be a
target of Uber. With often very competitvie prices for the middle class consumer to
more luxurious options like UberX, for classier or more business formal travel, to even
UberBoat options becoming available for water taxis. The untapped and outdated
industry of taxis are no more. The future is Uber. The numbers dont like. They were
founded in 2009 and just 6 years later in 2015, they have over 1.5 billion dollars from
venture capitalist investments and had a market evaluation of 15 billion dollars. The taxi
industry is a thing of the past, close the yellow door of the beat up sedan and open the
door to the future with Uber.

2. Market Analysis:

2.1. Classes A and B

Uber will be launched initially in the cities of Rio de Janeiro, Sao Paulo and Belo
Horizonte, with an initial focus in classes A and B.
The AB classes in the 3 cities:

Through the tables, we can see that the AB classes correspond to 27.13 % of the
population of the city of So Paulo, 28.85 % of the population of Rio de Janeiro and
29.68 % of the population of Belo Horizonte, representing a favorable market share for
positioning premium services.
2.2. The profile of Class A and B in Brazil:
Although this is still a small group compared to the over 200 million inhabitants of the
country, Brazil's economic elite spreads for a huge spectrum: it goes from billionaires to
a family with an income of 7,000 reais a month, the minimum to join the class B.

Even in the most restricted spectrum of the class A, that is, people with a family income
of at least 9,000 reais, the diversity is huge. So Paulo, the largest city in the country,
today has the largest fleet of helicopters in the world. It is the sixth city in number of
billionaires and where most Romane Conti wines consumers.
A study by Exame magazine, found that nearly 80% of people in the A and B classes in
Brazil earn up to 16,000 reais. What we will likely see in the coming years is the
combination of two movements: more people being caught by the middle class to the
upper classes and enrichment of the people who already are part of the elite.
Despite high inflation and low economic growth in Brazil in the last year, the service
sector between classes A and B is still doing very well. The consumers of these classes
feel much less inflation, high interest rates and unemployment. Companies from
different industries, such as tourism, automobiles, beverages, aviation and real estate,
among others, who bet in classes A and B in recent years, now reap the fruits of the
strategy. A study by consultancy Nielsen reveals that consumers in the top of the
pyramid are responsible for 60.9 % of sales growth in supermarkets. Participation of
class C in this regard is 33.8 %. According to the analyst Ilo de Souza, from Nielsen, a
phenomenon known in the market as "trade up" benefits companies offering services
and goods with a Premium positioning, such as Uber, In trade up , when Brazilians
experience a more sophisticated service, it does not return back to the lass sophisticated
ones.
In addition, according to the FGV (Getulio Vargas Fundation), the classes A and B
continue to grow significantly in Brazil:

2.3. Use of smartphones and apps in Brazil:

Brazil is the fourth country in the world in number of smartphones; in 2013 were
already 70 million smartphone, behind only the United States, China and Japan.
Between April and June 2014 were sold more than 100 smartphones per minute in
Brazil. Smartphone sales in Brazil during the second quarter of 2014 totaled 13 million
handsets sold, a 22% increase over the same period of 2013, a record number, according
to a study by International Data Corporation.
The figures show that even with the instability seen in other technology segments and
the low growth of the Brazilian economy, the category of smartphones was not affected.
There are four factors that explain the time: increasing product portfolio combined with
the drop in prices by manufacturers, more investment channels on top of this category mainly the retailer, the exemption taxes for smartphones by the government, and the
main factor is the user with a growing desire to be connected wherever they are. These
data are extremely favorable to the spread of Uber in the country.
The increased use of smartphones allows companies to work with the development of
technology to begin to think of tools and applications to facilitate the daily lives of
citizens, such as urban mobility. Among these applications is Uber.
2.4. The Taxi service in Brazil

