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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"We believe that to be successful in China, we absolutely have to have strong local management, and Jack Ma and his team are the best-of-breed Internet management team inside China."1

- Jerry Yang, Co-founder, Yahoo! Inc., in 2005.

"Yahoo still hasn't made a major impact in China."2

- Duncan Clark, Managing Director of Beijing-based consulting firm BDA China Ltd., in 2006.

"Specialization is the key. If Yahoo! is going to win, it has to do so in a new way. What's the point of building another Sina.com?"3

- Jack Ma, CEO of Alibaba Group4, in 2007.

Introduction

In January 2007, Jack Ma (Ma), CEO of the Alibaba Group (Alibaba), announced that Yahoo! Inc.'s (Yahoo!) China portal (Yahoo! China) would be reorganized into a business-oriented search engine5. While announcing the new strategy, Ma admitted that Yahoo! China was not doing well and also hinted at some key technological and organizational changes to foster growth.

Ma was confident that the new strategy would help Yahoo! China gain leadership and succeed in the highly competitive Chinese Internet market. Yahoo! was one of the first international Internet companies to enter China (formally in 1999). Initially, Yahoo!'s portal in China was modeled on the lines of its globally successful portal.

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But Yahoo! China found it difficult to compete with local companies like Sina Corporation (Sina), Sohu.com Inc. (Sohu), and NetEase.com, Inc. (NetEase), who together were popularly known as the "Big Three" Chinese Internet firms. (Refer to Exhibit I for information on China's local Internet companies).

In 2005, Yahoo! handed over the management of its Chinese operations to Alibaba. As of 2006, Yahoo! China still lagged behind local Chinese Internet firms like Sina and Sohu in popularity. Even in the Internet search market, Yahoo! China's share was lower than that of Baidu.com, Inc. (Baidu) and Google Inc. (Google). Yahoo! China's move to target business customers was the outcome of an internal research study, which found that while Baidu was the most favored choice among college students, Google and Yahoo! China were preferred by affluent and business-oriented customers. As part of its new strategy, Yahoo! China's search results were to be directed more toward corporate or business-oriented websites.

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1]  "Inside Yahoo's China Gambit," www.businessweek.com, August 12, 2005.

2]  "How Yahoo China Missed Out on The Mainland," www.businessweek.com, December 18, 2006.

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

4]  The Alibaba Group is a global e-commerce company and the largest e-commerce company in China. It was founded in 1999 and is based at Hangzhou in eastern China. The company has 16 regional sales and service centers across China and corporate offices in Beijing, Hong Kong, the United States, and Europe. Alibaba acquired Yahoo!'s Chinese operations in August 2005.

5]  Christopher Bodeen, "Yahoo China to Evolve into Business-oriented Search Engine," www.usatoday.com, January 08, 2007.

 

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