International management in the chinese market (2009)

Résumé du document

We present the case of the entry of eBay on the Chinese market and discuss the company's strategy. The case pertains to the period between 2002 and 2006, during eBay's entry on the Chinese market when it had adopted several different strategies in order to tap and snatch a share of the Chinese market.

When eBay decided to enter the Chinese market, the company decided to adopt a gradual and careful expansion strategy. The main reason why eBay decided to tap the Chinese market was because China represented a huge opportunity to develop the company's business aboard by its growing economy and also because the Chinese market has a huge potential with its 250-million-strong emerging middle class. However, the company was aware of some risks that the Chinese market represented. Indeed, at this time the Internet technology was not really well-established in the country and this caused some problems related to low internet speeds, high Internet access costs, and imbalanced economic and technological development in different Chinese regions. Moreover, as it was still a new technology, there was the absence of a reliable credit system for online payment. The Chinese government also resulted in some problems regarding regulations. Other factors were also taken into account. Indeed, the country had to tackle issues of corruption, currency problems as well as a lack of transparency and an adequate legal system to protect the interests regarding Chinese companies and customers.

Due of these reasons, the company decided to "test" the Chinese market by investing a minority stake in a domestic online auction company. Hence, in 2002, eBay decided to acquire a 33% interest in a domestic online auction called EachNet, China's first online auction website. In its initial days, EachNet was partly acquired and was fully acquired in 2003.

Later, in 2005, eBay decided to acquire Skype in order to expand its presence into the online communication sector. Skype is the pioneering global internet communications company which that offers for anyone with an internet connection to make free phone calls to anyone with an internet connection all over the world. in the same year and beyond Skype's acquisition by eBay, it had made a joint venture with TOM online Inc, China's leading wireless Internet Company.
EBay could forsee a huge and logical opportunity to create a partnership with TOM online Inc. Indeed, by already being a partner with its subsidiary Skype, it was established on the Chinese market and possessed local knowledge and established political connections. EBay saw a solution to remedy to its failing business and to boost development in China

EBay is a global brand founded in September 1995 by Pierre Omidyar in San Jose, California. According to the company's website, http://www.ebay.com/, eBay could be defined as "The World's Online Marketplace, enabling trade on a local, national and international basis. With a diverse and passionate community of individuals and small businesses, eBay offers an online platform where millions of items are traded each day". In other words, the success of eBay is that it has created a virtual platform to individuals where all kinds of goods are bought and sold.

Extraits

[...] Competition in the Chinese Online Auction Market The Chinese market has seen the number of local auction companies increasing at the beginning of the years 2000. At the time when eBay was eBay EachNet, this increasing number of domestic competitors has caused many troubles to the company regarding its market position. The fact is that these local rivals have taken more and more power on the Chinese domestic market, which has caused eBay EachNet's market share declining. eBay EachNet's most dangerous competitor was in fact TaoBao, a subsidiary of Alibaba. [...]

[...] Indeed its market share has gone to its main competitor TaoBao because of its incompatibility with the Chinese market. Part IV. Taking action and following up To remedy to eBay's failure in the Chinese market and especially with its joint venture with EachNet, the company became to be interested for one of Skype's partner TOM online Inc. Indeed, by already being a partner of its subsidiary Skype, established on the Chinese market and having the local knowledge and political connections, eBay saw there the solution to remedy to its failing business and development in China. [...]

[...] This is an additional component which explains why eBay EachNet did not succeed on the Chinese market. E. A centralized management EBay EachNet has met a main problem regarding the way the company was managed in China. In fact, the entity had less autonomy because the decision-making was centralized outside China. This gave to the company an important level of inflexibility and not the means to be reactive. According to a study conducted by to the China Market Research Group, eBay EachNet executives “revealed that senior management had not felt respected by their US headquarters”. [...]

[...] Presentation of TOM online B. The joint venture TOM EachNet REFERENCES Part I. Comprehend the case situation This case talks about the entry of eBay on the Chinese market and the company's strategy. We will see that between 2002, eBay's entry on the Chinese market and 2006, eBay have taken different strategies in order to tap and snatch a share of the Chinese market. When eBay decided to enter the Chinese market, the company decided to adopt a gradual and careful expansion strategy. [...]

[...] In other words, eBay EachNet has not invested enough in securing every step of the transactions in order to make customers confident. Indeed, it didn't integrate from the beginning in its online auction website secured payments terms as PayPal, whereas TaoBao integrated its AliPay system a few years before eBay EachNet. This advance in time was another reason why customers were more numerous on the TaoBao's website rather than on eBay EachNet. Indeed, eBay EachNet came too late with its securing system and was not able to regain its lost market shares. [...]