E-bay in Japan and Strategic and Cultural Missteps - Coursework Example

EBAY in Japan: Strategic and Cultural Missteps s: Executive Summary EBay Inc. is a multinational American based consumer-to-consumerinternet company with its headquarters in San Jose. Founded in 1995, it staked its claim as one of the success stories related to the 90s internet bubble. EBay’s current strategy involves international expansion that has seen it expand into over 24 countries, including Japan. Since eBay entered Japan in the year 2000, it began to struggle. By late 2001, most analysts were of the idea that eBay Japan needed to admit failure and sell its stake to a larger local player. This paper seeks to find out the cultural and structural missteps that eBay made in this market. EBay is committed to creating an enduring and great company that seeks to make a global difference, which informed their decision to enter the Japanese market. For one, they spent a lot of resources on add-ons rather than advertising in the market. This was a wrong move since most people did not know of their existence. Yahoo Auctions also possessed a stronger brand presence, which aided them in a market that identifies with strong brands. Their decision to wait in making their entry also allowed Yahoo Auctions to build this strong brand presence. In addition, this paper will show that their decision to use credit cards was a misstep, considering that Japan is a money-based culture with most preferring bank transfers and cash-based exchanges. Table of Contents Contents Page 1. Executive Summary…………………………………………2 2. Introduction…………………………………………………4 3. Literature review…………………………………………….5 4. Findings and Analysis……………………………………….7 5. Conclusion…………………………………………………..11 6. References……………………………………………….......12 EBAY IN JAPAN: STRATEGIC AND CULTURAL MISSTEPS Introduction EBay Inc. is a multinational American based consumer-to-consumer internet company with its headquarters in San Jose. Founded in 1995, it staked its claim as one of the success stories related to the 90s internet bubble (Fletcher, 2010: p260). The organization is now the manager of ebay.com, which is a shopping website and online auction where businesses and individuals can sell and buy a variety of services and goods globally. The website, on top of its auction like sales, has also expanded into the standard shopping, SKU, ISBN, UPC, online classified advertisements, online money transfers, and online event trading of tickets. EBay’s current strategy involves international expansion that has seen it expand into over 24 countries, in which the only countries they have failed in are Japan and Taiwan, as well as New Zealand. In the former two, Yahoo! Already had a head start, while Trade Me was dominant in New Zealand. Since eBay entered Japan in the year 2000, it began to struggle. By late 2001, most analysts were of the idea that eBay Japan needed to admit failure and sell its stake to a larger local player. However, even then, eBay would still have faced an uphill struggle. EBay announced, in early 2002 that it was exiting the Japanese market following its failure to ingrain itself into the Japanese market as it lagged behind Yahoo Japan (Fletcher, 2010: p260). They also announced that they would shut the Japanese language site with all customers in Japan directed to the US based site. At this point, they were the top site in all other 18 countries that they operated in with their strategy in Japan being one of their rare failures. This paper seeks to discuss the missteps that led to failure of their strategy. Literature Review EBay is committed to creating an enduring and great company that seeks to make a global difference. In order to attain success in the long term, the company ensures to make all its employees and clients empowered to point out concerns concerning the conduct of business. To do this, they have instituted a third party provider of solutions, Ethics-Point, which seeks to administer an integrity hotline for the submission of enquiries via the internet or phone. On submission of reports, the compliance and ethics office reviews them before assignment to an investigator. They also keep the communicator apprised of the investigation’s status, as well as keeping them informed on its conclusion. The company also strives to keep inquiries confidential to all possible extents with non-retaliatory policies. In early 2000, the company formed eBay Japan together with NEC Corporation as a joint venture with the latter holding a 30% stake in the business (Fletcher, 2010: p262). NEC was supposed to work with eBay in bringing to Japan the excitement of online auctions and in the creation of new market places for virtual trading. EBay Japan chose Merle Okawara as its CEO. Even before, eBay Japan launched in Japan, auction enthusiasts were already into its websites. They launched their website in early 2000 as NEC started its promotion via their BIGGLOBE site, which was its ISP. On launching, Okawara contended that the launch of eBay Japan was a milestone in their international expansion that would create excitement in the online auction format, in the world’s second largest internet market. This site was done in Japanese with items being listed according to the Japanese alphabet. Denomination was in Yen, and the listing was done under over 800 categories, although this was less than the categories displayed on the site in the US, which was caused by a combination on the Japanese site of various categories (Fletcher, 2010: p262). These were, for instance, music, movies, and books that were under one category along with tickets and travel. Apart from electronics and computers that were common across