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

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Presentation on theme: "Strategy in China: Alliance or Acquisition By: Bill Focht Lori Fox."— Presentation transcript:

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 1. Do Nothing 2. Refine eBay EachNet product and services offerings to reposition the brand and connect with local consumer base better 3. Merge with TOM Online 4. Seek out other mergers 5. 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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