Taobao and eBay Companies Differences

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Table of Contents

Introduction
Contingency Paradigm
Resource dependence and transaction cost paradigm
Institutional and population ecology paradigm
Recommendations

Introduction

The eBay China and the Taobao are online shopping companies which also offers trading platform in China. Taobao has employed the laggard activism strategy to not only capture the Chinese market, but also leapfrog the dominant eBay China Company. The Taobao has better knowledge of the Chinese market and disruptive technology than the eBay within the Chinese market. Unlike eBay which operates on the Customer-to-Customer (C2C) platform, the dynamic Taobao functions on the Business-to-Business (B2B) platform.

Despite purchasing the Chinese based Eachnet Company, eBay failed to penetrate the Chinese market due to imbalance in factors such as the western business style. In order to penetrate the expansive Chinese market, Taobao’s business platform was modified through introduction of services such as premium customer experience, compact support from the community, and low charges for small businesses. This analytical paper explores the above differences in the perspectives of contingency paradigm, resource dependence and transaction cost paradigm, and institutional and population ecology paradigm.

Contingency Paradigm

The contingency paradigm describes a company’s ability on the basis of contingency of the situation. There are two kinds of companies according to this theory. The first are those that develop a good relationship with their customers to deliver a task. The second are those that are only oriented towards the task at hand. They make the accomplishment of the task as their primary aim and take all steps towards the achievement of this goal.

Open-system verses closed-system

The Taobao Company, its business model is based on the C2C market. The attitude of the CEO towards localization is an indication of clear goal of the company. The goal is to concentrate on the local market through use of an open-system business model. The strategy was meant to take advantage of the challenge of smallness to defeat the giant eBay Company, which depends on the closed-system approach in execution of business strategies. The Taobao Company transformed the challenge of late market entry into a competitive advantage strategy within the Chinese online business environment.

Centralized verses decentralized system

Unlike eBay which developed a fixed entry strategy in the Chinese market, which was characterized by overconfidence and inertia, Taobao was packaged as a humble and flexible online technological trading platform. As a result of stable knowledge of the Chinese market, Taobao jumpstarted operations through a flexible and rational business decision process. Basically, this strategy was helpful since changing would not be as costly as those companies that have fixed and mature formulas for doing business such as the eBay Company. As indicated in the case study, a decision which could be made within 9 days at the Taobao would take 9 months at the eBay Company due to the centralized management strategy.

Knowledge efficiency

It is apparent that the Taobao Company more efficient knowledge and experience in uniqueness of products and services in terms of standardization in order to present high quality services to the Chinese market than the eBay Company. The main variables of its business operations are connected at central point by strategic planning which encompasses costing, speed, quality, flexibility, and dependability to create a smooth continuous operation tracking model from one segment to another. For instance, the company has been in a position to establish Chinese online business leadership position due to its appeal to the local customers, in terms of easy to use interface, free trials, and localized purchasing experience.

Balance between the soft and hard skills

The major part of success puzzle for the Taobao business management delivery operates on the periphery of the soft skills involving the timeless vision of organizational principles, defining value of the business, determining requirements, clarifying the vision, building teams, mitigating task, resolving issues, and providing direction as incorporated in the operations management system. The management of the Toabao Company realized that its success lied in the B2B strategy, which was modified to rest on the customer satisfaction. The corporate strategies of the company were then based on the traditional marketing, localized human resource, and efficiency monitoring units. On the other hand, the eBay’s platform was not modified to guarantee the localized experience among its customers.

Taobao has a very unique organization structure. The company exhibits distinctive and unique organization structure that is shaped by the organization’s goals. In advancing organizational learning, the system that helps the organization to avoid the learning disabilities is proactive organization thinking. For instance, its CEO notes that there is need to ensure that the customers directly and positively associate with the business due to premium service experience.

Organizational flexibility

The Taobao organization exhibits flexibility in its organizational structure that enables jobs to be redesigned thus, facilitating work based innovations. The teamwork based organization structure actually identifies the hierarchy of the organization structure in order to understand the complex network. In addition, it provides myriad illustrations of persuasive importance of problem definition within communication contemporary context. Unlike eBay Company which depends on different functions such as the Asia regional office, the head office in Silicon Valley and intuitions of the CEO of the Chinese branch, the Taobao Company has a simple organizational structure model comprising of a single CEO who is in a position to localize the business management strategies within the conservative Chinese market.

Continuous knowledge acquisition is crucial for adapting to and surviving in the competitive business environment. Thus, it becomes an important feature of learning organization. Continuous knowledge can be through activities such as research and development, market research, and competitor analysis. Unlike the highly professional and mature online business platform of the eBay Company, the Toabao’s platform is developing and easy to modify to fit within the Chinese online business market. Besides, the use of B2B model by the Taobao Company expanded its market base since it targeted small business. On the other hand, the C2C model by eBay became ineffective in China due to complexity of the system.

Resource dependence and transaction cost paradigm

Resource dependence

The Taobao Company majorly depends on the local means of production and running the business. The Taobao’s business model was to create a decentralized system in terms of a management line for the much needed market expansion within the Chinese market. The approach adopted by the management was to ensure that decision making process is shortened thus, avoidance of bureaucracy. Furthermore, adoption of decentralization by management was to ensure direct contact with customers within the shortest time possible. The company heavily depended on the local resource to achieve this. On the other hand, the eBay Company establish a hybrid system of integrating the western resource with its acquisition in the Chinese online business market. However, the company maintained its centralized management system from the Silicon Valley. Besides, the company used international resources such as the management team and system support.

