The first key attribute for eBay is its business model. eBay was the first successful player in the online auction industry. Their business model includes not only their modes of payment, but also the community in which they do business. This model has given eBay the prestige of being the world’s largest online action company. However, this model is not costly to imitate and is not rare anymore. The second core competency is eBay’s unique product offerings. EBay’s differentiated products and dedicated customer services through various channels including email, online chat or telephone give value and options to consumers, enhance user experience, and create great value for the organization. The company uses this attribute to set themselves apart from the competition and create a sustained competitive advantage. Another advantage is its strong brand name. eBay is the creator of the online auction industry, which has given them a competitive advantage. Since building a successful brand takes substantial funding, time and success. eBay’s brand identity creates a temporary competitive advantage (Exhibit 2)
Q2. The investment of 33% stake in its local counterpart, EachNet, is a good choice in 2002 to enter Chinese market. Although eBay was confident of the potential of 250 million strong emerging middle class in China, it recognized risks including internet infrastructure, imbalanced economic and technological development, the absence of a reliable credit system, lacking of transparent government regulation and inadequate legal system. Thus a joint venture is the best choice which enabled eBay to quickly enter the new market and offered information regarding to EachNet and Chinese market. Moreover the financial result proved that the investment is a good decision. By 2003, EachNet had held 85% market share. Its value had grown from US$90 million to US$225 million. The follow-on decision to merge EachNet in 2003 is also a good decision. On one hand, eBay could avoid management conflicts between two sides because usually joint ventures don’t work well in China. On the other hand, eBay minimized its investment by purchasing EachNet early. If it delayed the acquisition, the cost of acquisition would increase quickly because EachNet performed very well at that time.
Q3. The alliance seems to be a win-win strategy. TOM would bring about several benefits which eBay was strongly looking for. First, TOM could contribute its local knowledge, technology and brand value to the joint venture. eBay would be able to venture into the mobile commerce sector in China where TOM had been a market leader. Second, TOM is famous for its strong innovation and execution ability, which are supposed to enhance eBay’s performance in China. Lastly, TOM’s solid connections with government would facilitate eBay to introduce services to China market. However, there are some risks which could not be neglected. TOM lacks e-commerce experience, despite of its market leader position in wireless and internet services. The CEO of TOM has extremely limited knowledge about e-commerce and China market. Another risk involves the control rights. TOM obtained control rights, and the joint venture might be directed as TOM wishes. In addition, TOM’s culture is completely different from eBay’s. TOM is more profit-centered, whereas eBay builds a friendly family for employees. So there might be conflicts in culture integration in the joint venture.
In this alliance, TOM also carries risks going with benefits. TOM only takes over the C2C business, while eBay keeps the cross-board business, the most profitable business for eBay. Also to be more correct, eBay is using this alliance to test China market. If it succeeded, both parties get…