The Strategic Thinkers

Lameck Kurendi Mellen Catherine

John Oyugi- Purity Kemunto-
Momanyi- Barongo- Mutisya-
D33/2657/2018 D33/2468/2018
D33/2678/2018 D33/2644/2018 D33/2394/2018

Njuguna Anne Pacimal

Joseline Mwanda- Mary Akoth- Brian Nyangena-
Wangui- Mochengo-
D33/2656/2018 D33/2651/2018 D33/2511/2018
D33/2317/2018 D33/2676/2018

Donald Kandagor Brian Ngugi

Victor Cheruiyot- Mary Maonga- Henry Apollo -
Kipkenei- Muturi-
D33/83288/2017 D33/2611/2018 D33/2450/2018
D33/2524/2018 D33/2314/2018
 CASE STUDY

EBAY IN CHINA
E B AY ’ S S T R AT E G Y I N C H I N A : S U C C E S S O R FA I L U R E
 QUESTIONS

• What is eBay and why did EBay choose the Chinese market?
• What strategies did eBay use?
• What was eBay’s market value proposition?
• What was eBay’s goal to enter the Chinese market?
• What partnership did they have to make to penetrate Chinese market?
• How did they handle competition in China organization structure?
• Did EBay fail ? Why ?
• What are the recommendations or what we would have done differently ?
 INTRODUCTION
• Our analysis of the case study on eBay’s operations in China. Some of the key problems
identified in this study include;
 Lack of the key appropriate strategy to enter the Chinese market.
 The struggle to adapt to a different marketing environment.
• Our analysis aims at formulating and evaluating strategies and recommendations that eBay
would use to sustain its operations in China, through various theories, models and analyses.
To summarize the outcome of our analysis, the statement by Jolyon Baker, head of media at
Deloitte Consultancy 2006, “A copy and paste approach to targeting China based on
attempting the same business model as in a company’s home country is unlikely to succeed.”
Seems to echo our findings.
 Background

• 1995-Founded by engineer Pierra Omidyar as an experiment

-grew to be a business worth billions of dollars
• 1998-went public on NASDAQ
- considered successful company in the world
- large in enough to go global, capital IPO and high pressure for growth
• 1999-Ebay took over local auction website in Germany (Alando De AG). First non US
operation.
-Launched its own site in the UK and joint venture in Australia.
• 2000- Ebay ventured in Japan, Canada, France, Taiwan, Austria.
-Ebay was leading in four of this countries.
• In 2001-Ebay invested in Korea’s internet auction company.
-In Europe, Ebay acquired eBazaar, introduced it into Italy, Netherlands and
spain
-Established operations in Ireland, Singapore, New Zealand and Switzerland.
• Early 2002 - Ebay failed in Japan. Same year, Ebay announced its entry to China.
Mission
to provide a global trading platform where practically anyone
can trade practically anything.

Vision
To be the world’s favorite destination for discovering great
value and unique selection
WHAT IS EBAY?
Why did eBay choose the Chinese market?

• Fast Economic growth

• High population
• Technological advancement
• Liberal authorities in China
• Growing investment and
research sector
Strategies used by Ebay to enter the Chinese market

I. Market entry strategy

a) Acquisition
 EachNet
 skype
b) Joint venture
 TOM online
 Sauna Sohu and EasyNet
ii. Corporate strategy
a. Maintenance strategy

involves containing a situation keeping status quo.

 Risk based maintenance
 preventive maintenance strategy
 corrective maintenance strategy
 Condition based strategy

b. Contraction strategy/strategic withdrawal-

Creation of TOM Eachnet
c) Expansion strategy
 what was EBay market value proposition ?

• EBay market value proposition was to provide a global community of users where they can
easily and inexpensively communicate, exchange information and complete transactions

• The market includes 10s of millions of items from around the N creating a wide variety and a
selection of goods

• The opportunity to bring buyers and sellers together for a fee much lower than those of
traditional intermediaries and providing efficient information for exchange .
What was eBay's goal when entering the Chinese market?

• Localization of EBay

• To grow the core marketplace by expanding

their product offering into new formats
categories and geographies.

• Tapping into China’s growing Internet users.

Uniqueness of eBay in China ?

• Introduction of feedback programs .

• Establishment of VeRO and safety harbor
programs.
• customer service support.

This Photo by Unknown Author is licensed under CC BY-SA

 what partnership did they have to make
to penetrate the Chinese market?

a. Each net
b. Tom online
c. Sina, Sohu and NetEase-internet
portals
d. Shanda-vertical website

This Photo by Unknown Author is licensed under CC BY

How did eBay handle competition in China ?

• EBay was not swift enough in handling competition by the time

they put it splat place strategy such as introducing an escrow to the
payment system and giving better customer value they had lost a
large market share and the possibilities of establishing
differentiation advantages.

• Due to the cutthroat nature of competition in the Chinese market

eBay used joint venture acquisition managers and partnership to
handle competitors such as Internet and Tom online in order to
acquire the lost market share
Why EBay each net lost market share to Tao Bao ?
Weaknesses of eBay after each net acquisition

• Inability to build trust (GUANXI)

• Was less established in the Chinese market
• poor customer service
• lack of direct interaction between buyers and sellers
• Transaction insecurity
• Centralized decision making
• Lack of proper research of the Chinese market
STRATEGIC ANALYSIS
 SWOT

strengths weaknesses opportunities threats

• 20 years management team experience and good work relationship
• localized products
• Reduced risk
• Infinite transactions
• Fast buying and selling
• Alternative sources of income

Strengths After Joint Venture with TOM Online

• Ability to venture into the mobile commerce
• TOM online’s political networks in China
• strong recognition of domestic Chinese brands
 WEAKNESSES
• Fixed price
• limited range of auction in items on Chinese market
• lack of an escrow
• Poor customer service
• High listing prices
• Insufficient in-depth markets analysis
• centralized decision making
• Lack interpersonal relationship
• More Chinese had access to Internet.

