eBay's Problems in China
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Case Code: BSTR278 Case Length: 19 Pages Period: 2002-2007 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: eBay Industry: Internet and E-Commerce Countries: China Themes: Globalization, International Business, Joint Venture |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
e-Commerce Market in China
As of 2007, China was the world's second-largest Internet market after the US. According to the China Internet Network Information Center (CNNIC), the number of Internet users in China had reached 162 million by the end of July 2007. Of these, 122 million surfed the Internet using a broadband connection. On an average, the Internet user in China spent 17.9 hours online per week, compared to the 11.4 hours per week spent online by a user in the US...
eBay in China
eBay entered China by acquiring a 33 percent stake in EachNet, the Delaware, USA-based company, with an initial investment of US$ 30 million in 2002. In 2003, eBay acquired the remaining 63 percent stake for US$ 150 million and the company was called eBay EachNet. With this acquisition, eBay was poised to take advantage of the growing Chinese e-commerce market. eBay EachNet had a major presence in the Chinese online auctions market. In 2003, its market share was nearly 80 percent...
eBay's China Troubles
Within a span of three years eBay EachNet saw its market share eroding in the face of competition from Taobao. Commenting on Taobao's success, Jack Ma (Ma), founder and CEO of Alibaba, said, "When we started Taobao, even our own chief technology officer said, 'Jack, you are crazy. Don't forget eBay.' But we passed eBay in China in just two years."...
Joint Venture with Tom Online
Sensing the need for local support, eBay entered into a JV with TOM Online in December 2006. Whitman said, "One thing we've learned operating here for three or four years is that actually we're going to be better served by tapping into a local partner who has local knowledge."...
A Strategic Shift?
Many analysts considered eBay's new move indicative of the company's retreat from the Chinese market. Caris and Company analyst, Tim Boyd, said, "It's an admission that they failed in China, on their own at least. But I think that's something the market already knew."They saw the venture as a bail-out considering that Whitman had aggressively projected China as a key driver for eBay in the future in the face of slackening growth of eBay in the mature markets...
The Aftermath
The new entity started operating with the name 'Tom Yi Qu' (which means Tom eBay) in 2007. Wang Lei Lei (Wang) headed the JV, while Jeff Liao, head of eBay China, was also included in the management...
Outlook
China was well poised to unseat the US as the country with the largest number of Internet users in the first few months of 2008, according to Morgan Stanley. According to Chinese government figures, the number of Internet users in China had reached 210 million in 2007, a growth of 50 percent compared to 2006. Moreover, there was tremendous scope for future growth as the penetration levels were low, with only 16 percent of the population using the Internet. Unlike the US, people aged below 30 years were driving the growth...
Exhibits
Exhibit I: Online Trading Companies in China
Exhibit II: eBay Inc Financial Summary (In Millions of US$)
Exhibit III: Nine Problems in Development of e-commerce in China
Exhibit IV: Reasons for Failure of Foreign Internet Companies in China
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