Guangzhou Group Presented by: Cenk Eryilmaz Charles Robinson Clare Cheung Elaine Li Maggie Chan
INTRODUCTION World's leading e-commerce company (C2C, B2B) • Ecommerce • Payments 2003 eBay merged with eachnet as ebay eachnet to enter the Chinese market
MAIN COMPETITORS TaoBao • Finding the treasure Established in 2003 • Taobao is China's largest Internet retail platform
MARKET SHARE OF COMPETITORS In 2005 Taobao's 57.7 % eBay Eachnet 31.5%
RE-ENTER IN CHINA MARKET • Ebay eachnet withdraw its website in China after Taobao established three years which is free for buyers and sellers • 2007 re-enter Merged with Tom.com as joint venture – tom ebay
RE-ENTER IN CHINA MARKET • tight restrictions on sellers to clamp down on sales of counterfeit goods • To win shoppers' trust • Match with the China market • Become more success e.g. Skype
Internet development in China 5 years ago: --Less Chinese connect with internet Now: -- internet population increased by 24 per cent to 137 million people online --focus on first tier(Beijing and Shanghai) , second tier and third tier cities(Nanjing, Dalian ) --In 2006, online services in China spent 35.5 billion --Spending on online advertising rose more than 50 per cent to Dollars 638m in 2006
Popular online activities --Instant messaging, blogging , posting messages on website and online gaming --Tencent QQ: widely used by younger communities just like Chinese MSN but faster and more functions
Foreign VS Local internet companies 1. Foreign search engine : -- Google 36 per cent -- Yahoo 26 per cent 2.a.Local search engine: --Baidu80 per cent b.Alibaba business trade site: --accounts for about 80 per cent of individual online user transactions
Reason have been tailored to Chinese cultural requirements such as, Baidu Taobao: --prices start high , buyers get them down --ensure the buyer is happy with the goods before payment --people can buy in groups --Sellers shift in volume -- Buyers get a discount."
According to Forrester Research,online auction sales in the US have increased from $8.4 billion in 2001 to $54.3 billion in 2007. • China: smaller but grown rapidly
Seller and Bidders’ Behavior • Sellers maximize their revenues • make decisions(the auction design or selling strategies ) • Bidders good deal in lower price • make decisions(which auction and how much)
Methodology: Recording • a one-month observational survey(late September, 2006 to late October, 2006.) • At eBay China, all auctions of 17- and 19-inch LCD monitors were collected, whereas at eBay US, only DELL monitors were collected, considering the large number of available auctions.
Main Findings • Chinese consumers may not be comfortable selling and buying used goods without face-toface meeting. • more bidders per auction at eBay China than at eBay US the relatively low starting bid at eBay China.
The starting bid price has a significantly positive effect on price for both eBay China and US auctions. • the starting bid as a quality indicator for potential bidders; • high starting bid discourages bidder entry at eBay US, whereas bidders at eBay China are more willing to attend auctions with a high starting bid. • number of product pictures positive effect on price only for eBay China auctions
Discussion Questions 1 Why do you think eBay failed in China the first time around? What lessons in market entry strategies have you (eBay) learned from this experience? On the other hand, how have the local firms managed to beat the big multinationals at their own games?
Q1) WHY EBAY FAILED IN CHINA THE FIRST TIME AROUND? • charges users various fees for many functions such as listing and selling products • Don’t understand the China market place and culture • Slow and unstable services and a lack of updates • Unsecured payment system • discouraged buyer-seller contact that could lead to haggling
1) WHAT LESSONS IN MARKET ENTRY STRATEGIES HAVE YOU (EBAY) LEARNED FROM THIS EXPERIENCE? • the better design an online auction website has, the more people choose to use the website • the more people trust an e-auction website, the more they choose to use the website. • Doing local market research
1) HOW HAVE THE LOCAL FIRMS MANAGED TO BEAT THE BIG MULTINATIONALS AT THEIR OWN GAMES? • online chat function that allowed buyers and sellers to communicate virtually before trading • Enhance seller credibility • implemented an online payment solution called Alipay • Secured transaction
Leading Discussion 2 What are the unique challenges and pitfalls for a foreign business like eBay to enter the China and start its operations and sustaining growth in the China market?
Q2. CHALLENGES FOR FOREIGN BUSINESS different business culture and environment --different language (communication) --special habits, hobbies, customs, festivals
-- Cross-cultural misunderstandings -- value proposition for products and services may be significantly different -- exclusivism ( e.g. Japan)
2. local protectionism -- indirect subsidies to local industry • local competition develop rapidly -- underestimate the size and quality of domestic industry, e.g. Li Ning --compete in first tier,second tier and third tier cities with domestic company
PITFALLS 1. should observe Chinese law --different from foreign law (ocean law) 2. Should fully understand the dynamics of the relationship -- build up closer relationships with business partners
3. Restrict of government policy -- Many government restrictions, especially in political and human right overcome by thorough research, spending a lot of time in-market and following a focused business plan.
