Ebay

Question Paper Integrated Case Studies – I (MB3J1): January 2009 Case Study? (100 Marks) • This section consists of questions with serial number 1 – 5. • Answer all questions.

• Marks are indicated against each question. Read the case carefully and answer the following questions: 1. Till 2005, Ebay EachNet was the leader in the Chinese e-commerce market, controlling more than half of it. But eBay EachNet soon lost its market leadership position to Taobao. com (Taobao).

In this context, analyze the reasons that can be attributed to Taobao’s edge over eBay. 2. a.

To enable people to trade with each other, Pierre Omidyar created a marketplace in September 1995 which was later called eBay. By mid 1997, eBay received one million page hits per week with 15,000 listings on a day making it one of the most visited sites on the Internet in the US. Discuss the growth strategies adopted by eBay in US.

eBay initially had some success in China but failed to live upto the expectations. In this light, discuss how eBay entered China and the strategies it adopted to revive itself and its slowing growth rate. (20marks) (15marks) b. 3.

A significant mistake made by the eBay team in China was its notion of applying its US business model in China.

Discuss the business model of eBay in the US, its strengths and weaknesses. Also analyze how eBay tried to adapt its business model to increase its market share in China. 4. The entry of large Multi National Companies (MNCs) into emerging economies was considered to be the end of local players in markets. With the evolution of new markets and the change in the mindset of the customer, local companies are more successful than before in keeping the MNCs at bay.

Critically analyze this statement giving reasons for success/failure using relevant examples from the world of business.

5. The concept of e-commerce was introduced in China only in 1993 and it took some time for it to catch on. But once it did, e-commerce in China grew at a frantic pace. In this regard, discuss the opportunities and road blocks of Chinese e-commerce market. eBay’s Problems in China “We do not anticipate fading from China, we are very committed to the China market and we think the China market is going to be a very big market for m-commerce (mobile commerce) as well as e-commerce. “1 ?

Meg Whitman, President and CEO, eBay Inc, in 2006.

(10marks) (20marks) (15marks) (20marks) “I think it’s a question of recognizing that they were not achieving what they were hoping to, and finding a solution that offers them a better opportunity for the long term…. I think ? The case is prepared only for the purpose of examination and not to illustrate effective or ineffective performance of the company. The case contains factual information adapted to and combined with other information to enable analysis of the given topics. Page 1 of 30 1 2 3 4 5 6 7 8 9 “eBay CEO Whitman Says Company ‘Not Fading’ from China,” December 20, 2006.

Will Swarts, “EBay Partners with Tom Online in China,” www.

smartmoney. com, December 19, 2006. JupiterResearch is a leading provider of information services to the IT and technology companies. eBay EachNet is a subsidiary of eBay Inc. in China. eBay Inc.

(eBay) is the world’s largest online auction company and has around 233 million online auction users. The company had revenues of US$ 6 billion in 2006. In addition to providing online auction markets, eBay also has an online payment service called PayPal and a communications business under Skype, which offers voice-over-Internet protocol (VoIP) services.

TOM Online Inc. is a Chinese online portal and wireless Internet company.

It was the media flagship of Hong Kong-based conglomerate Hutchison Whampoa, which had interests in Operating of ports, Retail, Property development, and Communications. Founded in August 1999 by Chinese entrepreneurs, Bo Shao and Haiyin Tan, EachNet had 3. 5 million registered Internet users in 2002. Alipay is a division of one of the leading e-commerce companies, Alibaba. com, that allows individuals and businesses to send and receive payments online conveniently and securely.

Alipay’s core service is an escrow service which solves the concerns related to settlement risk between buyer and seller. In this system, after a buyer commits himself/herself to an online transaction, his/her payment is held in an Alipay account until he receives the product ordered. After the product is received the buyer notifies Alipay and the payment is then forwarded on to the seller. As of December 2006, Alipay had 33 million registered users. (Source: “Alipay – 33 Million Registered Users,” www. imnewswatch.

com, February 5, 2007) PayPal was a leading online payment company purchased by eBay in mid-2002.

In June 2007, PayPal had 143 million user accounts across the world. Through PayPal, individuals and businesses could send or receive money over the Internet. PayPal supported payments in US Dollars, Canadian Dollars, Australian Dollars, Euros, Pounds Sterling, and Japanese Yen. Buyers could also pay for their online purchases on various e-commerce websites and auction sites like eBay using the balance in their PayPal account.

Though this mode of transaction was quick, there were also a number of complaints from disgruntled PayPal users. Most of the complaints were related to the dispute resolution procedures of PayPal.

In eBay China, transaction fees used to be charged as a percentage of the value of completed sales. This ranged from RMB 10 for a sale worth RMB 500 to RMB 115 for one worth RMB 20,000 (Source: “EBay China to Waive Transaction Fees amid Stiff Competition – Report,” www. forbes. com, January 19, 2006.

