In was around the mid-2000s when many Internet-based sales companies started eyeing China as the big economic prize. With a rapidly expanding middle class and over one billion people, the country had—and still has—enormous purchasing power. eBay, the San Jose, California-based online consumer-to-consumer corporation, nearing its 10th birthday at the time, entered the country in 2004 with hopes of beating competitors to the reward. Two short years later, then Chief Executive Officer Meg Whitman flew to Shanghai to announce the company’s exit from China’s online auction market.
So why did eBay fail in one of the world’s most populous countries when it had succeeded so successfully here in ...view middle of the document...
“For U.S. companies who want to do business in China, they have to understand this concept,” Pavlou said.
In building TaoBao, Ma understood swift guanxi, and he equipped his online marketplace with tools that would allow this kind of relationship to bloom. Customers on TaoBao spend an average of 45 minutes using what the researchers call computer-mediated-communication technologies (think instant messaging) to ask sellers questions about themselves and their products before purchasing anything. eBay’s developers, on the other hand, didn’t grasp the importance of the Chinese concept and, although Pavlou said there were rumors after Whitman’s team purchased Skype that it would install video conferencing technology on its auction pages, the company never made is newest technology available for those purposes.
Jeff Menzise, a doctor of clinical psychology and a research associate with the Institute for Urban Research at Morgan State University, said that the factor underlying the success of TaoBao in China has everything to do with cultural worldview and their specific axiology. “One of the highest values is on personal relationships,” he said. “That’s how you see the tech they’re developing now is effective.”
The use of technology to accommodate a worldview such as guanxi could mean more savings for consumers all over the world, not just those in China. In their research, Ou, Pavlou, and Davison talk about how companies might use computer-mediated-communication technologies in association with an exclusive online discount.
Alison Hummel, a sales expert based in Philadelphia, recently helped her mother-in-law buy a car. She was on a local Fiat dealer’s website when she noticed an online-only discount. Hummel wanted more details, and was surprised when an instant messaging window popped up. Using...