1. Strategy in China: Alliance or Acquisition By: Bill Focht Lori Fox

2. History of eBay in China
1995 established C2C & B2C online/virtual marketplace in U.S.
2002 entered China purchasing 33% of EachNet for about $30M
2003 eBay acquired the remaining shares for about $150M re-branding as eBay EachNet
Competitor TaoBao was founded in 2003
2005 eBay acquires Skype expanding into online communications sector
2005 Alibaba forms partnership with Yahoo resulting in TaoBao becoming wholly owned subsidiary of Alibaba
2006 eBay announces joint venture with TOM Online

3. Problem Statement
In 2006, eBay was in the midst of merging with a Chinese based company, TOM Online, and were faced with deciding which strategy would be better to increase revenue growth in China: leveraging a merger with TOM online or considering alternatives such as investing in its current product and services offerings to reposition the brand.

4. Strengths Strong brand image 14% market share in global e-commerce
Unlimited transaction capacity
Successful international presence M registered users
Unique user feedback system
No inventory costs
Development and ownership of PayPal
Embedded cross-selling opportunities
Reputation for non-counterfeit products

5. Weaknesses Perception of poor customer service
Lack of buyer and seller interaction prior to sale
Bidding process unfamiliar in Chinese culture
Lack of “trust” as non-local company with short history
Centralized decision-making and lack of local insight
Web-site “too empty” for Chinese taste
Reputation for non-counterfeit products

6. Opportunities China economy growing in leaps
Chinese internet users ballooned to greater than 200M
Number of online shoppers at 55M and growing rapidly
Transaction value of C2C ecommerce market in China 23.1B and growing
Lack of “trust” as non-local company with short history
Chinese governmental regulations are reducing
Opportunity for merger with TOM Online

7. Threats Fierce competition from local rivals
Competitive pricing strategies
Need for more capital investment
Third company philosophy and management team would need to be synergized with eBay Eachnet
Dynamic marketplace
Chinese government interference/regulations

8. Alternatives Do Nothing
Refine eBay EachNet product and services offerings to reposition the brand and connect with local consumer base better
Merge with TOM Online
Seek out other mergers
Cease China operations and sell off eBay EachNet shares

9. Recommendations Merge with Tom Online
Provide the dynamic and strong visually oriented graphical interface that appeals to the Chinese marketplace
Institute an escrow system to satisfy the safety concerns of Chinese users and build trust
Provide significantly improved and hands-on customer service
Eliminate seller listing fees
Leverage Tom Online political connections

10. Recommendations
Incorporate Tom Online mobile technology in their long-term competitive strategy
Play Up public’s perception that TaoBao houses a greater number of counterfeit goods
Incorporate more customer-interactive interface such as live web-chat and customer support call-centers
Seek out an experienced and localized management team to manage the day-to-day operations of TOM EachNet

11. Questions