Ebays Blobal Expansion

Topics: Electronic commerce, EBay, Online shopping Pages: 8 (2700 words) Published: November 13, 2008

Internet has created unlimited market for online retailers and it became online shopping mall across the globe. Nowadays, the online retail is huge industry and one of the most successful companies is eBay. eBay was established in September 1995 by Pierre Omidyar as free auction website. Value of eBay is by providing person-to-person and business-to-business online market place. eBay provides internet market place for new and old goods, end-life products and second hand items, which might be difficult to purchase in retail shops. The simply and flexible business model of eBay has helped to keep eBay on top online auction retailer, attractive buyers and sellers across the world. Part of eBay’s strategy is global expansion of its brand Hillis Petit 2006. International expansion began by purchased German website Alando in 1999 Module Handbook 2008. During six years eBay has established twenty-seven international websites. In addition for the first time in 2005 eBay had more registered international users than American Hillis Petit 2006.

The project is divided into two main parts. The first part discusses advantages and disadvantages eBay’s methods of entering new international market by acquisition opposed to “green field investment”. The second part assesses eBay’s playbook strategy.

Question 1:
Pros and cons of eBay’s policy by entering an international market by acquisition oppose to Foreign Direct Investment.

Nowadays, internet provides new bigger opportunities for online retail not only on domestic markets but on international as well. World Wide Web helps to minimize borders and creates new global market opportunities for e- retailers. Thus internet increases possibility for online retail companies, such as eBay, to become an international company. eBay was found in 1995 and only four years later eBay began its massive global expansion. eBay’s expansion was not its independent own decision but was partly caused by increasing competition of Yahoo, Amazon and Microsoft as well Mahnke, Venzin 2002. eBay’s international expansion initiated in Germany, by acquisition of German “copycat” website Alando. Another method of market entry which eBay applied was “green- field investment” in the UK and Australia market. At the moment, eBay operates in 31 countries across the globe Module Handbook 2008. However, some entries to international markets was not successful, like Japanese market, and eBay lost the battle with its major competitor Yahoo Eghoff, Mabey 2006. Choice of cross–border entry to new markets is influenced various factors culture factors, market size, political situation etc.. Such as acquisition has own plus and minus; green field investment brings its own pros and cons as well. Even acquisition might seem as an expensive option at the beginning; it does not bring any other high additional costs in the future. On the other side, international acquisition helps to reduce risk of failing in new markets and help to build faster establishment on the market. Time and speed play one of the most important factors in successful entrants in international internet retail because right time and fast acquisition can influence future on the new market. Nowadays in internet time, successful international acquisition can help achieve competitive advantage by developing new better website before competitors and thus boost customer base. By cross-border acquisition, company gains established customers and achieve certain position in niche market. Acquisition ensures fuel transfer of local knowledge and minimizes possible competitors’ aggressive reaction. On the other hand, the green field investment has advantages as well. Green field investment is not so expensive entry option at the beginning as acquisition and reduces change of overpayment. Green field investment allows creating perfectly fitted facilities and using the best technology. Moreover, green field investment gives...
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