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Ebay’s strategy in China: Alliance or Acquisition?

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  1. Introduction
  2. EBay's market entry in a new foreign market
    1. Presentation of the company
    2. The Chinese market
    3. Why does Ebay want to enter in this new market?
  3. The implementation strategy
    1. Acquisition of Each net: advantages and disadvantages
    2. Joint venture with Tom Online
  4. Conclusion

In 1990's, many companies invested in the internet, the dotcom companies, because they thought it will generate a lot of profits quickly and will help in expanding their businesses. For them, internet represented a new market and a new economy. So, lots of companies were created around the world and the valuations of internet stocks were known as an important increase.

But in 2000's, there was a dotcom crash. Indeed, several factors were causing this failure. In first, lot of companies lacked experience in term of strategic decision-making, finances, marketing. Indeed, the managers of these companies had an IT and computer skills but they didn't have business experience. Secondly, another factor was the lack of product differentiation. So, they didn't have a competitive advantage and their strategies were to make promotions and price discount.

So, they reduced their profit margin and some companies stopped their activities because they had too many debts. Also, one important factor was the incompetent managers. Indeed, they didn't take into account customers' needs; there was not after-sales service or market researches before launching a new product. Finally, customers were not ready to buy on internet because at this period, the security was not perfect. Customers were afraid to give their identity, credit card details on internet.

But,some companies succeeded in this sector as Ebay. Indeed, Ebay is one dotcom company which is one example of success. Ebay succeeded in internet because the company recruited lot of employees who had an important experiences and skills in their areas. Indeed, its employees studied in great schools, like Harvard, had different skills (marketing, finance, consumer, technology) and represented all useful areas in the big company. Also, Ebay has grown locally, nationally and globally.

[...] And Alibaba was created in 1999 in China. So, consumers had more confidence to buy on TaoBao ?s platform because it was a more historical company, which was present before eBay on the Chinese market. Then, eEBay didn't introduce an escrow into its online payment system. It was a big mistake by the company. Indeed, in China it's really important for consumers to feel secure when they buy online. But, they were not comfortable with eBay's platform whereas on TaoBao, Alibaba had introduced their escrow, Alipay system. [...]

[...] eBay had reason to change its strategy on the Chinese market. The company took a good decision because today, it is closer to consumers' needs and expectations. Also, the diversification allows it to have more profits and more users. Concerning their respective ownership percentages, eBay had 49% stake and Tom Online 51%. So, Tom Online kept the power and it's normal because eBay Eachnet was in a bad position and had lost many of market shares. So, it was more interesting for eBay to do the joint venture than Tom Online. [...]

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