This is big!

eBay has decided to pull out of China!  Not that it is eBay just that they have lost 60% market share to a local player and cannot compete within the new regulations of the Chinese financial services industry.

Maybe we will now all wake up and see what China really is.  A great big marketplace that will change the way we do things.  They have millions of highly educated people who will take one the best and brightest from every country.  Add to this they have a population of well over a billion people the scope for growth is far greater than anything we have seen to date.

Today in the technology world people talk about moving to Silicon Valley.  Maybe they should be heading to China…

8 thoughts on “This is big!

  1. Michael, I believe this highlights a number of important points.

    Firstly, the difficulty in doing business in China, particularly in competition with a local company, with a very low cost base and in a developing regulatory regime which has a bias towards local companies.

    I doubt Taobao could achieve what they have done, anywhere else but in China.

    Secondly, it highlights the fact that despite it’s size, it is not a fait accompli that eBay will dominate the on-line auction world for ever.

    Indeed there are global niche markets where eBay is far from the ideal means to sell products.

  2. for an eBay to really “tip” it needs a lot of infrastructure like e-payments and online banking conveniences that is not available in a lot of the the BRIC countries (except Brazil). So the market will also take a long time to mature.

    What is needed in these markets is not to copy paste what has worked in the US, but to understand the local culture and then to craft a strategy. That’s the reason why Unilever beats P&G and Pepsi beats Coke in India !

  3. Kevin you are right on with regard to the low cost base, and just opening a local office does not give you that low cost base as many companies have found. I feel eBay will dominate in the US and other similar countries (Australia) for a while to come.

    Gautam, as with Kevin you are right on culture is a big important part of the game. I am always amazed at companies that decide to expand out of the US and get smacked back across the pond because they mis-read the cultural aspects of the new country. It happens surprisingly often here in Australia!

    I suspect the rest of the infrastructure will come quicker than it did in the US.

  4. In the interest of fairness I’ve seen plenty of European companies come to the US and get their heads handed to them (I worked for one of them). Cultural arrogance seems widely distributed.

    Regarding China, one thing you can never ignore is that the government is interested in foreign investment primarily as a means for Chinese companies and employees to learn how to compete globally. It is not a fair market to the extent that the US, EU, or even Japanese markets are fair to foreign companies. In my last job, I worked for a German company that was trying to break into the defense world here, from 2002-2004 when Germany’s opposition to US Iraq policy was stoking a lot of anti-German sentiment. And yet, I can say that not in one deal was our foreign ownership held against us unfairly.

    In this I would contrast China against India, whose aspirations to global status are no less profound, but strike me as significantly less imperial in nature. That being said, government in China changes like the weather as one faction pushes another out of power. The present trend of openness and liberalization is not novel, and only time will tell if it represents a phase change in their engagement with the world. One can hope.

  5. You are right Colin it does go both ways, it is easy to look at the issue from one point of view. Probably a bit of cultural arrogance from me.

    You bring up a very interesting point with regard to the government and how big a factor that it plays in China. I agree with you that the government views seem to change like the weather.

    A fantastic book on the whole subject is The Asian Mind Game, it is about 10 years old now.

  6. It may be unfair to assume that eBay is failing in China due to cultural ignorance. They did have a huge share of the market in China, until a local firm came along who offered free listings. Coupled with a bit of patriotism this is a pretty powerful incentive for people to start switch from eBay to Taobao. If eBay are in fact pulling out of China, the final straw may be the regulatory changes and their difficulty in finding a suitable local partner which I gather the regulatory changes require.

  7. For the last few years I’ve been seeing a slow trickle of friends leaving Europe for Asia / APAC. Sure they’re going to the easier places like Singapore, HK, Australia but most seem to see it as a stepping stone to the coastal regions of China.

    Last week one of my team left to return to India. Turn the clocks back 5 years and she’d have wanted to stay in Europe or move to the US, now India is a huge magnet. There is a huge excitement and energy.

    It’s worth noting that I know nobody who has moved to the US in the last few years.

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