Taxi service in Brazil also presents favorable data to Uber entry. The perception of
passengers in Brazil is that the fleet in the country is inefficient and cannot attend the
demand. Also, another factor that displeases the Brazilians, especially in Rio de Janeiro,
is the lack of security that the service provides.
So Paulo has 32,600 taxis in its fleet. With more than ten million inhabitants and
434,000 residents who are in Classes A and B, which most often use the service, the
average is 13 passengers per vehicle. There are special taxis, cooperatives, with fixed
point, luxury and ordinary. Are 2300 points on public roads, close to hotels and large
shops (supermarkets, shopping malls, subway stations, bus terminals and airports). The
lack of taxis, however, is felt especially in the more remote areas of the shopping
centers in major events. With the city getting a greater number of trade shows and
concerts every year, however, the shortage became also felt in other areas of the city.
Sao Paulo is not the only Brazilian city to experience this problem. But even with the
approach of the Olympics and the World Cup last year, the consensus among the
Brazilians city hall is not provide more concessions for taxis. As justification, the
municipal authorities claim that after the event period there will be no demand to justify
the increase.
In Belo Horizonte, the demand reaches 377 people per car. The city has a fleet of more
than five thousand taxis and stopped to provide concessions in 1995. Of the 437
permissions granted in the last and only notice, only 290 are enabled, since it is
impossible to transfer the license.

3.Economic Analysis
3.1.Basic Economic Dada Brazil
GDP: R$ 4,403 trillion (2013)
Per capita income: R$ 22.400 (2013)
Labor Force: 105,7 million
Minimum wage: 788,00 reais

GDP Evolution: 2,7% (2002); 1,1% (2003); 5,7% (2004); 3,2% (2005); 4% (2006);
6,1% (2007); 5,2% (2008); 0,3% (2009); 7,5% (2010); 2,7% (2011); 0,9% (2012).
SELIC: 10,5% per year (2014).

4. Competitive Analysis

4.1 Analysis SWOT

4.1.1. Strength

Uber is a global brand and is even becoming very popularized in various areas
over seas

Convenience - It hold ups to its promise of finding a ride in minutes. The system
is very convenient for consumers to commute and has great accessibility through
tools such as a mobile app that easily lets you track how far your driver is.

The payment system is trustworthy and easy to transact with little effort.

App to summon service versus having to hail or be rejected by cabs

Luxury to wait for Uber indoors (with estimated time countdown) versus having
to wait outside.

Security
Adding Value by Decreasing Costs:

Uber has increased efficiency in production, thus lowering costs. If it lowers costs, it
can lower prices charged, making it more competitive (and customers happier).

Uber drivers do not need to drive around looking for customers to hail it, which
saves fuel and time (Uber inbound vs. taxis outbound)

Uber drivers are not stuck driving for 8-12 hours a day; they can turn their
availability on or off at a whim

Uber does not have vehicular equipment to purchase, maintain, and depreciate as
Capital Expenditure, making the company more agile

Uber has fixed costs and employs technology to achieve economies of scale

Uber is able to pool risk because of aforementioned

As a result of reducing costs, Uber has the luxury of reducing prices without hurting its
bottom line.
4.1.2. Weakness

Pricing isnt the exact price they seem to match the company promotes because
it changes due to the time and your location and destination area.

4.1.3. Opportunities

Creating some sort of credit or reward points system

Partnerships with other companies (Spotify, Dileto, etc.)

Improving Product Differentiation - Uber was quick to integrate UberX (chipper

then taxis) and UberSUV in other cities, and most recently, it even integrated
UberBoats and water taxis. That could be a great opportunity in Brazil.

4.1.4 Threats

Other taxi drivers or brands that have a similar service.

Government regulations. - One issue that Uber is facing is government

bureaucracy and that is especially high in Brazil Government regulation is a
giant barrier in this situation.

Possibility of retaliations by competitors, such as protests by taxi drivers.

Presence of Substitutes - Depending on convenience, lower cost, or consumer

taste, taking the subway or walking, as examples, to ones destination are viable
alternatives. Public transportation and walking are not only welcomed on a nice
day, but they also reduce pollution for those who care about the environment.

