The Failure of eBay in China from the CRM Aspect
This segment of the chapter shows the background of “Why Ebay Failed In China: A Case Study On The Customer Relationship Management Strategies Implemented By Ebay In China From 2003 To 2013” and it is as presented below.
1.1.1 E-commerce in China.
Electronic commerce (e-commerce) refers to the use of electronic networks in the purchasing and selling of services or, in other words, conducting business electronically (Wang 2010, p.56). The action of e-commerce extends to the transmission of finances and data over the internet, which is the primary link for the process. It forms a business environment that has transactions that occur between different platforms, for example, business to customer, customer to business, business to business, and customer to customer.
In China, e-commerce officially made its way to the market essentially in 1995 (Wang 2002, p.68). During that time e-business was made public through the provision of internet services by China Telecom and then followed by the application of various online businesses operated by Jack Ma, commonly referred to as Chinese Yellow Pages. Three years later, China’s e-business domestically grew exponentially, but at that point, it only dealt with the exchange of information (Wang 2002, p.420). The main operator dominating the e-commerce sector in China during the boom of the business was mainly the government.
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With the emerging evolution in business, several local industries in China joined the application process of e-commerce. The evolution of China’s local industry in e-commerce formed a relatively similar economic trend that is experienced around the globe in the e-business industry featuring innovation and a market-oriented system (Lei 2007, p.130). In this way, China’s trend formed a predominant popularity in e-commerce with a display of a wide range of commercial infrastructure in the information age. The era of information with e-commerce support improved to a point that rural China managed to have a developed system of online payment and the credibility rating.
Moreover, in spite of the massive e-business growth in China, there are still poor farmers in rural China who need to be helped in accessing and widening the market for their produce. Therefore, the entrepreneurs are encouraged to connect the farmers with e-commerce in the rural farming areas. The connection will allow the farmers to partner with the entrepreneurs in selling their natural products for better prices. In this way, the entrepreneurs harmonize the farmers for the absence of better markets for their goods, and in return, the farmers match the entrepreneurs’ inadequate or lack of an express supply of produce for the market. Thus, the spread of online services in China have been widely observed since 2007, thus leading to sustainable development in the e-commerce industry (Liang 2010, p.23). The idea of insincere encounters in commerce has been eliminated by the impact of e-commerce on the creation of a profound business in China.
The implication set in China is that the platform offering e-services is sustainably and gradually improving over time, thus attracting more e-commerce dealers. Hence, with the drive in the evolution of different business industries in China, there should be a strong relationship between the e-business, the consumers and the government for growth in technology and logistics involved. As a result, the relationship enables the growth of small companies with significant government devotion to economy development. Accordingly, e-commerce has assisted in the growth of China’s economy through domestic and foreign trade (Liang 2010, p.77).
1.2.1. EBay in China.
The latest data reveals that the total online population around the world is 2.5 billion. Additionally, nearly 34.3% of the total population accesses the Internet to perform various functions, such as online shopping, research, and social networking. The China Internet Network Information Center (CNNIC 2013, p.56) revealed that in December 2012, the state had 564 million people, which is 42.1% of the Chinese population, that access the internet. This population of the internet users has grown to 3.8% as compared to 2011 (Schonfeld 2005, p.68).
In 2002, eBay, a successful internet company of the web 1.0 era, which was started by Pierre Omidyar in 1995, expanded its market in China (Bjornsson 2001, p.56). Under the management of CEO Meg Whitman, eBay purchased EachNet Company in 2002, which had dominated the Chinese online auction market. EBay assumed that the central business model would work well in China as it did in America (Wang 2010, p.32).
However, the company underestimated the capability of the competitors in the local business to outsmart them in the sector. However, Jack Ma, who founded Taobao, overtook the business model of eBay by providing the services that adapted to the Chinese context (Wang 2010, p.32). As a result, eBay ended up losing 75% of the market share in five years. The company was forced to sell its share at a loss to EachNet’s shareholders and to leave the country (So & Westland 2009, p.72).
1.2 Problem Statement
The penetration of e-commerce in China where there are transactions, such as business-to-customer and customer-to-customer, has faced various problems. The first predicament is the difficulty of penetrating e-commerce in China because the number of the internet users is very low. In 2006, around 16.2 %t of the internet users in China regularly shopped online, which was a lower number compared to such western countries as the United States, which had over 30% internet users, who are online shoppers (Li, Li & Lin 2008, p.93). The other issue is poor and inefficient infrastructures in China. The country has an inefficient logistics system with an increased need for freight and space transportation.
One more problem is the localizing market services where the internet companies face difficulties in localizing businesses and adjusting to e-commerce environment of China for giant online retailers from the western countries (Dellarocas 2003, p.87). For instance, in China, eBay applied different business strategies that it had utilized in other countries, but it was not effective in Chinese B2C and C2C markets (Antony, Lin, & Xu 2006, p.241). The study addressed the problems that the internet companies face while expanding their market in the countries with a rich culture. The study tried to emphasize the importance of direct communication between the online shoppers, as well as the need for the internet company to adapt to the culture of a new market.
1.3 The Purpose of the Study
The primary motive of the research is to identify the reasons why eBay failed in China with the aim of determining the key features of the B2C and C2C markets of China.
Aim of the study. To explore the reasons why eBay failed in China from the customer relationship management (CRM) aspect by making comparisons between eBay and other providers of e-commerce services.
1.3.2 Objectives of the Study
To review the historical researches study on customer relationships management and determine what is CRM in the modern business world.
To critically analyse the CRM strategies that eBay applied in China.
To identify the real factors that influenced eBay and led to its failure in China.
To discover some effective ways to solve some possible problems and make customer relationship management of eBay more efficient.
1.4 Research Questions
How to define CRM in history?
What are the practical problems eBay faced in the Chinese market during last ten years?
What CRM strategies did eBay take in the Chinese market?
What are the reasons the Chinese customers did not choose eBay?
Compared to Taobao, what are their differences in CRM in China?
1.5 Rationale for the Study
To identify the reasons behind the failure, this research reviewed all the customer relationship management strategies that eBay applied in China and analyze the main characteristics. At the same time, a variety of relevant data collected through questionnaire survey and interviews helped the research to be clearer.
1.6 Significance of the Study
The study helped the internet companies, such as eBay, realize the importance of understanding the customer e-commerce market of a country and its performance before applying any CRM strategies to a new market (Hu et al. 2004, p.62). Understanding the market assists a foreign enterprise in identifying the best business strategies that should be applied in order to make profits in the new market, which is the Chinese e-commerce market. The study also acted as a basis for the future studies related to the failure of customer e-commerce business by a foreign enterprise in a new market with rich culture and beliefs.
1.7 Scope of the Study
The scope of the study is the entire Chinese online shopping platform. The study targets the 564 million Chinese online shoppers by 2012. They are estimated by iResearch to go up to 790 million by the end of 2016 (Payne and Frow 2005, p.169). This populace transacts diverse business between clients and other customers, between business and customers. The table below shows the number of Chinese online shoppers from 2009 to 2016.
Custom Writing on
BA, MA and
Source: iResearch (China main customer to customer market share operators)
|Strategies||eBay Each net||Taobao|
|Pricing||Fees for transaction
Fee feature in the gallery, which was cancelled in 2008
No Chinese market survey
|Free transactions for the sellers and the buyers
Analysed the online market
|Web designs||Loading speed was slow
More goods centric
|Most loved site by people
Designed according to the likes and dislikes of customers
|Customer service||US policy with FAQ
Massive online discussions
|Target market||Young professionals earning salaries||A broader market that included students, and older population|
Was not active
|Online community that allowed instant exchange of information between the sellers and the buyers|
|Security||PayPal that allowed direct payment to the sellers||Alipay, and money was held in the account of the supplier until the product was delivered to the buyer.|
1.9 Limitations of the Study
The main limitation of the study is a language barrier, particularly because most people in China speak Mandarin even though some speak Cantonese. For that reason, the respondents who do not fully understand English faced difficulties in answering the English-written questionnaires. In the interviews, communication with the interviewees who were not fluent English speakers was difficult to understand because they gave the statements that were not difficult to understand. Incorrect information due to misunderstanding may have affected the findings of the study. Time was also a limitation because the two months period was not enough to gather more information from the online shoppers that would help enrich the data for the study.
1.10 Assumptions of the Study
The study assumed that the information provided by the randomly selected 210 online shoppers through the questionnaires and the conducted interview is true and unbiased. It also assumed that the information was enough and accurately represented by the online shoppers in China.
2.0 LITERATURE REVIEW
This section contains a review of the literature on the study why eBay failed in China during its operation between 2003 and 2013. It starts by giving the theoretical framework, followed by the review of the related studies. It also gives the summary of the entire chapter of the literature review.
2.2 Theoretical Framework
The Customer Relationship Management (CRM) Theory was developed in 1960 by Levitt. The scholar argued that for the sustainability of any business firm in the market, there should be a sense created in addressing the needs of the consumers. The contention of the theory is that in the long-term, a firm should have managed to build a strong attachment and loyalty with the target customers (Payne and Frow 2005, p.169). Additionally, in 1983, Berry emphasized the aspect of concentrating on the relationship that exist between the business and the consumers and not on the exchange process of goods and services (Berry 1983).
