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Strategy in China: Alliance or Acquisition By: Bill Focht Lori Fox

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

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Strategy in China: Alliance or Acquisition By: Bill Focht Lori Fox

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  1. Strategy in China: Alliance or Acquisition By: Bill Focht Lori Fox

  2. 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

  3. 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.

  4. 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

  5. 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

  6. 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

  7. Threats • Fierce competition from local rivals • Competitive pricing strategies • Need for more capital investment • Third company philosophy and management team would need to be synergized with eBay Eachnet • Dynamic marketplace • Chinese government interference/regulations

  8. Alternatives • Do Nothing • Refine eBay EachNet product and services offerings to reposition the brand and connect with local consumer base better • Merge with TOM Online • Seek out other mergers • Cease China operations and sell off eBay EachNet shares

  9. Recommendations • Merge with Tom Online • Provide the dynamic and strong visually oriented graphical interface that appeals to the Chinese marketplace • Institute an escrow system to satisfy the safety concerns of Chinese users and build trust • Provide significantly improved and hands-on customer service • Eliminate seller listing fees • Leverage Tom Online political connections

  10. Recommendations • Incorporate Tom Online mobile technology in their long-term competitive strategy • Play Up public’s perception that TaoBao houses a greater number of counterfeit goods • Incorporate more customer-interactive interface such as live web-chat and customer support call-centers • Seek out an experienced and localized management team to manage the day-to-day operations of TOM EachNet

  11. Questions

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