Case study: eBay in China
- Comprehend the case situation
- Defining the problem
- Identify the causes
- Generating alternative solutions
- Taking action
The proposed case deals with the eBay Company's plan to expand its activity to China.
eBay is a US company offering e-commerce, e-payments and internet communication services globally. It was founded in 1995 in California. eBay is the international online market place 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 year. At eBay, sellers can list products to sell on the website while buyers can browse them and bid on the interesting ones through auctions. The company doesn't make the mediation but just informs the seller and the buyer by e-mail when a bid exceeds the seller's reserve price. At any time, eBay takes possession of the product sold. By this way, the business model of ebay is simple: it charges fees to the sellers when they put up the product for sale, optional fees are also practiced for making goods more visible and in addition, eBay makes a good margin of profit on the sale. The company's service is completed by a customer service composed of personal customer services such as chat, e-mail and phone. The customer service is also composed of bulletin boards, customer support boards, personal pages, forums, personal shopper alerts (to provide potential buyers e-mail alerts), the turbo lister, pro-stores, feedback forums.
eBay has become a global brand because the company is managed by people with competencies in different parts of business such as marketing, finance and technology as well, but also thanks to a simple and accurate business model where the company takes fees and commissions on transactions done through its site. The company is developing itself in the global market thanks to a strategy including acquisitions, alliances and joint-ventures with local partners. Today, the international activity of the company in 35 countries represents 18% of the whole turnover.
Today, the company's plan is to expand its activity to China through a joint-venture with the China-based online and wireless operator TOM online in which ebay would have 49 % of ownership.
ebay is already present in the Chinese market because the company owns EachNet, a domestic online auction company. In addition, eBay also owns Skype, a global online communication company, which was already integrated indirectly in China through a joint-venture with TOM online.
TOM online is a local online company well-establsihed in the Chinese market with a very good experience and a knowledge of the market and with interesting political connections.
China represents an attractive place to do business, an ongoing economic growth, a gradual integration to the global trading community, an increasing place for internet and mostly an enormous population. In China, the population tends to get more and more access to the internet and to become more and more interested in the e-commerce applications.
[...] Although eBay is in a country where the legal environment is not easy, China is a complex country where being from abroad is not an advantage for dealing with the government and the legal aspects. As far, the company is suffering from a lack of trust and it might be difficult to change the minds of the customers because they trust more in Taobao. So we will give alternative solutions, both solutions will tend to improve the adaptation of the company in the Chinese market. [...]
[...] By this way, it appears that eBay didn't make enough effort in building up a trustable relation with Chinese customers while Taobao did it. In addition, eBay missed to secure enough buying processes when it entered first in China because it didn't include an escrow in the payment system while Taobao did it. Also, when Taobao allowed its customers to interact directly between buyers and sellers, EachNet didn't allow it. The negative point of EachNet would be the poor customer service proposed; it didn't for example, propose an instant message system. [...]
[...] eBay applied the US business model to China and it didn't work because Chinese websites were loaded of a lot information, links, graphic, banners and multimedia when EachNet looked with not too may services and information. In addition, the brand image wasn't coherent enough, the company emphasized auction and transaction processes; also rather to have an hotline support, the company just proposed online guidelines and there weren't forums for enabling users to help each others, this was considered as a bad customer service where in China, doing business alone is not well considered If we look at the organization, it seems that eBay had got a problem when it decided to centralize all the decision-making in the US, which represented a lack of flexibility and adaptation to the Chinese market. [...]