Ebay: Connecting in China

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eBay: Connecting in China
December 1, 2005

The Problem: Causes and Symptoms
The problem for eBay is how to factor the new Chinese business landscape, its conditions, culture and constraints so that it can penetrate into the large Chinese market. This is the challenge identified because Whitman, the company’s CEO, has announced that the goal for the company is to reach the $3 Billion sales level by 2005. In order to reach this new milestone, the company would need to look for key markets abroad and expand through them. And the biggest and most promising among the potential expansion points is China.

However, not all international markets are equal and exhibit the same characteristics. Internationalizing companies such as eBay would need to modify their firm to fit to the requirements of their chosen countries, while retaining their core competencies. This is the process of “Glocalization.” Therefore, how eBay would respond to China and its distinguishing features is attuned to this glocalization process. If China had a very similar landscape to eBay’s US mother country, with the same buying habits, same transportation infrastructure and same internet access among others, then there would be no problem with China’s landscape; or, the problem identified would be entirely different. eBay would simply have to carbon-copy its experienced US operations into the Chinese market. However, the Chinese market is unique. And in our given case, the characteristics that this country has in contrast with the US are markedly different. Ultimately, how these unique factors are taken into consideration by eBay into its market penetration strategy can either hamper or strengthen its growth towards 2005.

Situation Analysis
The situation in China calls for eBay to establish a foothold at the start of a trend when internet usage is just starting to surge upwards. Although now in 2005, we know that China has just passed the 80 million mark in the number of internet users[1], the number of users in this country when eBay made the initiative to buy a cut in the Chinese Auction firm, EachNet, was simply just around 27 million. In fact, Whitman, in her evaluation of expanding to the Chinese market said, “It was really early. There was practically no e-commerce in China. But this is a long-term bet."[2] Thus, looking at the internet growth in China as well as Whitman’s remarks, it is clear that eBay’s policy is to look for the environmental factors that can help it establish firmly. This is so such that when the large Chinese market does expand in net usage and becomes more open to e-commerce, eBay should already be present and even at the forefront. Whitman comments, “In three to five years, more people will be on the Net in China than in the U.S. How might eBay potentially lose in China? By not investing aggressively enough.” Hence, the situation analysis isn’t a question of whether to enter the China or not. Indeed, it is nearly a given for any glocalizing firm like eBay to penetrate the large Chinese market. Rather, the situation analysis is a question asking what factors and initiatives in China must eBay place its investments. Towards this, growth in China is of concern and $3 Billion is the target.

A SWOT analysis provides an environmental overview for eBay of 2002 (see appendix for diagram):

Key Strengths
Online Business Experience in the US
eBay has, since its inception in a small residential area of the San Francisco Bay Area in the mid-90s, gathered extensive online business experience to brokering millions of internet sellers and buyers. And since that time, it has witnessed the most common items for auction, the most common online purchasing & spending habits and has even learned through both the dotcom boom and busts at the turn of the millennium. Hence, looking at business sense, eBay is a tried-and-tested enough company that can have credible knowledge to dealing with...
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