| In 2002, eBay Inc. injected US$180 million to purchase | | | | would like to have a list of what's in China that is |
| 100% ownership of Eachnet.com, then the leading | | | | different from what's available back home. |
| eCommerce platform in China, capturing some 80% | | | | Unfortunately, this will be a never-ending list if |
| of the market. | | | | compiled. Hence, the general advice of just "Make No |
| Within 3 years however, this leading market share | | | | Assumptions". Corporate bigotry and arrogance have |
| had shrunken to just 36%, no thanks to an upstart, | | | | got no place here. |
| Taobao.com, which had entered the market in 2002. | | | | In fact, come companies enter China via means of |
| While some observers will be quick to point out that | | | | acquiring local companies. While the due diligence |
| used some "below the belt" tactics, eBay on its part | | | | work conducted centres around the financial aspects |
| failed to make the following observations: | | | | of the local business, future due diligence work may |
| Unlike elsewhere, eBay (or Eachnet before that) was | | | | have to take consideration of: |
| utilised not so much as a Consumer-to-Consumer | | | | Business practices (esp. if there are any expiring |
| (C2C) platform where individuals auction off their | | | | monopolistic licenses, or if kick-backs is a common |
| used items. Rather, eBay is a Business-to-Consumer) | | | | practice) |
| B2C platform where small businesses make their living | | | | Corporate culture (esp. if managers are incentivised |
| selling low-priced products to consumers. As such, | | | | to grow the business or just "follow the rules") |
| both sellers and buyers prefer to deal with fixed | | | | Social norms (esp. since China's average staff |
| prices, rather than auctioning; | | | | turnover is just 18 months, and depending on where |
| Due to banking controls in China, most buyers prefer | | | | you hire, employees may have social norms that are |
| to pay upon receipt of products, rather than making | | | | quite different from those you are familiar with. Even |
| online payments. This in turn reduces eBay's and its | | | | customers behave differently here too.) |
| payment gateway subsidiary, Paypal's, operating | | | | Be Actively Involved |
| income. | | | | Some international companies, knowing that China is |
| While eBay charges standardized fees for sellers | | | | rather different from what they experienced, chose |
| globally, it is unwilling to waive such fees to Chinese | | | | to appoint Chinese General Managers, and delegate |
| sellers, as it believes "free is not a business model". | | | | them full responsibilities of running their China |
| However, eBay's competitor is using its "no-fee" | | | | business. |
| policy to demonstrate to sellers that it sincerely | | | | The mistake here isn't about appointing Chinese |
| wants these users to make money first before | | | | General Managers or CEOs. The mistake that many |
| charging for the service. | | | | of such companies make is "management by |
| The end result: eBay had to "wrap-up" its China | | | | abdication", meaning they are literally hands-off. |
| operations by "selling" its stake in Eachnet to | | | | It would be unfair (not to mention gross bigotry) to |
| Tom.com, an online and wireless service provider | | | | assume that Chinese managers are dishonest, and |
| owned by Hutchison Whampoa. eBay had to fork out | | | | that they will steal from the company. It is just as |
| another US$40 million to get a 49% stake in the new | | | | unfair to assume Chinese managers are incompetent |
| is not faring any better either. It has since been | | | | in doing their jobs. |
| "privatised" (a nicer word for "delisted") from the | | | | It is, however, in the entrant's interest to learn as |
| Hong Kong Exchange in August 2007, with its share | | | | much about doing business in China in the shortest |
| buy-back price at HK$ 1.52 per share. This is lower | | | | time possible. Unfortunately, no amount of Executive |
| than its 2000 IPO price of HK$ 1.78.eBay recently has | | | | Development Programmes can adequately prepare |
| revived cn, in addition to eachnet.com, with the | | | | international companies to learn how they can |
| former focusing a lot more on helping sellers sell to | | | | succeed in China. International companies would have |
| international markets. The thing is, many eBay sellers | | | | to be actively involved in the day-to-day operations |
| already had registered international eBay IDs from as | | | | of their Chinese business, and NOT manage from an |
| early as as 2005 to service international customers. | | | | ivory tower (desk) back home. |
| Not only was the support from eBay lacking then, it | | | | Some areas to be actively involved include: |
| even shut down some of these sites when these | | | | Following your sales people to visit customers and |
| sellers were found to have multiple IDs. While | | | | get a real feel on what are some of the sales and |
| leveraging its global network is a great business | | | | customer issues that your Chinese subsidiaries are |
| initiative, eBay has since alienated its sellers (and | | | | facing; |
