Strategic Management - Ebay: Expanding Term Paper

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Their strategy is strongly transnational, as each community of buyers and sellers requires a high level of adaptation to their specific needs, and very low costs to participate in the eBay auction exchange-based transactions. eBay has taken steps in the right direction but not nearly with enough focus to make their transnational strategies succeed. Figure 1, taken from our course materials, illustrates the breakout of costs vs. adaption of strategies. For eBay their challenge is being in the upper right quadrant of this analytical framework, with high pressure to reduce transaction costs while at the same time needing to adapt their selling and buying community to unique country needs. This is the most challenging quadrant to expand a global business in.

Figure 1:

Comparison of Global Expansion Strategies

To eBay's credit they have been most successful in overcoming cultural differences between nations when they make equity investments and allow the foreign-based partner to manage day-to-day operations. This is because the foreign-based partners have established greater trust and have over time earned reputations for excellent performance. The case study paints an overly optimistic view of trust between buyer and seller when in fact this is the most difficult leap of faith for many to make when purchasing something online, as is seen in many of the studies completed on online auctions (McCole, Ramsey, Williams, 2010).

For eBay the issue isn't the lack of business sense, it is the lack of trust in the online community it has created and is attempting to scale into different global markets. This lack of trust is also predicated on the major differences between westernized cultures and Asia. These differences contribute to the lack of trust surrounding eBay's acquisitions and strategies to move into new markets.

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eBay lacks the grass-roots support of consumers in these Asian markets and as a result, their business model is struggling.

No amount of advertising or efforts to promote using westernized approaches will matter; instead, the company needs to recognize and respect the deep cultural differences between its own corporate culture, the western culture of which it is a part, and the major differences to the Asian culture as well. The local adaptation of content must be based on a multi-year plan if it is to be successful, and this assumes eBay wants to grow their own business model in Asia. It would be far better to acquire a commerce and auction platform and then using the process efficiencies learned internally, create greater profitability. Acquiring a company in these nations whose cultures and nature of trust itself is so different than the U.S. would greatly increase the odds of success for the eba6y buying community model.

Conclusion

The critical issue in this case is trust in the buying and selling community, and the ability to scale out a business model so that it can be profitable and reach economies of scale. For eBay, the challenges of penetrating new markets must center on making the community as effective as possible and thoroughly trusted. Only then can the company succeed in overcoming cultural barriers and achieving the revenue growth it is in the U.S. And other westernized nations......

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