Cross Culture Conflict of Groupon

So I will talk about Groupon’s Cultural background, Cause of conflict, Impact and Solution with references.

Cultural Background

Groupon is ecommerce website where they advertising local company’s product and sell them into good price by giving discounts to consumers. The founder of Groupon is Andrew Manson in 2007. Their first deal was for Motel Bar and it is located in Chicago besides their office. After their first deal, they increase their business across the city and also maintained the sense of humor that helped them to get attention from first customers. As momentum going on they had spread to 28 cities in 2009 and also it crosses the international border like Germany, France, Italy, Spain, UK, Switzerland and Belgium. In 2011, they launched special deal channels for inline advertising like GrouponLive, Groupon Getaways and Groupon Goods but after all this success they made a mistake which effect their reputation. However, they overcome their mistakes and get involve to meet the needs of customers like in 2012, a third of all their transactions in North America were made via mobile apps. Now-a-days, Groupon delivers good things for customers to shop local in online marketplace. And for small businesses, they offer comprehensive marketing campaign, complete with merchant solutions such as credit card processing and point-of-sale system.

CONFLICTS

After huge success in US, Groupon entered China in February 2011 and within seven months they lost 46.4 Million (Kan, 2011). 13 of locations in china closed and over 400 employees were fired from Groupon. Firstly, they failed in china because of arrogance because before entered in china, they assumed that their company will become the largest shopping site in china. They did not adapt Chinese culture and they started hiring employees with high salaries. They tried to make alliance with Lashou which is the largest Chinese group buying site. But Chinese site refused their offer even they gave warning to their employees that if any employee leaves their job for Groupon then they will never get job in China. Secondly, their china’s head manager thought what worked in Germany would work here. They did not understand local people’s needs. China has huge population and it is not easy to shine in Chinese market. Groupon made an aggressive sales tactics like they negotiate with buying operators by giving them 10 percent instead of 50 percent, which means they are looking for more profits in terms of business relationship. Local vendors were understanding these tactics and they refused to do business with them (iChinaStock, 2011). They used online marketing like email and they did not know that Chinese people did not check their email regularly. They used this strategy in Germany before but it did not work in China. Thirdly, they did not hire local talent who has idea on local market. There is only two people in top management and one is from Mainland China and another one is from Hong Kong. Their most of operations were run by foreigners who has limited knowledge about local market. However, foreign managers failed to negotiate with Chinese employee because they do not want to adapt Chinese culture and as a result Chinese employees are not happy on top management. For that reason, Groupon experienced incredible employee turnover. Lastly, Groupon made good decision to alliance with Tencent which next to Alibaba Group, is a true leader in China’s ecommerce. But Groupon refused to follow Tencent rules and regulations like they did not want to depend on Tencent’s local market expert, they chose to hire expats to run their business all over the country. As a result of Groupon’s over confident business model they failed in China.

Impact of organisation

After a huge loss, Groupon wanted to set their Chinese operations but Tencent knew that it is not easy for Groupon to catch the market. For that reason, Oliver Samwer who runs Groupon’s international operations from Berlin, went to China to talk to Tencent’s CEO about their problems (Chijs, 2011). After that they launched online coupon business in China but at the same time there are other 2000 Chinese group buying clone sites were competing with each other however Groupon became popular when they launched Boomerang and they understand local market and they had ballooned to nearly 5000 sites in china (Wharton, 2012).

Solution

First of all, Groupon failed in China because of their over smart attitude. They thought it is easy to catch Chinese local market and set up business. They could do market research before entered in China like Local consumer need because China is one of the most diverse countries in the world. Before doing business with them Groupon could learn about Chinese values, etiquette, protocol, mannerisms and gestures. Do business in China in the Chinese way, or be prepared for mistrust and failures (Lyakina, 2017). Secondly, their negotiation style was poor because they offered 50 percent of profit to Lashou but they gave them 10 percent. They could settle negotiation process before start business. Thirdly, if you want to do business with Chinese people then you have to follow their rules and regulations. What Groupon did actually wrong. They could hire manager from china because only local people could understand local people’s needs and wants. Lastly, they could hire local employees instead of giving opportunities to foreigners. To catch local market, it is important to recruit employee wisely.

Conclusion

If any company wants to expand their business in worldwide then they should know negotiation skill, local market condition, local people’s needs and wants and also they should know their competitors because they have to take the battle on their own ground. Perhaps, do market research is the most important step because researching about local market will help company to understand whether it is good or bad to enter a country. They should also make a strategic marketing plan based on current market.

Reference

Kan, M. (2011) Groupon’s China Venture Posts US$46M Loss [Online] https://www.pcworld.com/article/242505/groupons_china_venture_posts_us46m_loss.html

iChinaStock (2011) Groupon’s Flaming Train Wreck In China: Its JV Had A $46 Million Loss On Just $2 Million In Revenues [Online] https://www.businessinsider.com/groupons-china-train-wreck-gaopeng-jv-posts-46-mln-loss-only-21-mln-in-revenues-2011-10/?IR=T

Wharton (2012) The Groupon Effect in China [Online] http://knowledge.wharton.upenn.edu/article/the-groupon-effect-in-china/

Chijs, M.V.D. (2011) Groupon China Off To A Bad Start [Online] https://www.businessinsider.com/groupon-china-off-to-a-bad-start-2011-2/?IR=T

Lyakina, O. (2017) Top 5 Most Important Things about https://www.dragonsocial.net/blog/top-5-things-doing-business-in-china/#comments