Even though Yahoo China had created brand value, consequently becoming one of the largest internet giants in the Chinese market. However, throughout its development and growth, Yahoo China lacked strategic direction, leading to its failure. In spite of the initiatives geared towards ensuring the steady growth and development of the firm, Yahoo China faced a number of challenges associated with the diversification of the Internet era. The company lacked innovation on this front, thereby gradually becoming a disadvantage to most of the users. The disclosure of the users' private information could also be regarded as one of the factors that made it difficult for the firm to attract new users, consequently leading to its demise.
In addition to assessing the failure of the company in relation to its operational failure, one of the cultural dimensions that could be used to explain the failure is through Hofstede's cultural model. The culture between different nations can affect the way an MNC does business. For instance, in the year 2002 and 2004, the government arrested Wang Xiaoning and Shi Tao, for using Yahoo to email pro-democratic views, a factor that the Chinese government did not appreciate, as China is not a democracy (Venezia and Venezia, 2010). Following the arrest and subsequent suing of the company, Yahoo faced issues related to the clash of different cultures in the international markets in which it was operating, as the American and Chinese market had differing cultural as well as legal values. In light of the occurrences identified, it would be possible to posit that the cultural differences between markets can affect the operations of a company, which could be indicative of the idea that the success of international operations could be affected by the culture of a market.
Based on Hofstede's model, it is possible to indicate that the dimension of power distance is specific to the adaptation of a given culture, including the iniquities related to power distribution in organizations as well as relationships (Venezia and Venezia, 2010). Hofstede's model can be used to explain the relationship between Alibaba and Yahoo China, Alibaba's acquisition. After acquiring Yahoo China, Alibaba had to ensure that the firm's organizational culture could fit the one followed in the parent company. Since the main business of the parent company was e-commerce, Yahoo China became an experimental field in which the Alibaba executives could be trained (Decker, 2014). For this reason, the website was constantly subjected to experiments that invited renovation, transformation, and the remodeling of the website to adapt to the processes of Alibaba in terms of e-commerce.
It would be possible to attribute Yahoo China's failure to the high-power distance, which is one of the dimensions of Hofstede's model. Since Alibaba owned 12 other companies, either through acquisition or subsidiaries, Yahoo China was below the hierarchical chain. In this regard, the operational qualification had to be approved through signing contracts with Yahoo USA, which made the investment in Yahoo China unattractive. The high-power distance was also disadvantageous to Yahoo China in terms of operational flow, as it was difficult for the firm to avoid uncertainty. According to Chen and Starosa (2005, p. 59), uncertainty avoidance could be understood as the measure with which a particular culture can accept an ambiguous situation as well as tolerate uncertainty in future. Since Yahoo China had to seek operational approval from Yahoo USA, it was difficult to tolerate as well as avoid uncertainty, leading to the inability to become risk-averse.
Hofstede's model also emphasizes on the concept of individualism, which values the achievement of an individual and encourages each entity in an organization to act independently (Rinuastuti et al., 2014). The Chinese culture is rooted in the notion of collectivism, in which the social framework overrides individualism. Yahoo USA subscribes to the aspect of individualism, a factor that could not be applicable to the Chinese market easily (Venezia and Venezia, 2010). The collectivist culture of the Chinese thwarted the innovativeness of Yahoo China, consequently becoming a predominant disadvantage towards the growth of the firm.
The other theoretical model that could be used to explain the failure of Yahoo China is the PEST model. Organizations use the PEST model to discover, analyze, organize, and keep track of the macro-economic factors that can affect their business in the present and future (Perera, 2017). The model achieves this provision by examining the opportunities and threats existing in the political, social, economic, as well as technological forces. The political force is responsible for the creation of laws applicable to business in the market. In this case, the internet laws of the country affected Yahoo China. Because of the internet laws in China, it became difficult for the company to align its investments to product initiatives, such as the provision of e-commerce. In this regard, it was difficult for the company to align its non-bureaucratic way of doing business with the implementation of the internet legal framework in the country. The difficulty emanated from the idea that the national policy priorities did not align with the business priorities of the organization, as it was difficult to determine whose laws would apply for the different activities that take place online.
On the other hand, economic factors could be regarded as instrumental to the success or failure of a business in any economy. Periods of economic uncertainty could be one of the factors that might affect the operational results of a company, increase its external scrutiny, or reduce the possibility of accessing capital. Even though Yahoo China was not facing capital challenges, owing to its acquisition with Alibaba, the market was not as lucrative as expected. The inability of the firm to attract users meant that it was not sustainable as was initially expected, leading to its failure, including the failure to acquire enough capital. The type of economic system being used in China was also not suitable for the organization, as it was different from the system used in the United States, the parent market for the organization.
Social factors include the society's way of working or doing business. With the exception of functioning as a platform for receiving and sending emails, the people found it difficult to accept it as a platform for e-commerce, which was the initial intention of Alibaba following its acquisition. The socio-cultural environment of the Chinese market also made it difficult for the firm to prosper, as the government did not allow free speech, to the extent that the government arrested and prosecuted individuals using the platform for pro-democratic campaigns (Venezia and Venezia, 2010). The technological force is the foundation of internet development and the firm. Alibaba's acquisition of Yahoo China was to spearhead the e-commerce initiative advocated for by the organization. Even though the company engaged in the constant redevelopment of the platform to support this initiative, the value was constantly shrinking. The technological development created a number of threats that were not strategically formulated to fulfill the objectives and goals of the organization, thereby making the cost position of the firm obsolete. On the other hand, the company did not embrace ad-search technology effectively, thereby leading to its failure.
Chen, G-M., & Starosta, W. J. (2005). Foundations of intercultural communication. Lanham, MD: University Press of America.
Decker, S. (2014). An Insider's Account of the Yahoo-Alibaba Deal. [online] Harvard Business Review. Available at: https://hbr.org/2014/08/an-insiders-account-of-the-yahoo-alibaba-deal [Accessed 26 Jul. 2019].
Perera, R. (2017). The PESTEL Analysis. Nerdynaut.
Rinuastuti, H., Hadiwidjojo, D., Rohman, F. and Khusniyah, N. (2014). Measuring Hofstede's Five Cultural Dimensions at Individual Level and Its Application to Researchers in Tourists' Behaviors. International Business Research, 7(12).
Venezia, G., and Venezia, C. C. (2010). Yahoo! And the Chinese Dissidents: A Case Study of Trust, Values, and Clashing Cultures. Journal of Business Case Studies, 6(2), 29-34.
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