• Ecommerce had a steady growth in China.

• New business models to venture into search B2C B2B and C2C.

• Joint venture with Tom online to grow its clientele.

• Other companies lacked experience in terms of strategic decision and business modeling
finance marketing and distribution because they were mostly founded by computer
programmers who had no business experience .
• The slow and expensive Internet

• Government regulation

• Chinese culture

• Imbalanced economic and technological advancement in China The

growth of Tabao and Alibaba increased competition
 political economical social technological environmental legal

• Liberal authority It was a growing • The Chinese highly • The • The business • Lack of
hence favorable economy hence prioritized interpersonal technological environment was transparency and
environment potential market relationship advancement in competitive due legal system to
China are rapid to competitors protect the interest
• Government Lack of stable • It was therefore important
hence attractive such as Alibaba of both the
relationships payment system for foreign businesses
to eBay as it and substitutes company and its
enhanced by such as eBay aiming to
depends on like Taobao who customer health
joining TOM operate in China to build
technology eg: did better than unfavorable
online a network of personal
Internet, to them in the in environment
communication both
operate long run.
private and formal
 PORTERS FIVE FORCES
Threat of Substitution:
Threat of New Entry:
• In China market was
• the China market was not an
easy market to penetrate
• Threat of • Buyer controlled by bias in the
van need to buy
because of the high New Entry Power
competition long • EBay had fixed prices
competitors such as Taobao and buyers could not
• Hence the threat of new • Competitive influence the price prices
entrance was low hence they had a low
Rivalry bargaining power

Supplier Power: • Supplier • Threat of

Threat of Substitution:

• Products being auctioned in

• the threat of substitutes is
Power Substitution high as customer can easily
eBay war being supplied
from the Chinese market move from eBay to tabao
• The market was highly
even though the prices as they offer a similar
competitive library from
were fixed commodities service at affordable prices
tabao into the fact that the
and quantities of supply and offer opportunity to
market is not growing either
influenced prices hang gold and one on one
makes it more intense as
contact
they all must fight for the
same clientele
 why did eBay exit the Chinese
market ?

• Taobao overtook eBay By acquiring

majority of its market share
(customers)forcing eBay to virtually exit
the market because of reducing number of
clientele.

This Photo by Unknown Author is licensed under CC BY-NC

 EBay fail ? why ?
YES -EBay failed in china

Reasons EBay in China failed

 Lack of rapport and trust with the market in China
 Lack of trust a new market provider by the chinese
 It had competition from China and Chinese people tend to pick their own rather
than US originated companies
 Centralized control of eBay in the US
 Buying out the Chinese Each net instead of growing with it
 Late introduction of an escrow and customer service hotline
As much as Ebay in China failed in the end it had some successes in the
Chinese market which would be biased to ignore these included :

 Survived the dotcom crash (dotcom bubble)of the year 2003

 EBay made profits after just one month of its operation in the Chinese market
 successfully evolved from a trading place for collectables to a vibrant community where
anything would be traded
 SOLUTIONS AND RECOMMENDATIONS

• eBay should have adopted the strategy of alliance instead of acquisition

• Giving eBay China business autonomy

• offering alternative modes of payment that ensure that the payment security of clients

• provide direct interaction between buyers and sellers

• Introducing a segment or for users upon login to provide details personal information such as

their names identification number so as to prevent faking of identity

• They should do sector analysis

 CONCLUSION

The purpose of this case study was to identify whether eBay strategies in China failed or
not. And if the strategy failed, what was the reasons for their failure. Upon analyzing the
case study; doing the SWOT analysis, Five Porter analysis and PESTEL analysis, we
can say in confidence that eBay’s strategy in China failed. The recommendations and
solutions above would have helped eBay succeed in the Chinese market.
 REFERENCES
•Jolyon Baker, head of media at Deloitte Consultancy, 2006.
•http://hoadd.noordhoff.nl/sites/7526/7526-webpage2-10-2.htm
•United States Securities Exchange Commision Form 10-K
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Study Abroad Narratives. In Teaching and Learning Second Language Pragmatics for Intercultural Understanding (pp. 19-39). Routledge.
•Umarovich, Y. S. (2022). Empirical study of the peculiarities of interpersonal relations among employees of the internal affairs bodies.
Asian Journal of Research in Social Sciences and Humanities, 12(5), 308-311.
•Clarissia, M. S. (2019). A study on Ansoff Matrix Technique: As a growth strategy and an adaptive learning technique adopted in the
leading brand of products. Journal of Composition Theory, 12(9), 1494-1506.
•Global strategic management:Jedrezej George Fryans,Kamel Mellahi;(2005)
•John GrahamN-Mark Lam. The Chinese Negotiation — https://hbr.org/2003/10/the-chinese-negotiation
•Wang H.H (2010)”How Ebay Failed in China” , Retrieved March 23,2012
•IResearch Consulting Group, (2005) “China’s C2C E-Commerce Research Report  2005”
 ANY
QUESTIONS?