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 - – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, technology disruption, wage bills are increasing, increasing energy prices, increasing transportation and logistics costs,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, 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 -
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.
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.
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.
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.
Successful track record of launching new products
– Ebay China has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ebay China has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Innovation driven organization
– Ebay China is one of the most innovative firm in sector. Manager in eBay's Strategy in China: Alliance or Acquisition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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 -
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.
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.
Slow to strategic competitive environment developments
– As eBay's Strategy in China: Alliance or Acquisition HBR case study mentions - Ebay China takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study eBay's Strategy in China: Alliance or Acquisition, is just above the industry average. Ebay China needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
Low market penetration in new markets
– Outside its home market of Ebay China, firm in the HBR case study eBay's Strategy in China: Alliance or Acquisition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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 .
Shortening product life cycle
– it is one of the major threat that Ebay China is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ebay China will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Ebay China needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
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.
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.
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.
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.
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.
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.