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EBAY’S STRATEGY IN CHINA-ACQUISITION OR ALLIANCE


Q1. Critically assess EBay’s choice of market entry strategy for China, listing both the advantages and disadvantages of its acquisition strategy.
Ans 1. Background.The strategic alliance between EachNet and eBay was an important decision based on China’s heady economic growth. Western interest in China’s internet sector was apparent owing to China’s manufacturing led boom and gradual integration into the global trading community. EachNet has recruited 3.5 million registered users and was an ideal partner to further consolidate its leading role in the country's burgeoning e-commerce industry.
Although the development of the Internet in China had skyrocketed, business orientated portals had had a difficult time generating revenue. But eBay had made success with its auction model in the United States and had been expanding abroad.
In January eBay reported a fourth-quarter net profit of US$25.9 million and expected revenue for the first half of 2002 to be between US$490 and US$510 million.
Advantages to ebay-EachNet
• The deal with EachNet was an important step forward in eBay's strategy to build a truly global marketplace.
• International expansion would be an important driver of ebay’s growth.
• 250 million strong emerging middle class would offer great potential.
• E-commerce revenue in China was expected to grow nearly 12 fold to more than US$16 billion over the next three to four years.
• Statistics from the China National Network Information Centre showed that China's Internet users had topped 33.7 million by the end of last year, up 49.8 per cent over the same period last year.

Advantages of the acquisition.
• Executed in a two stage process- minority stake followed by acquisition would be a good strategy while testing waters in a new market.
• Founders of Eachnet were Meg Whitman’s alums at Harvard- good personal relationships
• EachNet had good business knowledge and strong domestic...

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