G202 Exam 1 Cases

Cases 1-4 from Debrief Slides

Productive Regulation as it pertains to Uber

the restricted licenses created an artificial shortage in the taxi cab market and cause social inefficiency

Entrepreneurial vision as it pertains to Uber

Uber wants to capitalize on the opportunity to create a net benefit for society and try to monetize it into profits

If the consumer’s willingness to pay _______ the costs of organizing the rides, Uber can turn a profit

exceeds

Describe the draw for Passengers of Uber

Low price

Simplified Process

Easy Search and payment

reliable access in more markets

upfront information (price and ratings)

feedback rating system

Describe the draw for drivers of Uber

80% of revenue

flexibility and control

access to loans and technology

increased productivity (heat maps)

higher volume and less tim e

feedback rating system

Describe Uber’s Efficient scaling of a two sided market

Passengers AND drivers benefit form tech

Surge price incentivized both sides to scale when needed
Higher price incentivizes drivers to come out more (Qs increases)
Higher price incentivizes passengers to seek out alternatives (Qd decreases)

With Uber, search costs _____

decrease. core competency is data analytics

How did Uber avoid regulatory costs

avoided insurance, licensing (taxi had high medallion prices), labor screening, and productive regulations

3 factors of Uber’s Competitive Advantage

Efficient Scaling in a 2-Sided Market

Tech-based Reductions in Search Costs

Avoidance of Regulatory Costs

Special interests of incumbent taxicab owners

want to protect their market power and profits from competition

Special interests of Uber

wanted to build a business model that avoids the high compliance costs of government licensing

How did #UberDCLove help Uber gain relative strength

used core competency of technology to run social media campaigns, minimizing lobbying costs

What interest group did Uber partner with to gain political and cultural legitimacy

Mothers Against Drunk Driving (MADD) - supported a nonpolarizing issue to gain traction - experienced in lobbying (political) and makes local communities safer (cultural)

Uber Strengths

A lot of investors and funds ($15b+) and expanded service to 75+ countries

Revenues growing to $7b+ and valuation of $62b

Uber Weaknesses

Legal and lobbying costs, startup costs, no profit

Inability to replicate political strategy across cities, states, and countries

Each location has a unique campaign (preventing economies of scale)

US Department of Justice Uber Investigation

use of ‘greyball’ software that hides Uber driver locations

possible violation of the Foreign Corrupt Practices Act

FBI Uber Investigation

whether Uber interfered illegally with Lyft, using a program that track locations of competing drivers

Otto lawsuit with Uber

Uber acquisition of Otto led to IP-lawsuit over stealing trade secrets from Waymo

California legislation against Uber

classifies gig-drivers as employees

The 20% revenue share of Uber ______ proved enough to cover the fixed costs of tech development, lobbying, and litigation

HAS NOT

Uber has not posted an annual profit in the five years since the case

How has Uber tried to increase revenue

Uber Eats and other partnerships

emphasis on delivery during pandemic - Postmates

How has Uber tried to increase local legitimacy

Partner with public transportation - can alleviate congestion as an extension of PT

Subsidization from cities allowed passenger to receive discounted fairs

Ventria’s Business Position

Patent Protected Drug - 20 employees found protein grown within rice

Life Saving Value - 2 million kids die annually

Globally Demanded by orgs focused on health (UNICEF, Red Cross, WHO)

What is the number one concern with Ventria

contamination

The US is the number __ exporter of rice to the world market

2

Why is California Rice so valuable to the state economy

$500m annual valuation

40% of state’s rice to export

2,000 farms growing rice, producing jobs

Only state with rice commission (CRC)

Who are Ventria’s Allies

Employees and Investors

Pharma and Infant Formula

Red Cross, UNICEF, WHO

Biotech Industry Organization (BIO)

UC-Davis

California Rice Commission

Neutral Stakeholders in Ventria

Federal Govt: EPA, FDA, and USDA

Who are Ventria’s Adversaries

Japanese Rice Retailers Association

Traditional Rice Anti-GMO Activist Coalition

California Secretary of Agriculture

What type of Political issue is GMO rice being grown in California?

Interest group politics - active special interest groups on both sides

Who has the relative strength in the Ventria Case

Ventria’s adversaries based on the position of the secretary of Agriculture

What are the three options for Ventria

Fight for approval in California (opposition strength is growing)

Compromise with the activists (costly)

Leave California and find a new, more conducive location (unknown- lots of questions)

What did Ventria decide to do?

Leave CA

Describe Ventria’s journey after leaving California

Missouri (Anheuser-Busch would not buy rice w Ventria there, so State pulled funding) → Kansas (city funded start up costs) → some public opposition, but USDA granted permits and crop was harvested

Is Ventria profitable?

Yes. product expansion occurred out of their Kansas production facility

What gave the state economy leverage over Ventria in rice producing states?

activists arguments from the heart and traditional rice’s arguments

what finally gave Ventria political leverage

Locating in a non-rice state, removing contamination from equation, and promising to inject jobs and attract more biotech firms

Major consumers of bananas in order

EU

North America

Asia

Who grows bananas in Latin America

USA: Chiquita, Dole, Del Monte

Ecuador: Noboa

Who grows bananas in the ACP (Africa, Caribbean, Pacific Rim)?

EU: Geest, Fyffes

What are the capital investment inflows of banana production in the host country

Job creation, medical care, education, etc

Communication and transportation infrastructure

What political instability was created by banana production?

The Banana Wars between Banana Republics

What countries are Chiquita’s Major Production Hubs?

