Paul Anders Schwamm, an entrepreneur from Tokyo, said that the failure of eBay is a classic case study on how not to launch a business in Japan. Analyze eBay’s entry strategies in Japan and examine what went wrong with its launch.
It is evidenced that the entry strategy of eBay Company in the Japanese market was not right and timely, as would be expected. The strategy and the launch of this prestigious company were never right from the word to go, and probably the company would not succeed and grow in this business venture. In fact, it was a wrong strategy for eBay to enter Japan late. The late entry enabled Yahoo to gain a tremendous led in the country’s business.
Yahoo had set its roots much earlier in the country that gave it enough opportunity to lead and acquire more clients and business in the country. Japan was the fifth market to be explored by eBay. Just like Yahoo, eBay strongly engages in internet services. The other markets where eBay had ventured its roots Austria, Canada, and France. The United Kingdom and Germany markets were captured much earlier as compared to the rest of the countries, and this happened way back in the year 1999 (Kary 2002, p.2).
It is important to note that eBay Company made a lot of strategic blunder in making critical decisions to capture the business in Japan quite earlier. This has enabled Yahoo to penetrate into the country. It is argued that nearly 98 percent of the Japanese make use of Yahoo services. The Japanese market provides the Yahoo Company with more than $5 billion yearly, which is the income generated from internet services.
The opportunity of enjoying such large sums of money was not utilized by eBay when a good opportunity to invest in that country presented itself in the year 2000, the top management delayed the penetration into this new market to gain a bigger market share in Japan (Masaki & Kiyotaka 2007, p.1). The strategic decisions to venture and acquire more business and clientele base in both the foreign and international markets were not implemented at the opportune moment in time. The strategic move to launch the online bidding services only came five months later after their business competitor, Yahoo, had already gained strong business ground in the country.
A year later after the company had gained entry into the Japanese market, towards the end of the year 2000; the company was facing serious challenges. The top management made strategic decisions to quit the Japanese market and sell the assets of the company. A decision was made to embark on a serious business operation in Japan once the economy has stabilized. Their competitor; the Yahoo company, had already become too strong to compete with in the first place. The strategic decisions made were to close the business and concentrate mainly on the United States’ online auction services. Consequently, the site for the Japanese language was closed down leading to the loss of 17 jobs in the company (Kary 2002, p. 2).
According to Masahiro Inoue, President, and CEO of Yahoo Japan, “Yang [Jerry Yang. co-founder of Yahoo!] understood it was critical to be first. We knew catching up with a front-runner is hard,because in auctions, more buyers bring more sellers.” Examine the disadvantages of not being the first mover in online auctions, with reference to eBay in Japan.
It was rather disadvantageous for the e-Bay Company since it entered the Japanese market late when the Yahoo Company had already acquired many clients. It was a very critical scenario since the auction business demands that the first company is in the best position to acquire and maintain many customers. Many customers are likely to bring more sales to the business, thus increasing the revenue stream for the company.
In addition, the company that has already established itself in the country has more customers than the new company due to loyalty established between the clients and the old firm. The company that has already established a very strong clientele base is not easy to out-compete in the market since they have already developed some brand identity for their products and services (Daniels, Radebaugh & Sullivan 2010, p.295). Therefore, it would not be easy for the e-Bay to outshine the Yahoo Company in this auction business.
Discuss the cultural misunderstandings in this case.
Cultural misunderstandings were witnessed when the e-Bay company failed in its cultural strategy to close down the Japanese language site and direct their clients to their US online operation sites. The investors and clients withdrew in the process and went to Yahoo that took care of their interest, The cultural step to close down this Japanese language site was not a good idea to be implemented by the top management of the company as it leads to reduced income, loss of jobs, and tainted company image. The good brand identity of the company was lost and several investors withdrew. It became difficult for the company to acquire more customers and maintain their existing customers in the United States.
The loss of a large market like Japan was a big blow to the eBay company since the country is the second-largest internet market in the world. It would be prudent for the company to stay put in Japan till the recession ends. In fact, its closer to Japan also gave Yahoo a good chance to expand its clientele base in the whole of the Asian continent (Masaki & Kiyotaka 2007, p.1).
What is eBay’s status in Japan as of the time of your reading this case?
Even though some critics have criticized the joint venture between the e-Bay and Yahoo, the former showed some success and growth. This was evidenced at the time of accessing this article. In fact, the company was at its peak performance, even at the time of the ‘dot.com’ era. The company was ranked number one online auction site in nearly 18 countries (Masaki & Kiyotaka 2007, p.2).
Overview of the company
eBay is an online auctioneer company that traces its origins from the United States. This company was formed in 1995, under the leadership of Pierre Omidyar. Initially, the company was established in 1996, as an Auction Web. In this firm, the sellers listed all the products that they intended to sell and indicated the smallest bid. Besides, the time that the auction was meant to last for each bid would be indicated.
Unfortunately, the company entered the Japanese market when their business rival, Yahoo had already laid a strong foundation in establishing an internet portal in the country. eBay is mainly concentrated in the Asian market and only intends to re-open new business venture more in the Japanese market once they finish handling financial and management the issues, which they face currently (Daniels, Radebaugh & Sullivan 2010, p.296).
SWOT Analysis of the eBay Company
The Strengths, Weakness, Opportunity, and threat (SWOT) analysis of the eBay Company can be presented in the following table.
In sum, in order to correct the missteps, the eBay company formed a partnership with Yahoo to allow internet users from either side to bid goods online. The new site was referred to as ‘sakimo.com”. This new site would enable users to bid items on the US eBay site using the Yahoo Japan ID. The suite was launched in December 2007 to enable the cross-boarder bidding to take place. This was a strategic move for the eBay company to attract more the Japanese clients, and even to retain the existing ones.
Daniels, J, Radebaugh, L & Sullivan, D 2010, International Business: Environments and Operations, Prentice Hall Publishers, Boston.
Kary, T 2002, eBay Exits Japan, moves into Taiwan. Web.
Masaki, K & Kiyotaka M 2007, Yahoo Japan Shares Gain on Online Auction Alliance with eBay. Web.