Anil K. Gupta Haiyan Wang
 
   
 

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IDEAS

 

 
Four Stories Rolled Into One
 
Think China and India, Not China or India
 
Megamarkets and Microcustomers
 
Leveraging China and India for Global Advantage
 
Competing with Dragons and Tigers on the Global Stage
 
The War for Talent: Dealing with Scarcity in the Midst of Plenty
 
Global Enterprise 2020

 

 

Endorsements and Reviews

Synopsis

Table of Contents

Q&A

Chapter-3


Mega-Markets and Micro-Customers:

Fighting for Local Market Dominance

Founded in 1995, eBay has been one of the major success stories of the Internet age. Meg Whitman, who was recruited as the company’s CEO in early 1998, is widely hailed as the architect who built eBay from its pre-IPO days to a market cap of over $40 billion at the time of her retirement in March 2008.

Whitman was well aware of China’s potential to emerge as the largest Internet market in the world. As she noted to security analysts in 2005, “Share of e-commerce in China is likely to be the defining measure of success on the net.” She made sure that eBay was an early entrant into China. The company did so by spending $30 million in March 2002 to acquire a one-third stake in EachNet, China’s equivalent of eBay. EachNet had been founded in 1999 by Tan Haiyin and Shao Yibo, two Harvard MBAs, who intended to emulate eBay’s success in China by adapting the eBay model to some of the unique features of the Chinese market such as payment systems, demographics, and consumer behavior. In the initial years, EachNet proved to be a roaring success. In June 2003, at the time of eBay’s decision to acquire complete ownership of EachNet, its market share in China was 85 percent.

Yet, by end-2006, eBay’s dreams in China appeared to be on the verge of collapse. The company’s nemesis was TaoBao, an auction site launched by China’s Alibaba Group in May 2003. By early 2006, TaoBao had emerged as the leading C2C and B2C auction site in China. In December 2006, eBay decided to pull back from China, shut down its local website, and become a 49 percent owner in a new operation to be named TOM EachNet and run by TOM Online, a China-based portal and wireless operator.

EBay is just one of a countless number of companies for whom there exists a wide gulf between the potential of the vast market opportunities in China and India and the extent to which the company has been able to realize the potential. Toyota is now the largest auto company in the world. Yet, its market share in both China and India is tiny and well below that of the leading players. Black & Decker is the number one power tools company in the United States and one of the leading competitors in Europe. Yet, its market share in both China and India, the hotbeds of new construction, is miniscule. BusinessWeek is the largest weekly business magazine in the United States with a circulation of nearly one million copies every week. Yet, in India, it is almost nowhere compared with the top three local publications, each of whom has a circulation of around 500,000.

Companies face many external and internal challenges in capturing the market opportunities in China and India. External challenges pertain to the fact that, for most products and services, these markets are very different from those in the developed countries, present extremely low buying power on a per capita basis, are internally diverse and complex, can be brutally competitive, and in some industries pose regulatory hurdles. On the other hand, internal challenges pertain to the tendency on the part of many companies to see the market opportunities in China and India as mere extensions of those in their home markets. Such companies demonstrate a strong proclivity to replicate their home country products, services, and business models in these markets instead of being open to inventing new approaches from the ground up. In extreme albeit rare cases, a company’s leaders may even be blind to the magnitude of market potential in China and/or India. Take the case of AT&T Wireless. In 1995, AT&T partnered with India’s Tata and Birla groups to set up Idea Cellular, a mobile operator, each party acquiring a one-third stake. In Oct 2004, AT&T Wireless merged with Cingular. In July 2005, Cingular sold its stake in Idea to the other two partners for about $250 million. Barely three years later, India had emerged as the second largest mobile market in the world and, if Cingular had not sold its stake, it would be worth about $3 billion in 2008. Cingular, now renamed AT&T Wireless, is once again looking for a (much more expensive) way to get back into India.

In this chapter, we analyze the structure of the market opportunities in China and India and lay out the strategic guidelines that can improve the odds of success in these two vast, rapidly growing, and dynamic markets.

 

 

Chapter-1

Chapter-2

Chapter-4

Chapter-5

Chapter-6

Chapter-7

Anil k. Gupta

     The Institute

 

        

 

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