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This paper will identify some of the reasons why E-Bay has problems in the Asian Markets as an internet auction provider. After examining articles from Philip Kotler and David Gertner as well as Moon Ihlwan among others, this paper will provide my answers about why did EBay want to expand globally as well as why any of these Asian nations wanted their business?
It will explain some research explored about what types of Entry decisions the company used in the Asian Markets.
Utilizing the knowledge gained about the history of global business. Answering the question about the problems that EBay has in the Asian market will allow me to discuss and apply concepts of the global market learned in module one in support of my answers. Lastly this correspondence will assess how EBay’s Marketing Mix assessment of the Four P’s assisted them in the global marketing strategy the company adopted for the Asian Markets? Why did EBay want to expand globally and why did nations wanted their business?
The reasons EBay decided to expand globally were various and resulted in an overall loss for the San Diego, CA based company headed by the former CEO at the time and California Gubernatorial candidate, Meg Whitman.
Some of the decisions made and acted upon by the company’s leadership were akin to the way Meg Whitman ran her political campaign. Instead of researching the culture and traditions of the places they chose to do business and working on an image of being local or at least embracing local cultures and traditions; they chose to feed issues with money.
In Whitman’s case borrow millions of dollars from herself to try to resolve the issue of losing as a candidate. Getting back on subject, the countries that eBay chose to expand globally in, were like all nations; ones that needed jobs. EBay sought the cheaper labor wages as a win-win situation for themselves or some instances the prediction of a high level of success due to their business reputation. Getting into the market was not difficult as the new market fell in line with what these countries wanted in ordered to develop their economies; while in turn enhancing domestic quality of life for their citizens.
EBay felt compelled to expand globally to remain competitive as the US domestic market share was becoming mature resulting in stagnant profits and overall growth. As all companies looking to globally expand eBay was investing in Asia to increase profits by gaining a positive entry into this new market share however there was no need to create a new market. The majority of the countries they chose had local internet auction industry established already.
EBay’s ultimate goals were to introduce their open auction business model at an international scale starting in places like Japan, China and South Korea to take advantage of these nation’s emerging economies in order to increase wealth. Entry Decisions Through the struggles in gaining entry into these emerging market areas, EBay learned that they must adapt as well as embrace some of the new technologies and products offered by their competitors in the Asian domestic markets in order to be successful or at least competitive in the market.
The beating they took in Asia was not just from Chinese and South Korean competition, but from two US based competitors in Yahoo and Google. A current domestic alliance with Yahoo against the giant Google has not resulted in any increase in positive business in the global market share as Yahoo is continuing to gain more shares of the market through its ventures with local competitors. EBay market entry decisions were integral to their failure in Asia.
As ascertained from a case study published May 2008 about EBay’s Strategy in Japan 1, “…they entered the Japanese market late after Yahoo Japan had already established and failed to retain customers. It took them two years to concede the failure of the EBay Japan and instead of making a deal with local investors they finally folded in 2002. Ironically, in 2007 EBay made a deal with Yahoo Japan to share internet sites and products in Japan in a joint web site called “Sekaimon” 1.
Their failures in Asia has eventually led to layoff of workers in countries like Taiwan and shutting down of several sites in Asia while rerouting customers to US based sites to maintain a virtual presence. In 2006 EBay’s South Korean venture Internet Auction was bested by a South Korean competitor named Gmarket whereas they equaled or eclipsed EBay’s profit share in South Korea that year. Gmarket also produced innovating products to the internet auction industry such as making shopping via internet fun and using tie-in promotions.
Excerpts taken from a Moon Ilhwan internet article in Business Week2, further explain the stiff competition EBay had in South Korea from Yahoo and the local upstart, “Gmarket’s business model places less emphasis on an open auction format than eBay’s. The company offers goods that one can order at fixed prices, with an option to negotiate prices with a seller on an exclusive basis. This allows buyers to conclude deals instantly instead of requiring them to wait until all bids are completed in open auctions…” and “…another tie in marketing program is a lottery called “lucky auction. It gives buyers chances to buy everything from LCD televisions to T-shirts at a fraction of the market value. A seller promoting an MP3 player, for example, invites consumers to bid for two of them within a given price range—usually less than 10% of the retail price. Then Gmarket’s computer picks two bids at random to decide the winners. Others visitors can buy the MP3 player at a special offer price. The seller attracts consumers, while Gmarket happily hauls in commissions.
