Guangzhou Group

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• Guangzhou Group
• Presented by
• Cenk Eryilmaz
• Charles Robinson
• Clare Cheung
• Elaine Li
• Maggie Chan

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INTRODUCTION

• World's leading e-commerce company (C2C, B2B)
• Ecommerce
• Payments
• 2003
• eBay merged with eachnet as ebay eachnet to enter
  the Chinese market

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MAIN COMPETITORS

• TaoBao
• Finding the treasure
• Established in 2003
• Taobao is China's largest Internet retail
  platform

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MARKET SHARE OF COMPETITORS

• In 2005
• Taobao's 57.7
• eBay Eachnet 31.5

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RE-ENTER IN CHINA MARKET

• Ebay eachnet withdraw its website in China after
  Taobao established three years which is free for
  buyers and sellers
• 2007 re-enter
• Merged with Tom.com as joint venture
• tom ebay

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RE-ENTER IN CHINA MARKET

• tight restrictions on sellers to clamp down on
  sales of counterfeit goods
• To win shoppers' trust
• Match with the China market
• Become more success e.g. Skype

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Internet development in China

• 5 years ago
• --Less Chinese connect with internet
• Now
• -- internet population increased by 24 per cent
  to 137 million people online
• --focus on first tier(Beijing and Shanghai) ,
  second tier and third tier cities(Nanjing, Dalian
  )
• --In 2006, online services in China spent 35.5
  billion
• --Spending on online advertising rose more than
  50 per cent to Dollars 638m in 2006

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• Popular online activities
• --Instant messaging, blogging , posting messages
  on website and online gaming
• --Tencent QQ
• ?widely used by younger communities
• ?just like Chinese MSN
• ?but faster and more functions

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Foreign VS Local internet companies

• 1. Foreign search engine
• -- Google ?36 per cent
• -- Yahoo? 26 per cent
• 2.a.Local search engine
• --Baidu?80 per cent
• b.Alibaba business trade site
• --accounts for about 80 per cent of individual
  online user transactions

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Reason

• have been tailored to Chinese cultural
  requirements such as, Baidu
• Taobao
• --prices start high , buyers get them down
• --ensure the buyer is happy with the goods before
  payment
• --people can buy in groups
• --Sellers ?shift in volume
• -- Buyers ?get a discount."

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HOW PRICE DETERMINANTS DIFFER ACROSS EBAY CHINA
AND US ? WHY?
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• According to Forrester Research,online auction
  sales in the US have increased from 8.4 billion
  in 2001 to 54.3 billion in 2007.
• China smaller but grown rapidly

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Seller and Bidders Behavior

• Sellers? maximize their revenues
• make decisions(the auction design or selling
  strategies )
• Bidders? good deal in lower price
• make decisions(which auction and how much)

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Methodology Recording

• a one-month observational survey(late September,
  2006 to late October, 2006.)
• At eBay China, all auctions of 17- and 19-inch
  LCD monitors were collected, whereas at eBay US,
  only DELL monitors were collected, considering
  the large number of available auctions.

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Main Findings

• Chinese consumers may not be comfortable selling
  and buying used goods without face-toface
  meeting.
• more bidders per auction at eBay China than at
  eBay US ? the relatively low starting bid at eBay
  China.

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• The starting bid price has a significantly
  positive effect on price for both eBay China and
  US auctions.
• the starting bid as a quality indicator for
  potential bidders
• ? high starting bid discourages bidder entry at
  eBay US, whereas bidders at eBay China are more
  willing to attend auctions with a high starting
  bid.
• number of product pictures ? positive effect on
  price only for eBay China auctions

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• Discussion Questions 1
• Why do you think eBay failed in China the
  first time around? What lessons in market entry
  strategies have you (eBay) learned from this
  experience? On the other hand, how have the local
  firms managed to beat the big multinationals at
  their own games?

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Q1) WHY EBAY FAILED IN CHINA THE FIRST TIME
AROUND?

• charges users various fees for many functions
  such as listing and selling products
• Dont understand the China market place and
  culture
• Slow and unstable services and a lack of updates
• Unsecured payment system
• discouraged buyer-seller contact that could lead
  to haggling

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1) WHAT LESSONS IN MARKET ENTRY STRATEGIES HAVE
YOU (EBAY) LEARNED FROM THIS EXPERIENCE?

• the better design an online auction website has,
  the more people choose to use the website
• the more people trust an e-auction website, the
  more they choose to use the website.
• Doing local market research

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1) HOW HAVE THE LOCAL FIRMS MANAGED TO BEAT THE
BIG MULTINATIONALS AT THEIR OWN GAMES?

• online chat function that allowed buyers and
  sellers to communicate virtually before trading
• Enhance seller credibility
• implemented an online payment solution called
  Alipay
• Secured transaction

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• Leading Discussion 2
• What are the unique challenges and pitfalls
  for a foreign business like eBay to enter the
  China and start its operations and sustaining
  growth in the China market?

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Q2. CHALLENGES FOR FOREIGN BUSINESS

• different business culture and environment
• --different language (communication)
• --special habits, hobbies, customs, festivals

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• -- Cross-cultural misunderstandings
• -- value proposition for products and services
  may be significantly different
• -- exclusivism ( e.g. Japan)

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• 2. local protectionism
• -- indirect subsidies to local industry
• local competition develop rapidly
• -- underestimate the size and quality of
  domestic industry, e.g. Li Ning
• --compete in first tier,second tier
• and third tier cities with
• domestic company

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PITFALLS

• 1. should observe Chinese law
• --different from foreign law (ocean law)
• 2. Should fully understand the dynamics of the
  relationship
• -- build up closer relationships with
  business partners

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• 3. Restrict of government policy
• -- Many government restrictions, especially
  in political and human right
• ?overcome by thorough research, spending a lot of
  time in-market and following a focused business
  plan.

