Analysis Introduction As information technology (referred to

Analysis of the role of trust in the success of Didi
Chuxing

Alexander Klaphake*

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Business
Administration, Principles of Economics and Business 2, University of
Amsterdam, Roetersstraat, 1018 Amsterdam, Netherlands

 

* Student ID: 11868716

   January 29th,
2018

 

1.    Introduction

 

As
information technology (referred to as IT heron after) is developing rapidly,
the sharing economy has been growing alongside. Especially the growth of this
economy within the travel industry is huge (Bardhi & Eckhardt, 2012). As
the definition of a sharing economy in academic terms is still vacant, in this
paper the sharing economy refers to a digital platform where people acquire,
deliver and share access to assets and services (Assignment the Digital Firm –
Digital Platforms and the Sharing Economy, 2017-2018). There is a lot of value
created within this economy, this is due to the fact that the basic idea of a
sharing economy is sharing goods and service with the entire population (Puschmann
& Alt, 2016).

Digital platform companies (e.g., Zipcar, WeWork, Didi
Chuxing) see their chance in dominating markets and providing more services
fitting the needs of the customers, therefore these companies are getting more
important within the Sharing economy (Pizam, 2014). These companies set up
people to share a range of products and services.

Platforms
have existed for centuries. Train platforms connect people with transportation;
malls connect customers to vendors (Van Alstyne, Parker, & Choudary, 2016).
What is changed now is that the ICT development allows these companies to gain
success without owning anything. The digital platforms are easily built and
whereas it used to be a business-to-business or a business-to-consumer
relationship these new platforms allow a consumer-to-consumer relationship
(Puschmann & Alt, 2016). Study shows that this new consumer-to-consumer
relationship is often stimulated by the fact that it is cheaper, more
convenient, and more sustainable than the traditional relationships (Hamari,
Sjöklint, & Ukkonone, 2015). The trust within these consumer-to-consumer relationship
is the main reason why these digital platform companies have such success, it
is a number one priority for consumers to feel secure when buying products and
services through online platforms (Hawlitschek, Teubner, Adam, Borchers,
Möhlmann, & Weinhardt, 2016). Although research has been done to the trust
within the ride-sharing industry in the western part of the world, only little
research has been done in the developing parts.

Therefore, the focus of this paper will be
Didi Chuxing, which is the biggest ride-sharing company in China. The company
was founded by Cheng Wei in 2012, and its business model is based on providing
transportation. With 450 million users across over 400 cities in China, Didi
has the biggest market share in its industry (Crunchbase, n.d.). All services
from Didi are offered through a digital platform (the Didi app) and include
on-demand taxi service, on-demand private car service and hitch-hiking. While
focussing on Didi Chuxing, the main goal is grasping to what extent the role of
trust is dictating the success of a business operating in the ride-sharing
industry in the sharing economy of China.

To answer this question a literature review
will be used, the literature consists of previous research and academic articles
which gives us insight into the theoretical term trust, the development of the
sharing economy in China and how they both affect the company Didi Chuxing. The
research papers and articles have been retrieved through online university
library databases and books from the UVA library.

The paper is structured as followed: section
two starts with a theoretical framework existing of theories, models, previous
research, and background information. The third section describes a discussion
of the findings and limitations to this study. Section four is presenting a
hypothesis and section five is a conclusion of the paper.

 

2.   
Theoretical Framework

 

2.1. The sharing
economy of China.

The sharing economy has become an alternative
provider of products and services who used to be provided only by established
companies (Zervas, Proserpio, & Byers, 2015). The sharing economy can be
referred to as an economic ecosystem that is developed through IT technologies
and is connecting individuals, organizations, governments and others, in order
to create value by sharing goods and services (Hamari, Sjöklint, & Ukkonone,
2015).  According to J. Schor (Schor, 2014), the
activities provided by the sharing economy can be divided in four categories:
reusing of goods, trading services, increasing usage of durable goods, and
sharing productive assets.

 

2.2. Trust

 

Interacting with other people whose minds
cannot be read is difficult for the human being. As human beings have an inborn
need of wanting to understand everything, this in-ability leaves them with a
huge complexity (Luhmann, 1997). But as people need communication on a day-to-day
basis, trust is one of the factors that shrinks this in-ability and makes us
able to communicate with each other the way people do. Without thrust this
communication would not be sufficient and human beings would less likely
communicate. Therefore, it is a very important part in interaction, especially
interactions that are not regulated or governed (Luhmann, 1997).  

