Academic journal article
By Huang, Echo
International Journal of Management , Vol. 24, No. 1
This article examines the e-commerce environment in Taiwan with respect to the People's Republic of China (PRC), then analyses market-specific entry barriers, and categorizes entry strategies of different companies in the cross-strait area. After observing sixteen early entrants, we report three major findings: 1) Maturity of the Taiwan e-commerce market is superior to that of mainland China, especially its progress in business environment and government policies, 2) Perceived market entry barriers affect entry strategy adoption, and 3) Most firms adopt B2B models and form alliances to reduce investment risks and capture growing markets in the cross-strait area.
China's recent IT-related economic growth, especially in the areas of telecommunication infrastructure, has impressed the Western world, with consumer demand rising at an annual rate of 30-50% (Tan, et al. 1997). Given the prolific growth of electronic commerce (EC) and attractive potential of the Chinese market, more and more multinational corporations (NINCs) are flocking into Taiwan and Mainland China. Despite the huge potential of the Chinese market, it is not necessarily an opportunity for every MNC. The disappointing experiences of many NINCs in China make it important to question whether international business theory, as explained in business schools, is sufficiently comprehensive to explain the China e-commerce experience (Child and Tse, 2001 ; Reid and Zyglidopoulos, 2004).
Although a large number of studies have analyzed determinants, strategies, and consequences of foreign market entry (Agarwal and Ramaswami, 1992; Dunning, 2002; Kogut and Singh, 1988), researchers have yet to examine how e-commerce firms expand into new geographic territories. The most likely reason for this gap is the relative novelty of these firms, and the sector itself. While the main business functions like marketing, sales, and channels have remained the same, the logic behind them is completely different.
This study tries to resolve the question by investigating sixteen early entrants and their business models and strategies for staying competitive in this new environment. In this article, barriers to market entry in Taiwan and China are explored, while focusing on the socio-cultural distance between MNC home country and the host nation, technology nature of investment projects, and the institutional and business environment and policies of the host country. This paper also examines Taiwan's EC environment compared to that of PRC, analyzes market-specific entry barriers, and categorizes each firm's strategy in cross-strait development.
The first section begins with a brief overview of the origins and evolution of the e-commerce business model. section two describes the current e-commerce environment in Taiwan and China, and then presents a conceptual framework for comparing the bilateral e-commerce environment. The third section details methodology and research findings. The last section concludes with suggestions for future research on cross-strait entry strategies.
2. EC environment in Taiwan and China
2.1 Market Barriers
This section discusses primary factors affecting MNCs' entry modes. There are two major barriers: EC-specific factors and country-specific factors. Palumbo and Herbig (1998) defined problems that may be encountered when a company operates through the Internet. Main obstacles experienced by companies committed to EC include psychological, operational, organizational, and product-related factors. Examples of psychological concerns include cost, risk and profitability of export, ethnocentric or geocentric orientations, short or long-term perspectives. Operational barriers refer to problems dealing with export paperwork, documentation, language problems, delay in payment, etc.
Reid and Zyglidopoulos (2004) reported that failure to understand competitive isomorphism, the size of the China market, inadequate prior market research, and urgency, explain why NINCs enter transactions that yielded disappointing and slow returns. …