Yahoo! in China: Local Problems for the Global Internet Giant

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Case Details:

Case Code : BSTR260
Case Length : 18 Pages
Period : 2000-07
Pub Date : 2007
Teaching Note :Not Available
Organization : Yahoo!
Themes : Business Strategy | International Expansion Strategies
Industry : Internet and e-Commerce
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

"We don't want those not interested in business or making money. They can go to Baidu. Our main focus is the high-end. We don't need to compare ourselves with Baidu in market share," Ma said, describing the new strategy.⁶

Yahoo! was not the only international Internet firm to have faced problems in the Chinese market. eBay Inc. (eBay), one of the world's leading e-commerce websites, too, for instance, was struggling to establish in China. In December 2006, eBay announced its partnership with Tom Online, a Beijing-based Internet portal, to boost its position in China.⁷ Even Google, the world's leading search engine, had had problems in capturing a substantial share of the Chinese online search market. Analysts said that Google was able to make inroads into the high-end segment, but on the whole it lagged behind the market leader, Baidu, which was popular among the youth, who constituted the major chunk of Internet users in China.

Some of the main reasons cited by analysts for the failure of foreign companies in China were strong competition from local Internet firms, the complexity of the Chinese language, the inability of these companies to understand local culture and preferences, and rigid government regulations. Due to these hurdles, most of the foreign Internet companies chose to collaborate with local companies, which had a good understanding of local business and culture.

Background Note

Yahoo! was founded by two Stanford University Ph.D. students, Jerry Yang (Yang) and David Filo (Filo) in 1994 in Sunnyvale, California, USA⁸ Yahoo! initially started out as "Jerry and David's Guide to the World Wide Web," a website that featured a directory of many other websites. Yang and Filo set up the website as they felt that there were many people who wanted to go to a single place to find useful websites. Given the widespread response to the website, Yang and Filo incorporated Yahoo! in March 1995. Its mission - to be a leading provider of Internet services to consumers and businesses across the world (Refer to Exhibit II for Yahoo!'s mission statement).

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6] Mike Sachoff, "Yahoo China to Change Strategy," www.webpronews.com, January 08, 2007.

7] "eBay and Tom in China Partnership," www.news.bbc.co.uk, December 20, 2006.

8] www.yahoo.com