eBay's Strategy in China: Alliance or Acquisition SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of eBay's Strategy in China: Alliance or Acquisition
n December 2006, eBay, Inc, a US company that offers e-commerce, e-payments and internet communication services globally, announced its plan to form a joint venture with China-based online portal and wireless operator, TOM Online, that would give each company 49% and 51% ownership, respectively. This was eBay's third strategic move in China, following its acquisition of a 33% stake in domestic counterpart EachNet in 2002 that marked its entry into the market, and a full acquisition in 2003. Despite the initial good results, eBay had been losing market share to local rival and Alibaba's fully-owned subsidiary-TaoBao. By 2006, eBay had seen its market share drop from a high of 85% to a staggering 29%, while TaoBao's continued to increase, reaching 60%. The joint venture was therefore an attempt by eBay to save its failing Chinese operations. The move also reflected the increasing difficulties foreign internet companies were facing in China because of fierce competition and a changing market environment. eBay believed that it would benefit from TOM Online's local knowledge and political connections. However, some analysts questioned whether political connections alone were the answer and suggested that eBay focus on its product and service offerings instead. How could eBay leverage the joint venture to its success in China? What alternatives did eBay have for enhancing its strategic position in the Chinese market?
Authors :: Lu Jiangyong, Zhigang Tao, Isabella Chan
Swot Analysis of "eBay's Strategy in China: Alliance or Acquisition" written by Lu Jiangyong, Zhigang Tao, Isabella Chan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ebay China facing as an external strategic factors. Some of the topics covered in eBay's Strategy in China: Alliance or Acquisition case study are - Strategic Management Strategies, Competitive strategy, Internet, Marketing and Global Business.
Some of the macro environment factors that can be used to understand the eBay's Strategy in China: Alliance or Acquisition casestudy better are - – challanges to central banks by blockchain based private currencies, increasing commodity prices, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of eBay's Strategy in China: Alliance or Acquisition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in eBay's Strategy in China: Alliance or Acquisition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ebay China, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ebay China operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of eBay's Strategy in China: Alliance or Acquisition can be done for the following purposes –
1. Strategic planning using facts provided in eBay's Strategy in China: Alliance or Acquisition case study
2. Improving business portfolio management of Ebay China
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ebay China
Strengths eBay's Strategy in China: Alliance or Acquisition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ebay China in eBay's Strategy in China: Alliance or Acquisition Harvard Business Review case study are -
Ability to lead change in Global Business field
– Ebay China is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ebay China in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Ebay China digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ebay China has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Ebay China has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in eBay's Strategy in China: Alliance or Acquisition HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Ebay China
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ebay China does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Ebay China is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ebay China is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in eBay's Strategy in China: Alliance or Acquisition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Ebay China has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in eBay's Strategy in China: Alliance or Acquisition Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Ebay China is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Lu Jiangyong, Zhigang Tao, Isabella Chan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Ebay China is present in almost all the verticals within the industry. This has provided firm in eBay's Strategy in China: Alliance or Acquisition case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the eBay's Strategy in China: Alliance or Acquisition Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Ebay China is one of the leading recruiters in the industry. Managers in the eBay's Strategy in China: Alliance or Acquisition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Ebay China are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Effective Research and Development (R&D)
– Ebay China has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study eBay's Strategy in China: Alliance or Acquisition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses eBay's Strategy in China: Alliance or Acquisition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of eBay's Strategy in China: Alliance or Acquisition are -
Increasing silos among functional specialists
– The organizational structure of Ebay China is dominated by functional specialists. It is not different from other players in the Global Business segment. Ebay China needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ebay China to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study eBay's Strategy in China: Alliance or Acquisition, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Ebay China products
– To increase the profitability and margins on the products, Ebay China needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Ebay China has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the segment, Ebay China needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the eBay's Strategy in China: Alliance or Acquisition HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Ebay China has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ebay China is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study eBay's Strategy in China: Alliance or Acquisition can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Ebay China supply chain. Even after few cautionary changes mentioned in the HBR case study - eBay's Strategy in China: Alliance or Acquisition, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ebay China vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Lu Jiangyong, Zhigang Tao, Isabella Chan suggests that, Ebay China is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study eBay's Strategy in China: Alliance or Acquisition, in the dynamic environment Ebay China has struggled to respond to the nimble upstart competition. Ebay China has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Ebay China has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities eBay's Strategy in China: Alliance or Acquisition | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study eBay's Strategy in China: Alliance or Acquisition are -
Buying journey improvements
– Ebay China can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. eBay's Strategy in China: Alliance or Acquisition suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Ebay China has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study eBay's Strategy in China: Alliance or Acquisition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ebay China to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ebay China can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Ebay China has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ebay China to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ebay China in the consumer business. Now Ebay China can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ebay China can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ebay China can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Ebay China to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Ebay China can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ebay China can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Ebay China to increase its market reach. Ebay China will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Ebay China can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ebay China can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats eBay's Strategy in China: Alliance or Acquisition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study eBay's Strategy in China: Alliance or Acquisition are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study eBay's Strategy in China: Alliance or Acquisition, Ebay China may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on Ebay China demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing wage structure of Ebay China
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ebay China.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ebay China in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ebay China in the Global Business sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Ebay China high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology acceleration in Forth Industrial Revolution
– Ebay China has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Ebay China needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ebay China can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Ebay China needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Ebay China can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ebay China can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study eBay's Strategy in China: Alliance or Acquisition .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Ebay China needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ebay China with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of eBay's Strategy in China: Alliance or Acquisition Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study eBay's Strategy in China: Alliance or Acquisition needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study eBay's Strategy in China: Alliance or Acquisition is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study eBay's Strategy in China: Alliance or Acquisition is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of eBay's Strategy in China: Alliance or Acquisition is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ebay China needs to make to build a sustainable competitive advantage.