Ebay's Strategy in China: Alliance or Acquisition
HKU701
JIANGYONG LU
ZHIGANG TAO
EBAY’S STRATEGY IN CHINA:
ALLIANCE OR ACQUISITION
In December 2006, eBay Inc., a US company that offered e-commerce, e-payments and internet communication services globally, announced its plan to form a joint venture with
China-based online portal and wireless operator, TOM Online, in which eBay would have
49% ownership.1 The move reflected the increasing difficulties foreign internet companies were facing in their attempts to snatch a share of the Chinese market amid fierce competition and a changing market environment. eBay first set foot in China in 2002 by acquiring 33% interest in EachNet—a domestic online auction company, followed by a full acquisition in 2003.2,3 In 2005, eBay acquired Skype4 to expand into the online communication sector. While Skype was a wholly owned subsidiary of eBay globally, it operated indirectly in China via a joint venture with TOM Online. Due to this existing relationship between the two companies,5 TOM Online seemed to be a natural choice of partner for eBay’s subsequent decision with regards to its online marketplace business. Recognising TOM Online’s local knowledge and political connections, eBay believed that a joint venture would benefit its failing business in China and help the company further develop its Chinese market.6 Some analysts questioned whether political connections alone were the answer and suggested that eBay focus on its product and service offerings.7
1
Vara, V. and Chao, L. (20 December 2006) “EBay’s China retreat highlights a tough market”, Wall Street Journal. eBay (Date Unknown) “eBay and EachNet Team Up in China”, Press Release, http://investor.ebay.com/releasedetail.cfm?ReleaseID=74802 (accessed 27 April 2007).
3
After the full acquisition in 2003, eBay operated under the name of eBay EachNet.
4
Skype is a peer-to-peer software program that allows people to make free calls over the internet to anyone who also subscribes to this service.
JIANGYONG LU
ZHIGANG TAO
EBAY’S STRATEGY IN CHINA:
ALLIANCE OR ACQUISITION
In December 2006, eBay Inc., a US company that offered e-commerce, e-payments and internet communication services globally, announced its plan to form a joint venture with
China-based online portal and wireless operator, TOM Online, in which eBay would have
49% ownership.1 The move reflected the increasing difficulties foreign internet companies were facing in their attempts to snatch a share of the Chinese market amid fierce competition and a changing market environment. eBay first set foot in China in 2002 by acquiring 33% interest in EachNet—a domestic online auction company, followed by a full acquisition in 2003.2,3 In 2005, eBay acquired Skype4 to expand into the online communication sector. While Skype was a wholly owned subsidiary of eBay globally, it operated indirectly in China via a joint venture with TOM Online. Due to this existing relationship between the two companies,5 TOM Online seemed to be a natural choice of partner for eBay’s subsequent decision with regards to its online marketplace business. Recognising TOM Online’s local knowledge and political connections, eBay believed that a joint venture would benefit its failing business in China and help the company further develop its Chinese market.6 Some analysts questioned whether political connections alone were the answer and suggested that eBay focus on its product and service offerings.7
1
Vara, V. and Chao, L. (20 December 2006) “EBay’s China retreat highlights a tough market”, Wall Street Journal. eBay (Date Unknown) “eBay and EachNet Team Up in China”, Press Release, http://investor.ebay.com/releasedetail.cfm?ReleaseID=74802 (accessed 27 April 2007).
3
After the full acquisition in 2003, eBay operated under the name of eBay EachNet.
4
Skype is a peer-to-peer software program that allows people to make free calls over the internet to anyone who also subscribes to this service.