The proposed case deals with the eBay Company's plan to expand its activity to China.
eBay is a US company offering e-commerce, e-payments and internet communication services globally. It was founded in 1995 in California. eBay is the international online market place enabling trade on a local, national and international basis with a diverse and passionate community of individuals and small businesses; eBay offers an online platform where millions of items are traded each year. At eBay, sellers can list products to sell on the website while buyers can browse them and bid on the interesting ones through auctions. The company doesn't make the mediation but just informs the seller and the buyer by e-mail when a bid exceeds the seller's reserve price. At any time, eBay takes possession of the product sold. By this way, the business model of ebay is simple: it charges fees to the sellers when they put up the product for sale, optional fees are also practiced for making goods more visible and in addition, eBay makes a good margin of profit on the sale. The company's service is completed by a customer service composed of personal customer services such as chat, e-mail and phone. The customer service is also composed of bulletin boards, customer support boards, personal pages, forums, personal shopper alerts (to provide potential buyers e-mail alerts), the turbo lister, pro-stores, feedback forums.
eBay has become a global brand because the company is managed by people with competencies in different parts of business such as marketing, finance and technology as well, but also thanks to a simple and accurate business model where the company takes fees and commissions on transactions done through its site. The company is developing itself in the global market thanks to a strategy including acquisitions, alliances and joint-ventures with local partners. Today, the international activity of the company in 35 countries represents 18% of the whole turnover.
Today, the company's plan is to expand its activity to China through a joint-venture with the China-based online and wireless operator TOM online in which ebay would have 49 % of ownership.
ebay is already present in the Chinese market because the company owns EachNet, a domestic online auction company. In addition, eBay also owns Skype, a global online communication company, which was already integrated indirectly in China through a joint-venture with TOM online.
TOM online is a local online company well-establsihed in the Chinese market with a very good experience and a knowledge of the market and with interesting political connections.
China represents an attractive place to do business, an ongoing economic growth, a gradual integration to the global trading community, an increasing place for internet and mostly an enormous population. In China, the population tends to get more and more access to the internet and to become more and more interested in the e-commerce applications.
[...] Although eBay is in a country where the legal environment is not easy, China is a complex country where being from abroad is not an advantage for dealing with the government and the legal aspects. As far, the company is suffering from a lack of trust and it might be difficult to change the minds of the customers because they trust more in Taobao. So we will give alternative solutions, both solutions will tend to improve the adaptation of the company in the Chinese market. [...]
[...] By this way, it appears that eBay didn't make enough effort in building up a trustable relation with Chinese customers while Taobao did it. In addition, eBay missed to secure enough buying processes when it entered first in China because it didn't include an escrow in the payment system while Taobao did it. Also, when Taobao allowed its customers to interact directly between buyers and sellers, EachNet didn't allow it. The negative point of EachNet would be the poor customer service proposed; it didn't for example, propose an instant message system. [...]
[...] As the company did with TOM Online which will be able to bring its knowledge for allowing people to interact online by skype, eBay should try to add some extra missing services by the outsourcing way, the outsourcing must only be done with the Chinese company, by this way eBay will be able to gain some confident and trust with Chinese customers by completing its offer with Chinese companies. Outsourcing should be implemented for tools such as the customer services which is essential for the Chinese people, and it is the same for a social network which should be completed with Skype technology, we should ask an agency to manage the contents of the website such as banners, flash games, etc. [...]
[...] Through this strategy, we can expect to improve our legitimacy in the Chinese market towards Chinese customers, we should become more a Chinese company and by this way, gain more confidence from Chinese people, we definitely hope to improve our relationship with customers as well through the customer services and social networking. Although this strategy might also be inefficient due to the late actual brand image and due to the late entry that we have in comparison to Taobao, we don't actually know what would be the reaction of Chinese customers but we expect that the reward system will be a plus point that will make the difference. [...]
[...] For all these reasons and aspects, we can definitely consider that the problems met by eBay in China are due to a lack of adaptation to the Chinese consumer behaviors and cultural differences, the company needs to adapt that. IV. Generating Alternative Solutions By the previous points, it seems that eBay is suffering from a legitimate decision-making source and a referent as well. Indeed, the company is suffering from a lack of trust from Chinese customers, so the company needs to be more legitimate and needs to find out what is referent in the Chinese market that can guarantee towards consumer trust on the website and the company. [...]
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