In this way, Customer Relationship Management can assist in the creation of a better service platform for dealing directly with the issues experienced by the customers who are affected at large in the industry by the products and/or services offered (Boulding et al. 2005, p.156). The process of CRM is formulated in a way that it can produce three different levels, namely, initiation, maintenance, and termination (Reinartz et al. 2004, p.300). The initiation stage is mainly concerned with the acquisition of new customers in the market, as well as the re-acqusition of the customers who used to consume the produce.
Additionally, the aim of the maintenance stage is to retain the customers that were acquired through rapport creation and maintenance. Maintenance should be ensured by offering better products that can adequately satisfy the needs of the consumers compared to the way the competitors do (Winer 2001, p.90). The essence of the termination phase is the reduction or fully elimination of unprofitable customers, thus economizing on the resources in the business budget (Reinartz et al. 2004, p.292). Therefore, the model can conveniently be applied in the cases whereby two different strategies of two companies are compared. The outcomes of the different strategies can be substantiated by the use of experimental data, considering the three levels process of CRM.
2.3 Customer Relations Management (CRM)
CRM, which is interchangeably used with Relationship Management in marketing literature, is an orientation comprehensively arranged to form a strategy that is used in order to acquire the customers and retain them by creating a partnership relationship. CRM is involved in an integrated process of sales and marketing, customer services and supply-chain in an organisation for a realization of a durable and mutual benefit among the consumers and the industry (Shah et al. 2006, p.120). During the progression, for the organizations involved, it is supposed to achieve long-term profitability through the delivery of effective and efficient customers’ value for their money. The practice of CRM plays an intermediate role in turning the attracted clients into the loyal consumers as part of a vital marketing aspect in trade.
Therefore, generally, the main aim of CRM can be focused on a long-term collaborative connection between a firm in commerce and the customers with other involvements, for instance, the government. CRM is also associated with the feature of “customer selectivity,” which implies that companies must segment and choose the appropriate customers for the business’s market program. The selection of the customers is made in order to help the company ease the allocation of its resources because it has the main consumers that can be served best instead of speculating the suitable users, thus creating a mutual value (Parvatiyar & Sheth 2002, p.5). Objectively, a company’s aim is to identify the ways in which it can most profit and at the same time create the value for the customers.
2.4 The Emergence of CRM
The development of customer relationships dates back to the Pre-industrial period whereby there was a wide-spread direct link between the producers, mainly of agricultural products, and consumers in the market (Parvatiyar & Sheth 2002, p.7). The linkage developed a bond, and in the dawn of the industrial mass production era, the relationship that existed between the producers and the consumers reduced due to the introduction of middlemen. The advent of middlemen made the market transaction oriented, that is, the operations involved in production and consumption were separated. The brokers took up the marketing functions because of their economic orientation aimed at buying the goods and selling them at higher prices.
Thereafter, such factors as de-intermediation, through innovation and adoption of sophisticated telecommunication technologies, rapidly developed and evolved CRM since now producers can directly interact with the end-consumers of their produce. The creation of market relationships was improved in different industries, such as insurance, banking and household appliance, due to the dynamic nature of the process of de-intermediation. The tools are used to market in broad data customer base since it creates a direct connection with the consumers thus there is eliminating the need for the middlemen’s functions. More than usually, the consumers also put effort in contacting the producers; hence, the on-line investments, such as insurance, can attest to the willingly consumers’ direct relationship (Parvatiyar & Sheth 2002, p.7). Consequently, the growth of economic services with an individual institution offering the production and delivery services has made CRM prevail and in return minimize the role of brokers.
Moreover, another factor that has clearly come out in drive for the embracement of CRM in commerce is Total Quality Management (TQM) (Parvatiyar & Sheth 2002, p.7). TQM is a philosophy created to provide a sense of improving the quality of the produce, as well as reducing the production costs. With TQM in mind, the necessity to involve the consumers and the suppliers in the value chain increases in the organization and leads to creating the need for closer operational relationship among them. In the dynamic market across the globe, there is a strong implication of having changing the expectations from the consumers. The prudent position an organization can relate to is cooperative linkages with its main users. The developed relationships assure a company with a way of keeping track of the expected changes and appropriate preferences. For the internationally oriented businesses integration with other establishments has become necessary to ease their operational costs that mainly involve customer relationship management. To avoid imperative relationships among companies, the adoption of CRM programs has been considered on a worldwide business scale. Thus, management of customer relationships, which is complexly known as Global Account Management (GAM) in a global scope, embraces partnership in the business activities.
2.5 CRM in the 21st Century
The relationship that has been viewed in commerce is that the customers mainly control the businesses and, to a considerable extent, the kind of workers employed because the consumers potentially hold the success or failure of a company in the industry (Galbraith 2005, p. 67). Customer relationship within the business industry has become the satisfaction of the demands and expectations of the customers instantaneously (China Business 2006). The linkage has made the customers develop anticipation that the businesses involved in the industry know their special preferences and should always turn to action and have the production underway. Therefore, the connection has been made more comprehensive with the use of innovative modes for communication of the customers’ likings.
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Hereafter, the establishment of customer value must be served proficiently and be aimed at satisfying all the consumers’ needs and wants. Subsequently, both the producers and the consumers recognize that having appropriate first-hand information affords them an added advantage in demands in the market competition. As a result, currently, all the personalised services are highly in demand as the customers need to directly speak with the persons in charge for the best market deals. The customers go to the extent of requesting the companies they deal with to have changes that can meet some other needs they desire (Galbraith 2005, p.50). Ultimately, the success of an establishment in the market lays in the connections established with the targeted customers.
2.6 The CRM Strategies that eBay Applied in China
Between 2001 and 2005, the C2C e-market of China grew rapidly. The number of online shoppers had increased to 22.5 million by 2005, eight times higher than in 2001. The transaction volume in the e-market had also increased from 0.4 billion to 13.7 billion RMB by 2005.
The C2C online market in China was founded by EachNet, which was launched in 1999. It managed to attract over 870,000 users, making it China’s most popular auction site. EBay merged with EachNet in 2003, allowing it to launch its C2C strategy in China.
Taobao.com, which is EBay’s main competitor in China, was started by Alibaba.com in 2003 and was the C2C vendor in China. In 2006, eBay invested 2.2 billion in China, whereas Alibaba invested 4.45 billion. The competition grew intense with an increased capital volume. Thus, these two internet companies used various strategies to attract more customers. For instance, Taobao offered free services to its C2C business, while eBay lowered its transaction fees. In 2006, no vendor got better financial returns; thus, each stopped focusing on price competition. Both companies tried to focus on employing unique Customer Relation Management (CRM) strategies that led to different results.
With the aim of outsmarting its competitor, eBay employed various CRM strategies to increase its financial returns. One of the strategies was the selection of the target customers who were well educated, with age between 20 and 40 years, familiar with internet use and have a monthly income more than 3,000 RMB (Hu, Lin, Whinston & Zhang 2004, p.237). In 2005, this kind of customers was segmented by eBay in the Chinese online market of 17 million users and encouraged them to join its global customer-to-customer business. Unlike Taobao that included local young and older people as its target customers, eBay included the young generation and professionals in China as its target customers.
According to Schonfeld (2005), eBay employed the internationalization strategy to expand the online auction transactions with the aim of expanding China to other cultural markets and languages abroad. The CEO also emphasized this strategy in her interview with the CNN that eBay had the users in over 50 countries and uses the English language, making it an American site (Schonfeld 2008, p.1). Schonfeld argues that the strategy criticizes the internationalization plan of eBay since the company employed a tactic that would dilute and fragment web integration through the combination of local websites acquisition in international C2C e-commerce (Schonfeld 2005, p.1). Therefore, the company broke its brand in the independent marketplaces in the international market and failed to offer reliable PayPal services to the local markers because of restrictions and regulations of the global finance.
Additionally, Kotler (2000, p.45) notes that eBay used online business services as the major products, as well as promotion and pricing as the marketing strategies to win new customers and dissatisfied customers. During the initiation process of service and product development, eBay provided such services and products as credit assessment system, search engine, ID verification, and guideline. However, eBay highlighted the standardized, internationalized and professional products that meet the demands of the mainstream customers. The following strategy was opposed to that of its main competitor, Taobao, who depended on the practical, vibrant and localized products to meet the demands of the local customers. For instance, eBay’s website interface is rich in text with blue and green background to make eBay appear trustworthy and reliable, whereas Taobao’s website interface is rich in pictures with orange background to look friendly. eBay focuses on encouraging the customers to engage in online global trading and is mainly recognized as online Wal-Mart.
