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Yahoo-Alibaba Companies Deal Case Case Study


In the presented study, the issues of the right approach towards the negotiation, the importance of the team, and the ability to find new ways of resolving a problem after a failure are addressed by the former president of the Yahoo Company.

At the beginning of the 2000s, US companies began to penetrate the Chinese market. However, there were few deals, and Chinese rivals were more successful in the market. Moreover, the Internet as an industry was not as developed as in the USA. The company experienced difficulties in gaining revenue, and the management style of the entrepreneur was also perceived negatively by the company’s staff.

The alternatives were either to continue working with the aggressive manager, to hire new staff, to close the deal, or to find a new company to collaborate with. The Yahoo Company decided that a new company would possibly resolve the problem of difficult market positions. Nevertheless, it was a risk.

In this case, the success of the deal was supported by the specifics of the negotiation between the Yahoo Company and new managers. As the former president of the company notices, the founder of the Alibaba Company impressed them with his management philosophy. It is often the case that companies with different visions and approaches cannot effectively operate and build a business, even if it is potentially profitable. In this case, the alignment between the Yahoo and the Alibaba administrations led to a favorable deal. Due to good relationships with the founder, the company’s negotiations with Alibaba were facilitated, and the joint venture was created.

The ability to recognize mistakes and learn from them was one of the key approaches that helped the company succeed in the market, argues the author.

The importance of negotiation and cultural agents is also underlined by the author of the article. As Sue Decker explains, the company had to agree to abandon their previous “control” approach in favor of the Chinese colleagues who insisted on it. As it turned out, such an approach was standard in the Chinese Internet and media industry. Here, the company could have refused, but eventually, the deal would end in the same way as their previous one did – with little to no success. Therefore, the company chose another approach to the existing norms in business in China and only profited from it. Any alternative to this decision would have resulted in a complete failure, just as it was with 3721. Although the company agreed to give up control over many procedures in 3721, it was not enough for the local team to compete with Chinese rivals. Therefore, in the new deal with Alibaba, the company had no other option but to give up all control they had over the local operations. What is more, employee issues were also resolved by the partner, who had no previous connection to the company. Nevertheless, the deal brought revenues and success because the company’s leadership teams aligned in the approach towards business. Chinese leaders were open to the suggestions and U.S. methods of business management. Due to this ability to negotiate, the two companies were able to work on the issues that emerged in the market and become serious competitors to other Chinese companies.

Thus, the understanding of local complexities and features of the market can greatly improve an outsider’s business, but only if a foreign company is willing to accept the rules.

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IvyPanda. "Yahoo-Alibaba Companies Deal Case." November 17, 2020. https://ivypanda.com/essays/yahoo-alibaba-companies-deal-case/.

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IvyPanda. 2020. "Yahoo-Alibaba Companies Deal Case." November 17, 2020. https://ivypanda.com/essays/yahoo-alibaba-companies-deal-case/.

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IvyPanda. (2020) 'Yahoo-Alibaba Companies Deal Case'. 17 November.

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