eBay's Problems in China

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Case Details:

Case Code : BSTR278
Case Length : 19 Pages
Period : 2002-2007
Pub Date : 2008
Teaching Note :Not Available
Organization : eBay
Themes: Globalization | International Business | Joint Venture
Industry : Internet and E-Commerce
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

eBay was founded by Pierre Omidyar (Omidyar), a software programmer at San Francisco, California, USA, in 1995.

Omidyar got the idea of creating an Internet auction site when his fiancée faced a difficulty while trying to collect Pez dispensers from the San Francisco Bay Area.

Omidyar launched an online auction site called Auction Web (www.ebay.com being the domain name) in September 1995, creating a marketplace that would enable people to trade with each other...

e-Commerce Market in China

As of 2007, China was the world's second-largest Internet market after the US. According to the China Internet Network Information Center (CNNIC), the number of Internet users in China had reached 162 million by the end of July 2007. Of these, 122 million surfed the Internet using a broadband connection. On an average, the Internet user in China spent 17.9 hours online per week, compared to the 11.4 hours per week spent online by a user in the US...

eBay in China

eBay entered China by acquiring a 33 percent stake in EachNet, the Delaware, USA-based company, with an initial investment of US$ 30 million in 2002. In 2003, eBay acquired the remaining 63 percent stake for US$ 150 million and the company was called eBay EachNet. With this acquisition, eBay was poised to take advantage of the growing Chinese e-commerce market.

eBay EachNet had a major presence in the Chinese online auctions market. In 2003, its market share was nearly 80 percent...

eBay's China Troubles

Within a span of three years eBay EachNet saw its market share eroding in the face of competition from Taobao. Commenting on Taobao's success, Jack Ma (Ma), founder and CEO of Alibaba, said, "When we started Taobao, even our own chief technology officer said, 'Jack, you are crazy. Don't forget eBay.' But we passed eBay in China in just two years."...

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