INTERNATIONAL BUSINESS

A2 - Individual Research Paper

Course code                     BUSM4553

Course International Business

Student name

Lecturer’s Tzach Ronen

name

Number of words 1215 words 

Date 08/08/2020

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Introduction

EBay is a multinational e-commerce company that people can go shopping online and popular for their
bargains, promotions and sales. This American based online retailer implements a variety of products
from every categories with affordable prices. Therefore, they are targeting to every segments of
consumers from low-middle income to middle-high and high income. Founded in by 1995 by Pierre
Omidyar in 1995, Ebay became the most well-known online retailer for building-up an Internet site to
connect and provide goods and services for buyers and sellers and has been one of the successful e-
commerce company worldwide until today.

After having had a certain reputation, Ebay decided to enter the Chinese market in 2002. As same as
Walmart entering Germany in 1997, this American company implemeted the business model that they
use to use to overcome the world’s market, expecting to gain a high rate of profit and revenue.
However, the “formula” did not work like as they did not take consideration about this special market.

Regarding this research paper, I am going to analyse factors that launch negative impact cause the
failure of Ebay in China. Second section will focus on specific recommendations for Walmart to
operate better and be summarised all essential points before expressing my own opinion about Ebay.

Analysis of reasons why Walmart failed

1. Pest Analysis

Cultural conflict is considered to be the top factor that that affected Walmart heavily. Many American
e-commerce enterprise have been struggling to enter an interesting market that differ from the global
market when they have to overcome the diffeculties from local competitors (Lu J. 2011)and Alibaba is
a big opponents that stop Ebay from conquering this market.

Ebay made a mistake when they entered with ‘no mechanism for simulating guanxi’ (Marquis C. and
Yang Z. 2014) More specificly, this interesting market tends to trade with nailed price (fixed prices)
instead of applying C2C model and offering auctions. Back to the 2000s, the chairman of Alibaba –
Jack Ma released a C2C strategy called ‘TaoBao’ not only he wanted to make more money, increase

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profits for Alibaba but the billionaire also defense the habit of Chinese shopping culture and reject
Ebay from China, gain back every market shares. In Chinese culture, people belive in gods and money
or treasures are considered to be a gift for the them due to the fact that the higher value gifts, the more
courtesy they are to the gods (Ahern 1981), and leads to fact that Jack Ma named his C2C strategy –
TaoBao (Digging for treasure). He has aimed to the believe of the Chinese in their culture to persuade
the consumers to deal with TaoBao. Moreover, Ebay made a mistake and spent nearly $100 million for
advertising on the from the Internet to public transport such as busses, taxi or subways. Lack of facts
about the Chinese people habit at that time, Ebay did not recognize that a majority of the citizens prefer
watching TVs rather than accessing to the Internet.

In addition, most of Ebay’s goods are second hand products or goods that have been used by other
people, leads to the rejection of buying from the Chinese consumers. People believe that consuming
second-hand products might bring bad luck for their from losing money to bad family relationships
(Hill G. 1987). Beside that Ebay entering China without knowing the language. More specificly, the
head of Ebay in Chinese branch did not know Chinese and incidently pushed them into the ‘lost of
translation’

Payment method is also a factor that Ebay had been fended off by TaoBao when they applied the
method used in other markets. There’re a lot of small businesses across China and Paypal or cheques,
bank payment cards or sending money through mails are not effective in the local

1. Uppsala analysis

The process of migrating Ebay’s technology platform with the aim to connect the US and Chinese
consumers, in which Ebay target have a free trade between 2 countries met a lot of difficulties and the
main factor is considered to be the distance between 2 big nations. Customers found it hard to access to
the webpage due to the weak internet connection between USA and China.

Furthermore, the firewall in place blocking traffic that the Chinese government disapproved of, anytime
any listing came up looking vaguely suspicious, the foreign computer server that processed the
problematic information would be blocked for anywhere between 24 hours to several days. The slow
and unstable services frustrated users and caused them to leave eBay EachNet in droves. The presence

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of TaoBao as a better alternative further sped up its popularity. Moreover, Ebay met obstacles with the
Chinese government when they are not approved to be ‘migrate’ the datas and infomation due to the
suspicion of the government. They afraid that those datas from foreign server can bring harmness or
unexpected isues to China

Recommendations

In overal, cultural conflict is considered to be a big and unavoidable factor that every companies meet
when entering into new markets. However, business enterprises can reduce the effect of ‘cultural
difference’ by preparing, reseaching deeply in order to understand the markets. More specificly,
businesses can set up plans or strategy that suit the market the most after understand the market deeply.
Regarding this case, Ebay has applied the Global internationalised strategy which is similar to what
they did in the US and other markets instead of understading that their strategy were not effective as
there were too many cultural differences between US and China

As a result, Walmart should use the multidomestic strategy to enter this market. More specificly,
multinational companies in general and Ebay in particular ought to adapt their products or services to
individual characteristics of specific countries or regions by building local responsiveness (Kedia,
Nordtvedt, & Pérez 2002). Despite the fact Ebay might take times to delve into the market, it could
create better opportunities for them to understand and serve those interesting customers efficiently.

In addtion, Ebay not only could make surveys on the habits and the buying charateristics of the
consumers but they also can employ people from that market to work for the company; in which the
head of Ebay would have a better understanding about the local cultures. Eto (1994) has also enhance
my point of view ‘research and measure for comprehensive organizational assessment and
benchmarking’ and ‘changes in culture and management systems such as recruitment’.

Conclusion

To sum up, Ebay is successful e-commerce company when they had earn a lot of profits from the
global market, though they still endured negative impact entering in the Chinese market due to the
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difference in culture and restrictive understanding about Chinese market. As mentioned above, Ebay
should apply Multidomestic strategy instead for the internationalised strategy in order to reasearch and
adapt with the market to minimize the cultural conflicts. Regarding my opinion, although Ebay is
intially popular in other parts of the world, they are unable to conquer the Chinese market which means
that the progress to internationalise has both advantages and disadvantages; and Ebay for instance has
failed. Thus, I think that to be successful business, especially multinational business, we ought to have
a clear consideration suitable management, understanding about the benefits and costs of every aspects
from culture to econmy of the market that we intend to enter.

Reference List

Cox T. (1994), ‘ Cultural diversity in organizations’, San Francisco: Berrett-Koehler.

Kedia B., Nordtvedt R. and Pérez L. (2002), ‘International business strategies, decision making
theories, and leadership styles: An integrated framework’,Competitiveness Review: An International
Business Journal, pp.33-52

Talaulicar T. (2009), ‘Global retailers and their corporate codes of ethics: the case of Wal-Mart in
Germany’, The Service Industries Journal, pp.47-58

Lu J. (2011), ‘American Internet Companies’ Predicament in China: Google, Ebay, and MSN
Messenger, Javnost - The Public, Journal of the European Institute for Communication and Culture

Gates H. (1987), ‘Money for the Gods’, Modern China, pp. 259 -277

Lee A (2018), ‘A Case Study on International Expansion: How eBay Failed in China’, blog post
8th August, viewed 8th August 2020
<https://medium.com/@alexlee611/a-case-study-on-international-expansion-how-ebay-failed-in-china-
d762d94b9f4b>
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Marquis C. and Yang Z. 2014, ‘Learning the Hard Way: Why Foreign Companies That Fail in China
Haven’t Really Failed’, Harvard Business School