Evaluate the following 4 strategic options that eBay can use (both actually used
ID: 356429 • Letter: E
Question
Evaluate the following 4 strategic options that eBay can use (both actually used and potentially can use). List the advantages and disadvantages of each of them, and come up with your own final rank ordering of the choices if you are in charge of eBay’s strategy for entering the Chinese market.
-Enter via building its own subsidiary from scratch
-Enter via alliance (investing in equity, but not in majority control status)
-Enter via joint venture (equal control with a partner)
-Enter via a full acquisition of a Chinese firm
Explanation / Answer
Evaluation of all the 4 options are as follows:
-Enter via building its own subsidiary from scratch
Advantages: - Will help to create its same own brand.
- Direct & full control on all the operations & financial expense.
- Can use already exciting brand name.
Disadvantages: - Its a time consuming process, as might take years to gain a substantial size.
- Capital intensive, all the operations are to be built from scratch.
- Cultural barriers, different work culture & market segment might create issues in day to day operations.
-Enter via alliance (investing in equity, but not in majority control status)
Advantages: - Faster mode compared to subsidiary as operations can be started straight after alliance.
- Less capital intensive, as initial road map or atleast market study is already in place.
- Lesser issues of cultural barriers.
Disadvantages: - Less control over the operations, thus might effect the company's long term vision.
- Keeping an eye or control over all the financial expenses is tough, thus might lead to some extra expenses or cost.
- Company's interest is not safeguard, as in case of dispute, ebay will loose complete business.
-Enter via joint venture (equal control with a partner)
Advantages: - Company's brand name can be taken forward with local player.
- No cultural issues, as complete support will be provided by local partner.
- Operations will not be heavy (as taken care by partner) & complete clarity about the financial expenses.
Disadvantages:- In case of dispute, company has to either completely sell its share or buy back complete venture (if allowed by country's law).
-Enter via a full acquisition of a Chinese firm
Advantages: - Fastest mode to enter the market.
- Already running operations provide help to keep focus on company's vision & not on market study and other analysis (as they are already in place).
- Already Trained workforce & established customer base.
Disadvantages: - Change in management might lead to interdepartmental issues & clashes, as new management will have different work culture which might not be accepted by exciting staff.
- Company needs to redo or remold all the operations & finances as per the parent company, so that company did loose its visions & forte.
- Initial investment is high, as company needs to ensure complete buyout in the initial phase only.
Thus, based on above evalutaion these strategies can be ranked as follows:
1.Enter via joint venture (equal control with a partner)
2.Enter via alliance (investing in equity, but not in majority control status)
3.Enter via a full acquisition of a Chinese firm
4.Enter via building its own subsidiary from scratch
Joint venture is fastest mode & safe mode, as it results in lesser investment, with exciting market study & customer base, also offers complete clarity about the company's finances & future growth trajectory.
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