EBay also employed the pricing strategy of service charges to assure high quality of its services. According to ChinaByte (2004, p.1), in 2001, eBay started charging it customers the promotion fee, transaction service fee, and product list fee. However, in 2004, eBay started reducing the promotion fee and the product list fee when price competition from Taobao increased. The transaction fees were also cancelled when eBay realized that the Chinese sellers and buyers were sensitive to pricing policy and charge programs. EBay also added the promotion strategy that used mainstream media to attract its customers. The company paid more than two million RMB to advertise on the national channels during the largest celebration and spring festival in China (Barnett, Luo & Feng 2010, p.46). It also employed online promotion, which it believed that it effectively and directly recruited new people. EBay also promoted its services through mail and portal websites, for example, Sina.com, thus denying Taobao the chance to advertise on the same website.
According to Winer (2001, p.90), the maintenance phase of the CRM strategies involves relationship programs, such as loyalty programs, community building, customization and customer service. EBay employed most of these strategies to try to win as many customers as possible, who would help outdo the competitors. Customer service is any contact between the firm and customers that can be either proactive or reactive. EBay had a customer service centre where the customers can communicate with the junior management executives through online messages before communicating with the top executives. This implies that communication with the firm is hierarchical.
In the loyalty programs, the firms are expected to reward the customers that purchase more than once. According to Winer (2001, p.102), eBay rewards it buyers with discounts and coupons, while the sellers are encouraged to organize their super-seller clubs. Building the community is another strategy of managing customer relationships. It is achieved when a firm creates various networks that allow its customers to exchange the information related to the products and create relationships between the brand or company and the customers (Winer 2001, p.100). In China, eBay built the community by actively sponsoring and organizing offline and online community activities. The community members of eBay were also ready to share their information to the customers.
Finally, eBay also employed customization as a CRM strategy to win more online buyers and sellers. Customization is transforming the customers from the just service and product takers to the makers of these products and services (Winer 2001, p.91). Winer notes that eBay took advantage of customization to provide what customers want. For instance, eBay offered professional management tools customized for the sellers, such a customized mail promotion. EBay believed that when it would segment its customers in terms of their online profiles and purchase behaviour, it could accurately and easily provide email promotion services that inform the customers about the items sold on the platform.
However, most eBay’s customization services are only for the sellers, unlike Taobao that allows its sellers to change their prices after they have negotiated with the buyers. EBay denied such deals. As a result, the sellers cannot negotiate with their buyers before they agree on the cost or before the buyers pay through the payment platform provided by the vendor. Additionally, the discount system of eBay, for instance, the coupons for transaction, can only be given by the officials of eBay, and the sellers cannot design these coupons like those sellers using Taobao’s shopping platform (Luo 2003, p.1317).
2.7 The Real Factors that Influenced eBay and Lead to Its Failure in China
According to Barnett, Luo and Feng (2010, p.50), eBay lost the auction market share in Chinese marketplace because the company refused to alter and moderate the commissions on sales and user fees that were in the business model. Its main competitor, Taobao, provided a free business model, allowing the local Chinese sellers to sell their products locally without commissions, user fees, and other transaction payments (Barnett, Luo & Feng 2010, p.51). Consequently, the difference was seen because eBay attracted fewer users to its website. As a result, in 2006, eBay was forced to pay 40 million USD to Tom Online to give up the control of eBay China.
Barnett, Luo and Feng (2010, p.51) argued that eBay failed because it lacked special accommodations when it came to financial transactions between the sellers and the buyers. When eBay took control of EachNet’s online operation in 2003, it only offered a credit card system that was backed by the PayPal service for one year. EBay failed to improve other innovative systems that would address different issues of online payment, such as distrust between online sellers and buyers and inadequate credit system. Barnett, Luo and Feng note that other Chinese online operators managed to include other systems, such as direct messaging between sellers and buyers and cash on delivery (Barnett, Luo & Feng 2010, p.51). For instance, Taobao introduced and implemented the “Zhi-fu-bao” system, which is an online escrow deal that accepts bank accounts, credit cards, as well as direct cash deposits.
Williamson and Zeng (2004, p.87) also argue that strategic mishaps made by eBay when it existed three years in China was caused by a poor decision structure, which was centralized. Strategic decisions regarding the business matters were to be first accepted by the managers who were situated in the Silicon Valley, the eBay headquarters. An approval process often took long, weeks or months, before appropriate actions were taken concerning new investment on market demands, products and services to the Chinese market (Jamalzadeh et al. 2013). On the other hand, Taobao had managers and employees who responded to changes to services and products quickly, mostly in few hours. The company also updated its website twice a week.
Williamson and Zeng (2004, p.89) also add that in response to slow operations of their system, eBay decided to relocate its servers to the data centre in the USA to integrate the online operations of EachNet to the global infrastructure of eBay. However, unintended consequences were noted as the following move slowed down the response system of the eBay website. Events, such as submission and search slowed down; thus, many eBay customers moved to the competitors. This situation shows that mishap of decision structure led to a devastating impact.
Kirkpatrick (2007, p.1) believes that the well-known internet companies, such as Google, eBay and Yahoo with foreign brand name, lose their competitive advantages in China because they focused on improving their technology and strong financial resources. These companies forgot that they had little knowledge about the consumer psychology and local culture that can connect them with the local society. For instance, eBay took the opted to take the action of investing in a strong local internet company, EachNet, and supplied its international capital resources and technical know-how. EBay should have allowed the local managers to take the operational and strategic decisions during the initial stages of growth since they had the best knowledge regarding the local culture and consumer behaviour (Kotler & Armstrong 2004, p.23). Then, as the company and market stabilized, they could introduce the western management practices and system gradually, which will assure minimal risk and sustained growth in the management system.
According to Kotler & Armstrong (2004, p.23), eBay made a crucial error when it failed to establish a mechanism to stimulate Guanxi. It is a traditional Chinese concept describing the special inter-personal relationship. It is considered an important factor when doing business in China. Guanxi could be incorporated in the online setting through the introduction of Swift Guanxi that embraces computer-mediated commutation (CMC) technologies, such as feedback system, message boxes, and instant messaging (Leung, Lai, Chan & Wong 2005, p.530). These technologies would have helped simulate the customary, interactive, face-to-face communication.
Unfortunately, eBay failed to allow its sellers and buyers to communicate directly where they would establish personal connections (Boulding, Staelin, Ehret & Johnston 2005, p.157). It did not consider that business in China is social and not just business; thus, it only included Skype, which was not familiar to many local people. Taobao, on the other hand, introduced Ali-wang-wang, which allowed direct messaging and chatting between the sellers and the buyers before they made deals. This strategic factor was based on the deep understanding of the consumer culture in China and the market environment that was not practically trustless.
2.8 CRM Success Factors in E-Commerce to Avoid a Possible Failure
In order to succeed in e-commerce, the creation of a comprehensive system of customer relationship management is paramount. Customer retention through the emergency of relationship marketing has practically made the customers one of the primary asset in any firm in any a particular industry (Kennedy et al. 2006, p.259). Understanding the procedure and variety of influential factors involved is critical in the success of the company. Such aspects as the consideration of the process in dealing with the customers, the human skills involved and technology used, have been in the forefront in the formulation of the ways that ensure the sustainability of a company in the market. Therefore, the adequate placement of the facets in CRM contributed to the reduction in customer turnover through the satisfaction of their value and improved sales with profitability in the market shares (Rajnish et al. 2003, p. 99). Thus, strategic organization of business affairs focuses on how cohesion may be achieved and it contributes in assuring the success of CRM.
Furthermore, support to the top management in a company and the business processes are vital in the implementation of CRM. The two concepts can be applied alongside innovation and invention of new technology in the company, which helps in building on customer relationships. Through technology, firms can easily improve their employees’ abilities in customer and public relations and the understanding that the workers are the building factors of a company in the industry (Kennedy et al. 2006, p.256). The employees determine the quality of company’s information presented to potential customers. The personnel also gives support to the top management, ensuring system quality by providing information to a firm for technology readiness and data acquisition to deal with the dynamisms of the customers’ preferences.
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In addition, the use of the performance system, which incorporates the aspects of critical factors involved in competitions and the performance indicators, assists in noticing the areas concerning the customers that are supposed to be satisfied for successful competition for a company (Kordalipoor, Shahhosseini, & Hamidi 2015, p.407). The performance activities should constantly be managed in order for them to have a significant impact on a company for successful competition in an industry. For the sustainability of the success of a firm, the activities variables should be provided with maintenance programs that can also improve the undertakings appropriately as the changes in the industry occur.
Consequently, there is a significant connection overly between the CRM system and the quality in the system, information, services offered and management for the success of a firm (Migdadi et al. 2010, p.56). Hence the combination of factors in an organization with the creation of harmony designs a support system that provides the sustenance of achievement of a company’s objectives. The provision of information and how to relate to the connection first-hand reduces resistance to change when the market desires otherwise. The publication of new company information for the customers to relate with earlier also improves the acceptance of new products a firm produces (Sin 2005, p.129). Therefore, the behavioural components to be adopted for success of a business in any particular platform of commerce can be put broadly in essences of the technology-related, information-based, CRM organization and consumer-focus.
