INTBUS 7506 International Business Strategy
Added on 2020-04-15
41 Pages6904 Words141 Views
Running head: ACQUISTION CONCEPT OF TOM ONLINE IN EBAYAcquisition Concept of Tom Online in eBayName of the Student:Name of the University:Author’s Note:
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY1Executive SummaryThe research report elaborates about the comparative study on acquisition theory of TomOnline and eBay. The study statistically measured the sampled data and took the conclusion.The acquisition theory is better than joint venture with Tom Online. As a personnel manager,I would like to choose acquisition procedure rather than joint venture. Hence, according tothe public response, I would help company to change their minds. The acquisition theory isgoing to be helpful for eBay according to the analyzed data. My research could be beneficialof decision-making of the company. As eBay and Tom Online, both are popular companies ofChina, eBay would be more successful for taking the correct decision.
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY2Table of Contents1.0Introduction.....................................................................................................................31.1Purpose of the Study....................................................................................................41.2. Interest of the Study.................................................................................................41.2Preview of the Research..............................................................................................52. Body.......................................................................................................................................62.1Literature Review and Hypothesis Development........................................................6Disadvantages of Joint Venturing:-....................................................................................6Advantages of Acquisition Strategy:-................................................................................8Hypotheses:......................................................................................................................102.2. Method and Data Analysis:...........................................................................................10Survey method:................................................................................................................10Questionnaire Set:............................................................................................................10Statistical Methods:..........................................................................................................102.3. Finding and Results:......................................................................................................112.4.Organization:.............................................................................................................353.0Conclusion.....................................................................................................................353.1.Summarization of Adequate and Appropriate Conclusion:.......................................354.0References.....................................................................................................................36
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY31.0IntroductioneBay is an internet company that functions as an internet market place, by bringingthe buyers and sellers to one place and facilitating trade on local and internationalbasis(Verbeke, 2013). Consumers and businesses founded eBay in 1995 for creating aplatform for sales of goods and services. eBay operates more than 35 global markets in theworld across continents like North America, South America, Latin America, Asia Pacific andEurope. eBay had entered China and was planning to dominate the China market in 2004.Despite having business in so many countries of the world, eBay is still struggling to grow inChina as it faces several issues and constraints there (Lee & Renner, 2016). Tom Online isalso a mobile internet company in China offering a variety of online and mobile servicesinvolving wireless internet and online advertising. The analysis is carried out to understand the political, economic, socio cultural, legaland environmental factors that influence and affect the joint venture of eBay and TomOnline. A large amount of foreign direct investments that is available in China. This is majorflow into e-retailing and mobile services. Thus, it has led to a lot of improvement in the e-retailing and internet service platform. China is an emerging economy with a high number ofmiddle-income populations that has a high level of disposable income (Buckley & Ghauri,2015). The internet penetration is also very high in Chinese society and majority of shoppersprefer to buy products and services online rather than going to a shop to purchase them(Dalbehera et al., 2017). The technology infrastructure in China is growing and the mediaoutlets are blocked by the government that restricts the promotion of the services of themarketing firms like E-bay and the internet mobile companies like Tom Online (Buckley etal., 2016). Consecutive effort in business of both the companies might bring newopportunities for both the companies.
