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 - – cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, technology disruption, increasing household debt because of falling income levels,
customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, 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 -
Superior customer experience
– The customer experience strategy of Ebay China in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
High brand equity
– Ebay China has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ebay China to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Ebay China in the sector have low bargaining power. eBay's Strategy in China: Alliance or Acquisition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ebay China to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Ebay China is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Global Business industry
– eBay's Strategy in China: Alliance or Acquisition firm has clearly differentiated products in the market place. This has enabled Ebay China to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Ebay China to invest into research and development (R&D) and innovation.
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.
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.
High switching costs
– The high switching costs that Ebay China has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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 -
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.
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.
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.
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.
Need for greater diversity
– Ebay China has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study eBay's Strategy in China: Alliance or Acquisition has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ebay China 's lucrative customers.
High cash cycle compare to competitors
Ebay China has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study eBay's Strategy in China: Alliance or Acquisition that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case eBay's Strategy in China: Alliance or Acquisition can leverage the sales team experience to cultivate customer relationships as Ebay China is planning to shift buying processes online.
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.
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 -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Ebay China can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ebay China can use these opportunities to build new business models that can help the communities that Ebay China operates in. Secondly it can use opportunities from government spending in Global Business sector.
Manufacturing automation
– Ebay China can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Building a culture of innovation
– managers at Ebay China can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ebay China is facing challenges because of the dominance of functional experts in the organization. eBay's Strategy in China: Alliance or Acquisition case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ebay China can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, eBay's Strategy in China: Alliance or Acquisition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
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 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 .
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.
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.
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.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Ebay China.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Ebay China business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Ebay China can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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.
