Cross Cultural Management Of Ebay Management Essay
EBay is one of the biggest internet business organsation which provides an open ground for creating online marketplaces for selling and buying goods and services, as well as online payment services and communication for both individuals and businesses globally. It is successfully established in United States and expanded to Europe. However it struggled to gain a considerable market share in Asian market such as Japan and China. The news article I have chosen reported that eBay has decided to fold Chinese subsidiary but set up a joint venture with a local partner Tom Online. It is a good example of MNCs regards globalisation, intercultural communication and international market entry strategies issues. It is also a lesson for all the international managers to learn from that they should study the local culture and thus, satisfy the needs of local consumers.
Organisaitons are going international because reactive and proactive reasons such as global competition, customer demand, economies of scale and growth opportunities. China, as a fast growing developing country with booming economics, is attracting more and more foreign investors. After its huge success in the US and Europe, eBay was trying to getting into China, one of the biggest markets in the world. EBay is intended to expand its power over ebusiness and increase its competitive advantages in the global market. However eBay has not been aware that China is a different market compared to the US or Europe. EBay did not assess the local environment and coming challenges enough, which leads to their big failure in the future.
EBay firstly used a fully owned subsidiary strategy to enter China by acquiring Eachnet, a local internet company with five years experience in ebussiness, with $180 million. It gives eBay a quick entry into the market. However in order to take full control over decisions and operations, they quickly replaced the general manager with a German man who does not even speak Chinese and brought in a CTO from US (Kuchinskas 2004). The Chinese market is different from most western markets because of its culture, custom and behavior. Like it indicated in the news article, when Chinese buying stuff online, they would like to talk to the buyer for enquires and negotiation. However, eBay has “discouraged buyer-seller contact that could lead to haggling” on its site. Deresky & Christopher (2008) has indicated that the differences in the culture and lifestyles of people require international managers to develop cross-cultural sensitivity, which is the deep understanding and honest caring of other culture. As being in the market for five years, the management in Eachnet should have a compressive local knowledge of the consumers need and preferences, as well as the ways of doing business. In contrast, a German manager and a US CTO who do not understand the local market will have no chance to be successful. EBay is lack of cross cultural sensitivity at the start and is not willing to learn from local expertise, which is a big mistake when conducting international business in another country. Consequently, the lack of understanding of local culture makes Taobao, the biggest local competitor, own 57.7 percent of the Chinese online auction market share which is nearly the double of what eBay has.
The environment assessment should be conducted by international managers. A proactive international manager should be aware of the up-to date local political profile well. The Chinese government always has a strong control over the domestic financial services companies by strict regulations. Therefore, it had limited the ability of eBay’s payment mechanism, Pay Pal. As effective international management, it should conduct a quick process when facing this kind of challenges to minimize the risks. However eBay keeps investing in Pay Pal internationally without quickly figuring out an effective solution to adapt to the Chinese political regulatory environment. This directly results eBay losing its competitive advantage and the volume of market share in China. Like Mr. Clark said in the news article, “The end game is who can control online payment. They’ve had their hands tied on that”.
Global management is the process of developing strategies, designing and operating systems around the world to ensure sustained competitive advantage (Deresky & Christopher, 2008). An international manager should be aware of its regional and international competitors. During the same year when eBay is established, another local online auction site Taobao entered the market and became eBay’s biggest competitor in China. For effective international management, competitive analysis (also called SWOT analysis) should always been taken to assess the organsation’s strength, weakness, opportunities and threats. Although eBay gained a huge success in US and Europe, Asian consumers are not familiar with the eBay brand back then. EBay used its success in the US as proof-of-concept leaded to its over-confidence. As Ms. Steiner said in the news article, “eBay failed to react quickly enough when Taobao entered the market with no user fees.” Taobao has a better understanding of Chinese culture especially consumer behavior and preference. In contrast, eBay is not only lack of local knowledge, but also rapidly reactive management process for its competitors.
Organisations change their strategies to cooperate with the dynamic environment. After the failure in the Chinese market, eBay has learned from the experience and changed its entry strategy to the China market from a fully owned subsidiary to a joint venture with Tom Online. The Chinese government regulations have put strong pressure on foreign companies to set up joint ventures. This can be seen as nationalism of the local government. It is trying to grow domestic economy and help local organisations to build their competitive advantage in global competition. Joint ventures offer considerable opportunities such as rapid entry into new markets with the help of the local partner who has local contacts and familiarity with local operation (Deresky & Christopher, 2008). As Ms. Steiner said in the news article, “A partnership with Tom Online would be an effort to salvage its Chinese investment.”
From what has been discussed above, eBay has been through a difficult period in the Chinese market. It used a standarlisation approach on its subsidiary without considering the cross culture management issues such as the culture diversity in management and consumer behavior. EBay’s lack of the culture sensitivity resulted the loosing of the market share to its competitor. Furthermore, without fully assessing the political environment of China and essential analysis of the competitor and itself, eBay could not conduct an effective and rapid management process in the fast-paced changing environment like China. However eBay is learning from its failure and changing its strategy based on Chinese political and cultural conditions. It is now going to set up a joint venture with the local partner to continually gain volume in the Chinese market and thus, increase its power globally.Order Now