2.9 Gap in Literature
EBay and Taobao used different CRM strategies to try to win online customers. The results both companies got reflect the importance of CRM techniques when it comes to attracting a certain type of customers. Besides the availability of the up-to-date resources, the service provider should have a good relationship with the customers and be able to immediately take care of their problems when they arise. Since other studies focus on the general reasons that eBay failed in China, this study explores and compares the CRM strategies eBay and Taobao used in China. It identifies which strategies worked and those that did not and what eBay would have employed to succeed in the China online market.
2.10 Summary of the Literature Review
Being a well-known online company operating well in the western community, eBay hoped to do well in China too. It tried to employ some of the best CRM strategies, such as promotion and pricing strategies, as well as loyalty programs; but, its competitor Taobao outsmarted eBay. Some of the factors that caused the failure of eBay in China were poor communication channels that did not offer instant messaging among customers; a poor decision making structure that took so long before solving an issue and failed to provide transaction fees that were better than that of the competitors. The main lesson learnt was that understanding the culture of a community, in this case Chinese culture, is important for a company before it decides to expand its market in that community. Culture explains the consumer behavior that can guide a firm what should be provided to satisfy the needs of the customers.
3.0 RESEARCH METHODOLOGY
The study aimed at exploring the factors that led to the failure of eBay in China after Customer Relationship Management had been applied for a decade. This chapter comprises research design, study variables, site of the study, target population, sampling techniques and sample size, collection research instrument, validity and reliability, pilot study, data collection procedures, data analysis procedures, and finally, ethical considerations.
3.2 Research Design
The use of a case study design was applied in the study, whereby eBay in China was the main focus. The alteration of subjects under investigation is avoided when using a case study in particular. That is case studies make an emphasis on the analysis of a particular context with a relevance to the subject matter (Sekaran 2002, p.22). The use of case also disputes generalization focuses on the understanding of a certain situation and the complexities involved. In this way, there is avoidance of a study that has pervasive data; hence, the provision of information is critical for problem-solving.
Besides, the application of questionnaires in an online survey design was essential in the study for the provision of quantitative data. Questionnaires cover more inquiries, as a one of the qualitative methods, which assist in identifying comprehensive information. The use of qualitative approach subjective data evidence and different variables reveal the interaction process of relationships in a particular environment (Veal 2006, p.32). The methodology is mainly concerned with an assortment of detailed information about some circumstances ideal in the examination of perceptions and attitudes. Moreover, the research used face-to-face interviews in order to gather more relevant information since the method has a personal approach that allows probing in the cases with distortion of content in the questionnaires. Therefore, the interview complements the survey questionnaire design because the respondents were selected in researcher’s needs in understanding the factual data from the falsified e-commerce opinions.
The use of secondary data sources was also part of the study in both descriptive and explanatory discussions. Thus, qualitative methodology was primarily applied to the Chinese online users. The inferential approach with the use of CRM theory and the review of different kinds of literature formed the foundation of the findings, providing more insight into the field of study. Hence, the emphasis on qualitative research enables the study of social phenomena, which is characterized with the findings that are proportional to the research’s objectives (Myers 2009, p.40). However, simultaneously with qualitative methods, quantitative methods could have been applied, but the style treats socio-cultural aspects superficially in the description of the reality of phenomena.
3.3 Study Variables
Customer relationship management was the focus of the study, and the variables were measured regarding the strategies which eBay used in the Chinese market that made it fail. It should be noted that the independent variable was the market, and the dependent variable was the strategies of a company that depended on how the market behaved for it to change. Age and sex of the consumers formed the market, making them the independent variable, which the industry depended on in e-commerce. The usefulness of technology as a variable is the speed of service delivery. Trust as a variable is an extent of customers’ expectation on e-commerce in delivering various transactions. The two create the loyalty of consumers to a particular company, linking products of the business with the behaviour of the users towards the industry at large.
3.4 Site of the Study
The area of study selected for the research is China, a country with 641,601,070 Internet users according to the International Telecommunications Union’s figure of 2013 (Pehrsson 2013, p.21). This population is the biggest in the world, which opens a wide market for international internet companies, such as eBay. The research explored the Customer Relationships Management strategies used by eBay and their outcomes in the Chinese online market.
3.5 Target Population
The main people targeted in the study included online shoppers in China only. The sampled respondents were predominantly contacted online. The research included 210 online shoppers who have frequently viewed purchasing products and contacted for the study in the months of January and February 2016. The inclusive criterion used is a consideration of the case study, which was about eBay in China specifically. China’s online users were appropriate in the study because they are the main users of e-commerce who may be able to provide relevant information on customer relationships (Kim, Kim, & Hwang 2009, p.40).
Before conducting a study, there should be knowledge available of the sample required for the research (Gray 2009, p.35). To develop cohesion between the research and the issue in question, the sample provides guidelines on how the approach may be made. It should be noted that with a huge population involved and financial constraints in research, a significant segment of the population of contacts representing the whole population serves better for a survey design.
3.6 Sampling Technique and Sample Size
Random sampling design was particularly purposive and accidental. In this random sampling, large numbers of the questionnaires (200) were distributed online particularly to the regular online shoppers or those that have ever shopped online. Hereafter, purposive sampling was used because the elements were chosen based on the aspect of customer relationship management. The choice of the sampling technique was justified because it produces exactly what is intended to in many cases from a limited group number.
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On the other hand, accidental sampling is one of the most commonly applied techniques. The sampled cases in the study are usually selected because they can be obtained whenever there is a need. The advantage is that the method was relatively easy applied during the study. Considering the sample size, the researcher chose ten online shoppers to interview directly, and the 200 questionnaires were distributed. It should be stressed that only 80 were received back. The total number was a considerable representation of 43% customers in the internet platform.
80 questionnaires returned +10 interviews conducted x 100=43%
Total of 210 respondents
3.7 Research Collection Instruments
In the case of study, in this instance eBay in China, there was a restriction on some variables relevant to the research. However, the investigation allows the consideration of multiple sources of evidence regarding a particular case of interest (Yin 2003, p.27). The use of multiple data collection during the research was deliberated for the sake of getting improved insight into consumer relationship management in an inclusive way in the Chinese market. In this way, the nature of the study required the assessment of secondary data, in addition to the interviews and the survey questionnaire design. The use of the scientific literature pointed out the environment that eBay existed in as well as online discussions about the development of eBay in the Chinese market.
Consequently, the study progressed to the point of comparing eBay and Taobao, which is an approach focusing on different competitors with a view of their strengths and weaknesses. To fortify the secondary data usage, books, journals and articles were referred to because of the online knowledge of eBay in the Chinese market (Wang, Lu, & Zhao, 2010, p.350). The collection of data from the web sources assisted in more understanding of the competitive frame because more research is needed for strengthening the reliability of the already found information. The information used was mainly discussing eBay, Taobao and the relationships that exist in e-commerce (Yin 2003, p.35). Thus, the framework orientation authenticates the findings of the research; therefore, the references are important for the validity and dependability of the criteria in the discussion. Additionally, questionnaires and interviews formed a crucial part of the study and helped in getting first-hand information. The questionnaires questions were to be distributed to a big audience. The following questions were selected to cover closed-ended responses only. Hence, the respondents were allowed to give direct answers, such figures and yes or no responses.
3.8 Validity and Reliability
When the reliability and validity of the study are assured, then the quality of the investigation increases. Certain steps need to be followed when testing the research findings to ensure the investigation is reliable. Therefore, the investigator needs to remember that mistakes during an investigation can affect the findings of the research; therefore, data collected should be evaluated properly.
3.8.1 Validity. According to Yin (2003, p. 34), checking validity in a study is important as it determines whether a research measures what it is planned to measure. There are two ways of testing the validity of the research. The methods include internal and external validity. The former deals with how the findings reflect reality (Golafshani 2003, p.26). The study attempted to fulfil this validity by using as many sources as possible to broaden and improve on the views of the issue investigated. The study is also designed the research questions that are well defined to guide the research. In the case of external validity, problems are tested if their findings can be used outside the studied case (Golafshani 2003, p.27). This research clearly indicates the problems needed to be measured and chooses the suitable research methods to measure those issues. Additionally, the study can be generalized for other studies that investigate suitable customer relationship management strategies for internet companies.
3.8.2 Reliability. Reliability plays an important role in avoiding biases and errors. It is tested when a similar study is carried by another researcher. If similar conclusions and findings are obtained, then the study is reliable (Yin 2003, p.37). Nevertheless, the exact procedures used by the first researcher must be similar with the second investigator regarding the materials used and the time is taken to do the first test. The reliability of the data on eBay in China was increased by selecting the information from different sources that were trustworthy. Since primary data from respondents may be biased as it is dependent on people’s opinions, secondary data was used to fill the gaps and complement the primary data. Therefore, the reliability of the secondary data was facilitated by using various sources to confirm whether they had similar information. All the sources employed in this study are listed in detail in the references list.
Table 1: Summary of the Sources that Contributed to the Reliability and Validity of the Study
|-Complimented primary with secondary data to fill the information gaps
-Use of credible sources that have reliable information
|-Conducting a pilot study
-Use of many sources as possible to broaden and improve the views
-Design of the well-defined research questions to guide the research.
