Please read and answer the following questions. 3-a) If China will go from 17 mi

Question

Please read and answer the following questions.

3-a) If China will go from 17 million to 190 million middle-income people by the year 2020, would the scenario presented Best Buy in 2006 not be applicable anymore? That is, the culture shock in 2006 was that the Chinese would not pay for Best Buy’s overly expensive products unless they are a brand like Apple. Would newly rich Chinese customer engage in this purchasing behavior by 2020?

3-b) With Alibaba’s ownership of the popular TaoBao online shopping system (similar to eBay and Amazon) and its spread across the world, will a Western-based online shopping culture ultimately infiltrate China?

3-c) What can other companies that are considering investing in China learn from the experiences of Best Buy and eBay?

Explanation / Answer

3a) There were three major reasons why Best Buy failed in 2006. i. Chinese will not pay for expensive products unless it is an Apple, ii. Too much piracy in chinese markets reduces demand for electronic products in competitve markets and iii. Chinese do not prefer shopping in huge mega stores. Hence, even if China goes from a 17 million to 190 million market, unless untill the other two factors, which are piracy and preference to shop at small stores, are taken care of, bestbuy might not succed as much as it was supposed to be.

3b) According to the information provided to us, the only differentiation between eBay and TaoBao is the presence of chat feature. Also, we know that TaoBao is quiet popular in China while eBay. This gives us enough proof to believe that the Chinese do not have problems with online shopping systems as long as it is reliable and can offer that connect between seller and buyer. With increase in speanding power, the number of people using such online platforms will increase and thus will increase the online shopping culture in China

3c) From the experiences of Bestbuy and eBay, it is evident that the Chinese are typical of their culture and a deep understanding of the consumer behavior is important before setting up shop in China. Sometimes, something as small as absence of a chat function can bring down a company. Hence, any new company planning to invest in China should be ready to innovate and adopt such that the core of the organization is maintained, while still customising their products and services to suit Chinese customers

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