Assignment 2 – Cultural Barriers
A networking success story
Cooler.com was a social networking site designed for people over the age of 25 living in the UK. It was set up in 2004, as the success of sites such as MySpace and Facebook prompted the generation of a number of copycat sites.
Unlike many of these, Cooler.com became very successful. In a 2007 poll, users who were questioned about their preference for the site replied that they liked the look and feel of the site design, the absence of targeted advertisements, the ability to use video messaging, the creation of customized user channels, and connections to professional and career development sites.
In 2006, Cooler.com expanded across Europe. It obtained free translation of the site content by appealing to European users, and was an instant success. News stories described how Cooler.com’s networking services were enabling professionals to forge new business links across Europe, find career opportunities across the EU, and enable interactive communication between family and friends in a world in which many people were moving freely through the EU in search of work and life experience.
At the end of 2006, Cooler.com had a quoted value of 12,000,000 GBP; an amazing achievement considering that its two founders (Gary Keegan and William Brent) established it on a second hand computer using a spare bedroom as office space.
A desire for expansion
With the European success, Cooler.com’s founders looked further afield for countries to expand into. The U.S. market for social networking sites was saturated by 2007 and there seemed no way for Cooler.com to break the dominance of the main players. However, one of Cooler.com’s founders, Gary Keegan, visited Japan early in 2007 and noticed that there was only one major networking site there. To his surprise, this site had many different features from Cooler.com. It had no real means of requesting new friends and seemed to rely mostly on people posting anonymous blogs that readers could respond to.
When Gary returned to the UK, he told William Brent that Cooler.com had to expand into Japan. Their success there was guaranteed.
A rapid move Gary Keegan was convinced that, if Cooler.com did not move rapidly to establish a presence in Japan, they would lose a potential market advantage to other major social networking sites. Despite William Brent’s protests that the company was not ready for an expansion into Japan, the site was established within a month of Gary’s return to the UK. Cooler.com did not have Japanese employees and did not feel there was a need to employ translators. Instead, they relied on users contacted online to translate the website content. This had been a very successful strategy for Europe and had contributed to Cooler.com’s profit margins.
A costly mistake
However, six months after setting up the Japanese site, user numbers were still disastrously low. William Brent insisted that Cooler.com set up an office in Tokyo to try and establish a corporate presence there. They employed a small team of Japanese consultants and marketing specialists to try and promote the site. However, the new employees were very critical of the way in which Cooler.com had set up operations. When Brent visited the new offices, he held a meeting to discuss all their concerns. He was told that Japanese internet users had different views about security and communication than Europeans. The Japanese believe that online security is very important and are reluctant to use their real names and photos online. They prefer blogging to blatant self-promotion. In addition, most Japanese tend to use mobile sources to access the Internet, not computers. Cooler.com was not optimized for mobile use. Another major problem was that Cooler.com had not established a presence in Japan for a long time.
The Japanese viewed this as insulting, as well as the often amateurish translation that had been provided by the users.
By 2008, it appeared that Cooler.com’s investment in Japan had been wasted. They had made no significant inroads into the market, and the operation in Tokyo was running at a loss. William Brent decided to try and reposition the site to recoup some of the sunk costs.
Case Study Discussion Questions
1. What mistakes did Cooler.com make with this market entry?
2. How could Cooler.com have avoided this expansion failure by running through a strategic planning process?
3. Based on the information in this case study, what would be the best market entry strategy for a social networking site wishing to enter Japan?
4. How might Cooler.com recoup some of their losses?