The Analysis of the Companies
Executive Summary
This casestudy analyzes the factors that helped Taobao.com to overtake eBay China and to eventually minimize eBay’s presence in china.The analysis of the companies has been done by employing different models. AAA framework has been employed to analyze the structural weaknesses in eBay’s entry and expansion in China. A 4C model has been employed to analyze the advantages Taobao had when compared to eBay China.
AAA analysis of eBay China indicates that it did not succeed in perfectly employing at least one of Adaption, Aggregation and Arbitrage strategies. It failed to adapt to the Chinese customer requirements in its product offering and online portals. It overlooked the problems of integrating eBay China with eBay global. It did not exploit the differences between China and the rest of the world to increase trade volume. It rather concentrated on centralizing technical and operational bases according to eBay global. This diluted the potential product offering advantages.
4C analysis shows that Taobao had in depth understanding of Chinese culture, economy, connection with customers and community at large. Taobao utilized the local Chinese advantage in designing its product offerings and communication mechanism with people. Taobao had good relationships with the customers, government, leaders and collaborators. Taobao’s in depth knowledge of Chinese market and its customers helped them in gaining market share. But due to its no fee structure, its profits were less. This is one of the major concerns for Taobao. Later, they started to explore products for which they can charge fee.
An unstable leadership of eBay China further compounded its problems. In contrast, under the leadership of Jack Ma and with its strong Chinese values, Taobao had captured majority of the online C2C market in less than five years. eBay China, which followed a globalized structure, could not imbibe Chinese culture in its operations and was driven out of competition.
AAA Globalization Triangle Analysis of eBay China
Adaptation
Adaptation is a strategic response to differences and eBay tried to adapt to the Chinese market by without a serious thought to the underlying hindrances.
By acquiring Eachnet.com, eBay entered the Chinese market at a crucial stage. But, it just tried to apply its tailor made strategies to the distinctively unique Chinese market. It changed the Chinese operations to align it with eBay’s worldwide system without taking into consideration the different social and customer dynamics of China.
eBay could not replicate its success in Australia, Canada, Germany etc., in China. It failed to properly understand the regulatory requirements for Chinese banks and online payment constraints.The Chinese customers who predominantly prefer no fee services failed to respond to the fee based