Buying Behavior and Market Analysis - Essay Example

? Buying Behavior & Market Analysis Buying behavior and market analysis Case Problems facing eBay’s operations in its Asian Markets Questions still linger on how a company with a global market leader position cannot quite get a footing and establish its power in South Korea, China and other Asian markets. With its operations online as an auction company, eBay’s model in business centers on the use of the internet in delivering its services and products to its customers. Hence, the eBay stores have no inventory and do not ship products to its customers. However, the company gains its income through movement of information. In this case, the company uses the ideal task of the internet of moving information to its benefit. This business model around eBay has gained a lot of success in the local American market. Moreover, the model has been taken to numerous foreign markets gaining a lot of success. Case in point, the model has been successful in the European markets in countries such as Germany, France, and England. However, replicating this success has proved to be a huge challenge for eBay in its Asian markets. In effect, there has been a failure of the model by eBay in Korea and China while its operations in other Asian markets experience slow growth. Therefore, this expose elucidates the factors contributing to eBay’s failure in establishing itself while using the global marketing concepts. The Korean subsidiary of eBay, Internet Auction, dominated the auction market over the internet in South Korea in 2004. In this case, the eBay subsidiary revenues accounted for a third of eBay’s revenues in the Asian market. However, a Korean upstart called Gmarket overtook Internet Auction in terms of the market share and consequently revenues earnings significantly dropped. It is noteworthy that eBay’s principal rival, Yahoo!, held a 10% stake in the startup. Effectively, by the end of 2006, Metrix pointed out that the 17.2 million unique visitors in Gmarket surpassed the 17.1 million visitors for eBay (Ihlwan, 2006). On the other hand, Eachnet’s--the subsidiary unit of eBay in China--chief executive unexpectedly resigned. According to market analysts and researchers, the reason for the resignation was eBay’s loss of its top position in the Chinese internet auction market. In this case, Alibaba.com’s Tao Bao ranked first while eBay’s Eachnet followed. It is important to note that, the chief rival, Yahoo!, held 40% of Tao Bao’s venture. According to an agency, partly owned by the government, called China Internet Network Information Centre quasi, Tao Bao led the online auction market in China with a 67% share while eBay’s Eachnet held 29% of the market share (Mangalindan, 2006). One factor that eBay never considered was that, the global approach in which online auction firms offered products across nations was practical in instances that competition was limited. In this case then, since eBay controlled the Asian market prior to entry of its competitors, it never did enough timing to know when to change its auctioning strategy. In addition, being the dominant player made eBay become more complacent. The complacency, critics claimed, was evidenced by eBay’s move in transferring its Chinese operations’ decision-making responsibilities to its headquarters in the United States after acquiring Eachnet. In fact, critics say that this strategy caused a collapse in communication with some instances where it took weeks to correct typos on their website (Lou & Feng, 2010). Meanwhile, eBay’s competitors paid attention to grievances by eBay’s clients and vendors. Failure to time its entry into the Asian market, more so in Japan influenced heavily its Asian success. The company’s move to join the market five months after its rival Yahoo! failed in its quest to establish itself as the leader in the Asian online auction market. In this case, there is the significant beneficial factor in establishing a foothold by a first-mover in the online auction market. Case in point, eBay’s first entry into the US market before its competitor Yahoo! ensured the company succeeded in becoming the market leader. On the other hand, Yahoo! struggled with restricted success to establish the same business model only operating in eBay’s shadow. Ihlwan and Hof (2006) noted that, the pricing concept did not play well into eBay’s strategy in the Asian market. On one hand, the merchants cited that the Gmarket platform offered a cheap listing of items in comparison to the eBay platform in Korea. In addition, the fact that Chinese users had to use eBay’s worldwide common interface did not resonate well with these former Eachnet’s clients. This transition to the common interface made eBay lose over half of the registered users (Lou & Feng, 2010). In this case, eBay missed in terms of positioning its products to its customers’ preferences. For a company whose vision is to become the best in personal trading community in the world, eBay’s failure to get a grip of the Asian market did not deter it from venturing again through introducing changes in its strategy. One strategic change the company made was entering new markets through joint ventures and acquisitions. The company made three acquisitions in India, South Korean, and India all valued at $1.5 billion. It is important to note that, the acquisition and joint ventures strategy was worldwide (Corporate Acquisitions, 2010). Upon realizing its mistake in competing directly with Taobao.com as one of its greatest undoing in the Chinese market. The company effectively devised a strategy where it would make an effort in determining the needs of its customers. In the Chinese market, the strategy involved delivering differentiated global market solutions while using the company’s global trading online platform. One such strategy targeted small shops such as a clothing shop called Tang Fengyan, with a small local market share. However, since the company considers venturing into the global market, it in effects considers