eBay’s (diversification) expansion modes in China included acquisition and joint venture. Critically evaluate each mode of diversification by identifying the advantages and disadvantages for EBay given the competitive environment within the overall industry and specifically in China.
By the year of 2006, eBay’s combined international investments in Latin American, Europe and Asia Pacific has totaled revenues of 2.1 billion, representing 49% of aggregate revenues of the company at the time. Seeing the great potential of the Chinese C2C online auction market which back then comprised of 250 million customers, eBay has launched various attempts majoring the acquisition of EachNet in 2003 and the later joint venture with TOM Online, in order to compete in the gigantic Chinese market with domestic powers like Alibaba and Taobao. We want to take turns to discuss the benefits and drawbacks of each of the two big moves that eBay took in positioning its business position in China. Acquisition:
The full acquisition of EachNet by the U.S industry giant at 2003 was without a doubt an influential event perceived by the Chinese C2C market. Founded in the same year, Taobao was just beginning to apply its successful business experience from operating Alibaba. The competition between eBay EachNet and Jacky Ma’s Taobao was on the way. Advantage:
* Taking the advantages of its matured operations of the U.S C2C third-partier business, eBay entered the Chinese market with confidence and a strong backup. Unlike the premature Taobao that is yet to gain real experience in C2C operations (Alibaba, founded in 1999 also by Jacky Ma focuses primarily on B2B industry services), eBay EachNet applied its U.S business model and soon formed alliances with top Chinese internet portals—Sina, Sohu and NetEase as well as leading vertical websites. * Utilizing the resources of its domestic treasury, eBay poured luxurious advertising expenditure of EachNet in China’s...