Cross Cultural Management

Muhammad Luqman 27100

Assignment # 02
Case study

Submitted date: 20 January 2020

Submission to: Sir Kashif Khan

Q1.Highlight in points what was Face book’s strategy to enter the Chinese
Market?

Let's take a look at three ways Face book could approach the Chinese market, and
the challenges that each strategy could face.

1: Launching a censored Chinese version

The easiest way for Face book to enter China is to launch a Chinese version
contained within the country, in which users can only connect to each other,
instead of international users.

While this would be a form of self-censorship, other companies have adopted the
same strategy. MySpace, which was launched in China by News Corp. in 2007,
filtered out content regarding religion, politics, and other politically sensitive
topics. In 2010, Apple launched a Chinese version of its App Store, which only
sells government-approved apps. Earlier this year, Microsoft was accused of
censoring China-related searches by displaying different results for English and
Chinese searches on sensitive topics like "Tiananmen Square," "the Dalai Lama,"
or "Taiwanese independence."

2: Possible joint ventures

A more conservative approach would be to enter China via a joint venture with an
existing social network, like Weibo, Tencent Weibo, Renren  (a Face book clone),
and Baidu.

Weibo, which is owned by Sina, reported that monthly active users rose 30% year-
over-year to 156.5 million during the second quarter. Ten cent’s Weibo, which
piggybacks off of Ten cent’s massive Internet Empire (QQ, We Chat, and Q Zone),
has at least 220 million monthly active users. Renren, by comparison, is in bad
shape its monthly unique users dropped 18.5% year over year to around 44 million
last quarter. Baidu runs the blogging network Baidu Space, although it's unclear
how many users actually use the network.

3: Relying on stand-alone apps

That brings us to the third idea entering the Chinese market via a stand-alone
mobile app like WhatsApp, Face book Messenger, or Instagram. Of these three
apps, WhatsApp is the only one that hasn't been banned by the Chinese
government. The numbers are encouraging. WhatsApp's monthly active user base
doubled from 300 million to 600 million users between August 2013 and August
2014, and Zuckerberg previously declared that the app could eventually reach 3
billion users. Unfortunately, the main problem for WhatsApp is Ten cent’s We
Chat, the dominant mobile messaging app in the country. We Chat’s user base
grew 86% year over year to 438 million monthly active users in the second quarter
of 2014.

2. What are the possible reasons for Face book’s failure in not being able to
enter the Chinese market?

Face book is still trying, but it needs to understand it will be particularly difficult
for it to survive in China.

First of all, Face book can be easily substituted in China. Chinese apps, including
social media services like We Chat, are much more general and useful in China.
For many Chinese, We Chat is not only a communication platform but also a
digital wallet. The app is akin to a blend of messaging, social media, and mobile
payment and ordinary people find it impossible to imagine life without it.

We Chat’s innovations particularly its app-within-an-app model makes other apps

like Face book seem rather basic in contrast.
Second, the current policy climate for foreign internet companies in China is not
ideal. The Chinese government has been publicly supporting domestic tech start-
ups in all ways. The development of foreign-invested companies is restricted by
many state policies in China companies are forced to transfer technology, create
joint ventures, lower market prices, and even aid home-based players.

More broadly, China has strengthened its internet regulations under President Xi
Jinping. Chinese citizens who wish to gain access to Face book must tunnel in
using a technology tool known as a Virtual Private Network (VPN). But a number
of VPNs have been removed from app stores or shut down meanwhile last year.
Following with a new cyber law that went into effect on June 1, 2017, the
government appeared to improve its “Great Firewall,” shielding politically
complex content and the sources of various other content from the public. Even if
Face book is permitted to run an innovation center in Zhejiang, it is unlikely to be
allowed to operate its main communication stage in China. The nation-wide
internet clampdown will continue to stall Face book’s progress to change the
company’s status in China.

Last but not least, China’s increasing cyber security awareness is also a problem
for Face book. The move comes in the aftermath of Edward Snowden’s exposure
of a huge U.S. cyber espionage program called PRISM. As part of its national
security planning, China has been enhancing its cyber defense systems, delisting a
number of U.S. tech companies from state procurement. In April, Face
book admitted its mistake in allowing a data leak of up to 87 million users to
Cambridge Analytics, a firm working for the Trump presidential movement. The
credibility of the company is facing a crisis at home and abroad. Because of the
concern that Face book could be a vehicle for cyber espionage, the Chinese
government will continue reject the company from its domestic market.