Leading Discussion 3 What factors influence the successful introduction of new product/services to the Chinese consumers in terms of marketing operations (4Ps)?
Product & Services • Information and Safety • Vary products: Local, foreign • Feeling of safety • Proof of the security payment • Platform for trading
Product & Services (Cond.) • Payment method—escrow service (安付通) • provide high quality service to the customers • Biddersescrow servicesellers
Price • Price of delivery • Free for charge
PLACE—PLATFORM FOR TRADING • User-friendly • Sellers and bidders must be in touch • Easy way to discuss each others • Ability to bargain the price with the sellers • More SAFETY and Information • Use of an escrow service to ensure the buyer in happy with goods before payment(安付通) • An agreement with Chinese authority to obtain a payment license
Website tailored to Chinese cultural requirements • Customers can negotiate with sellers. • Personalized applications • Informative homepage
Promotion • “What ever it is, you can get it on eBay, and Shop victoriously! ” • Culture context: culture adaptation • Brand name, knowledge about the brand, information’s about the quality, brand equity, impression towards the brand
Market • Understanding MarketChinese demographics, lifestyle and consumption pattern is essential to the successful business • Competition: Yahoo, Google • Government Regulation/ policy: favorable vs. unfavorable • Economic and political Environment: stable or not
Leading discussion 4 • It appears that eBay has re-entered the China C2C market? If you were the new eBay China CEO, what would you do differently this time from the last time ?
eBay’s re-entry • Initially, eBay took an active role in preventing buyer and seller contact. • This was detrimental to their success as an auction company as it fostered a lack of confidence between buyers and sellers. • As a result, eBay was not able to remain competitive.
eBay’s re-entry • With one of eBay’s primary problems being a lack of buyer and seller contact, this should be one of the first things they look at upon re-entry into the Chinese market • eBay’s acquisition of Skype gives them an excellent means of addressing this problem, while at the same time, reinforcing the use of another eBay owned service.
Skype • In the second week of September 2005, eBay announced the acquisition of the Skype net phone service for $2.6 Billion USD. • By November of 2006 the number of Chinese Skype users has exceeded 23.5 million people, with over 100,000 new accounts being created daily.
Skype & eBay • Obviously, for a Chinese person to be using eBay, it can be safely assumed that they have a computer. • This means that they have, or can get the Skype service. • eBay can then tie a person’s eBay account to their Skype account, or vise versa.
Skype & eBay • By tying the Skype service into eBay, they will have made it easy for buyers and sellers to contact each other. • This will also allow eBay to promote the Skype service, while at the same time, the Skype service can be used to promote eBay
Skype & eBay • eBay’s initial fear, and reason for preventing buyer and seller contact, was to prevent haggling and out-of-eBay sales. • The simple way to fix this would be an early auction termination fee. • This would not impose any undo burden on legitimate eBay sales, while at the same time allowing eBay to profit from those trying to circumvent the system.
Skype & eBay • Additionally, an early termination fee would incentivize the seller to convince the buyer to simply bid on the auction, further promoting the eBay service.
Leading Discussion 5 How do economic environment, politics, and policies affect business planning in China? Is contingency planning important for China? Is it true that some companies are too big or too famous to fail in China?
Economical and political changes Planned, communistic economy in former China No need for Marketing, no competition Change: Government introduced transformation from planned system to free market system Marketing causes competition With competition: Regarding law changes can be expected: Room for negotiation with local governancies is possible possible that changes are disadvantegous
Stable economical growth of entire China gives security to MNCs BUT: Increasing power of consumers influencing law to their benefits => long term Economical and political changes
MNCs too big to fail `? Yes: Ebay e.g. is able to do re-entries as often as they like many locations all over the world supporting financial resources for the entries ( global chess ) Profiting from economies of scale
References • http://proquest.umi.com/pqdweb?index=43&did=1292815601&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1190172581&clientId=25836 • http://proquest.umi.com/pqdweb?index=30&did=1214737151&SrchMode=1&sid=4&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1190172938&clientId=25836 • http://proquest.umi.com/pqdweb?index=49&did=1330798481&SrchMode=1&sid=4&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1190173074&clientId=25836 • http://proquest.umi.com/pqdweb?index=8&did=1182697491&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1192526383&clientId=25836 • http://news.alibaba.com/article/detail/business-in-china/100151761-1-how-ebay-lost-china-market.html • http://www.taobaotrends.com/taobao-agent/why-buy-from-taobao.html • http://www.chinadaily.com.cn/china/2006-12/19/content_762837.htm • http://www.iacis.org/iis/2006_iis/PDFs/Huang_Dai.pdf • http://en.wikipedia.org/wiki/Marketing_mix • http://www.sbaer.uca.edu/research/sbida/1999/30.pdf • http://www.bus.ucf.edu/slee/VCR(China).doc • Purchase article - http://news.cnet.com/eBay-to-nab-Skype-for-2.6-billion/2100-1030_3-5860055.html?tag=txt • User statistics article -http://share.skype.com/sites/skypegear/2006/11/