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• Leading Discussion 3
• What factors influence the successful
  introduction of new product/services to the
  Chinese consumers in terms of marketing
  operations (4Ps)?

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Product Services

• Information and Safety
• Vary products Local, foreign
• Feeling of safety
• Proof of the security payment
• Platform for trading

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Product Services (Cond.)

• Payment methodescrow service (???)
• provide high quality service to the customers
• Bidders?escrow service?sellers

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Price

• Price of delivery
• Free for charge

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PLACEPLATFORM FOR TRADING

• User-friendly
• Sellers and bidders must be in touch
• Easy way to discuss each others
• Ability to bargain the price with the sellers
• More SAFETY and Information
• Use of an escrow service to ensure the buyer in
  happy with goods before payment(???)
• An agreement with Chinese authority to obtain a
  payment license

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• Website tailored to Chinese cultural requirements
• Customers can negotiate with sellers.
• Personalized applications
• Informative homepage

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Promotion

• What ever it is, you can get it on eBay, and
  Shop victoriously!
• Culture context culture adaptation
• Brand name, knowledge about the brand,
  informations about the quality, brand equity,
  impression towards the brand

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Market

• Understanding MarketChinese demographics,
  lifestyle and consumption pattern is essential to
  the successful business
• Competition Yahoo, Google
• Government Regulation/ policy favorable vs.
  unfavorable
• Economic and political Environment stable or
  not

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• Leading discussion 4
• It appears that eBay has re-entered the China C2C
  market? If you were the new eBay China CEO, what
  would you do differently this time from the last
  time ?

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eBays re-entry

• Initially, eBay took an active role in preventing
  buyer and seller contact.
• This was detrimental to their success as an
  auction company as it fostered a lack of
  confidence between buyers and sellers.
• As a result, eBay was not able to remain
  competitive.

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eBays re-entry

• With one of eBays primary problems being a lack
  of buyer and seller contact, this should be one
  of the first things they look at upon re-entry
  into the Chinese market
• eBays acquisition of Skype gives them an
  excellent means of addressing this problem, while
  at the same time, reinforcing the use of another
  eBay owned service.

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Skype

• In the second week of September 2005, eBay
  announced the acquisition of the Skype net phone
  service for 2.6 Billion USD.
• By November of 2006 the number of Chinese Skype
  users has exceeded 23.5 million people, with over
  100,000 new accounts being created daily.

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Skype eBay

• Obviously, for a Chinese person to be using eBay,
  it can be safely assumed that they have a
  computer.
• This means that they have, or can get the Skype
  service.
• eBay can then tie a persons eBay account to
  their Skype account, or vise versa.

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Skype eBay

• By tying the Skype service into eBay, they will
  have made it easy for buyers and sellers to
  contact each other.
• This will also allow eBay to promote the Skype
  service, while at the same time, the Skype
  service can be used to promote eBay

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Skype eBay

• eBays initial fear, and reason for preventing
  buyer and seller contact, was to prevent haggling
  and out-of-eBay sales.
• The simple way to fix this would be an early
  auction termination fee.
• This would not impose any undo burden on
  legitimate eBay sales, while at the same time
  allowing eBay to profit from those trying to
  circumvent the system.

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Skype eBay

• Additionally, an early termination fee would
  incentivize the seller to convince the buyer to
  simply bid on the auction, further promoting the
  eBay service.

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Leading Discussion 5

• How do economic environment, politics, and
  policies affect business planning in China? Is
  contingency planning important for China? Is it
  true that some companies are too big or too
  famous to fail in China?

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Economical and political changes

• Planned, communistic economy in former China ? No
  need for Marketing, no competition
• Change Government introduced transformation from
  planned system to free market system
• ? Marketing causes competition
• With competition
• Regarding law changes can be expected Room for
  negotiation with local governancies is possible
• ? possible that changes are disadvantegous

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Economical and political changes

• Stable economical growth of entire China
• ? gives security to MNCs
• BUT Increasing power of consumers influencing
  law to their benefits gt long term

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MNCs too big to fail ?

• Yes Ebay e.g. is able to do re-entries as often
  as they like
• ? many locations all over the world
  supporting financial resources for the entries (
  global chess )
• Profiting from economies of scale

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References

• http//proquest.umi.com/pqdweb?index43did129281
  5601SrchMode1sid3Fmt3VInstPRODVTypePQDR
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• http//news.alibaba.com/article/detail/business-in
  -china/100151761-1-how-ebay-lost-china-market.html
  
• http//www.taobaotrends.com/taobao-agent/why-buy-f
  rom-taobao.html
• http//www.chinadaily.com.cn/china/2006-12/19/cont
  ent_762837.htm
• http//www.iacis.org/iis/2006_iis/PDFs/Huang_Dai.p
  df
• http//en.wikipedia.org/wiki/Marketing_mix
• http//www.sbaer.uca.edu/research/sbida/1999/30.pd
  f
• http//www.bus.ucf.edu/slee/VCR(China).doc
• Purchase article - http//news.cnet.com/eBay-to-na
  b-Skype-for-2.6-billion/2100-1030_3-5860055.html?t
  agtxt
• User statistics article -http//share.skype.com/si
  tes/skypegear/2006/11/