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Yahoo: Relationship Crisis with Alibaba in China  
 
Product Ref: 11/503C Company: Yahoo! Inc.

Product Type: Case Industry: Internet Software and Services

Related Product(s): Teaching Note
Authors: Zhigang Tao   Penelope Chan
In October 2005, Yahoo! Inc. ("Yahoo") formed a partnership with Alibaba Group Holding Limited ("Alibaba"), the country¡¦s biggest e-commerce firm. The company invested US$1 billion in Alibaba for a 40% stake and transferred the ownership of Yahoo! China ("Yahoo China") to Alibaba. However, some media outlets have described the two companies' relationship since 2005 as being anywhere from rocky to downright ugly. Yahoo's decision in mid-2009 to switch to Microsoft's Bing search technology has prompted Alibaba to adopt a search engine from Yahoo's local competitor Sohu.com. Then Alibaba collaborates with eBay Inc. instead of Yahoo in entering the US business-to-business market. Meanwhile, Yahoo directly competes with Yahoo China for advertisers by soliciting companies in southern China to advertise on Yahoo's Hong Kong website. Alibaba has been making a loss in its operations since 2006, and the search revenue share of Yahoo China has dropped from 27% in 2005 to an insignificant level in 2010. But Yahoo has turned down Alibaba's offer to buy back its stake because it would like to wait for the IPOs of Alibaba's two major subsidiaries before any exit. In light of growing tension with Alibaba, Yahoo's board would like to review its approach to managing this partnership and figure out what should be done to mend the ties.
Functional Area : Strategy & General Management

Issues: Effective management of cross-cultural partners. Remedial strategies for an estranged business relationship. Direct competition between business partners. Transformation of a partnership's nature in response to market changes.
Length: Text: 16 pages
Exhibits: 18 pages
Country: China (People's Rep. of)

Pub. Year: 2011 Level of Difficulty: 3
         
This product type is available in the following language(s):      English
         
Related Information: N/A
 
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