3.9 Pilot Study
Preliminary study assists in pre-testing, which is essential when conducting an investigation before the actual data is collected (Bryman 2012, p.42). A pilot study is a method that investigators use to pre-test questionnaires with a small sample to detect different challenges and adjust or eliminate the questions that affect the ability of the method to test what is intended to measure (Malhotra 2010, p.27). In this research, a pilot study was conducted to pre-test and get rid of complex information in the interview guide, as well as to clarify or change the questions that were sensitive or vague. The process was accomplished, and the interview guide was anticipated to contain refined content. The questionnaire was also pre-tested with five online shoppers from different provinces in China. The test also resulted in the adjustment of several questions in the questionnaires to get more information from the respondents during the actual data collecting day. There was also the change in the questionnaire layout to give it a professional look that is accepted across all cultures.
3.10 Data Collection Procedures
Yin (2003, p.35) notes that the collection of data for a study is not dependent on one source to examine the restricted the number of variables. However, various sources allow one to obtain evidence from various sources. This section presents the various procedures used to collect data that helped in coming up with the conclusions. Data was collected from primary sources, questionnaires and interview, and secondary sources from the journals, articles, and books. These multiple methods of collecting data were used to gain a better insight into the case of eBay operation in the Chinese online auction market.
The face-to-face interviews were conducted to ten online shoppers, which enabled the collection of qualitative data used to explore relevant information on eBay’s strategies in China. The average time for each interview was fifteen minutes. Several biases can be experienced during interviews and thus should be addressed properly (Creswell 2003, p.30). For instance, there are such issues, as misunderstandings in opinions and wrong people selected for the interview. To collect data effectively, the interviewees should be selected appropriately and ensure that they understand the real opinions of the respondents.
Two hundred electronic questionnaires were also used to help get the deeper and wider knowledge of online shoppers concerning different customer relationship management strategies. The questionnaire was posted on a research website www.ebayresearch.com for the eBay registered users to answer. Families, friends and other familiar people to the respondents registered with eBay were also invited to answer the questionnaire survey, which also helped in obtaining quality answers. Each questionnaire took an average time of ten minutes to answer all the questions.
The questions helped to understand the online shoppers and what they look for when selling and buying the products and services on the online auction website. The questionnaires were based on good practice and addressed more questions than those in the interviews. The questions revealed the interest of online shoppers in China, the image of eBay in China, and the main issues during the consumption experience of the customers. Other ideas gotten from the questionnaires were the type of eBay customers, the extent of satisfying them, the company’s strengths and weaknesses in satisfying its customers, the ways that can help to improve the services, and whether buyers and sellers felt safe when purchasing from eBay
Under the secondary source, the data was used in an explanatory and descriptive manner to help to discuss the results obtained from the primary source. The secondary data used was obtained from books, scientific papers, web pages, publications, and reports.
The participants involved in the study and the data collection methods to be used are as follows:
|Participant||Data Collection Method||Reason for the choice of a method||Sample Size||Sample Criteria||Data Collection
|Online shoppers||Interviews||Explore details better||10||Interview bias||January to February, 2016|
|Online shoppers||Questionnaire||Get the main voice||200||Questionnaire design||January to February, 2016|
3.11 Data Analysis and Presentation
The data was analysed by finding and relating the collected qualitative data to the issues of the research. According to Yin (2003, p.40), data analysis is aimed at comprehending the data collected about a certain subject and then drawing reasonable conclusions. Investigators analyse data to give fair evidence, produce persuasive analytical conclusions, and prevent other incorrect alternative interpretation that is not based on scientific research (Yin 2003, p.39). A common strategy used is the theoretical proposition that leads to a collection of data that is based on research questions. The obtained results of the study are compared to the findings and results presented in the books, journal, and other academic works.
The study held the iteration between the data and theoretical propositions and matched sufficiently with the conflicting data patterns in the literature. The design and completion of the study took a period of three months, but covered a case study of ten years, which is the period that eBay operated in China, mainly the time the company entered in China in 2003 and terminated its operation in 2013. The information from the questionnaires and the interview was written down to get a better clarification of the data. Certain important points during the interviews were also noted down and analysed. The findings from the questionnaires and interview were compared with the existing literature.
3.12 Ethical Considerations
The information obtained from 210 respondents of questionnaires and interviews was confidential and was only used for the purpose of the following study. The respondents were also given the right to participate freely in the research and contribute willingly in giving their opinions. The relevant authorities were consulted to seek permission to carry out the research in the area of study, China. Due explanations had also been given to the respondents before the start of the data collecting process to help them understand the questionnaires. Additionally, after the completion of the research, a copy of the findings was made available on request to the people or institutions willing to have the information.
4.0 FINDINGS AND DISCUSSION
This section presents the findings of the study regarding the respondents views on which strategies eBay used in China and the reasons why the company lost its market share during its operations in China. The section ends by giving the analysis of discussion of the findings given by respondents and what is learned from the case study of eBay.
4.2 Introduction of the eBay Case
EBay Inc., an international company, is one of the many auction and e-commerce websites around the world. The study chose the company to act as an example of the underlying and explicating theoretical background of the customer relationship management strategies effective in the countries with rich cultures and beliefs. As a strong global company with strong presence in e-commerce, eBay has developed strong customer management strategies around the world to retain its customers. The Chinese market is also an important aspect of the study and is a distinct market compared to other markets around the globe. The market is wide and has the largest number of online shoppers in the world.
EBay’s first attempt to expand its online market in China was in 2003. It strategically cooperated with EachNet in 2002, which was the only customer to the online customer company in China and had already fully established itself. The cooperation of eBay with EachNet resulted in one large online company that took control of almost the entire online market, profiting from the 90% of the entire population of the Chinese online shoppers. However, the success was threatened by the emergence of Taobao, a company founded by Alibaba.com. It entered the Chinese online market offering free online services on the customer-to-customer platform. Consequently, Taobao quickly dominated the online customer-to-customer market, taking control of nearly 69% of the entire online market and leaving only 29% to eBay. The second attempt of eBay entering the online market of China was in December 2006 when it tried to enter a joint venture with TOM online. EBay announced this plan in 2006 where it was to hold 49% of the joint ownership with TOM online, a local online portal and wireless operator (Ye et al. 2008, p.11).
With the information above, the interest of the paper was in finding out the sources of failure of eBay in China while it managed to succeed in many other countries. It also explored the ways that eBay could have used to outsmart its competitors and recover its share in the market. Some of the questions related to this situation were whether eBay had made the suitable strategic techniques when expanding its market in China, what changes the company could make in the strategic design that would help reduce or maintain its market losses, and whether the joint scheme with TOM online could help eBay preserve its share in the Chinese online market.
This segment of findings shows different sections and it is presented below.
4.3.1 Strategies eBay employed in China. After the respondents had finished filling the questionnaires, they were sent, and results were reviewed. Most respondents were either buyers or sellers on eBay. The questionnaires were displayed during a period of one week, and a total of 200 questionnaires were returned. Ten questionnaires were incomplete, making 190 questionnaires valid for the study. Table 1 displays the demographic distribution of the respondents that participated in the study. Most respondents were young and highly educated. The respondents aged 30 years and below were over 60% of the total participants. They were experienced online customers with university degrees. Over 40% had at least more than one-year experience in online shopping and spent about eight hours online every day. Additionally, more respondents were females.
Table 2: Demographic Information of the Respondents
|Demographic Information for the Interview and Questionnaire Respondents|
|Online Shopping Experience (190)|
|Hours Spent Online in a Day|
Respondents also revealed that the main form of communication on eBay is Skype and that each user should have Skype IDs to communicate with other buyers and sellers. However, most users did not have the IDs. Only 30% of the interviewed and questioned respondents have the Skype IDs. The sellers without Skype ID did not show any indication of having online status, and among the 30% customers with Skype ID; only 7% were online during the peak hours of trading, which is in the evening. For that reason, most buyers have to email to communicate with sellers; fortunately, email addresses of all customers are provided. Alternately, the buyers can leave messages on the online message board provided by eBay China.
When asked about the effectiveness of instant messaging, most potential buyers and sellers revealed that they strongly prefer a platform that helps the online buyers and sellers to make immediate communication about possible transactions. They also revealed that they prefer communication channels that are embedded in the customer-to-customer platform and not those that require one to switch to other Information Management systems. On eBay China, customers use a disjointed model, which does not indicate the online status of a seller, thus limiting the buyer’s opportunity to contact online sellers immediately. Alternatively, the communication channel is non-integrated, for instance, Skype and email, an approach similar to other international operation of eBay. Taobao, on the other hand, has an integrated customer-to-customer model that eases communication among the customers and is free of charge.
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Additionally, when respondents were asked to compare the eBay’s interface design with that of other internet companies, most agreed that eBay website has an international feel. The interface design replicates the eBay’s international model in China without considering the Chinese context. One respondent indicated that direct communication is very important for online transactions in China. However, the eBay’s business model regarding online transaction is not a transactional since it just offers a critical communication platform that is inefficient when the customers want to build trust during their transactions. During communication, the customers discuss different matters, such as availability, size, discount, delivery terms, payment method and colour of the product.
