1. What mistake was made?
The story of EBay in China is about as straight-forward as it gets. In 2004, EBay decided to begin operations in China. Envisioning a threat, the Chinese e-commerce Alibaba decided to counter EBay with an auction site of their own. In the hope of gaining market share, EBay began heavily advertising on websites and billboards. This was their first mistake. Alibaba, realizing that Chinese customers prefer TV advertising, invested heavily in that medium. Additionally, Alibaba tailored their auction site to the needs of Chinese consumers, while EBay continued to use Western concepts that did not fit as well with Chinese culture. Finally, Alibaba focused on customer satisfaction (Wang, 2010).
2. What did the company do to solve the issue? Was it able to recover, in your opinion?
EBay did not respond to the threat at all. It attempted to bombard users with advertising, but completely missed the mark. Unlike Alibaba, with its deep understanding of Chinese consumers, EBay was never able to gain market share. Before long, EBay finally gave up and closed down its Chinese auction site. It continued to have a presence in China in the form of a partnership with Tom Online, but allowed Alibaba full access to the Chinese auction market (Wang, 2010).
3. What should companies do to avoid making a similar mistake?
EBay’s example in China is really a case of a company not understanding the market it is entering. The company is successful all over the globe. It could have been successful in China, as well, if it had put more time into researching what makes Chinese consumers tick. When an international market, especially one where the culture is radically different, research is vitally important. Understanding the political, economic, and cultural aspects of the new market are the only chance a company has to fuel success.
Wang, H. (September 12, 2010). How EBay failed in China. Forbes. Retrieved September 28, 2012.