Ebay’s Strategy in China: Alliance or Acquisition Essay

In December 2006, eBay Inc., a US connection that offered e-commerce, e-payments and cyberspace communication go globally, announced its plan to form a marijuana cigarette venture with China-based online portal and radio set operator, turkey cock Online, in which eBay would have 49% ownership.1 The move reflected the increasing difficulties foreign internet companies were facing in their attempts to snatch a share of the Chinese market amid unruly competition and a changing market environment.eBay first set foot in China in 2002 by acquiring 33% interest in EachNeta domestic online auctioneer company, followed by a full acquisition in 2003.2,3 In 2005, eBay acquired Skype4 to expand into the online communication sector. While Skype was a wholly owned subsidiary of eBay globally, it operated indirectly in China via a joystick venture with TOM Online. Due to this lively relationship between the two companies,5 TOM Online seemed to be a natural prime(a) of partner for eBays subsequent ratiocination with regards to its online marketplace bank line. Recognising TOM Onlines topical anaesthetic knowledge and political connections, eBay believed that a joint venture would benefit its failing business in China and help the company further develop its Chinese market.6 nearly analysts questioned whether political connections alone were the answer and suggested that eBay instruction on its product and service offerings.7 1Vara, V. and Chao, L. (20 December 2006) EBays China put out highlights a tough market, seawall Street Journal. eBay (Date Unknown) eBay and EachNet Team Up in China, Press Release, http//investor.ebay.com/releasedetail.cfm?ReleaseID=74802 (accessed 27 April 2007). 3After the full acquisition in 2003, eBay operated under the name of eBay EachNet. 4Skype is a peer-to-peer software program that allows people to subscribe to free calls over the internet to anyone who in addition subscribes to this service. Skype provided peer-to-peer int ernet telephony serviceie, sec messaging and online telephone service. In 2005, eBay acquired 49% stake in Skype China, with TOM Online owning the rest. stem Schwankert, S. (20 December 2006) EBay to replace Chinese auction site with JV, ITworld.com, http//www.itworld.com/Tech/2403/061220ebay/ (accessed 27 April 2007). 6Bradsher, K. (22 December 2006) With TOM Online, eBay gains Chinese clout, International Herald Tribute. 7Rein, S. (24 December 2006) TOM Online Must way on Products Connections Dont control Success, SeekingAlpha, http//china.seekingalpha.com/article/22946 (accessed 20 June 2007). 2Isabella Chan prepared this case under the watchfulness of Prof. Zhigang Tao and Dr Jiangyong Lu for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. This research was partially support by a grant from the University Grants delegacy of the Hong Kong Special Administrative Region, China (Project no. AoE/H-05/99).