Panama

Honduras

What policies did the EU use to restrict banana trade

Tariffs and Quotas with licensing fees

What were the restrictions on banana trade for traditional acp (former colonies)

Free access

What were the restrictions on banana trade for the ACP

some restrictions

What were the restrictions on banana trade for Latin America

most restrictive quotas and highest tariffs

What were the goals of the EU Banana Trade policies

Incentivize capital investment for development in former colonies

Special interest to protect domestic companies (Geest and Fyffes)

Who are the winners of the EU’s trade restrictions

EU Banana Companies: higher prices and over-production

EU Governments: collection of tariff and licensing fee rev

Former EU colonies: capital inflow

Who are the losers of the EU’s trade restrictions

EU consumers (Germans): higher prices and under-consumption

foreign banana companies: crowded out by the domestic producer’s over-production

Latin American Countries: de-incentivized capital investment

What type of political issue is the Chiquita case?

special interest (comes down to relative strength)

What were Chiquita’s actions against EU

Lobbying with Bob Dole

USTR Section 301 Petition

GATT Complaint

Lobbying with Bob Dole

Unwanted public attention on Bob Dole’s motive to represent Chiquita put an end to this partnership with no positive resolution for Chiquita

USTR Section 301 Petition

successfully accepted but ultimately produced no sanctions against the unfair trade practices of the EU

GATT Complaint

Filed by LA countries against EU. Panel ruled against EU, but action stemming from the ruling was blocked by the EU members

What countries signed the Framework Agreement with EU

Costa Rica

Colombia

Nicaragua

Venezuela

The Framework Agreement

four countries received preferential treatment in the form of an expanded quota relative to other LA countries in exchange for helping block action stemming from the GATT ruling

Why didn’t Chiquita expand to Asia

too far for economical transport and studies show consumers prefer the taste of locally grown bananas

What issues did Chiquita face after their lobbying failed

Missed opportunity to move into ACP (competitors moved first)

US and LA market were saturated with bananas (prices and profits low)

Asia market not viable

What did Chiquita do to re-position

acquisitions of pre-packaged salad producers and converted several plantations to salad

market for pre-packaged salads growing in the US

Chiquita merger with Fyffes

wanted to get ahead of shared competitor, Dole. Rejected by Chiquita

Cultrale-Safra Acquizition

Chiquita acquired by Cultrale-Safra, so C-S can leverage Chiquita’s distribution, farming, and logistics

What was Chiquita’s greatest problem

Foreign firms do not have much political leverage (relative strength) in influencing domestic policy makers

How did Chiquita solve their problem

A euro-market dependence exposed its business to political risk, so the moved to a more US-focused product to gain leverage and lower risk

Describe the Value Chain of Producing Music

Artists (10%) → Record Labels (70%) → Distributors (20%) → Users

Distributors represent the digital tech shock

Music Distributors before digital

Brick and Mortar

Online Retail

Radio and Synchronization

Digital Music Distributors

Digital downloads

Streaming

Piracy

What are the two parties within the interest group politics of the Spotify Case

Incumbent record labels: want to protect their returns from holding music copyrights

Napster, Limewire, and other file-sharing sites: wanted to build a businesss model based on the weak enforcement of copyright digitally

Who has relative strength in the Uber case

Incumbent taxi drivers

Who has relative strength in the Spotify Case

Record labels (copyrights on their side)

What is threatening the music industry

piracy

Can the govt significantly affect the probability of getting caught for piracy?

No. Global enforcement is the problem - costly and nature of copyright protection

Where does copyright protection stop

at the country’s borders unless other countries reciprocate protections

What is the probability of getting caught for music streaming piracy

pretty close to zero

has spotify recorded a annual profit

No

Pros of Digital Music Distribution

Cheaper than buying an album

Convienient
Easy to customize (unbundle)
Easy to purchase
Easy to transport
Easy to use
Easy to store
Easy to share - piracy threat to record labels

Cons of Digital Music Distribution

No physical product (no cover art)

Quality concerns

No ability to resell

Need data plan to support

Buy a device - Opportunity seized by Apple

How did labels initially fight against MP3 Files

They sued the PMP300 device manufacturer

What did record labels do once consumer preferences shifted to digital

launched their own streaming sites: PressPlay and MusicNet

What were the limitations of PressPlay and MusicNet

limited artists

Limited playability

Digital Rights Management protection

Pay for all constraints while Napster was free

How did the records recover from the failure of their pay sites/platforms

shared their music libraries with other digital distributors

What is Apple’s Value Proposition

X -First Mover

X -Innovative Business Model

X -Special Backing from Labels

👍 Good Branding/Marketing

👍 Closed Eco-System

Spotify’s Value Proposition

Freemium vs Premium business model not unique

Learning algorithm is copied from Pandora not unique

Interface copied from competitors

Music library is the same as competitors

Commodity offering of 20% of revenue - hard to earn profits, so try to create a winner takes all

Winner Takes All features

High-switching costs

Barriers to Entry

Network Effect

If Spotify achieves one of these, it can potentially win the market

What partnerships has Spotify tried to use to grow

Facebook, Tinder, Hulu, Starbucks, Xbox

Why do disruptors and artists have to disrupt the stronghold record labels have on copyrights

record labels hold most of the revenue, but rely on distributors to innovate and adapt

Give examples of artist led disruptions to record label strongholds

Radiohead’s pay what you want

Wu Tang Clan’s auction of one copy of their album

Frank Ocean bypassed Def Jam and Universal, using Apple

What disruptions can distributors like Spotify lead

lowered production costs, replicating what the labels offer, but it is hard to crack contracts between music labels and artists (and legally crack copyright laws) ex: Taylor Swift removing her music from Spotify

Spotify for Artists

Artists can independently upload their music to Spotify

Spotify for Podcasters

podcasters negotiate directly with Spotify

predictions show that 20% of listening will be non-music content