) Yahoo! Inc. was founded by Jerry Yang and David Filo in January 1994 and was later incorporated in March 1995. It ranks second in the online advertising market, after Google Inc. The company’s revenues for 2007 were US$ 6.

7 billion. Google, Inc. was co-founded by Sergey Brin and Larry Page in 1998.

Google is the world’s most popular Internet search engine and has a diversified range of products such as E-mail, blogs, etc. Founded in 2000, Baidu. com is the leading online search engine in China.

The company’s revenues for 2006 were US$ 107. 3 million. Citigroup Inc. , headquartered in New York City, New York, USA, is a leading financial services company. Ina Steiner, “Bad News for eBay in China,” www.

auctionbytes. com, September 25, 2006. Plastic dessert holders bearing pictures of cartoon characters such as Spiderman and Snoopy. “Meg Muscles eBay Uptown,” www. pathfinder. com, June 5, 1999.

Celebrity Shopping Network: The Best Online Shopping Networks,” www. travel. syl. com, February 15, 2006. Griff, “The Way We Were,” www. pages.

ebay. com, June 27, 2003. “Benchmark Capital,” www. fundinguniverse. com, 2000.

Earlier, Whitman had been General Manager, Pre School division of Hasbro Inc. , a toy company (1997-98) and President and CEO at Florist’s Transworld Delivery, a floral products company (1995-96). She had also worked in various capacities at The Strite Rite Corporation (1992-95) and had been Senior VP for the Walt Disney Consumer Products division (1989-92). ww. iship.

com, provided shipping rates for Airborne Express, Federal Express, United Parcel Service, and the United States Postal Service. The B2B market size was expected to be between US$ 2. 7 trillion and US$ 7. 3 trillion by 2004, whereas B2C spending was pegged at around US$ 184. 5 billion by 2004. (Source: “eBay Taps Business to Business Boom,”

CNET News.

com, March 15, 2000. ) “eBay Launches Business Exchange,” www. investor. ebay. com, March 15, 2000. Autotrader.

com was launched in May 1998. The company had 1. 5 million listings of used cars on ts site in early 2000. According to internetworldstats. com, as on September 30, 2005, the US was the largest market with 203 million Internet users followed by China with 103 million Internet users.

Shopping. com is a website that provides price comparison services for goods sold on the web. It was founded in 1998. The China Internet Network Information Center (CNNIC) is the state network information center of China, founded as a non-profit organization in June 1997. The Computer Network Information Center of the Chinese Academy of Sciences runs CNNIC.

CNNIC looks after everything related to the Internet in China like domain names registration, IP addresses, relevant researches, surveys and information services, and international liaison and policy research. “CNNIC: 137 Million Internet Users in China,” www. imnewswatch. com, February 5, 2007. “China Surpasses US in Internet Use,” www.

forbes. com, March 31, 2006. “China to Have More Internet Users Than US,” www. timesofindia. indiatimes. com, January 25, 2007.

Giovanni Navarria, “The Future of Dissent: Hacking Chinese Censorship,” www. opendemocracy. net, December 20, 2005. China E-commerce Profit Model Report, 2006-2007,” www. researchinChina. com, January 2007.

iResearch Consulting Group is a market research company based in China. It offers companies market research services related to ecommerce, Internet, online games, etc. “China’s Baidu Says to Enter e-commerce Market,” www. reuters. com, October 18, 2007.

MII has the authority to regulate the software and communications industry and is accountable for the manufacture of electronic and information products. It is also responsible for information dissemination related to the Chinese economy. C. E. Unterberg Towbin is an investment bank.

Will Swarts, “EBay Partners with Tom Online in China,” www. smartmoney. com, December 19, 2006. A pictogram is a character that represents an object, a concept, or an activity through a picture. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 2 it’s an indication of how complex and difficult China is. In most of the other countries where eBay has expanded, those have been pretty mature and stable economies.

China is neither. ” 2 ? Patti Freeman Evans, Analyst, JupiterResearch3, in 2006. Ebay Changes its Strategy in China 39 40 An ideogram is a character that represents an idea.

Bill Powell and Jeffrey Ressner, “Why eBay Must Win In China,” www. time.

com, August 22, 2005. 41 Ling Liu, “Bidding Fierce for Chinese Online Buyers,” www. sfgate. com, May 30, 2005. 42 Martyn Williams, “EBay Sees E-commerce Potential in China,” www.

thestandard. com, February 11, 2005 43 Gross Merchandise Volume refers to the total value derived from closed listings in the online trading market. 44 Ina Steiner, “Competitor Comments on eBay China Rumors,” www. auctionbytes. com, November 08, 2006.

45 Victoria Shannon, “EBay Returning to China,” www. iht. com, June 21, 2007. 46 Shaun Rein, “eBay’s Tom