Strategy in China:
Alliance or Acquisition
By:
Bill Focht
Lori Fox
History of eBay in
China
1995 established C2C & B2C online/virtual marketplace in U.S.
2002 entered China purchasing 33% of EachNet for about $30M
2003 eBay acquired the remaining shares for about $150M re-branding as eBay EachNet
Competitor TaoBao was founded in 2003
2005 eBay acquires Skype expanding into online communications sector
2005 Alibaba forms partnership with Yahoo resulting in TaoBao becoming wholly owned subsidiary of Alibaba
2006 eBay announces joint venture with TOM Online
Problem Statement
In 2006, eBay was in the midst of merging with a
Chinese based company, TOM Online, and were faced with deciding which strategy would be better to increase revenue growth in China: leveraging a merger with TOM online or considering alternatives such as investing in its current product and services offerings to reposition the brand.
Strengths
Strong brand image
14% market share in global e-commerce
Unlimited transaction capacity
Successful international presence - 221.6M registered users
Unique user feedback system
No inventory costs
Development and ownership of PayPal
Embedded cross-selling opportunities
Reputation for non-counterfeit products
Weaknesses
Perception of poor customer service
Lack of buyer and seller interaction prior to sale
Bidding process unfamiliar in Chinese culture
Lack of “trust” as non-local company with short history
Centralized decision-making and lack of local insight
Web-site “too empty” for Chinese taste
Reputation for non-counterfeit products
Opportunities
China economy growing in leaps
Chinese internet users ballooned to greater than 200M
Number of online shoppers at 55M and growing rapidly
Transaction value of C2C ecommerce market in China 23.1B and growing
Lack of “trust” as non-local company with short history
Chinese governmental regulations are reducing
Opportunity for merger with TOM Online
Threats
Fierce competition from local rivals
Competitive pricing strategies
Need for more capital investment
Third company philosophy and management team would
