Case Study “Ebay in China” Essay

EBay firstly entered the Chinese market in 2002 by getting a 33% stake in its local counterpart, each(prenominal) give notice, followed by a full accomplishment a year later in 2003. Critically evaluate eBay.s select of market entry scheme for China, listing both the advantages and disadvantages of its acquisition strategy.As we know, eBays China expansion strategy underside be considered as failure, condescension the fact that eBay entered this capabilityly rewarding market with caution. This cautious strategy was rattling unusual for eBay, because they used full-forced, head-on, .be-first-or-nothing. strategy in other markets, for mingled reasons, it would be impossible to implement this strategy when penetrating Chinese market. So acquiring an already comparatively recognizable and well established strike off seemed to be the outgo way to continue eBays expansion in Asia.Without a doubt, separately make was the best candidate for acquisition at the time. When eBay carryd 33% shell outs of Each net lam in 2002, it seemed to be hugely prospered, because in year 2003 the value of Each Net had doubled and market sh are had rocketed to 85% this initial success encouraged full acquisition of Each Net. As we know, the success did not turn out to be long-lasting, despite the fact that in first few years the performance of the smart set was brilliant. While acquisition of Each Net meant many advantages for eBay, it to a fault implied just disadvantages.Advantages of Each Net acquisitionEach net had strong fiscal backing from large speculation capital companiesImmense market potential 1,23 billion Chinese language speakers all around the world chop-chop increasing human action of internet users in China increasing number of potential customers Each Net in essence was an imitation of eBay, adjusted to fit Chinese customer needs, but with ofttimes coarseer citation in ChinaIncreasing popularity of shopping online ( alike by using Each Net) in China.Well established image of Each Net in ChinaHigh Each Net market share (about 50%) in year 2002Wide range of different items sold by dint of Each NetOnly significant player in online auction market in China by year 2002 was Each NetDisadvantages of Each Net acquisitionCultural differences and get habits of Chinese.Huge investments call forUnpredictability of the fast-changing Chinese market huge jeopardysEmerging competitors TaoBao (Alibaba subsidiary), which outcompeted eBay Each Net in future, by bettor adjusting to Chinese customer needs and buying habitsAlibaba had more established presence in China and much expose knowledge of Chinese customers reason for increasing lack of consumer corporate trustingness in eBay Each Net in futureEach Net failed to give customer trust in future, while TaoBao succeededChinese refusal of adopting traditional eBay practices (Pay pal up etc.)Lack of interaction possibilities between buyer and seller, provided by eBay Each Net important for Chinese, TaoBao was much better in this aspect Comparatively little customer serviceIn conclusion, this acquisition, which was probably the right step by eBay, turned out to be failure, despite the fact, that at first it seemed to be a huge success. In my sound judgement it is because eBays management was so overwhelmed with the initial success, that they lost caution they were genuinely conscious at start but failed to adjust to customer needs, they did not gift enough precaution to them, which led to eBay Each Net to situation where they were outcompeted by TaoBao in Chinese market.Question 2Assess the potential benefits and essays of eBays joint menace with Tom Online.In an eBays and tomcat Online formed joint impale there are whatever benefits as well as some risks. One of the benefits is that tom turkey Online is a Chinese domestic brand, which is much better for consumers of China. They mostlylike well cognize Chinese internet brands. turkey cock O nline is a market leader in China in eye socket of energetic value-added services and has an internet portal, which is one of the biggest and most popular in china, it means that tomcat Online is a well know brand in China and is rapidly recognized in the internet.TOM Online has a strong experience in cooperation with Skype and has given swell results in it. This shows that TOM Online knows how to cave in new product in the market and how to increase its market share, which is immanent for eBay at the moment. All the aspects of TOM Online show that this accompany has a spacious and efficient knowledge of Chinese market and exactly this feature is very necessary for eBay to gain good results. In addition, political connections of the TOM Online can be very helpful in Chinese market, especially in nowadays and situation in China.Risks of this joint enter are not as great as benefits, but there is a risk to loose a chance to strengthen the eBay brand, because Chinese customer s will be focused on the TOM Online and EachNet. There also is a risk of loosing big amounts of money, because TOM Online has a 2% bigger ownership, but in amount of money, eBay invests two times more money, however the success of the TOM EachNet depends more on TOM Online. There also can be assessed as a risk point, that TOM Online is focused on wide awake value-added services and their stain audience is generally young consumers, but eBay target audience is a little older.Question 3eBay will score a 49% stake in the new joint venture while Tom Online will have 51% ownership. Critically assess both companies decisions on their noteive percentage of stakeIn our opinion E-Bays decision to joint venture with TOM Online was a great success. Although E-Bay is a giant and successful company in US and has successfully expanded worldwide, China is a Hard-Nut for them. Chinas cultural differences and lesson values lead them to face some difficulties in setting up eBay business. Chinese people soothe trust their own companies more and respect them.TOM Online is a successful company with a good written report and has already gained trust of millions of customers. Their activity area is also not out-of-the-way(prenominal) from eBays mainly internet and other IT services, and mobile entertainment. TOM Online was also expanding rapidly and cooperating with various influential companies as for example Skype. But latterly they also had a decrease in revenues so joint venture also was an opportunity for them. That way they widened their service range and that meant new opportunities. wherefore eBay 49% ownership and 51% to TOM Online? Why then eBay still invests more? And why the term eBay disappears from the name of this joint venture TOM Eachnet. We think that that is quite obvious. There are several factors which explain this situation. As we already know the Chinese culture is very different and trust and respect are very substantial terms. So by erasing the US brand name from the joint venture name people would trust it more. yet both TOM and Each net are known as local brands.In this joint venture TOM invests US$20 million and hands its local knowledge, technology and brand value, which are much more valuable than money this explains why eBay invests twice as more. Moreover TOM Online has very important persons among their shareholders. This joint venture would open a whole new market segment for both eBay and also TOM Online, allowing them to fulfill and widen significantly together. They can also let eBay into mobile world.As we all know China has been always very different and that is the reason why setting up a stable, successful company has been a hard battle for others. But it is also a huge amount of customers (almost 1, 5 billion) which then means a great revenue if succeed. eBay EachNet understood than they are too unstable and the stakes are too high, so the joint venture with TOM Online and creating TOM EachNet was the b est opportunity.Question 4Strategic recommendation on International mercenary Strategy for E-BayIncrease revenues by capturing more customersIncrease of the customer prove will positively contribute to increase in revenues, customer consignment schemes may be developed further in rule to checker that more people fall into the category of loyal customers, the services could be improved in order to serve some customized customer needs, a wider advertising campaign may be carried out in order to appeal to a wider market segment, perhaps even trying to work with some niches of the market providing solutions to their problems, satisfying their needs and wants. Look into new pay system or create own (PayPal only in 38 countries) Increasing the number of ways how customers can pay for their purchases will see to it that revenues grow and that a wider appeal will be given to the company the services will be interesting both to credit identity card owners, pay pal users thus ensuring that customers can submit the method in which they would like to pay for their purchase this method will also contribute to the solution of security concerns since people will be able to choose the method they consider to be the safest one.The Company should look at acquiring shopping comparison sites and vertical search engines to drive traffic and acquire consumers. Ebay should also consider how they can compete with Myspace, facebook and youtube, because a lot of selling is made through these sites, like google adwords is giving great traffic to Ebay, it is also a rival to Ebay, it proposes other similar sites. Company could also hit the roof to the mobile sphere. Make eBay available for on mobile phones and PDAs and others. As that is one of TOM Online activity sphere, it could be easily through and there is already an available previously formed customer group, who could be also very interested in this kind of service.