Government regulations and rules in the Chinese online market
The fact that the Chinese market is a key market for global firms provided a chance for eBay to begin its operations in China. The rapidly expanding middle class and the fact that the economy was booming suggested that eBay could gain from the higher purchasing power of the consumers. However, the case was not to be as eBay withdrew its online auctions business from the China market. The Chinese market is massive but without a strategic plan, it is impossible to make a significant and sustainable presence in such markets. The Chinese culture is diversified when it comes to online services meaning that it is imperative for businesses to understand the different needs and desires of customers. Foreign companies like eBay are faced by rules imposed by the Chinese government on online consumer-to-consumer business and business-to-consumer models with such measures posing as threats to success of the business. The ruling Communist Party is keen on reining on the internet business transactions by foreign online companies such as eBay such that in the end, only the local online retailers are left to benefit. A major concern has been the need to consider core values that prescribe to the Chinese cultural views with a focus on improving the moral quality of the nation.
Such efforts have led to prohibition of foreign ownership and joint ventures in online business with a requirements that all the contents involved in the transactions be stored in servers within the territories of China. The implication of such moves is that they pose threats to firms such as eBay that may wish to re-capture a significant portion of the Chinese market in spite of earlier failure to make competitive establishment in the market. the restrictions on foreign online companies in the Chinese market has led to withdrawal of firms including Google, Facebook and Twitter that are among the main sources of information regarding where customers could access sellers through online channels. The fact that government approval is required in most of the online operations for foreign companies hinders penetration into such market for fear of being frustrated by the government rules that seem not to be accommodative to foreign businesses.
The point to note from such restrictive measures is that the Communist party in China could be aiming at restricting the western influence in efforts to preserve the culture of China. With the increasing technological use and the rising population in China, restrictive measures on online presence for foreign companies in the Chinese market interferes with expansion plans such that firms kike eBay could be forced to look out for other promising markets such as India. The regulations have therefore acted as barrier to entry by eBay that is forced to look out for local companies to form joint ventures but still have to go through the government approval teams to be allowed to operate in the market.
Cultural aspects eBay failed to consider
Cultural aspects in China led to eBay failure as the company did not lay out enough strategies to help it cope with local requirements. Its operations were easily countered by TaoBao that make a quick presence in spite of the fact that eBay had more experience in online marketing. EBay failed to carry out its activities in the Chinese market according to the requirements of indigenous platforms form the Chinese people who still appreciate their culture more than the influence western nations.
Chinese consumers require that sellers be able to establish personal relationship with them such that they are able to relate in ways that prove mutual trust and dependence. That is one element eBay failed to consider such that its services were untrustworthy among the Chinese consumers. Direct communication between the seller and buyer before transactions take place is an important component of the culture of Chinese consumers since they would want to be confident while engaging in online transactions and would need the seller to assure them of reliability. With the rising cases of fraudulent behavior among sellers, it is imperative that the views of consumers with respect to worries on ethical consideration of sellers be considered.
The first impression from the seller therefore underpins the subsequent relations and is key to building a loyal environment in the Chinese market. To a larger extent the failure to understand such tends among consumers could be attributed to the fact that eBay had failed to hire enough local managers who could have provided the company with insights regarding the core values of the Chinese people. Local managers are important component of organizations that wish to penetrate global markets since they help in convincing the local of the value the business could bring to them and improve communication between the company and its new consumers. With local managers, everyone in the new market identifies the fact that the business is focused on promoting wellbeing of the existing culture. Such markets and that while providing employment to a significant majority as desired by the government. Reliance on foreign expertise therefore proved destructive for eBay as its lost 75 % market share to TaoBao, a local company that was established to specifically outdo eBay from the Chinese market. The other factors that led to failure of eBay in the Chinese market is that it required its customers to make payments using credit cards however, that was not the culture in China since majority of customers lacked credit cards while others were not of the idea and preferred cash on delivery.
For security concerns, many customers were unwilling to consider engaging in online payments, something that eBay failed to notice early enough. Major differences in the websites from the typical Chinese websites also proved to be disadvantageous for eBay since it had not taken time to identify the key aspects that ought to have been included in the website. The color theme was different to what Chinese customers were accustomed with the Chinese people keen on attaching value to color. The websites also had some difficulties in usage such that customers found it hard to identify the products and how they could interact with the platform in a convenient manner. EBay also failed to consider the fact that the Chinese consumers require that they be allowed the chance to give personal feedback to express their views on the satisfaction derived and the improvement to be done by the company. This implies that the company had failed to assure consumers that it was willing to have personal relationship with them. In the end, eBay failed to identify limitations of its plans which would have been key to helping it stabilize in the Chinese market. As such there were poor connections between the company and its customers hence the relationship lacked elements of trust and opportunity for peer recommendations. The credit payment method did not consider the low and middle income consumers since the charges were high such that small scale vendors opted for the services of competitors who understood the local market requirements better. The lessons from failure of eBay therefore provide international companies with the need to ensure they take into account socio-cultural factors as well as federal rules and regulations before penetrating the markets.
Works Cited
Barboza, David and Paul Mozur. "New Chinese Rules on Foreign Firms Online Content." The New York Times 19 February 2016: 1-4. Document.
Chin, Josh. "China Issues Broad New Rules for Web." Wall Street Journal 21 February 2016: 1-3. Document.
Juan, Carol and Robert Davison. Why eBay Lost to TaoBao in China: The Global Advantage. Technical Report. Beijing: Association for Computing Machinery, 2009. Document.
Marquis, Chris and Zoe Yang. Learning the Hard Way: Why Foreign Companies That Fail in China Haven’t Really Failed1 . Technical . Harvard: Harvard Business School, 2014. Document.