the international sites, eBay’s web sites had some categories that were specific to Japan, for instance, Hello Kitty, as well as Pokémon merchandise. Online help information concerning the selling and bidding for items had more details on the site in Japan compared to that in the US eBay site (Fletcher, 2010: p263). Details that highlighted transaction safety on the site were also highlighted in the form of graphic links, which was different to the site in the US that displayed these in the form of text. The Japanese web site also allowed consumers in Japan to view listed items on eBay websites on a worldwide basis, as well as the prices in the form of Yen. On the Japanese eBay site, there was Super-shops, which was a merchant-person section via which an individual user can bid for an item that is listed by companies. Some companies, such as Marubeni Corporation, @venture, Culture Convenience Club, Kinkou, and Mitsui real Estate, participated in selling jewelry, real estate, electronics, and computers in Super-shops (Fletcher, 2010: p264). EBay Japan, as in other markets, charged final value fees and listing fees. These listing fees ranged between 30 and 240 Yen with final fees ranging between 1.25 to 5%, which depended on the listed item’s final price of sale (Fletcher, 2010: p264). EBay, after a year in Japan, secured only 3% of online auction market share that was valued at approximately $1.6 billion. After finding that its online auctions did not have many takers, they scrapped online transaction fees in mid 2001. At this point, eBay contended that they were taking business as a marathon sans short-term profit goals. They claim that soon after stopping levying commissions, they saw an increase in listings number. EBay Japan had approximately 4,000 items, compared to millions around the world, even up to 2001. During this period, Yahoo Auctions held its position as Japan’s leading auction site with over two million items in their listings, as well as around one hundred and eighty transactions every day (Fletcher, 2010: p265). Bidders.co.jp was in the second position with listings containing around 100,000 items. Rakuten, the online mall, with both C2C and B2C auctions, held the third position. EBay was not able to make any sort of headway in Japan in the year 2002 either. At this point, Chris Donlay, the spokesperson for eBay said that they had been taking serious considerations concerning growing their business in Japan and went on to contend that, while business had been growing, it had been doing so at a rate that was slower than expected (Fletcher, 2010: p267). EBay, in 2002, was ranked at position four in the online auctions market in Japan with Yahoo Japan maintaining its lead, which was followed by other Japanese players. At this point, most analysts took the view that the company could improve their position if only they acquired one of the players currently holding the top three positions. In early 2002, the company announced that they would close their Japanese website in March 2002. At this time, they had seventeen people in their employ with approximately 25,000 listed items on their website (Fletcher, 2010: p267). Despite the work that eBay put in when accessing the Japanese market, the issues that they faced were insurmountable sans changes inherent in the market, in Japan. Following the site’s closure, clients who had continued desire of accessing the site had to redirect to eBay’s United State website. Findings and their Analysis There have been various reasons that have been cited for eBay’s failure in Japan. However, most analysts are of the idea that the main reason was yahoo Auction’s dominance in the online auctions market, in Japan. Yahoo, having entered the market in 1996 via a venture jointly with SoftBank, made the right strategic and cultural moves in becoming the biggest provider of internet access and Japan’s biggest internet portal (Fletcher, 2010: p271). Before these sites began operating in Japan, most analysts were of the belief that they would not be met with much success in Japan since most Japanese citizens were conscious of their image and would prefer not to buy used and second hand goods. In this case, most international and, indeed, Japanese internet companies, were not interested in accessing this market. EBay, however, was the first company to show interest in entering this market. When Yahoo Japan learnt of eBay’s plans, they decided to pre-empt them and move towards attaining a head start via a launch of online auctions and to beat eBay to it (Fletcher, 2010: p271). Yahoo Japan immediately took it upon them to develop an auction site for the Japanese market. CEO and President of Yahoo Japan, Masahiro Inoue claimed that they knew that it was hard to catch up with a front runner, especially in a country like Japan that is very brand conscious (Fletcher, 2010: p272). In addition, they knew that more buyers were vital in bringing forward more sellers, especially in auctions. Yahoo Japan consequently launched Yahoo Japan Auctions in September 1999, four months after they decided to launch the company. It was able to attract a number of sellers being Japan’s first auction website since they were able to bring in a large number of buyers. This was essential, especially since the Japanese were not known for buying second hand products. Initially, they did not charge any fees for transactions with all services being free. Most analysts were of the idea that the five-month lead that they had over eBay was important. Faced with no competition, they were able to establish firmly themselves in a nascent market. The online market especially in a market like Japan that does not have many takers