Ebay's strategy in China: alliance or acquisition

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Ebay's strategy in China: alliance or acquisition

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Abstract

When we talk about business, especially e-business and major firms which are well established in this sector, we mostly end up talking about American companies, because most people consider America as ‘the land of opportunity'. I definitely agree with this, because majority of the well established firms have their origin in the U.S. However, the same can be said for China these days. In fact, the Internet is playing a huge role in small businesses, because it facilitates economic growth. For example, one of the earliest attractions about the Internet was the global interest for retailers and wholesalers, in terms of market place. The modus operandi is simple: buyers and sellers could meet online (there is no store location), they can conduct a business, and exchange a product for money through websites.

The first company that made it possible to sell products on the internet was eBay. In fact, in this online auction house (like taobao.com and alibaba.com in China), buyers and sellers never meet, they exchange money for goods and eBay doesn't have to be involved in the most important and expensive part of the e-commerce (or e-business) which is shipping the product (this part is the responsibility of the seller). eBay, and in general, all the online auction sites that we have nowadays, are the true embodiment of a ‘frictionless marketplace'.

Introduction
Presentation of the company and the Chinese market
1. Presentation of the company eBay
2. Small overview of the Chinese market and the current situation
Conclusion

Extract

[...] The company had introduced this system in the Chinese market, where most people still make payments in cash. In fact, few people have a credit card, which makes it difficult for online payment. However, eBay spent more than 100 million Yuan (which represents about $US12 million) to launch a new online payment system, adapted to the Chinese behaviors. Nowadays, eBay users pay for their goods through an online banking system or bank transfers. Alibaba and Taobao created a partnership in 2003 in order to secure payments. [...]

[...] The most used means are the following: * PayPal, the electronic platform of payment (eBay has been the owner of PayPal since 2002) * banking transfer * Personal check * Money order * Google Checkout, the electronic platform of payment owned by Google (not yet accessible in France) * Cash payment with handing-over of the object. The method of payment is generally specified in the advertisement. The salesman can also propose insurance on the delivery of the product. In 2001, international markets accounted for 18% of the company's total net revenues. [...]

[...] Once the inscription is validated, i.e. to be able to buy (after checking the email address indicated in the inscription) and to be able to sell (after identity check of the member by postal mail) (justifying of residence) or banking identification (by the credit card)), each member can: Sell merchandise: - If new, then the marketing activities are subjected to the local legislation of the country - the sale of services, e-books and certain objects is strictly supervised, even prohibited according to the countries. [...]

[...] This index is built starting from several opinion polls of experts arriving at a conclusion about their perception of the level of corruption in the public sectors of hundred countries. By this index, we can classify the countries on a scale from 0 to 10; 0 indicating a high degree of perception of corruption and 10 indicating a low degree of corruption. Transparency International, which was created in 1993, is a non-governmental organization which campaigns against corruption. The main office of this organization is in Berlin in Germany. [...]

[...] eBay China had to face many challenges in order to remain in the Chinese market. In fact, the Chinese government forces the foreign companies to make joint-ventures with the local operators. Moreover, eBay China had to fight against Taobao, its Chinese rival and leader in this market in China, which took majority of the market shares of eBay; a major disadvantage is that eBay did not provide a telephone support. Tom Online allowed eBay China to have a mechanism to send SMS and MMS to put purchasers in contact with salesmen. [...]

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