Abstract
The paper addresses a case study carried out on a multinational e-business company called eBay. French entrepreneur Pierre Omiya started the company in the United States in March the year 1998. The company had a successive growth and within 10 years, it had close to 40 countries.
Similarly, it had a tremendous growth with the number of employees rising from 50 employees to more than 15,000 employees. As the company looked for more expansion rooms, it moved to Asia particularly Japan and China. However, in Japan and china, the company failed to sustain itself in those countries and pulled out.
This paper, therefore, seeks to find the reasons why eBay failed in Japan as well as china, what the company could have done differently in order to fit in the Asian market, and why it was not able to compete with its competitors such as Alibaba. Moreover, the paper discusses the management practices that eBay could have acquired whether local or global and the suggestions to the eBay leadership.
The failure of eBay
During the establishment of any form of business, a critical analysis of the market as well as the competitors is essential. This gives the business the insight of what to find in the market as well as giving the business ideas to use in order to have competitive advantage. A good market research would have given eBay potential analysis on the targets depending on various factors such as market characteristic, competitors’ conditions and products, financial and economic conditions, cultural, political, social factors and market prioritization.
According to the case study, it is evident that research analysis of eBay Company was not good enough to help them penetrate the Asian market or the company failed to do the market research. The use of self-reliance criterion in Japan was a major blow to the establishment of eBay.
Self- reliance criterion is a method of a multinational corporation assuming that the product, services and ways used to enter in the domestic market or another market in operation is applicable to any other market. The company used the previous approaches to other international markets in Japan. In addition, eBay failed to carry out a good analysis on how to counter its competitor in Japan that had already penetrated in the Japanese market very well. The company failed to do product analysis to help them produce products and services that are easier to penetrate and able to compete in the market.
The company had learned about its failure in Japan and was faced with other challenges in China. However, the company approached the partnership method in the Chinese market and failed to sustain the fees charged by EachNet on its products and services. The company in China was unable to counter the competitors unlike in Japan where the competitor was a well-established firm.
The company in Japan used the website that was used in other countries that lacked local and cultural practices of the place of operations. Moreover, eBay failed in maintaining EachNet management as well as modes of operations that made it to reestablish itself in China. This caused the people to loose confidence and trust of dealing with it.
Solutions to the failures
The most crucial thing the company could have done first was an extensive market research. As the company did in the other parts of Asia as well as China, instead of the company establishing itself from the start in Japan, it could have entered the market through partnership. They could have identified a major competitor with the Yahoo and partner with it. This could have given them an advantage to penetrate the market as well as an opportunity to learn and study the market and local/cultural practices.
In addition, partnership would have enabled the company to know the competitors products and services well, learn the economic and financial aspects of Japanese market, known the methods used in Japan to advertise and promote products and services and any factor related to their business. Similarly, instead of eBay using self-reliance criterion to enter the market they could have established a market approach for the Japanese market.
Financial/economic analysis was essential to help them address the fees to charge for their products and services in Japan that would also apply in China, where they could have sustained or lower the charges charged by EachNet. On competitors, the competitor analysis is the initial step. It helps in analyzing the competitors’ products and services, charges or prices, the means they apply to penetrate the market, the means of advertising and promotion and their strategies to counter other competitors. All this information was necessary for eBay during their company analysis. The change of website to favor the local market is also a solution to the failures.
There are societies that hold and find their local and cultural practices superior and of great importance. They therefore hold them more than any other practices. Moreover, in China, eBay could have sustained the managements and operations of EachNet that could have helped sustain and gain more trust from the customers (Dlabay, Scott & Scott, 2011). Similarly, instead of outsourcing employees from outside China they could have sourced their labor in China.
eBay failure to compete with Alibaba
Jack Ma who is the owner of the Alibaba started his own e-Commerce that offered the same products and services to eBay. Furthermore, this company offered products and services with no charge as well as quality services that helped the company gain more trust from the Chinese market. Moreover, Jack Ma being a Chinese had enough knowledge of what the Chinese market needed than eBay management. They therefore incorporated social and cultural practice in their website unlike eBay whose website was global. In addition, Alibaba being a business-to-business profitable business could compensate any losses made by Taobao.
Thus, Taobao was generally used to interfere with eBay markets. The specialization of eBay in customer-to-customers business only made it difficult to compete with Alibaba that had diverse specialization. The people management practices should be local or global, but the factors to influence these practices should depend on the nature of the market. There are those markets that will favor the local practices while others will favor the global practices. For instance, the European market will favor global practices more than local. Therefore, the key determiner of the practices to use is the market research, which will dictate what practices to use.
Conclusion
Remarks to the eBay leadership are on the significance of comprehensive research as well as their management. They need to have comprehensive market research before entering any market. In addition, they need to improve their management skills, knowledge and competence through hiring specialists to deal with certain issues.
Reference
Dlabay, L., Scott, J., & Scott, J.S. (2011). International business 4th edition. Mason: Southern Cengage Learning. Web.