Why Ebay Failed in China

Topics: Overseas Chinese, People's Republic of China, EBay Pages: 6 (1899 words) Published: August 30, 2013
A report on Ebay and Taobao.

Ebay v/s Taobao

Critically evaluate eBay’s chosen market entry strategies, into the Chinese ‘C2C’ market, determining the shortcomings of the strategies deployed during the case study period. When entering into a new market, there are many aspects that must be considered in order for a company to be successful. Through this case study we will look at how eBay developed their market strategy using the concept of six key factors timing, location, marketing, HRM, logistics and ownership (Peng & Meyer, 2011) and obtain results on how the company fell apart into the China’s C2C market. EBay entered into Chinese market via acquisition of EachNet, a Chinese online auction established in 1999 by Chinese entrepreneurs Tan Haiyin and Shao Yibo. It acquired one -third of EachNet’s shares, in 2002 by investing $30 million. The other investment of $150 million for the other two-thirds was made in a year later. In total, eBay spent $180 million for buying EachNet (McGregor, 2003:29) equivalent to 225 million RMB. This acquisition was named as Brownfield Investment and all the decision making at eBay China was centralized to eBay headquarters in the U.S. which turned the table for Ebay in the Chinese market as this led to change of one of the factors mentioned as ownership and also a new COO was appointed with german origin and resignment of Shao Yibo came as mistrust for the people towards the company. Although eBay’s market entry strategies such as joint ventures, licensing, and acquisition are very effective and made eBay successful in global market and become the world’s largest online market place, the situation in Chinese market was totally different. EBay was popular and had a very good reputation in the U.S. and international market, but Chinese people did not know much about eBay. Even though it was still a very effective strategy of eBay to enter Chinese market via acquisition and it should have followed the policy of “THINK GLOBALLY, ACT LOCALLY” but failed to do so which resulted in the downfall of the company. Ebay never really left China and came up in 2012 with joint venture with xiu.com. The shortcomings of eBay’s strategies were:

* EBay’s lack of understanding of Chinese market and culture - Instead of adapting products and services to meet the local customers’ need, eBay stuck with their global platform (American business model) which was not suitable for Chinese customers. This demonstrates a vital failure in ‘marketing’ and ‘location’, two of the foundational blocks in entry strategies. The lack of local management knowledge and local connection stifled eBay’s expansion and effectiveness. It made eBay waste a lot of money making mistakes, and doing the wrong things, for instance, eBay brought in upper management from outside the country who did not understand the local market which shows poor human resource management, another key section of entry strategy effectiveness. * EBay also made a considerable marketing mistake by advertising on websites, as small businesses in China and many Chinese people did not use internet as much as other countries eBay had entered did (Doebele, 2005). * It made a timing error when entering into Chinese market. EBay was not aware of local rival Taobao, they did not know that they had to face very tough competition in China. * Another mistake was that eBay still charged fees despite their competitor used no-fee model. This does not quite fit into any of the six foundational areas for market entry perfectly, but rather it shows a lack of understanding of the market and also a lack of willingness to change. PayPal, a payment system which eBay thought it would help making a payment easier for customers, also presented a problem stemming from a lack of understanding and unwillingness to change as in China (due to Chinese government’s tight control of financial service providers) PayPal was prohibited from offering...

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5. Sherman S., Sherman J., Westland, C. (2009) How eBay lost the China market, [Online], Available: http://news.alibaba.com/article/detail/business-in-china/100151761-1-how-ebay-lost-china-market.html [5 Nov 2012].
6. SinoCast China Business Daily News (2005) Global Resources Allies with eBay to Co-develop Chinese Market, [Online], Available: http://www.accessmylibrary.com/article-1G1-136415008/global-resources-allies-ebay.html [4 Nov 2012]
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*2 Daft, R.L., Kendrick, M. & Vershinina, N., 2010, Management: International Edition, Cengage Learning EMEA, Hampshire.
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