Wednesday, April 27, 2016

The Chinese Lure

The lure of 1/3 of the world’s population is too great for many companies to ignore despite the risks associated with attempting to transfer the skillset and appeal of a western company to the East. As demonstrated by the “Mapping Contexts” section in Strategies that Fit Emerging Markets, the difference between advanced economies (e.g. US, Europe) and emerging markets (e.g. India, China) is staggering. The government controls, enforcement of laws, and openness of these economies is wildly different, so to assume that success on one half of the world will translate to success on the other half of the world is foolish.

There are many American companies that have tried their hand at capturing a portion of the Chinese market, many successful, and many unsuccessful. Surprisingly, some of the best American companies have had no success in certain markets overseas, Google and eBay in China. As mentioned in Strategies that Fit Emerging Markets, the company needs to tailor its product suite to the needs of the market, or else not enter that market. It seems that the success of these companies on their own turf led to an exaggerated confidence level in entering the new markets.
Google and eBay decided to go head to head with their respective counterparts in China, both failing to meet the needs of those markets.

“eBay was no match for TaoBao, China’s heavyweight company, in this industry. In an article for the Association of Computing Machinery, two Hong Kong-based professors cited TaoBao’s built-in instant messaging system as a reason for its edge over eBay China. Customers wanted to be able to see a seller’s online status and communicate with them easily — a function not seamlessly incorporated into eBay’s China system.”[1] Either eBay did not do its homework when deciding to compete in China, or it believed that their success in the US would pave the path into a large market share in China, neither of which proved to be true.

Google had a similar failure, though for a different reason. While they did compete directly with Baidu, “which initially catered to consumers by offering easy access to pirated media”1, Google faced massive opposition from the Chinese government due to censorship. Both of these obstacles however seemed surmountable to Google due to their success elsewhere.

These two obstacles show that despite the time, effort and money that an entity can put into an objective, some plans are doomed from the beginning due to either a lack of planning, lack of strategy, or both. There are many examples of American companies that have succeeded in foreign markets, China specifically, but Google and eBay are instructive examples because of the dichotomy between wild success in one market and utter failure in another.

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