One interviewee commented that since in China there are very high risks of fraud, the buyer needs means of reducing any uncertainties during buying and selling goods. Therefore, most interviewees revealed that embedding information management system in the customer-to-customer platform facilitates pre-transactional communication, which develops trust between the seller and the buyer. They also agreed that the Taobao’s interface design is a purely an indigenous platform that embraces Chinese culture. It developed WangWang, a typical Chinese product made to facilitate communication among customers and to build trust before purchasing any products.
Regarding the question about the payment method used on the eBay website, the respondents confirmed that a PayPal service backing credit card is the only payment method provided by eBay. Most respondents complained that PayPal service was not an effective method of transacting business between the sellers and the buyers, especially when there are distrust issues. Most preferred other better payment methods, such as cash on delivery, which can ensure that the buyers receive the commodities they have paid for, and the sellers receive money for the products they sell. One interviewee pointed out that eBay should emulate Taobao, which has a “Zhi-fu-bao” online system that accepts bank account, credit cards, and direct cash deposits. This strategy is rooted from the deep understanding that the Chinese culture that thinks every seller and buyer is not trustworthy.
The findings on the trust issues in the Chinese market are important and should be considered by the internet companies. Trust between the sellers and the buyers before they engage in any business is crucial in the Chinese context. Since the issues of potential fraud and insecurity are paramount in China, trust plays a crucial role in reducing various fraud cases. Additionally, the legal infrastructure needs to be well-established so as to protect the online transactions. China has the tendency of distrusting the unknown others, especially the strangers met online. For this reason, the theoretical concept of swift trust proposed by Myers (2009) should be considered. The concept allows zero history work groups that need to use the minimal opportunity to work together and develop a relationship based on trust. There also the need for the sellers and the buyers in the online customer-to-customer context to cultivate swift trust to develop enough confidence that helps in engaging in the online financial transactions.
4.3.2 Why did eBay fail in the Chinese online market?
When respondents were asked why eBay failed in China, they gave various answers and one was that eBay underestimated the structure of the Chinese online market and handled online shoppers lightly, not first considering the factors that are important to them. One of the factors was that the Chinese have the tendency of supporting the companies that are China-based or provide the services and products that have Chinese context. Most respondents also mentioned that security and trust are key aspects in the Chinese market, which were not effectively provided by eBay EachNet. One respondent confirmed that eBay’s payment methods provided a rating at the end of a transaction, which was not important as providing safer payment methods. The respondent also added that the whole process of the transaction was that the buyer sent the money for the product or service of interest to the seller who sent that product to the buyer after payment had been accepted.
The respondents also agreed that eBay provided the systems that were not safe because they could not offer online conversation services between the sellers and the buyers. One respondent said that the thought of not considering the following tactic was not appropriate for the young Chinese market at that time. It should be noted that the payment system of Taobao called the Alipay was considered a better method. One respondent, who visited the Taobao site, said that when the buyer wants to pay for the services or products, the credited payments are verified and can only be withdrawn when the customer receives and checks the product. The respondent thought that this kind of payment system does not only prevent different frauds cases, but also provides a suitable service to the Chinese online market with the trustless society.
The respondents also mentioned that after eBay had acquired EachNet, the company did not involve the staff with deep knowledge and understanding of the Chinese market. The employees were people belonging to the upper or middle class and had no knowledge of people who they were targeting to use their website. They were people who only have experience in the large and mature markets, running under the market laws that were unknown or followed in China. They also lacked a truly representative view of the country and market in which eBay operated. According to Schonfeld (2005, p.1), the former staff of EachNet also complained about their colleagues at the headquarters being arrogant. There was no good communication between the employees and their colleagues, which was not even known by CEO Meg Whitman until she traveled to China and informed about the poor communication between her employees.
Additionally, the eBay’s headquarters did not give its Chinese subsidiary, which had a better understanding of Chinese market, enough autonomy in making decisions on the matters that were not very important. Williamson and Zeng (2004, p.89) believe that eBay made a wrong strategy that may have caused its failure when it moved its main server from China to California. This step worsened the slow internet connection that already existed, causing more dissatisfaction among the customers of eBay EachNet. Williamson and Zeng (2004, p.90) also add that it was strange that eBay did not change its global strategy and adapt to the Chinese online market. The company had resources and strong marketing orientation, but it failed to provide appropriated services that the Chinese market wanted; though, it continued to provide different westernized concepts that do not relate to the Chinese culture.
EBay faced difficulties in China as it attempted to regain its share in the online market, leading to various implications. Considering the research questions of the study, this section focuses on the findings regarding CRM theory and the strategic management eBay applied in China. The discussion of the findings in this section focuses on eBay’s global strategy that was hindered by localization and the ways that the company used the CRM strategies as well as coalitions with other local-based companies to retain its market share. In the managerial aspect, the findings referred to the implementation of the CRM strategies in the global strategic approach aimed at winning the Chinese online shoppers. It is also concerned with the way eBay handled the strategic alliances to understand the consumer behaviour and the culture of the Chinese market.
4.4.1 Theoretical implications. As defined in the literature review, the term Customer Relation Management has three dimensions: initiation, maintenance, and termination that define various customer relationship management strategies. When studying the case of eBay, it was revealed that eBay held the three dimensions, as well as the strategies, such as choosing their target market; developing pricing and promotion strategies; and organizing loyalty programs, community building programs, and customization. However, it still held the global strategy of standardizing, coordinating and integrating different western concepts to the young Chinese online market (Yip 2002, p.54). These dimensions were the cause of the failure of eBay in the Chinese online market.
Firstly, the company failed to provide localized products and choose to provide standardized products. Secondly, the Chinese subsidiary had limited or no involvement in the process of decision making or strategic designing. Finally, the Chinese-based subsidiaries lacked interdependence to the executive or even plan competitive moves autonomously. Therefore, competitive moves were made after the approval of the people in the headquarters and were normally exclusively global scaled.
On the issue of eBay pursuing global strategy and not national strategy due to the distinctiveness of a specific market, the company employed better strategies, such as lowering transaction fees, when Taobao emerged. Therefore, the question remains what outcomes would have been if the eBay had pursued the national strategy in the Chinese online market. However, according to Mellahi et al. (2005, p.36), eBay is categorized as a global company as it offers its services and products to many countries in the world. Therefore, it may have been difficult in practice to separate global and national strategic management, especially considering that all strategic moves cannot necessarily apply across all borders.
Moving to the issue of strategic alliances that eBay formed with local companies, such as EachNet, made it from co-specialization alliances. According to the theoretical framework, businesses should create a sense where customers’ needs are addressed. This implies forming a co-specialized alliance with the firms that have unique and complementary capabilities that can produce a better business, technology or products (Payne and Frow 2005, p.169). The characteristics of such an alliance contribute unique resources, competencies, and assets. In the case of eBay, EachNet provided necessary tools, such as customers, to eBay that would have helped it establish a better business in China. Taobao also played an important role in the eBay’s history in China because it provided crucial political connections that would have assisted in eBay surviving in the Chinese market.
Additionally, eBay, as seen in the literature review, formed strategic alliances with other online companies, such as TOM online and EachNet. It used the alliances to grow and penetrate into new markets, a common practice and an important driver used by eBay to enter not only the Chinese market, but also other markets. In its two attempts to enter the Chinese market, the company did not operate on itself but formed the coalitions with local online companies. EachNet, on the other hand, used the alliance to sustain and gain competitive advantage. Small firms participate in bigger projects in order to form strategic alliances with bigger companies to develop faster and be more profitable than they would do independently (Lee & Makhija 2009, p.539). These small firms use the big companies to obtain the needed resources and technology to compete successfully in the wide global market. In their turn, big companies also use small local companies to gain knowledge of the culture of a specific market and to attract customers. EBay formed an alliance with an established company, but it failed to use the local knowledge to offer suitable products and services.
It was revealed that there were several reasons that resulted in the failure of eBay China. One of the main reasons was a lack of cooperation among the management teams, specifically among the people at the headquarters and the employees operating in China. When the requirements of the opposing team members are not met, then problems arise, especially if there is competition between the allying companies. In the case of eBay, the competition did not exist, but the management teams from the foreign company did not meet the requirements of the team based on the local country by allowing them to make decisions independently.
From the analysis of the findings, the study provided important lessons to the global companies trying to expand the market in a specific local country. The study also filled the gap regarding various challenges global companies face while trying to penetrate the local markets, especially those that have rich culture and beliefs that influence the customers’ purchasing behaviour. In this case, each international company needs to embrace diversity by being taking all paths than can offer better services to the customers.
4.4.2 Managerial implications. Appropriate strategy implementation at any managerial level is important for business success. The case of eBay in China is a good example of how ineffective CRM strategies employed did not have all the crucial aspects that would have helped win the hearts of Chinese online shoppers. Although all the CRM strategies were included, such as offering loyalty programs and promotion programs were not good enough to effectively fit in the Chinese context. For instance, safety and trust are important issues to the Chinese online shoppers, but eBay did not make any effort to introduce better innovative systems that could assure the safety and instil trust among buyers and sellers.