Trust can broadly
be defined as the confidence a person has in his or her most desired
expectations of the actions from others, based on foregoing communication. In
spite of the fact that another person’s previous behaviour cannot warrant the
behaviour will be exactly the same in the future, previous behaviour of a
person that has been correctly expected in the past increases trust (Lewis
& Weigert, 1985). There is however a difference between trust in general,
referred to as natural propensity trust, and trust in an online environment
(Schlosser, White, & Lloyd, 2006). According to research done by Kiku Jones
and Lori N.K. Leonard (Zervas, Proserpio, & Byers, 2015), natural propensity trust has no
connection with trust online. In other words, a consumer who trusts people a
lot in daily life does not have to be as trusting when making transactions
online.  Research has shown that online purchases, according
to consumers, are risky, therefore trust plays a very important role in giving
confidence to customers (Kim, Ferrin & Rao, 2008). The customer is always
left between the risks and the benefits when it comes to buying online, the
transaction will be done when the benefits of the product weigh up against the
risks of it. This framework complies with Lewin’s theory (Lewin, 1943).

When it comes to mobile services, trust has
the same important factor as it has on the internet. It is the confidence a
user of the mobile service has in the safety and privacy of their information
(Gao, Krogstie, & Gransæther, 2008). In other words, trust in mobile
services means using the service thinking it will be risk free, while there
will be advantages in the future. For the digital platform companies who
provide these mobile services, trust is hard to earn and easy to lose (Nijte
& Parsa 2005). 

 

2.3.
Familiarity and reputation.

One of the other factors that simplify the
communication between people is familiarity. Familiarity is a comprehension,
often established on communications, events, and the understanding of what,
why, when and where other people do what they do (Luhmann, 1997). Trust and
familiarity are connected, but different. As trust focusses on actions in the
future, familiarity is based on focussing on these actions in the present. For
example, familiarity with Uber one of the largest digital platform taxi hail
service would be knowing how to order a taxi, choose between different types of
taxis, and eventually finding the taxi in real life. Familiarity here is based
on previous interactions with the app and therefore knowing how to use it.
Trust in Uber on the contrary, might imply providing credit card information to
pay while there is not a 100% confidence in that your credit card information
will be used appropriately in the future.

In an online digital platform contributing to
the sharing economy, reputation is an important part for success (Ma, Huang, Ba?ar, Liu, & Chen, 2016). The strength of the relationship between
the consumer and the digital platform indicates the level of reputation the
platform has (Ma, Huang, Ba?ar, Liu, & Chen, 2016). Whereas a platform with a weak relationship
a lower level of reputation can be expected and a strong relationship a higher
level of reputation. The trust in consumer to consumer businesses is different
from a business to consumer trust. The reputation of the platform providing
consumer to consumer business is very important in positively influencing trust
(Leonard & Jones, 2008). A good reputation can be achieved by strong
relationships (Ma, Huang, Ba?ar, Liu, & Chen, 2016), but also an excellent perception of the
platform influences a reputation positively (Leonard & Jones, 2008).

2.4. Guanxi

Guanxi
refers to a specific type of connection between partners through mutual
exchange of favours and shared obligations (Yang, 1994).  Guanxi includes informal and intimate
affiliations and is very strict in involving mutuality, commitment, and a sense
of duty (Hwang, 1987).  Guanxi has an
important impact on the way Chinese behave (Kipnis, 1997). Guanxi is based on
three sub-dimenions, specifically ganging which focusses on affection and
bondings through emotion, renging focussing on mutually beneficial exchanges,
and xinren which is focussing on interpersonal trust (Kipnis, 1997).  Especially the last sub-dimension, xinren, is
important for this research paper, while a breach of trust disconnects the
Guanxi.

 

2.5. Didi Chuxing.

Didi Chuxing claims to contribute to the
sharing economy by providing a consumer-to-consumer digital platform for
ride-sharing. Didi Chuxing started in 2012 and is privately held, but has
nevertheless been the biggest ride-sharing company in the world since 2016. According
to the annual report from Didi Chuxing, in 2015 the ride-sharing company has
provided 1.4 billion rides since its founding and in 2016 alone the company
provided 200 million rides. The company surpassed Uber which in 2015 provided only
1 billion rides since its founding in 2009. In Aug 2016 Didi Chuxing
incorporated Uber. Success for a new company can be defined as steady year over
year growth, a large number of users, and a considerable revenue. Since Didi
Chuxing complies with all these factors, the platform can be named successful.

