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TAOBAO vs. EBAY China

TAOBAO vs. EBAY China. Elise Lin BUS 550. Overview. Background Overview Macro and Micro What made a difference in China eBay vs. Taobao : business strategies and technologies Comparison in the capital market Conclusion.

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TAOBAO vs. EBAY China

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  1. TAOBAO vs. EBAY China Elise Lin BUS 550

  2. Overview • Background Overview • Macro and Micro • What made a difference in China • eBay vs. Taobao: business strategies and technologies • Comparison in the capital market • Conclusion

  3. 1995:Pierre Omidyar founded eBay, an online marketplace for buyers and sellers • 1998: listed on NASDAQ • 2002: acquired for $1.5 b • 2002: started strategic alliance with in China • 2005: acquired for $2.6 b Voice Over Internet Protocol (VOIP) Growth Strategy: acquisition eBay’s headquarters in San Jose

  4. Internet Infrastructure took off

  5. Top 10 Internet Countries – 2012 Q1 Source: Internet World Stats

  6. Rising Purchasing Power

  7. Huge Business Opportunity for C2C in China is forseen First Mover Advantage

  8. + in • 1999: EachNet was founded by two Chinese entrepreneurs, American- trained MBAs inspired by eBay’s success • 2001: EachNet held 90 % of China’s Internet C2C market • 2001: EachNet started to charge listing fees to sellers • 2001: eBay approached EachNet • 2002: eBay acquired EachNet for $180 m (record high in China) • 2002: eBay Japan struggled • 2004: eBay China officially moved onto eBay’s global platform eBay considered China to be the company’s second most important target market, after the U.S.

  9. eBay Did Not Keep the Lead, the First Mover Advantage

  10. B2B Shopping search engine C2C (Taobao) B2C third-party online payment platform Internet portals Cloud computing

  11. 40% 20% 30% 2% (Ma and managements) Alibaba Group’s headquarter in Hangzhou, China Source: www.people.com.cn

  12. Taobao • 1999: Alibaba was founded in Jack Ma’s apartment • 2002: Alibaba grew to be the leading B2B Website in China • 2003: Taobao was founded again in Jack Ma’s apartment • 2004: Alipay was launched • 2008: TaobaoMall, a dedicated B2C platform, is introduced to complement Taobao’sC2C marketplace • 2010: Taobao Mall launches a new independent web domain, Tmall.com • 2011: Taobao broke into three separate companies, Taobao Marketplace, Tmall.com and eTao • 2012: Tmall.com changes its Chinese name to strengthen its positioning as a source of high-quality, brand-name products

  13. Why + < in • Centralization -- Too globalized, not localized enough 2005: Jack Ma: eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose–but if we fight in the river, we win. • Less innovative and integrations in technology(IT systems) • Arrogant, over-confident 2004: Cobb: viewed Internet C2C as eBay’s primary expertise, and did not think that it could be matched by its competitors in China

  14. Centralization Vs. Localized • eBay changed the Chinese operation to match with eBay global (listing categorization, interface styles and technologies) • Taobao : categorizes as the typical structure of a local department store • eBay created a regional layer, eBay Asia in Korea • eBay Moved servers and the maintenance to Silicon Valley • Pricing changed : insertion fees, final-value fees and features fees : 3% of the transaction as the service fee : no fee Inflexibility to respond to the customer Chinese customers complained

  15. Fees for selling on eBay Sources: eBay

  16. Fees for selling on Taobao— Tmall (天貓) Source: Tmall

  17. Competing in Technology Services (IT systems)

  18. Competing in Marketing Ma: “eBay may have deep pockets, but we will cut a hole in their pocket.”

  19. Taobao’s EC Strategies Customers perceive Taobao as informal and friendly No fee policy and secured Alipay service discourage customers from doing offline trasactions Categorizes similar to local department stores Integrated an instant messaging service into each seller’s webpage AliWangwang: http://www.taobao.com/wangwang/2010_fp/buyer.php?TBG=43351.80787.3

  20. Running a Business is like a Marathon Source: yahoo finance

  21. It Is Still Too Early to Claim Alibaba’s Fate NASDAQ China Shanghai Composite Index

  22. Conclusion • Nowadays it is important for corporations to go global, but key strategies have to be considered: • Centralization vs. decentralization (empowerment, globalized) • Potential issues from growing through acquisitions (cultural conflict, IT integrations…) • Are you ready for the target market (Alibaba failed in Korea) • For contemporary companies, how to find the IT FIT that can go along with the company culture and the external environment is a key to success • How to generate the revenue (revenue streams) in order to gain substantial competitive advantage in the market

  23. Question 1 In the case eBay and Taobao, which company did eBay acquire? • EachNet • EveryNet • Baidu • Tmall

  24. Question 2 In the case eBay and Taobao, why did eBay in China have only 21% of its users use their payment services? • Taobao had first mover advantage • eBay China’s payment system constantly crashed • Customers confused about multiple payment systems • None of the above

  25. Question 3 In the case eBay and Taobao, why did Chinese customers complain about the eBay China’s availability of service? • eBay China’s servers were overloaded by too many users • Maintenance was done on California time schedule • Hackers attacked eBay servers • Government censorship in China

  26. Thank You ! Q & A Beijing's Bird's Nest stadium National Aquatics Center, Beijing, China

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