Easy Imitability - Ubers app features are easy to imitate.

4.2. Uber versus Taxi in Brazil

In Brazil, according to Federal Law No. 12,468, " the use of a motor vehicle, own or
third parties, for individual public transport paid passenger " is exclusive of taxis. So the
activity of Uber may be consider illegal by the city hall of Rio de Janeiro, Sao Paulo and
Belo Horizonte. Uber spokesman Lane Kasselman, reinforces that this is not a taxi
company, and only offers a platform to connect drivers and passengers, and states that
passengers are unsatisfied with the standard taxis.
In Brazil, the professional CNH can be obtained by any driver that submit to the
production process, but to be a taxi driver you must have a license issued by local
governments. In So Paulo and Rio de Janeiro, licenses are no longer being issued,
because according to local governments, both cities have enough taxis and the only way
to obtain a license is by donation of a holder of the license.
Therefore, some drivers found in the Uber an outlet for their willingness to work behind
the wheel. The driver just need a professional CNH (identified by a text in the document
notes field) and an average car manufactured from 2009.

Experts point out that if it re ach ta legal battle the cause is lost to the taxi drivers. The
concession system was formulated and based on values and old laws, a time when the
consumer had no bargaining power and so the state came as a mediator to the public.
But with social networks and the possibility of several competing platforms, consumers
can experience and evaluate the service, which will need to work harder and improve
quality and to stay alive
There are studies, such as the one of Larry Downes, of Georgetown University, who
analyzed these types of conflicts, generated by new technologies and observed that new
technology always overlap. When consumers discover that the service could be better,
they tend to push for change. And as in Brazil, the taxi service is very inefficient and
passengers are very unhappy Uber will be able to establish itself in the market.

5. Marketing Plan
5.1 Product Profile
Uber is an application that offers a similar to the taxi service, but with differentiated
service. The service provided by the application is considered luxury market, mainly
because the cars are luxurious, has good service and the drivers provides water to
customers, making the race even more enjoyable. The company also offers a faster
service, safely and at a fixed price.
Uber for business is the opportunity for the companies, because your employees link to
a company-provided payment source and bill each ride directly to your account. The
Uber in business has several advantages, you can control your route and analyze the
costs, and youll be able to make decisions about travel costs based on real-time data.
5.1.1 Positioning Strategy
The Uber is positioned as a safer transport company, with an excellent service and
expensive luxury , making the most accessible cities .

5.1.2 Target Market

The target market of Uber are the classes A and B, in the regions Rio de Janeiro , Sao
Paulo and Belo Horizonte . A good opportunity for Uber is the rise of the middle class
and businesses located in these regions.

5.1.3. Brand Value

The brand values of Uber are security, reliability, luxury and transparency.

5.1.4 Product Strategy

The main differences between Taxi ( direct competitor ) and Uber are the safety and
luxury that the uber offers . The differentiated service, mainly aimed at companies have
competitive advantages like being in several countries of the world and be able to access
from your mobile phone .

5.1.5 Product Identity

Uber is a innovative and alternative way to get transportation, you can get a ride and
pay a price cheaper than common taxi cabs. The direct competitors are the taxi cabs
companies.
To reach sophisticated people, they use luxury cars, and all the images involving the
brand shows comfort, success and wealthy people.

Uber logo reflects security and sophistication.

5.2. Pricing Strategy
Analyzing the operation of Uber in the US, we can see that the pricing strategy currently
used by the company is the price skimming, in which the company sets its prices high to
quickly recover expenditures for product production and advertising. Gradually prices

are being reduced through promotions and through the creation of a low cost service
called UberX that offers a service in smaller cars with a reduced price per trip.
As a market strategy, Uber could operate in Brazil performing the same way. The
coming of the app to Brazil happened last year and is already winning customers in
major cities. As a way to reach the masses, the UberX could be implemented in Brazil in
order to increase the number of drivers working with them, which in turn reduces rates
and ensures reliability during peak times.
Uber is committed to be a low-price leader, so this strategy besides attending the
demands also leads the app on the right path to achieve its goals. The local operation's
objectives are to increase the basic app partners drivers in the cities where the system is
already working to reduce call handling time, gain new users and bring the service to
other cities. The idea is, the more drivers are associated with Uber, the shorter the
waiting time for the service.

