Challenges of International Project in China - Case Study Example

Case Studies of Challenges of International Project in China Introduction The facets of operating a project inan international market face different challenges. Nevertheless, there are different factors that must be considered for a project to succeed in a foreign country. According to Bonache, (2008), some of these factors highly depend on the internal operational factors of the foreign country. Although China has many physical facilities such as good road infrastructure, nice cities, good lighting and high end cars, there are hidden challenges such as culture, government regulations and the level of professionalism from Chinese workers (Alon, 2003). Case study 1: eBay failure in China In 2004, eBay had just ventured into Chinese market with the intent of dominating the Chinese market. Alibaba, however, was an already established Chinese company by that time, which helped small and middle-sized enterprises to conduct their businesses online. As one of the strategy to block eBay from taking over the Chinese market, Alibaba decided to launch a competing consumer-to consumer auction site that did not intend to make any money, but to block eBay from winning Alibaba’s customers. Nevertheless, as eBay was busy aggressively advertising with major portals and spreading its ads on buses and other places, Alibaba was keen on advertising on TV (Wang, 2010). This strategy by Alibaba was as a result of extensive research that revealed that most people would prefer watching TV than log on to internet. Since most people in the west hardly heard of Taobao, which in Chinese means “digging for treasure”, eBay was unaware of the strong message enclosed in this advertisement slogan that was employed by Alibaba and which was repeatedly on TV after every 30 minutes. The decision by Alibaba not to charge its sellers for listing and transaction was considered admirable to most people unlike eBay, which charged for the same. Alibaba was more of customer centric as opposed to eBay, which was more of product centric. In addition, Alibaba decided to concentrate on reaching more people by messaging mobile subscribers, who were more than internet users and whom were the main target by eBay. In this regard, it is apparent that Alibaba had an upper hand against eBay, which is a global counterpart because it clearly understood the Chinese customers and what they wanted (Wang, 2010). In fact, Alibaba was cited asserting that eBay was a shark in the ocean, but Alibaba was a crocodile in the Yangtze River. Meaning that eBay could be thriving in the international market, but could not beat Alibaba in China. With these deliberations, it is apparent that eBay failed to capture the Chinese market because it failed to learn the Chinese culture as opposed to Alibaba, which clearly understood the Chinese culture and what they wanted (Wang, 2010). EBay failed to recognise Chinese market and business environment, which are very different from that of the west (Vasudeva, 2006). In fact, eBay sent a German manager as well as chief technology officer from the U.S, but none understood Chinese and the local market. Additionally, since the eBay management did not understand the Chinese market, they used a large number of resources and time advertising on the internet in China whereby small and middle entrepreneurs did not use the internet. The other failure factor for eBay involved adoption of global platform, which did not fit local customers’ tastes and preferences. Summary The case study outlines the major requirements of any business entity that would wish to venture into a foreign market. The challenges that eBay faced all pointed out to the strong Chinese culture that requires thorough research before venturing into Chinese market. For instance, competing with Alibaba, which is a local company in China, required a smart move that would first enable eBay to win the trust of Chinese. Offering discounted offers on those that needed to transact through eBay would, for example have attracted more customers. Chinese people would have thought that eBay was not there to deprive them, but to help them transact their businesses. This is what Alibaba did because they knew Chinese would feel that Alibaba wanted to help them. That is why Alibaba went ahead and decided not to charge them at first. Case study 2: Starbucks success in China China is known for its history of drinking tea, which is considered as a strong culture associated with it. However, many people were skeptical about the success of Starbucks on its decision to venture into the Chinese market. Nevertheless, Starbucks has successfully captured the market with over 570 stores in operation in 48 cities across China (Wang, 2012). The success of Starbucks is attached to different entry strategies that were well articulated upon before beginning its operations in China (Bonache, 2008). First, after extensive market study, Starbucks thought of thinking different. Starbucks already knew that it stood no chance if it was to venture the market with the western idea of business to the Chinese market (Wang, 2012). Chinese people are very attentive to any issue that would alienate them from their culture. Given that Chinese people have the love for tea, Starbucks decided not to advertise and make any promotions when entering the Chinese market. This would have created a notion of bringing westernization to China, something that would have been used to bring down any effort by Starbucks to succeed in the new market (Gitman & McDaniel, 2008). Therefore, Starbucks decided not to advertise and promote its products, but instead decided to implement smart entry strategy. This involved selecting high-visibility and high-traffic locations. The idea behind this strategy was to target Chinese middle class. Additionally, this was to create a place for people to meet as they socialize. In addition, Starbucks was quick to understand that it would win the favour of the Chinese market if it used popular local ingredients such as green tea (Wang, 2012). The strategy is considered ideal to Starbucks as it worked for it. People quickly developed the taste for Starbucks coffee. The other strategy involved the learning of Chinese culture that would make Chinese people like Starbucks if the organisation adopted the culture. For instance, the organisation learned that Chinese people love comfortable lounge chairs and upbeat music. This was particularly attractive to the young generations who were eager to have a taste of western coffee culture, which represent a symbol of modern lifestyle. Additionally, Starbucks decided to train local employees so as to fit its organisational culture for the local stores to meet the global standards (Marinov & Trifonova, 2012). Summary Starbucks can be argued to have articulated on the beliefs of Chinese before venturing into the market and leaned what they like and hate. For instance, Starbucks knew very well that taking the western ideologies to china would be like committing suicide. That