Didi
Chuxing is providing on demand, and location based car-sharing. Customers who
want to use Didi Chuxing are able to download their app which works on android
and IOS smart phones. The app is used to submit a trip request which is then
sent to Didi Chuxing drivers who use their own vehicles. The Didi Chuxing app
is allowing consumers to indicate when and where they need a pickup, and the
drivers on the other side of the platform respond to this request. When
requesting a taxi, the app leaves you with two types of taxis to choose from.
The first is a normal taxi, which is a registered taxi with all the licenses
needed. The second is known as a private driver which refers to anyone willing
to earn some extra cash, possesses a car, and has a valid driving license.  For the normal taxi option, payment can be
done in cash when reaching the destination or through online payment services
like Alipay, Wechat wallet, bank account, or credit card. For the private
driver option, payment can only be done through online payment services. Didi
Chuxing takes a percentage of the fare, and the rest will go to the driver.

 

 

 

3.   
Discussion & Limitations

This study began by testing if trust was
an important part to the ride-sharing company Didi Chuxing. According to the
finding in the theoretical framework, the following assumptions can be made.

First of all, Didi
Chuxing is a digital platform company who provides services, therefore the
company is dealing with previous experiences of the services provided all the
time. Since positive experiences in the past increase consumer’s trust,
negative experiences decrease trust. In other words, if there is no trust in
the company less rides will be made since the previous experiences of the
consumer were bad. This makes trust important to the company.

Second,
familiarity and reputation are important to the company. Familiarity since
ordering a taxi through the Didi Chuxing app obligates you to know how to use
the app.  And reputation, while there are
relationships between consumers, drivers, and the platform that have to be
strong for success. This makes trust important as well since familiarity and
reputation are mutually influencing trust.

And finally, Didi
Chuxing is a company operating in China. In China guanxi has a lot of value
within the culture, also in that of the online platform culture where
transactions are being done on a daily basis. Since trust is one of the main
dimensions within guanxi, to be a trustworthy company is a vital part in
successfully doing business in China. Therefore, trust is also important for
the success of Didi Chuxing.  

Since Didi Chuxing
is stimulating the utilization of durable assets, by having more people use the
same taxi. And considering the company stimulates the sharing of productive
assets by sharing taxi’s and other ride services, Didi Chuxing falls into two
categories of the sharing economy described by J. Schor (Schor, 2014) and is
therefore contributing to this economy.

Although
the preparation of this study has been done carefully, limitations and
shortcomings are still present. First of all, the study was done by only one
ride-sharing platform in China. Therefore, the results only apply to Didi
Chuxing. It still has to be determined if the foundings are applicable to all
companies in the ride-sharing industry in China. Second, the research founded
about guanxi were focussing mainly on villages in China, which might not be a
reliable representation of the entire population.

 

 

4.   
Hypothesis & Future Research

Hypothesis.
Based on the Chinese culture, trust is a very important part in business. The
consumer-to-consumer platform provided by the sharing economy instills more
trust than the traditional business-to-consumer platforms, causing companies
partaking in the sharing economy (such as Didi Chuxing) to grow more rapidly in
China.

Trust
is an important part for a company operating in a consumer-to-consumer platform
and it is also important within the Chinese culture. While knowing this, future
research can be conducted to find out if a company whose business model is based
on selling through consumer-to-consumer platforms, were to have more success in
China instead of other parts in the world.

5.   
Conclusion

The main goal of this paper was studying
the part trust plays when dictating the success of a ride-sharing company in
the sharing economy of China. Since only few studies have been focussing on
this issue, especially in developing countries, there was an urge to study
this. Didi Chuxing, a ride-sharing company operating in the sharing economy of
China, was used to answer this question. Based on the findings, trust is
important when dictating the success for the reasons described as followed.
First trust is based on experiences whereas no trust implies bad experiences in
the consumers point of view. Second, Familiarity and reputation are important
for the company and have a mutual influencing connection with trust. Third,
guanxi is very important to the Chinese population. In guanxi, trust is one of
the three dimensions which makes it important when doing business.

 

 

 

 

 

 

 

 

 

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