Question 1: eBay’s (diversification) expansion modes in China included acquisition and joint venture. Critically evaluate each mode of diversification by identifying the advantages and disadvantages for EBay given the competitive environment within the overall industry and specifically in China.
By the year of 2006, eBay’s combined international investments in Latin American, Europe and Asia Pacific has totaled revenues of 2.1 billion, representing 49% of aggregate revenues of the company at the time. Seeing the great potential of the Chinese C2C online auction market which back then comprised of 250 million customers, eBay has launched various attempts majoring the acquisition of EachNet in 2003 and the later joint venture with TOM
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Disadvantage: * As adopted from its business model in the U.S, eBay EachNet charges an insertion fee from its users when they listed an item for sale online. However, entering the market, Taobao knew that the initial capturing of customer base is crucial thus did not apply any insertions to the sellers but mainly gained interests from providing advertisements opportunities on its webpage. So for EachNet, it was a “charged vs. free” competition against Taobao. * The backup from eBay’s business headquarter provides strong financial and other supports to EachNet’s operation. Yet, the insistence that local decision-making has to be agreed upon by the U.S headquarter hinders EachNet’s top management to adroitly respond to problems. As suggested by Juan Fernande, “when they (headquarter decision makers) see management (of EachNet) in China localizing and modifying corporate practices, they get upset.” However, such localizing and modifying can be rather essential in living in the Chinese market.
In December 2006, eBay and TOM Online co-announced their joint venture which eBay represents 49% ownership while TOM has the rest 51%. This is a somewhat clear sign that eBay turns its focus of the Chinese market from C2C e-commerce to m-commerce (mobile commerce), a business intend that captures revenue by providing and marketing value-added mobile devices and derivatives.
* eBay would