EBay is a global company doing well in so many countries, both developing and developed ones. The alliance with EachNet, another successful company, was a significant step that would have led to a successful business in China. The biggest mistake the management of eBay made was to expand its market in a country with rich culture while still keeping to the westernized ideas that do not work well in the China. It was revealed that Taobao, the biggest competitor of eBay, did not have many capital investments at its disposal, but the company made quick and smart decisions that outsmarted eBay. Maybe, with the joint venture with TOM online, eBay will implement the lessons learned from its previous venture in China. In this case, the study on eBay reinforces that a competitive market is essential while trying to thrive in a new market.
5.0 CONCLUSIONS AND RECOMMENDATIONS
From the findings, it is evident that the company failed to utilize important principles of CRM in the Chinese online market. EBay underestimated the Chinese online market and failed to comprehend and adapt to the dynamics of the locals. It was proven that the company forced the Chinese to accept their centralized policy in all its international operations. The company eventually failed, leaving the local online platform as Taobao with better policies such as C2C model took over the online market. In the global competitions with different industries involved, a company must always stay oriented to the consumers for success and survival. An organization has the responsibilities to provide its customers with what they desire in the acceptable value and to anticipate their needs and wants. Therefore, a company has to prepare the delivery of the new products before the users acquire knowledge of it for the organization to compete the opposition in the market.
Moreover, the understanding of the customers by a company is that they are entities without which a particular industry cannot function accordingly. Therefore, a producer must be able to grasp and comprehend the factors involved in customer relationship management for the continuous improvement of information and the understanding of the target clientele. Customer relations are broad and complex, thus forming the consideration aspect of the consumers’ socio-cultural concept. Hence, the deeper an organization indulges in customers’ culture ensures how a firm can transform the market through a clear comprehension of customers’ behaviours. The effort put by the firms to properly know their customers can significantly contribute to a profit increase for the business. Comprehending customers’ actions and trends also assists a company in discontinuing business to the customers who have less value and, as a result, concentrating more on the valued users and seeking better ones.
Furthermore, there are factors that are considered to make customer relationship management successful. Firstly, having proper information about consumer at an appropriate time advances the quality of services to the clients. Secondly, the quality of an organization’s system with support to the top management increases internal relationships between the personnel. Lastly, use of suitable technology focusing on the targeted consumers builds on the organization of public relations in business, the quality of produce, and the knowledge of customer management at large. Consequently, the use of technology plays a significant role in coordinating such activities as marketing, dealing with different unsolved problems, internet customers servicing, and organization of sales.
Additionally, with the focus on the development and sustainability of a company and customer satisfaction, management of customer relationships should integrate all levels of an organization. The amalgamation should not be limited to the supply chain and the types of stakeholders involved, thus placing the customers at the summit of the commerce. In term of changes during the process of CRM, the examination and analysis of implementation procedures should consider all the participants for commitment to the adjustment within and beyond the business environment. Finally, if all the participants involved in e-commerce value the whole process of customer relationship management with professional gratification to different cultures and embracement of innovative technology, then sustainability in the market can be a reality through significant customer satisfaction and increased productivity.
The situation perceived from eBay China about Taobao depicts how culture is critical in understanding customers’ relations in the international business competitions. Naturally, creating a strong relationship management between the producers and the consumers must start with the incorporation of the employees. The workers must be given a vivid understanding of what they are expected to do in terms of delivering what consumers desire and comprehending the reason behind different needs. The implication is that having a charismatic management inside/ outside an organization gives a business an upper hand when it comes to rivalry in the international e-commerce market. Hence, in international competition by any particular e-commerce company, there are ideas that may be applied for them to contend effectively.
5.2.1 Localization of top management.
A practice that has always been accomplished effectively in international organizations is aimed at using the middle and lower levels management who come from the local market, which is the country targeted by a particular company. The adopted procedure of management is necessary for most of the multinational organizations. However, when dealing with the top management team, selection problems of appropriate candidates becomes a trust issue. Therefore, the company executives only select their employees. In the case of eBay, China had an American-trained Chinese top management, who applied their knowledge in the market (Ye et al. 2008, p.11). The organization executives assumed since they were Chinese they understood the market better, but instead, they knew little about the market because they did not understand the local culture on the ground. The top management employees lacked the extensive networking with the local communities, thus a diminished social relation. The absence of a sense of belonging because of their American culture in the instance of eBay also made it hard for the top management to understand the likings and needs of ordinary Chinese customers. In this way, using a top management team, which has a close relationship with the locals, may serve an e-business better in producing relevant merchandises to the market and developing customer value for a sustainable business.
5.2.2 Proper and fast decision making.
The practice should go hand in hand with a disseminated structural power with the proper staff acknowledgment of the issues to be addressed. One of the mishaps made during and before the collapse of eBay in China was the issues of the approval of strategic decisions by eBay headquarter managers in the Silicon Valley. Before any action was taken for an investment or response to new market demands, there was a lengthy process to be followed for approval, which took weeks (Ye et al. 2008, p.11). The delay made eBay lose a lot of customers who related to the dynamism of the market around the globe. In contrast, the managers and employees of Taobao were given power to instigate the changes that responded to the market appropriately in a matter of hours, be it production or services rendering.
The centralization of eBay operations in the United States slowed down the customer response procedures. For example, a searching and submissions process by customers was prolonged (Ye et al. 2008, p.11). Due to the elongated processes, customers defected to competitors in huge numbers, causing a devastating impact to eBay and, in turn, Taobao amplification. If a company aims to succeed in any market decision making, it should solve each problem that arises from the customers as quickly as only possible. To avoid customer deserting the establishment, a quick and proper respond is crucial for any business, especially in e-commerce, which uses vibrant technology daily.
5.2.3 Consideration of social networking and media.
Manipulation of customers was not considered to be appropriate by eBay China in market competition. The idea of manipulation has been used by the competitors of eBay in China. Taobao has been using the media and social networks to extend the operation in relating with the customers in China (Lafevre 2013). The adoption and embracement of the media builds a positive attitude in the consideration of a particular company in the market. Direct relationship with consumers to show them how an establishment understands their issues better in a manipulative manner through social networks has made companies in e-commerce survive competitions. Taobao has been publicized widely in China as an organization that embraces the culture of martial art, thus affording the company a strong attachment among employees, customers and potential new clients (Ye et al. 2008, p.11). China is a country that has attachment to legendary history, which is highly appreciated. Thus, it would be of great significance to take the social media platform to execute beneficial relationships for the sake of business sustainability.
Then, a company, which is interested or is pursing e-commerce in China, should understand that several internet segments are rapidly growing among the Chinese. The sections include the text chatting, audio and online video communications, which form part of critical social networking activities attributed to the Asian feminine culture as a motivation of using the internet (Chau et al., 2002). As to Taobao, it should be stressed that the company uses extensively online chat rooms, which propel discussions and postings between the employees and the active participants (Chaffey 2011, p.67). The foundation of a company in building structures for sustainable development through customer services and market popularity is solely based on winning the hearts and minds of consumers. The internet headlines and verbal communications through social media cannot be overlooked if success is to be realized sustainably.
5.2.4 Local partnership.
In the market that different industries indulge in face one difficulty, the international foreign brands are involved. Thus, they transfer their original internet trademark to other market and expect it to fair the same as in the previous one. E-commerce is not the same as other consumer markets, such as Sony and Coca-Cola. For the case of eBay, its name in China had little competitive advantage even though it maintained its power in technological and financial resources. Having little knowledge of the consumers’ local culture reduces the connection power between a firm and its clients, hence challenging when it comes to an organization taking root in the market. In this way, an organization can invest in a well-selected strong local company to carry out the activities. In the process, in terms of resources, the main establishment can supply their technical and capital assistance. As the business grows, a local firm can be allowed to take decisions concerning different strategic operations (Hatoum 2015). After the business has become reasonably stable, the chief establishment can steadily introduce the features of their management, whether western or eastern, depending on the origin of the organization (Ye et al. 2008, p.12). The whole gradual practice is aimed at ensuring minimum risk in entrepreneurship management and guaranteeing growth sustainably.
5.2.5 Concentration on initial market growth.
When relating to a new market, such as e-commerce, it is crucial to build up the relationship with the consumers first, instead of focusing, in the early business stages, on the profits because ultimately, the company, which has the customers, usually survives and wins the competition. Forfeiting immediate returns for the sole reason of winning more consumers is an evident success in the case of Taobao in China. The company managed to double its market size after eBay had failed. It is observed that Microsoft after many years also discovered and applied the same procedure (Kirkpatrick 2007, p.3). Therefore, new companies in e-commerce, especially those with a desire to join the Chinese market, should be ready to forego profit collection in exchange for strong market establishment. China has a huge population and an economy which is developing fast. For an establishment to focus on the main market, then the long-run client relationship management strategy will pay-off ultimately.