eBay as the platform to take it to this crucial market. Such strategies have paid dividends with the company experiencing growth in its revenues in the Asian market (Lou & Feng, 2010). Case 2: Starbucks global growth strategy Starbucks is a US household company operating in a saturated market. In effect, the company had to look into the global markets as a way of maintaining its profits margins. In this case, the company had to look for a large market for their products and hence considered china as the most suitable country in its global market strategy. China is unique due to two facts; the first one is that the country is the most populous in the world. In addition, the country’s GDP grows in double digits despite the recent world economic crisis. However, the Chinese culture varies greatly to that of the Americans. In this case, Starbucks entry strategy into the Chinese market has to be carefully planned in order to get a market share of this crucial market for maintaining and growing the profit margin. This following is an assessment of the strategic decisions the company has to undertake in order to establish a foothold in the critical Chinese market. With over 16,000 outlets in the world, Starbuck operates 11,000 of these stores in its homegrown market of the US. However, the company’s strategy in was to have 40% of their outlets based outside of the homegrown market in comparison to the 29% it operated outside the country (Haoting, 2009). The economic recession in the country was main reason for the company’s strategy to have many outlets in the global market. In effect, the company closed more than 200 outlets in the United States in 2008 deemed as loss-making ventures. In effect, thousands of its United States employees lost their jobs. In addition, the company’s profits plummeted by 53% to $315.5 million in 2008 compared to 2007’s profits. For this reason, the company needed to expand strategically into the global market and more so into the Chinese market. Fowler (2003) noted that, the Chinese predominantly drink tea and coffee is an unfamiliar beverage to most of them. In effect, the entry strategy chosen by Starbucks targets a different clientele from the mainstream tradition China. This clientele is the increasing mobile demography with an interest in consuming products with a foreign and international appeal. In effect, this demography is predominantly youthful. Moreover, this clientele and specific demography belongs to the Chinese middle class with substantial amount of disposable incomes. In this case, the company wants to create the “Starbucks experience” to its customers. Thus, the company intends the Chinese market to embrace its outlets as a lifestyle to the affluent in the country experiencing a double-digit growth. One strategic decision the company embarks on in its attempt to establish a grip of the global market is choosing the best strategic partners. In this case, the company needs a partner who can enhance the company’s maintenance of its success rate. Effectively, such a partner should have similar values to Starbuck’s, in relation to success and quality, and a proven record of accomplishment. Such a partner is the Yunnan government in China. Yunnan produces 98% of the Chinese coffee and has sold its coffee to Nestle for a long period. Therefore, collaborating with Starbucks ensures more quality coffee due to new technologies of production. Yunnan then sells the coffee beans to Starbucks who roast it in the United States and take it back to China. Although the company claims that this is not part of its cost cutting strategy, the company admits that the strategy helps it to control redundancies and inefficiencies (Haoting, 2009). Starbucks dropped its logo in 2011 and replaced it with another logo with a worldwide appeal. The management noted that the change in the logo mirrored its global expansion strategy. In this regard, the company had realized its growth strategy worked and to emphasize its international appeal had to change the logo effectively dropping the words coffee and Starbucks. The meaning of this, the company explained, was that the company stopped laying emphasis on offering coffee to its customers and strategically positioned itself to offer an experience to its customers. In this regard, the company had a change of strategy and started offering its customers customized beverages as part of its global strategy. In effect, the company recorded significant growth in its profits margin in 2011 due to these strategic changes for the first time in a period of five years (Lee, 2011). References Corporate Acquisitions (2010). EBay in joint venture to grow Gmarket in Asia. Corporate Acquisitions news. Retrieved from http://corporateacquisitionnews.com/partnerships/ebay-joint-venture-grow-gmarket-asia- 926745a Fowler, A. G. (2003). Converting the masses: Starbucks in China. Global Policy Forum. Retrieved from http://www.globalpolicy.org/component/content/article/162/27615.html  Haoting, L. (2009, May 2). Starbucks pushes China sales with local brew. China Daily. Retrieved from http://www.chinadaily.com.cn/business/2009- 02/05/content_7447136.htm Ihlwan, M. (2006, June 28). Gmarket Eclipses eBay in Asia. Bloomberg Business Week. Retrieved from http://www.businessweek.com/globalbiz/content/jun2006/gb20060628_910393.htm Ihlwan, M & Hof, R. (2006, July 17). Out-eBaying eBay in Korea. Bloomberg Business Week. Retrieved from http://www.businessweek.com/magazine/content/06_29/b3993080.htm Lee, A. M. (2011, January 5). New Starbucks logo Unveiled. Huffington Post. Retrieved from http://www.huffingtonpost.com/2011/01/05/starbucks-new-logo_n_804809.html Lou, X & Feng, M. (2010). TAOBAO VS. EBAY CHINA. [PDF document]. Retrieved from Stanford Graduate school of Business online website: http://gsbapps.stanford.edu/cases/documents/IB88.pdf Mangalindan, M. (2006). China May Be eBay's Latest Challenge as Local Rivals Eat Into Market Share. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB116061293963989984.html?mod=seekingalpha Read More