Case 3-3: Rakuten
Posted by busi6517 on June 12, 2006
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monalynn said
Here is a high level summary of the discussion. Feel free to add to it and or provide additional feedback.
The main issue of this case was noted as cultural differences. It was also noted that expansion should not be the highest priority. Resources must be invested in stabilizing the company strengthening its core competencies. Competitive advantage of Rakuten was knowing and understanding the local consumers better than Yahoo. In order to expand internationally it needs to understand consumers in the various international markets just as well. Expansion also will require a substantial influx of capital to be successful. Yahoo Japan is also a formidable threat and could enter in a price was to entice local customers of Rakuten.
To prevent Rakuten from failing it was suggested that a good market analysis was needed. It was also suggested that they merge with local companies in the markets that they wish to penetrate and to mitigate the threat posed by Yahoo Japan by strengthing its core competencies and emphasis on its current business model. Rakuten should evaluate the probability of success in international opportunities analyzing risks and devising a strategy to mitigate. For the short term, resources should be allocated for local use. International market growth should be a long term goal.
shanshan Wang said
Thanks Mona for summarize our discussion. I just want to add some suggestions about how will Rakuten fulfill its long term goal to increase international market growth. First, as we discussed, merger with oversea local company is a good choice. Merger is better than joint-venture or using outsourcing because joint venture may bring some risks, for example, with join-venture, the partner could learn the main IT strategies from Rakuten, and later the partner could betray Rakuten and start its own business secretly. Besides joint-venture, using outsourcing is not a good choice for Rakuten as well because Rakuten highly base on its IT infrastructure, it should position in the STRATEGIC quadrant on the strategic grid, so in this position, it is hard to be successful outsourcing. On the other hand, merger can avoid these problems and can reduce the culture difference problem because these local companies understand the local consumers better than Rakuten so that can reduce investment risk and maximize profit.
Expanding to international market, I think the corporate culture also is an issue for Rakuten, because it adhered to strict rules and intensive work schedule, for example, all employees should dress in suit and every Monday at 8:00am all employees gather for company assemblies. However, in the North America, people are more like freedom, employees prefer dress casually and fewer formal rules and flexible work schedule. Therefore, if Rakuten want to expand internationally, it will change some of its corporate culture to fit for local employees.
In addition, Rakuten should consider the aggregate implementation risk of a portfolio of expanding projects and recognize that different projects may require different managerial approaches to achieve the high probability of success in international markets.
Gerard said
As Shanshan Wang, merging with an oversea local company was one of the choices we discussed last monday. In my opinion, it is a good choice to merge with an other comapny, since it will open for them a new market what means that they will have new customers. on the other hand they have to take into condsideration the risk of merging with other comapnies since these companies would take from their customer. In this case i think the best choice for Rakuten will be to merge with companies that sell different products then it does, what would allow both of them to have one market and customers with more products.
Sarah Sabri said
I didn’t have chance to participate in this case; but, having read the
summary of discussion which “monalynn” made, I have some ideas about international
market growth.
Personally I think if Rakuten wants to enter the global market, the first job is
to analyze the market they want to penetrate precisely. This includes the
corporate culture of the new market (which was mentioned completely by “shanshan Wang “ ) as well as risk assessment of entering into new market.
Secondly, I think joining with the new local company with the similar size and market
presence is worth to consider. There are a lot of benefits in doing this among
which we can mention the immediate access to market, higher sales, enhanced
distribution channels, new technologies and expertise.
As Rakuten is a technology based company, it has an opportunity to get the benefit of the other company’s IT operations and infrastructure. In this case the core competency of two companies will be enhanced. Besides, when there is lack of resources in marketing and sales in some demographic areas, Partner Company might compensate this deficiency by suggesting different approaches about their local market. Also, I think to enter the global market, Rakuten mainly needs to attract its customers’ trust first. To do so, physically presence is usually needed which is sometimes expensive. However, the international partner can serve as company’s branch in other area and strengthen the presence of Rakuten.
Mostafa said
Shasha’s point of merging is very luring, however I just wanted to point out some of the following cons of merging:
1. Loss of Control
Rakuten may loose the full control at management level. Therefore, they may not be able to run the company as they wish in the new geographic region.
2. Disclosure of information and technologic know- how
merging and operating in other nations may require Rakuten to disclose valuable information or technological know-how. This a great disadvantage for Rakuten
3. Coflicts and Integration
In the past it has been observed that majority of mergers failed due to failure of proper integration between the companies…so for Rakuten it can be an issue as well
Overall, all the point made by Mona and Others are very relevent and useful. I just wanted to point out some downside of the issue of merging.
Thank You
Majed Jandali said
Rakuten has established an enormous footprint and presence in Japan by expanding and acquiring new lines of businesses. This proved to be successful so far, but will it sustain over the long term?! In my opinion, expanding in local markets with a fast pace may pose some problems in the near future. For instance, cannibalization can occur if analysis were not conducted carefully before acquiring.
Expanding Rakuten presence internationally by merging is a viable solution. As mentioned ealier by Mostafa, certain drawbacks should be considered and be given ample amount of attention since the merged company might betray Rakuten and exploit it’s know how to their advantage. As well, conflict of interest might occur (such as, Rakuten might need the profits generated in its international market to reinvest in Japan’s market which might lead to a conflict with the merged company).