Another incentive at Gmarket is that retailers can offer online links to their own mini homepages within the site, issue discount coupons, run joint mileage points programs, and use an internal messenger service called G-messenger for instant chatting with sellers. Some shops listed on the site have also drawn traffic by promising to donate 10 cents to a favored charity every time a product is sold…” 2 Thus far EBay has attempted joint ventures and mergers to enter the Asian market share and has met negative results.
This has had a negative effect on their overall performance to expense ratio in their stock valuation from 2000 thru the present time but has not deterred management from continuing to compete for a market share in Asia. An ongoing joint venture with Yahoo keeps EBay with a foot in the door of the foreign market and continues the strategic alliance against Google. EBay has expanded to Southeast Asia to see what they can obtain in Singapore, Malaysia and through operations in the Philippines. Currently they are doing promotional sites in Thailand and Vietnam to gauge future profits in those nations as well.
EBay’s use of the Four P’s in their marketing mix assessment EBay’s use of the Four P’s in their assessment of their global market strategy was regretful in Asia when in comparison to Yahoo’s success. Lost on the EBay leadership was the desire to be a part of the local market and understanding cultural diversity of each Asian nation they wanted to establish a market. From my personal experiences going to countries such as Japan, South Korea, Guam, or the Philippines for business this is vital to earning shares of the Asian market and as a personal prospective as well.
Yahoo’s co-founder, Yang is a male businessman of Chinese-Taiwanese descent which had to give Yahoo an edge in Japan, China and South Korea over EBay’s CEO at the time Meg Whitman; who was female, Caucasian descent and unaware culturally of how to gain the confidence of local leaders and business persons. 3 The product that EBay had to offer was nothing innovative to the Asian market as there was already a local variant of online auctions/internet industry thriving in Japan, China and South Korea.
Timing and placement of EBay’s business model was late and over reaching as Yahoo already was established in each of the locations chosen and early profits resulted in a false analysis of future outcomes for EBay in Asia. Promotions used on the global EBay sites had advertising geared globally instead of locally which went ignored by local customer’s. More emphasis toward local advertising of domestic interests could have attracted and retained their customer base.
Lastly, pricing of their product which was part of the business model was somewhat excessive and confusing. So when an upstart company like Gmarket introduces something simple like, fixed prices and special deals the customer’s internet shopping experience just became more simplified to use and less time to use resulting in a more desirable overall product than EBay was offering at the time. The EBay pricing system had customer’s waiting out the end of a bidding process which still did not guarantee the customer the outcome desired if they were outbid.
EBay’s management’s inflexibility hindered the local management’s ability to make decisions that would help them get more of the local market share and build from there in their own country and marketplace. 3 Discussion EBay’s ventures in expanding to a global market were incurred several surmountable challenges. As stated in the lesson the Asian market share is vital and profitable for many companies. As the research depicted one of EBay’s primary challenges was completion at several levels; global and local/domestic competitors all vying for a market share of the internet auction industry.
EBay attempted to manage market entry problems long after their original business model was viable in the region, by adapting lowering or waiving fees for its services to keep up with the competition from Yahoo, Google, Chinese stall worth Internet Auction and South Korean upstart GMarket. EBay failed to incorporate some of the local technical innovations that likes of GMarket produced for its customer base such as, local advertising on the sites, fixed price so that internet shoppers could get what they were shopping for and not have to outbid others and wait for the outcome of who actually won/bought the products advertised.
History was another problem for EBay, they did not study the culture and traditions of the places they chose to enter the market at. Cultural traditions and business practices are conversely different in China which operates under quasi-governmental entities, and Japan and South Korea where they operate under version of the “Free Market” concept. Along with not understanding Asian cultures the company did not attempt to adapt its global business model to the local market when incorporating its management and leadership philosophies to the region.
This resulted in a management and leadership staff overseas that would not be capable of maturing as a team to meet the local demands of the market. Just being in the region did not give EBay the advantage they seemed it would, thus their own inflexibility and lack of foresight contributed greatly to the problems they are facing in the Asian market. To EBay’s credit they have not thrown in the towel and have remained in Asia through joint ventures and are actually conducting promotion in Southeast Asia (Thailand and Vietnam) as well operations in Singapore, the Philippines and other places.
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