Strategic Management: Ebay Case Study

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To assess the attractiveness of China, we have used Key Country Matrix. Aside from China we decided to use Europe and the US, since eBay has been successfully running its business in the following markets for a long time. Nevertheless, it has failed in Chinese market. The following analysis allows us to conclude that China belong to developing countries and its market is quite attractive. However, in case of competitive strengths of eBay its running business concept is less suitable for the following market. Moreover, we would like to add that China is behind the US and Europe in terms of Logistics, Economy, etc., since Europe and the US tend to be more stable and „mature” countries in comparison with China.

GLOBALIZATION DRIVERS (YIP)

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Industry Internationalisation Drivers (YIP Drivers)

Score (1-9)

Market Drivers

Common Customer Needs

7

Global Customers

6

Global Channels

6

Transfarable Marketing

7

Cost Drivers

Scale Economies

9

Favourable Logistics

4

Country Skill/Cost Differences

9

Govt Drivers

Favourable Trade Policies

4

Compatible Technical Standards

6

Common Marketing Regulation

6

Comp. Drivers

Interdependence

8

Competitors Use Global Strategies

7

Fom the proposed Globalization Drivers we see that in case of eBay in China the most crucial drivers are Cost Drivers, since the Cost Differences and Scale Economies are quite sufficiant and for eBay it is important to undrestand how to overcome possible problems connected with the following drivers.

CAGE

The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic differences or distances between countries that companies should address when crafting international strategies.

Cultural: In case of eBay in China language was not the main problem, but still it could be considered as the problem. Moreover, there were a lot of problems in terms of ethnicities and lack of trust, different values, norms. Chinese belong to High context culture that highly values collectivity, trust established through long-term relationship. Also, it has been stated in the case that eBay used Internet as a base for its promotion, but Chinese opposite to Americans and Europeans watch TV more than use Internet. Moreover, there was a lack of communication between sellers and buyers.

Administrative: China and the US (eBay’s country of origin) have different currencies, colonial ties and do not share regional trading bloc.

Geography: Chinese market is far away from American. Nevertheless, the following problem cannot be fully taken into account since eBay belongs to E-commerce Industry that operates online.

Economic: It is widely known that Chinese market in terms of price level is lower than, for example, European or American. Therefore, for eBay it was hard to enter it with its “one fits all” model.

Taking into account the YIP Drivers and CAGE Matrix, we assume that eBay saw the following advantages and disadvantages when acquiring EachNet:

Advantages:

- Benefit from the position obtained by EachNet

- Chinese-language trading platform

- Remove a strong competitor

- Managerial control

- Flexibility

Disadvantages:

- High set-up cost

- Complex acquisition integration

- Centralized decision model (the US model)

Question 2

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According to Global/Local Matrix, joint venture with TOM allowed eBay to act locally (Multidomestic Strategy) in a more efficient and effective way, taking into consideration the following advantages and disadvantages:

Advantages:

- Existing sales network

- Good political networks (in China)

- Local knowledge, technology, brand image

- Ability to invest into mobile commerce

- Low cost

- Rebranding of “eBay EachNet” to “TOM EachNet”

Disadvantages:

- Less overall control

- Long negotiation period

- Need of a strong partner

Question 3

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International law firm Freshfields Bruckhaus Deringer advised TOM Online on the joint venture agreement with eBay EachNet, eBay's China-based subsidiary. TOM Online will have a 51 per cent stake in the joint venture, and eBay will have the other 49 per cent. At closing, eBay International AG will provide and initial funding of US$40m in cash in the form of capital of the joint venture and TOM Online will enter into a shareholder's loan agreement with