The ideal strategy for performance measurement should be aligned to communication channel in the company. For implementation of the strategy, the management of the eBay Company does not balance the short term and long term consideration towards decision making since the resource allocation and use is centralized. Management that ensures long term obligations are fulfilled and considers mostly the role played by resources invested in technology, continued innovations in the production of new products, and conducting intensive researchers in the market to identify fresh market niches.

In order be able to carry out organizational psychology assessment on the basis of centrality, research and statistics are needed to understand the various behavioral patterns that exist within the scope of an organization for this role. This self guided approach is based on collaborative procedures that involve designing specific learning experiences to teach organization on how to monitor automatic behavior; recognize the relationship between these behaviors and cognition, ways to test the validity of the relationships, and measures to apply to substitute the distorted thoughts with more realistic cognitions. The decentralized system of communication and decision making at the Toabao is less limiting, in terms of information flow, since a lot of talent is noticed in the company as employee are given the opportunity to proactively participate in the business process at the local level.

Cost paradigm

The Taobao Company rolled out an interesting entry into the Chinese market by concentrating in the affordable traditional methods of advertising. This strategy ensured that the company was sustainable even when it offered free services within the first three years of operations. The affordable but very visible traditional methods of advertisement ensured that the targeted market was in a position to distinguish the business from its rival. Besides, the company introduced very low charges for its services that could not be matched by its rivals. The administrative costs of the Taobao Company are less costly as compared to the eBay Company which is managed from the Silicon Valley and uses very sophisticated and mature technological platform. Unlike the costing system of the Taobao Company, which is internalized within the local Chinese market, the payment system of the eBay Company is externalized within the confusing platforms such as PayPal. Such platform proved difficult to use among the Chinese customers. On the other hand, Taobao’s internalized system proved flexible and friendly between businesses and customers.

Institutional and population ecology paradigm

Institutional paradigm

The Taobao Company has three building blocks of learning such as a supportive learning environment, concrete learning processes, and practices leadership that reinforce innovation. The managers play a significant role in setting up the learning environment for their employees. This culture has created an ideal climate for innovation and communication among the employees. This culture is meant to create an ideal climate for innovation and communication among the employees. The company’s team work culture spells the rules of engagement and expected results. These rules appreciate diversity and uphold integrity in judgment as enshrined in the company’s vision and mission statement.

Since the Taobao Company is localized, it has very minimal challenges in surviving the regulatory pressures from the Chinese government. Besides, it has earned legitimacy from the local market that prefers to create an identity with the company perceived as adhering to the Chinese culture. On the other hand, the eBay Company has to deal with the coercive and regulatory pressures from the Chinese government since it uses the international business platform in the unique Chinese market. As a result, the company has faced difficulty in reaffirming its legitimacy, especially between its conflicting online payment systems.

Population ecology paradigm

Other factors associated with inhibiting learning in organizations are inappropriate organizational structures, entrenched attitudes towards learning, and emphasis on meeting targets. Fear and resistance to change in organizations that are characterized by high levels of bureaucracy and inter-functional rivalry are the main reasons that impeded the eBay’s strategy to penetrate the Chinese market. In comparison, the cultural structure of the Toabao Company has spurred a continuous growth in the competitive Chinese online business market. The Toabao organization exhibits flexibility in its organizational structure that enables jobs to be redesigned thus, facilitating work based innovations. The company has diversified its operations to merchant service and small business segments to ensure long term sustainability. Generally, when all other factors are held constant, the Taobao Company is better positioned to sustain its business within the Chinese market due to its unique services, wide appeal to customers, and relatively flexible management model.

Recommendations

Operation efficiency

Operational efficiency and market niche provide an indication of how well the company manages its resources, that is, how well it employs its assets to generate sales and income. It also shows the level of activity of the corporation as indicated by the turnover ratios. The level of activity for the eBay and has remained relatively stable despite threat of competition, and constant change of taste and preference. In order to stay afloat, the company should streamline their operational costs and introduce freelance marketers paid on a commission. The marketers will operate from their homes to save the company daily expenses of running its business in China. Through implementing this proposal, the company will reduce its wage bill and seal cost loop holes.

Consumer centricity

Properly designed online marketing and product distribution management facilitate the success and sustainability in online marketing. To increase credibility and maintain professionalism, the current channels of reaching the consumers at the Taobao should be tailored to encompass processes and features that flawlessly facilitate a healthy and lifetime relationship between the business and its clients. Among the new development elements that the company should incorporate include trust, liability acceptance, distribution, fair retribution process, and passing accurate information to target audience to restore confidence within these networks. This strategy will ensure that the business is sustainable.

Functional team

Essentially, the success of e-marketing depends on proper alignment of a functional team that is responsible for the creation of flexible and quantifiable measurement tracking tools for reviewing results periodically. Reflectively, the eBay and Taobao companies should introduce a functional team with the essential knowledge in social media and tools used in marketing via the Internet. The two companies should realize that promotion of their products is not merely an advertising function. They should come up with both advertising campaigns and promotional strategy that are defined by the nature of the market, the size of the market, and the preferences of their customers.

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