for used products is very difficult to prosper in if one does not gain first mover advantage (Fletcher, 2010: p273). When eBay entered the Japanese market, Yahoo Auctions had already developed a customer base that was loyal to it. Moreover, their practices, such as those involving final value fees and listing fees, also worked to disadvantage eBay. Most Japanese did not want to pay for the service that had been provided freely by Yahoo Auctions (Fletcher, 2010: p274). Although they stopped this practice in March of 2001, this did not work to change their situation significantly. In addition, even when Yahoo Japan Auctions began to levy nominal fees starting from July of 2001, it had no adverse effects on Yahoo. Another factor that hurt eBay in Japan was yahoo’s brand strength in Japan. Yahoo was already the best known brand in the online sector in Japan with its success in service channeling from services, such as search and mail, to Yahoo Auctions. On the other hand, only those interested in online auctions knew eBay (Fletcher, 2010: p275). The Japanese, generally, are more trusting of established and well known brands, which proved to be a great advantage fro Yahoo Japan Auctions. Had eBay started out earlier in Japan, it is possible that they could have benefited, for instance, immediately after Yahoo launched their own site. EBay had spent a lot of time in finding head of its Japanese operations and the establishment of a subsidiary. They had also spent time in the development of a site that they thought would appeal to the Japanese market. EBay consumed too much time in the development of various add-ons like newsletters, detailed product descriptions, and horoscopes for the Japanese sites (Fletcher, 2010: p280). In addition, although Yahoo possessed a wide presence in the internet market, in Japan, it used most of its resources in advertising its Japanese online auction site’s launch. They used billboards in various prominent locations all over Japan, as well as across magazines. After the launch, Yahoo Auctions even continued to spend about an average of 8% of annual revenues on promotions in the country. On the other hand, eBay spent less on advertisements, preferring, instead, to do so through word-of-mouth. Since not many users decided to register with the company, their strategy, obviously, did not work (Fletcher, 2010: p280). Numerous analysts had the viewed that the company’s decision to utilize their American-centric model of payment in Japan, rather than modifying their model of service to suit Japanese needs (Deresky, 2013: p43). They decided to charge user fees for item sales and listings; users were required to submit information relating to their credit cards at signing up time. This process was not very popular with Japanese. In addition, most Japanese who were internet savvy were young with preferences of not utilizing credit cards. Although, this was not so, Japan was still a society that was highly based on the cash system with most Japanese preferring to pay for their procurements via bank transfers and cash (Deresky, 2013: p43). Website design has also been cited as a contributing factor to the troubles that they encountered in Japan. On its sites in Japan, the company elected to include a search section, rather than the creation of sub-categories under every category (Wibbeke, 2010: p49). Probably this annoyed a number of customers since they had to spend more time in finding more items on the eBay sites. For instance, US users who want to search for desktop PC external modems need to go through; Home, Buy, Networking, Desktop components, Desktop modems, and external. However, the Japanese websites had no sub-categories under Networking and Computers with users needed to use the function of search. The results produced on using the function, in addition, included items that the searcher could not find relevant. For a country that is known to do one-stop shops, this was an inconvenience (Deresky, 2013: p47). EBay can also be faulted for choosing the wrong country head. The company was keen on getting a head of Japanese operations who understood English and Japanese. They chose Okawara as eBay Japan’s CEO and President who was of Japanese origin with experience of entrepreneurship. However, the fact that she had no prior experience in the internet sector, and it was possible that she was not aware of business trends, which, in hindsight proved a serious mistake. Conclusion As one of the largest auction websites in the world, eBay made a number of crucial areas in entering the Japanese market. The company has done incredibly well in other areas that it has been involved in with the exception of New Zealand, Taiwan, and Japan. For one, they spent a lot of resources on add-ons rather than advertising in the market. This was a wrong move since most people did not know of their existence. Yahoo Auctions also possessed a stronger brand presence, which aided them in a market that identifies with strong brands. Their decision to wait in making their entry also allowed Yahoo Auctions to build this strong brand presence. In addition, their decision to use credit cards was a misstep, considering that Japan is a money-based culture with most preferring bank transfers and cash-based exchanges. References Deresky, Helen., 2013. International Management Managing Across Borders and Cultures, Text and Cases. Pearson College Div : Upper Saddle River. Fletcher, Richard., 2010. The impact of culture on web site content, design, and structure: An international and a multicultural perspective. Journal of Communication Management , 259 - 303. Wibbeke, E., 2012. Global Business Leadership. London: Routledge. Read More