is why the company decided not to advertise itself because Chinese have the love for tea and not coffee, which Starbucks specialises in. Starbucks also was aware of the idea that young generation would be excited to have a taste of coffee as a sign of modernisation. With such deliberations, it is clear that Starbucks succeeded in overcoming these challenges and thrived in the Chinese market. Case study 3: Enterprise Resource Planning (ERP) failure in China ERP are systems that incorporate software modules that are used to handle basic corporate functions such as finance, human resource, sales and distribution. However, ERP adoption and diffusion in China has faced many challenges most of which are related to cultural issues (Xuea et al., 2005). Given that most ERP are designed by western IT professionals and their functionality embedded in them reflects the western cultures, the acceptance of them is equally based on Chinese culture as well. Therefore, the implementation of the systems is highly dependent on the Chinese companies whose existing structures, functionality and processes are highly dictated by the Chinese culture (Verner & Abdullahb, 2012). Additionally, Xuea et al., (2005) argued that despite international ERP vendors’ failure in China, local Chinese ERP vendors have been noted to expand their market. In this regard, it is correct to argue that the local vendors flourished because of their knowledge of the Chinese market. Summary Perhaps the major challenge with ERP was the issue of fighting with the Chinese culture. There is a tendency by Chinese people to support one of their own/their local projects and organisations before they can think of the foreign organisations. Therefore, what ERP ought to have done is to deliberate on what the local companies offered and what made Chinese people like them. With that at hand, it would have been easy for ERP to design systems that favours Chinese culture with little of westernization in these systems. Case study 4: Google failure in China It is now eighteen years since Google tried to venture into the Chinese market (DAltorio, 2010). Google stepped into the market with certainty that it could take over Chinese market like it did in the U.S. However, Google failed by ignoring the basic rule of any business: knowing the market. Basically, Google tried to impose its western ideologies of the web for China, but failed (DAltorio, 2010). China is believed to account for one-fifth of the people that take to the web around the world. Google failed to recognise facts about local competitors such as Baidu ADR and Tencent Holdings. Google also ignored the idea of free music downloads. In fact, free music downloads is what made Baidu most popular in China. Therefore, the biggest mistake that Google did was to expect China to adapt to it instead of it adapting to China (DAltorio, 2010). For instance, Google’s China page search box displays Google’s U.S page instead of Chinese language. Additionally, Google also failed to understand that typical Chinese internet users spend most time online for entertainment purposes as opposed to western internet users who spend most time online on work related purposes. Summary Due to their strong culture, Chinese people expected that Google would respect their language and bring in a platform that would have allowed them to freely go online without being subjected to the U.S made search boxes. Therefore, the biggest challenge that Google encountered is related to the change of its U.S pages to Chinese pages. Case study 5: facebook failure in China One of the major reasons why facebook failed in China is due to political factor, which blocks freedom of speech as opposed to the same in the western culture. However, as much facebook want people to express themselves, in China, some sensitive words are considered to trigger problems to the country. China has a history of holding on to their culture that advocate for peace thus becoming difficult for facebook to break the culture where people can post any comments they want on their walls (Jackson, 2011). Additionally, facebook faced stiff competition from local social media such as shanzhai, which in Chinese means “copy”. Therefore, any effort by facebook to bring in new technology is seen as the similar version of domestic social media thus, since facebook is then viewed as a similar version of the local social media, its creativity is invisible. This becomes unattractive to Chinese people. Summary Facebook faced the challenge of political factors that made it difficult to capture the Chinese market. However, shanzhai was also a challenge to facebook, but this is simply because of it understanding of the Chinese market. Conclusion The basic factor for any foreign business or project to consider when entering a market like China is the study of the market. Culture is indispensable when it comes to success of projects and businesses in foreign markets. With the case studies outlined, it is evident that all these companies failed because they ignored the Chinese culture. Although other factors such as political and business environment plays a part in determining the success of a project, they are all intertwined to encompass culture of the market. For Starbucks to have succeeded in China, the study of the market and especially the culture was a major boost to its success. Reference list: DAltorio, T. (2010). The Number One Reason Why Google Failed In China. Retrieved on 27th Jul 2014 from: http://www.investmentu.com/article/detail/12977/google-fails-in- china#.U9T-LvkbCqE Xuea, Y. et al. (2005). ERP implementation failures in China: Case studies with implications for ERP vendors. Int. J. Production Economics, 97: 279–295. Verner, J. & Abdullahb, L. (2012). Exploratory case study research: Outsourced project failure . Information and Software Technology, 54: 866–886. Wang, H. (2010). How EBay Failed In China. Retrieved on 27th Jul 2014 from: http://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/ Bonache, J. (2008). Determinants of the success of international assignees as knowledge transferors: a theoretical framework. The International Journal of Human Resource Management, 19, (1), 1-18. Wang, H. (2012). Five Things Starbucks Did to Get China Right. Retrieved on 27th Jul 2014 from: http://www.forbes.com/sites/helenwang/2012/08/10/five-things-starbucks-did-to- get-china-right/ Gitman, L. & McDaniel, C. (2008). The future of business: the essentials. Mason, OH: Thomson South-Western Alon, I, (2003). Chinese culture, organizational behavior, and international business management. Westport, CT: Quorum Books. Vasudeva, P. (2006). International marketing. New Delhi: Excel Books. Marinov, M. & Trifonova, S. (2012). Internationalization of emerging economies and firms. New York: Palgrave Macmillan. Jackson, E. (2011). How Facebook can Fail in China in 5 Easy Steps (if They Copy MySpace). Retrieved on 27th Jul 2014 from: http://www.forbes.com/sites/ericjackson/2011/04/13/how-facebook-can-fail-in-china-in- 5-easy-steps-if-they-copy-myspace/ Read More