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY4The research report discusses about the SWOT analysis (Strength, Weakness,Opportunity and Threat) of collaboration of eBay and Tom Online (China based company).We carried out necessary hypotheses and data analyses for the disadvantages of joint ventureof both the companies and undertaken the advantages of acquisition strategy of eBay.1.1Purpose of the StudyThe purpose of the paper is to advice E-bay against its possible joint ventureagreement with Tom online in order to expand the market in China. The research paperpresents the arguments against the joint venture and asserting that an acquisition strategy forgrowth can be pursued to gain a strong foothold of the Chinese market. The acquisitionstrategy would be fruitful for eBay from several directions and dimensions.1.2. Interest of the StudyThe competition in the internet auction market in China is tough as the potentialmerged business could lose out to the strong local competitors (Lee & Renner 2016).Moreover, the Chinese consumers also prefer to buy from renowned companies in the e-commerce market in China rather than a new entrant. Moreover, in 2002, when eBay plannedto enter China, it also did not incorporate the payment escrow and Paypal into its system(Reid 2015). On the other hand, TaoBao had the escrow in the form of Alipay System. Eventhough PayPal was introduced later in the Chinese market, eBay had lost its market share. The cultural differences between eBay and its local operating company like TomOnline can also become a cause of concern for the management in the end. The decision-making could be centralized as many organizations in China and this may not work in favorof eBay. It would make the decision making process more time taking and the work processmore inflexible (Wieland et al., 2017). This may also force EBay to deliver a lag response to
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY5the ever-changing Chinese market. eBay would like to acquire Tom Online and expand theirbusiness in current scenario. 1.2Preview of the ResearchThe main success factor for the company is the sales generated by eBay. eBay has thefirst mover advantage in internet commerce, especially in the online auction sales, and itcreated a big network that divided customers into buyers and sellers (Akter et al., 2016).Although there were the other companies that were into auction sales, eBay managed tosurpass them as it conducted auctions with no inventory that meant costs savings. In 2002,eBay’s online commerce business surpassed that of Amazon. Even during the dotcom crash,the company’s business was unaffected because of its strong fundamentals. The companyalso enjoys a high market capitalization rate. The business model of the company is also asuccess factor for the company as its management constantly explores new pathway. Theconsumers also flock to eBay because it offers a wide range of product selection (Wei et al.,2014). Another reason for success of the company is its customer support and service systemthrough various channels like e-mail, online text and telephone calls. However, despite thesefactors of critical success for the company, it has not set up a strong foothold in China. At last, after struggling to establish a stable presence in the commercial market ofchina, eBay announced on December 20, 2006. eBay is going to establish a joint venture with
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY6politically excellently connected Tom Online. However, we feel that eBay would be morestrategically correct if it would choose acquiring Tom Online rather than joint venturing.2. Body2.1Literature Review and Hypothesis DevelopmentWhy acquisition strategy is better than joint venture is a very important question.China’s internet market place is also fraught with challenges like 1.slow internet speeds2. high access costs for the internet usage3. inequalities in economic and technological developments in different parts ofChina4. Absence of a credit system for online payments5.Too much of government intervention and regulations6. Corruption and lack of transparency in the trading system (Lee & Renner 2016)In order to do business in China, it is proposed that eBay adopts the acquisitionstrategy instead of going for a joint venture. A minority stake in a local trading and e-commerce company should be the right strategy to commence the growth of its business inChina (Verbeke, 2013). The reasons that acquisition as a growth strategy may be morefavorable than joint ventures are discussed in this section (Reid, 2015). Disadvantages of Joint Venturing:-The main characteristics of the joint ventures are that the owners are treated asseparate entities and there is no transfer of ownership from one owner to another. These jointventures or alliances could be very flexible as it is mostly associated to some purpose or
ACQUISTION CONCEPT OF TOM ONLINE IN EBAY7project to which joint venture will be undertaken. However, the joint ventures have a finitereliability. The main disadvantages of pursuing a joint venture are that there is separation ofownership into two distinct entities that makes the operation of the joint venture complicated.Both the organizations have to act not only for their interests but also from the interest of theindependent collaboration industry (Kogut, 1988). Managing the resources of each of theorganization can be conflicting with the interests of the joint venture together (Wieland et al.,2017). The flexibility of the joint ventures in the short term as well as long term is necessaryfor success. Without clearly defined objectives for which the joint venture is generated, itwould naturally fail. The strategic planning is essential for the success or failure of the project(Wang, 2012). The longevity of the joint venture is finite and unlike the mergers andacquisitions where the transaction outputs are increasing concerns, the joint venture onlycreate a strategic alliance. This alliance is only focused on the current business and ongoingoperations (Verbeke, 2013). Thus, the joint venture tends to operate within a limited time andas such all decisions like capital allocations, resource or operations planning and strategicgoals of the organization must align within the period of the joint venture.Single mistakes in this typical competitive market could teach a bad lesson to themanagers of eBay, growing the frustration. Some issues could affect the growth of the jointventure. Their resources and practices will impose several barriers such as lack of diligence,poor matchmaking and making miscalculations at the time of transition that could lead toconflict between management and the workers on the venturing companies (Brush et al.,2015). The management of acquired company may be apprehensive of the growth strategy. Ifthe risk factors of the business are not promptly detected or defined, then they could alleviateto bigger issues after the joint venturing (Klettner et al., 2014).
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