5.3 Interpersonal Aspects to Consider in E-commerce
With the adoption of the ideas in the industry of e-commerce, interpersonal factors must be incorporated in the process for the success of a business. Online transactions rely on interactive platforms, which can reduce various risks in the virtual marketplace. Interpersonal relationships in the e-commerce industry can be achieved through practically applying trust, commitment and satisfaction for mutual benefit exchange.
5.3.1 Trust. As applied and realised by Taobao, through the use of mediation communications via computers, customer trust can be achieved by shifting the expectations and habits in purchasing to immediate gratification of needs and desires. Dealing with fraudulent products and ratings builds the trust of consumers to a particular business. For new businesses, capitalizing on the issue of safety, the guarantee of eminent products and the delivery of the same improves on a successful strategy in handling the market. Customers crave for the products that are credible and have a sense of distinctiveness. Thus, the provision of tan equivalent entity gives a company a better competing power. The satisfied customers trust a particular establishment in providing what they require. The incorporation of comprehensive advertisement through the veracious channels promotes trust to an organization. Using a channel, which is frequently exposed to the targeted consumers, serves a company better compared to the randomly posting advertisements (Wang 2010, p.1). Therefore, learning more about the market helps in building trust, hence, it is an inclusive customer relationship management.
5.3.2 Commitment. Close and personal relationships are formed around the issue of the natural “give and take” situations which implies that a good linkage with the customers can result from the satisfied consumers. The contented buyers return favours to the business in terms of their loyalty to the company. The clients may also promote the business marketing activities through positive rating and comments or the word of mouth. The western companies have a good reputation when it comes to the quality of their products; consequently, the option that is left for developing their businesses further is the provision of the services that are valuable to consumers with options of delivery (Wang and Ren 2012, p.5). To attract new buyers in a new market, such as China, a western organization should make use of the marketing strategies that promises innovative differentiation in its products. The delivery of products in an inventive manner through creative campaigns might lure more consumers who may become promoters of a company’s brand.
5.3.3 Satisfaction. The fundamental reason for the creation of trust and commitment is to enable proper and enriched communication between the producer and the consumer. At every level of the selling and buying processes, there must be a way to enhance customer trust and value creation for a lasting customer relationship (Chaffey 2013). Sustainability is mainly created when customers dwell on a particular product using different social media. Preference is critical when an organization tries to fulfil consumers’ needs. When advertising, there must be acknowledgement of clients’ likings, and companies must be accustomed to online marketing campaigns (Wang and Ren 2012, p.4). For example, the Chinese market is very dynamic in preference; hence, modifications should be made to fit promotion, which will relevantly cover online and offline buyers. Then, a combined approach in relationship marketing promises a deeper understanding in the implementation of connections prevalent in the market for full customer satisfaction. Tailoring an organization’s activities in the transaction process to suit consumers’ requirements harmonizes the market since the environment hardly changes. The coverage of cross-cultural aspects in e-business gives a company online competitiveness power and sustainability.
5.4 Customer Relationship Perspectives in China
This segment of recommendations shows client relationship highlights and it is as presented below.
5.4.1 Marketing strategy. The market in China is sensitive to pricing. Since the market is still young, new experience seeking is the basis of the potentiality of the customers. Customer-to-Customer has not fully grasped the market in China; hence, the consumers are still willing to assess the emerging products before compelling to them. By using strategies in customer relation implementation in comparing eBay and Taobao, there is a clear disparity in service rendering. Taobao has free services that have local designs, which provide more opportunities that give a perceptiveness of a new business. Therefore, Taobao forms the situations that are significantly appealing to customers in China. On the launch of Taobao, its affiliation to Alibaba Ma Yun was kept confidential until it grew to a point of full customer realization (Yang 2005, p.14). EBay blocked Taobao in the marketing commercials and exclusively used the platform forcing Taobao to use small websites for promotions.
Additionally, even though the obstruction of Taobao in promotion stages was difficult, the openness of customers to try new products directed them to Taobao. As to the background comparison of Taobao and eBay, it should be stressed that the former did not win the customers through global reputation, but because the young market is usually ready to try other emerging experiences with different companies. The companies that succeed counted on the marketing strategy but not on their reputation. The fact that eBay had a global reputation did not avert the consumers from transferring to new producers.
5.4.2 Social orientation. The relationship between a firm and customers plays a critical role in transaction that is carried online in China. The Chinese market embraces online negotiations that make it easy for the users to sharing their views about a certain product, thus, giving way to the creation of a virtual community that is emotionally connected. The communications among the users and the organization’s employees is a suitable strategy that affects the decision of the customers in purchasing and, in most cases, improves the will of clients in engaging in transactions as it was in the case of Taobao (CNNIC 2006). The free service strategy practiced by Taobao caused an increase in its market shares. The upsurge was due to tailoring of relationship management services to fit the Chinese culture, providing an extensive market (Wang 2010). Transaction services are not important when it comes to retaining of the clients because venders require comprehensive services in social management for easy relationship and maintenance of the users. The way the Chinese market works can be characterized by the adoption of multiple interacting behaviours that different individuals mingle in dissimilar standards (Yang 2005, p.190). The composition of the market is a mixture of social networks built hierarchically.
In addition, the more connections the strangers have in the e-business, the more close they will become. The intimacy develops trust between the vender and the consumer. The tradition formed in the market is that businessmen are the main tools for building strong ties with the consumers through social relations, such a, chatting and meetings (Sun 2005, p.5). The connection created between the two establishes a relationship, which means that they are no longer strangers. Most of the time, the connection formed culminates in the recurrent transactions, building both trust and loyalty. The use of the open systems of communication provides a wide range of information regarding a new product or market changes through social connections. Taobao offered a virtual platform, which is vibrant in sharing information with its customers about the products, thus improving trust and leading to customer’s enriched desire to transact with the company. It is proven that from a perception created in many industries concerning an environment characterized by the fragile authority framework and information distortion, the only trustworthy and most useful information is conveyed through social networks (Borgatti & Cross 2003; Luo 2003, p.440).
Nevertheless, mainland China is considered to have imperfect market information, thus reducing the sophistication of contract enforcement (Millington, Eberhardt, & Wilkinson 2006, p.505). Therefore, China can be noted to be a socially-oriented market in which the relationship existing in the souk plays a vital role in supporting an organization’s development strategy. Hence, the vendors should fully consider the importance of customer services because it influences a user’s intention of purchasing a particular product.
How it works:
5.4.3 Community involvement. In China, the involvement of all the members of a particular community in e-business forms a significant aspect in building loyalty in the customer-to-customer market. The degree of loyalty increases depending on the number of times a customer links with the community (Greeven et al. 2012). In a well-working community with the established communication platforms, like meetings, people can easily share their opinions about a particular company and products (Sumeet et al. 2006). The social relationship created in the community among the members shows trust since new customer rely on the knowledge of the client who referred them to the company. The communities’ loyalty in China is built-up through an accumulative process with the customer-to-customer services experiences. Taobao is different from eBay in the way it designs its social marketing with different community cultures. The added advantage that Taobao experiences is retaining community involvement in its business since it incorporates and practices the approaches in social marketing, which include the building of a community social network.
5.5 General Applications
This segment of recommendations shows general application highlights and it is as presented below
5.5.1 Delimit the business scope. The aspect of relationship is universal; though, it can be applied in different disciplines and parts of the world. Therefore, it is usually tempting to expand an establishment, especially when a company is successful (Parvatiyar & Sheth 2002, p.23). In this way, the businesses should take proper precautions not to lose their uniqueness that keeps their customers attached to them. In defining the extent of the business, a company should understand that marketing is in line with the code of exchange and transaction.
5.5.2 Respectable database. A consumer relationship management needs to have a databank that provides a measurement entity that helps understand how a business relates to customer. The collection of information would be valuable for monitoring and evaluating a company’s progress reference to the main stakeholders. In the process, the database can be merged with a well-developed performance metrics applied to measure the management of customer relationships (Parvatiyar & Sheth 2002, p.24). The adoption of a standardized instrument for checking for the quality of the services being rendered and giving feedbacks may also assist the top management in solving and improving the operations of the company.
5.5.3 Longitudinal research methods. This particular technique is important in the changes that occur over time and would help in noticing the trends in the market. The data used in measuring the learning process in a business cycle is employed in noting the changes (Parvatiyar & Sheth 2002, p.25). With the access to such information, an organization can avoid all the risks that may hinder customer satisfaction. The data from the stock market or government agencies is used by the scholars in testing the changes in respective business disciplines in question.
5.5.4 Business official publications. When posting information that gives an organization credit in the official pages or top journals in the market, credibility and legitimacy are noticed among the consumers (Parvatiyar & Sheth 2002, p.26). Mainstreaming information may be published in the journals devoted to issues that are emerging. The criteria used in selecting a journal depend on their reputation in the industry. An improved image is noted out of the publications, and more consumers would like to know more about the products being circulated alongside the name of a company. Since the young markets are open to novel emerging products, potential users will avail themselves of the process of the publications.