5.2.1. Handling Expenses

The majority of Uber fares go to the independent drives. Uber only receives 20% of
gross fares. Moreover, profit from these gross rates is used to pay the costs of the
service. These expenses include payment processing, payment fraud, refunds, customer
service, dispute resolution, cellular handsets and service fees for the drivers, and local
regulatory efforts.

5.3 Market access and distribution Strategy

It is important to analyze the market access and the strategy of distribution. Let's look at
points as relations with government, protectionism market in the cities of Rio de Janeiro
and Sao Paulo, mainly unions and regulations. The channels of distribution and
localization and others also are important in this process.

The main means of acquiring our service and through apps, available for Google play
and Apple store, it is important to analyze that the e-commerce in Brazil is growing and
this is an opportunity to enter in the market with this app. The Distribution channel is
B2C (business to consumer), trade made between the producer and the client through
the Internet, this channel has many advantages like Global access, Increased availability
and others.
At the beginning we will install our product in the cities of Rio de Janeiro, Belo
Horizonte and Sao Paulo, It is important to analyze the Brazilian market before the
expansion to others cities. The main market protectionism points are the unions that
work against the system, because it is a cheaper service. Taxi drivers ' unions claim that
the company was violating the national legislation regulating the profession and prepare
protests against the company, this is the biggest problem of apps.
.
5.4. Promotion
Ubers marketing tactics have always been unique - from delivering ice cream, to
barbecue in Austin. From Pedicabs, to giving onesies to their youngest riders.
The Uber marketing strategy has always been to try to keep a strong relationship with
the customer by adopting a strong position in social media. This can be done via
Facebook, Twitter and even personalized emails to companys employees who often use
the taxi service in their routines.
The digital marketing could also work with the promotion of sales through the
distribution of directed promotional coupons for specific regions and dates. Social
media also helps in a way that customers can make the app famous sharing their
experiences. Uber adds touch points throughout the ride experience that increase
virality.
When it comes to advertising, ads in restaurants, bars, buses and rest stops becomes
essential for the release of the app. Since these are places that possibly, consumers may
request the Uber service.

In addition to the investment in advertising and digital marketing, activities off the
internet also are very important to build the relationship between the app and the client.
Just as it happened to promote the new diversified private rides, offering on-demand ice
cream to users, ordered and paid for through their app, in Boston, Chicago, New York
City, San Francisco, Seattle, Toronto, and Washington DC.
This position is taken because Uber provides a readily available service at a premium
price. It is aimed at customer that realizes the value of time, and is willing to spend
some extra money for convenience.

Sources
https://www.uber.com/
http://www.planalto.gov.br/ccivil_03/_Ato2011-2014/2011/Lei/L12468.htm
http://businesscofounder.tumblr.com/post/34572063959/lessons-fromubers-marketing-strategy
http://exame.abril.com.br/tecnologia/noticias/brasil-e-o-quarto-pais-domundo-em-numero-de-smartphones
http://g1.globo.com/tecnologia/noticia/2014/09/venda-de-smartphonespassam-de-13-milhoes-no-brasil-no-2-trimestre.html
http://hermanomota.com.br/2012/07/23/classes-a-e-b-o-mercado-que-maiscresce-2/

http://www1.folha.uol.com.br/mercado/2014/10/1526962-produtos-paraempresas-sao-novo-mercado-de-apps-de-taxi.shtml
http://www.adetax.com.br/index.php/informacoes-e-servicos/estatisticas/