| buyers too), and it's a case of "too little, too late" | | | | Following your production people around and find out |
| now. | | | | what goes on in production, procurement and supply |
| Interestingly, when Bo Shao, founder of the original | | | | chain management. If you merely source from |
| Eachnet (the one that captured 80% market share in | | | | Chinese factories or wholesalers, visit them and |
| the first place) offered to make a return to take | | | | strengthen the relationship. |
| over the reins in 2006, his offer was turned down, | | | | Getting to know your key Chinese staff on a |
| citing resistance from "internal politics". No, Bo Shao | | | | personal level, not to poke at their private matters, |
| isn't going to be China's Steve Jobs, thanks to eBay's | | | | but again to strengthen their relationship with you |
| intervention. | | | | and your company. |
| Make No Assumptions | | | | While it is important to assume nothing when in China, |
| Many companies come to China with high hopes of | | | | it is just as important to be assertive when the need |
| capturing a slice of China's enormous market | | | | arises. Many Chinese managers love to use the |
| opportunities. Some have accurately identified some | | | | phrase "But this is China, and this is how we do |
| of China's flawed business practices, and seek to | | | | things here." |
| straighten out things in China. | | | | Those who use the same sentence repeatedly are |
| Unfortunately, transplanting what works at home isn't | | | | at best unwilling to change for the better, and at |
| the right solution either. Cultural issues aside, as a | | | | worst be using that as an excuse for something |
| developing economy that just opened up to the rest | | | | more sinister. |
| of the world 30 years ago, there are many business | | | | When confronted with the "But this is China" tagline, |
| practices that are just different, if not strange, | | | | it is important not to just jump in to your |
| compared to markets in developed economies. Here | | | | assumptions, but rather use some simple questioning |
| are some examples: | | | | such as: |
| A Fortune-500 3rd-Party Logistics (3PL) provider | | | | "Can you enlighten me, why is it so in China?"; |
| would like to standardise operations for all its China | | | | "What if we try something different? Are there any |
| subsidiaries, but to no avail. The subsidiaries report to | | | | companies that tried something different and |
| no one except to "guarantee" the parent company a | | | | succeeded?" |
| certain amount of profits each year. Any perceived | | | | "Can we just try a different approach in this case |
| over-intervention will just make them defect and ally | | | | just to test the reaction?" |
| with other 3PL providers. | | | | Even when you are unsure what is the best course |
| Insurers from Hong Kong and Taiwan are finding that | | | | of action for your China operations, you can remain |
| unlike its financial planners back home, their mainland | | | | silent but be keen in your observations. At worst, |
| Chinese financial planners are more concerned about | | | | you will know what will be the right steps to take |
| making "a fast buck", rather than working hard at | | | | things don't work out as expected. |
| understanding customers' needs. | | | | Be Continuously Improving |
| McDonald's, the world's market leader in fast-food is | | | | Success is a journey and not a destination, so they |
| a distant second compared to KFC, simply because | | | | say. The same applies to achieving business success |
| the Chinese customer perceive that for the same | | | | in China, although it's going to be a much bumpier ride. |
| price, a fried chicken drumstick has a higher intrinsic | | | | In the case of the Singapore government's venture |
| value compared to a piece of minced beef | | | | in China, they have since learnt their lessons well, and |
| sandwiched between two pieces of bread. | | | | are making tons of profits, especially through its |
| Singapore-owned retailers tend to have poor service | | | | property subsidiary, Capitaland. Unfortunately for |
| for their China outlets even though their service | | | | eBay, due to its unwillingness to face its own |
| standards back home was great. The reason being | | | | mistakes, it has lost vast opportunities to capture |
| they have largely been pampered with skilled staff | | | | potentially the world's biggest and fastest growing |
| back home, and are unaccustomed to getting | | | | eCommerce market. |
| unskilled staff delivering the same levels of service. | | | | It is unlikely that any international company can get it |
| Finally, the Singapore government thought it had the | | | | right upon landing in China. The key is simply be |
| entire deal sealed when it got Beijing's support to | | | | observant, and learn from early mistakes quick. |
| build the Suzhou-Singapore Industrial Park (SSIP). | | | | After all, not many companies can afford to burn |
| Unfortunately, without local government support, it | | | | US$180 million, then just shrug and say, "We see it as |
| literally got hell in its first 10 years of inception. | | | | an evolution in China." Not many senior executives |
| At this juncture, I understand that many readers | | | | can survive that either. |