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Posted: July 24th, 2022
The Downfall of eBay China
The Downfall of eBay China
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Abstract
EBay Inc is an e-commerce company with its headquarters in the United States. It is known for its constant success. In 2002, the company penetrated China to take advantage of the opportunities in the C2C market. Being on the development phase of online business, China exhibited many resources. Its geographical location also made it a strategic market for eBay since it connected the Asia Pacific region. EBay Inc acquired EachNet, which was the dominant online company in China. It did so to leverage the resources and models that EachNet used in its business. However, eBay China did not succeed as it had expected. This was facilitated by various reasons, which include the integration of leadership and movement of operations to the headquarters in the United States. The company also failed in satisfying the target market due to poor customer service. In this analysis, the aim is to show the attractive of Ebay’s C2C market in China. The paper explores the location advantages of the Chinese market and the ownership advantages (firm-specific) and how they affect the competitive advantages of the company.
Keywords:Acquisition, customer service, e-commerce
The Downfall of e-Bay China
eBay Inc. entered the C2C market in China through the acquisition of EachNet Company, which was the leading C2C provider. eBay saw an opportunity in the vast growing Chinese consumer market, thus its decision to invest in it. However, eBay China did not succeed as anticipated, and this led to its withdrawal from the market. Customer satisfaction and service were some of the factors which led to failure. The gaps in China’s C2C market and the advantages that eBay ad EachNet at the time of the venture guaranteed profitability of the investment.
Some of the factors which made China’s market attractive include the promising growth of online business and less competition in the domestic market. As of 2002, China had shown great ability to develop e-commerce. The growth of online consumer business had made it be ranked second after the United States (Zeng n.d.). This attracted eBay since it would contribute to its primary goal of becoming the biggest online company in the world. Additionally, there was less competition in the online market in China. During this time, the online business was on its growth process; thus few traders focused on the C2C business in online platforms. eBay China took this opportunity to increase its profitability while enjoying less competition.
China also had specific advantages that made it appropriate for the venture. First, it had resources that were required to develop the business. There were many individual retailers and companies which were involved with the traditional form of trade. Utilization of these resources increased the sales of eBay from 2002 to 2006, as seen in table 1(Zeng n.p.). Second, the geographical location of the country also favored the penetration of eBay into the C2C market. China connected many countries in the Asia Pacific region, and this was beneficial in reaching out to many buyers and sellers. As a result, this would lead to the expansion of the company leading to increased profitability.
eBay China exhibited several advantages to the online business. eBay Inc had financial and material resources required for innovations. The company had been among the most successful e-commerce businesses in the U.S. Additionally; it had a developed technology system that would facilitate faster services for buyers and sellers (Zeng). Besides, the firm leadership founded by Meg Whitman, who was the president and CEO, defined the company’s success. On the other hand, EachNet Company knew the target market. EachNet had an elaborate and advanced customer service, which led to the satisfaction of customers.
These ownership advantages should not grant the eBay China competitive advantage. This is because eBay China operated from the headquarters, which was located in the U.S. After the full acquisition of EachNet, eBay China moved its operations to the command center where every service is authorized (Zeng). Chief decisions were made in the head office. This made the decisions of operators in China, less important. Therefore, the services provided to the target market do not satisfy it since their preferences had not been considered. As a result, eBay China will experience high competition from the domestic e-commerce companies in China.
To conclude, the opportunities in the C2C market in China guaranteed the success of eBay China if a strategic plan of improving customer service had been made. Also, eBay Inc had enough resources to penetrate the Chinese market and be the leading online company in the world. The company failed because of integrating all of EachNet’s leadership and operations to the headquarters.
Table 1: EBay Sales from 2002 to 2006
Year 2002 2003 2004 2005 2006
Sales (‘000 000’) 1214 2165 3271 4552 5970
References
Zeng, R. (n.d.). eBay in China.
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