Team presentation in the module Global Strategy with the task to analyze the battle between eBay and Taobao within the Chinese eCommerce market and its inferences.

1. Team 11 Hangzhou - Introduction
Taobao
The battle within the Chinese e-commerce
market and what we can learn from it.

2. Introduction
“eBay may be a shark in the ocean, but I'm
a crocodile in the Yangtze River.
If we fight in the ocean, we lose, but if we
fight in the river, we win.“
- Jack Ma (2005)

3. 3
Contents:
Inception Analysis Outcome
• Company structure
• Timeline of events
• Timeline in numbers
• Interrogation
Team 11 - Taobao
• External analysis
• Internal analysis
• Analysis of the battle
• Comparison
• Lessons learned

4. Inception Analysis Outcome
Company structure:
4
Team 11 - Taobao
International B2B platform Domestic B2B platform
B2C and C2C exchange Online payment service

5. Situation Analysis Outcome
Timeline:
5
Jack Ma
founded
Alibaba
Launch of
Zhao Cai
Jin Bao
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Foundation of
EachNet
Team 11 - Taobao
eBay failed in
Japan and pulled
out
Launch of
Aliwangwang
Introduction
of PayPal in
Rebranding
in eBay
EachNet
China
Launch of
Taobao
Launch of
AliPay
Launch of
eYoubao
eBay shuts
down its
Chinese site
Taobao
market leader
with 84%
eBay enters China
by purchasing
EachNet

6. Inception Analysis Outcome
Market share:
6
90
80
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007
Team 11 - Taobao
Taobao
eBay

7. Inception Analysis Outcome
Interrogation:
» How was Taobao able to succeed against
eBay and to force them to leave the Chinese
market?
» What are the reasons for the defeat of eBay?
» What can multinational as well as small local
companies learn from the events?
7
Team 11 - Taobao

8. Inception Analysis Outcome
External analysis|PEST:
8
Political/ Legal
• Single party
socialist
republic
(Rubber
Stamp
Parliament)
• Business
based on the
relationship
with
government
officials
Team 11 - Taobao
Economic
• One of the
fastest
growing
economy in
the world
• Rising
disposable
income
• Growing
luxury
consumption
among the
young
Sociocultural
• Guanxi
(personal
connections
& good
relationships)
•Cash-based
society
Technological
• 2nd largest
spender in
R&D
spending
• 200 million
internet users
• Huge growth
in the e-commerce
business

9. 9
Inception Analysis Outcome
External analysis|Market:
Team 11 - Taobao

10. Inception Analysis Outcome
External analysis|Five Forces:
10
Team 11 - Taobao
Intensity of Rivalry (HIGH)
• Taobao vs eBay
• Paipai
• Low switching cost
• Lack of product
differentiation
Bargaining Power of Suppliers
(MEDIUM)
• ICT providers
• Increasing number of online
retailers
• Taobao and eBay as major
players
Bargaining Power of Buyers
(MEDIUM)
• Increasing number of buyers
• Low switching cost
• Taobao and eBay as major
players
Threat of New Entrants (HIGH)
• High Industry Growth
• Low Product Differentiation
• Low Switching Cost
• Few Competitors
• Low Capital Requirement
• Low Chance of Retaliation
Threat of Substitute (MEDIUM)
• Brick and Mortar
• Shopping Experience
• Try and Claim the Product Right
Away
• No Transaction Risk

11. Inception Analysis Outcome
External analysis|Competitors:
11
Team 11 - Taobao
eBay Paipai
Future Objectives Regain share in the Chinese
market
Gain more market share
Current Strategy • Collaborative Strategy
signed exclusive advertising
rights with major portals Sina,
Sohu, and Netease with the
intention of blocking
advertisements from Taobao
• Acquisition
Acquired 15% stake in e-commerce
website
JD.com to build stronger
competitor against
Alibaba Group Holdings
Assumption Presence of a niche market Lots of room to grow
Competitor’s
Capabilities
Strong international trading
network and huge financial
resources
Huge community base
(QQ)

12. Inception Analysis Outcome
Internal analysis|Resources:
12
Team 11 - Taobao
Tangible:
» Financial “backup” of
Alibaba.com
» Technology
Intangible:
» Pioneer visionary CEO
» Young local employees
» Strong Brand Equity
» Strong start-up culture of
friendship and informality
» High Trust between
employees

13. Inception Analysis Outcome
Internal analysis|Capabilities:
13
Area Capability
Executive Team (CEO) Ability to motivate employees and deliver strong and
Team 11 - Taobao
emotional messages.
Management Ability to understand Chinese customer’s needs.
IT Ability to deliver new functionalities and features in a timely
fashion.
Logistics Good delivery system.
Payment Reliable payment system.
Communication Ability to create a sense of community among customers.
Design Ability to design in accordance with customer’s taste.
Relationship Strong social capital among Chinese companies.

14. Inception Analysis Outcome
Internal analysis:
14
Core competencies Competitive advantages
Understanding of the local
customer
Strong social capital with
companies
Strong motivating
corporate culture
Team 11 - Taobao
Design and delivery of
customer centered
products and services
Superior relevant
partnerships
Employee citizenship
Superior
value for
customers

15. Inception Analysis Outcome
Interim conclusion|SWOT:
15
Team 11 - Taobao
Strengths
• Understanding of Local
Culture
• Market Expertise
• Strong Brand Equity
• Employees citizenship
• High trust among customers
• Strong partnership network
• Free of charge
Weaknesses
• Quality Control
(counterfeit)
• Revenue
Opportunities
• Growing internet usage
• Growing online shopping
• Growing disposable
income
• Growing branded/luxury
market
Threats
• E-Bay competition
• Smaller companies
competition (Paipai)

16. Analysis of the battle
Taobao vs. eBay

17. Inception Analysis Outcome
The battle|Strategies:
17
Team 11 - Taobao
Strategy
Localization
Global brand
image

18. Inception Analysis Outcome
The battle|Vision of eBay:
» To capture market share in order to create
profits
» First Mover Advantage
» Adopted current global strategy
» German COO, American technician
» Headquarter based in Silicon Valley, USA
18
Team 11 - Taobao

19. Inception Analysis Outcome
The battle:
19
Team 11 - Taobao
“I'm not a tech guy.
I'm looking at the
technology with the
eyes of my customers,
normal people's
eyes.”
- Jack Ma

20. Inception Analysis Outcome
The battle|Vision of Taobao:
» Protect Alibaba from eBay
» Knowing the market advantage
» No Revenue Model “let [the consumer]
make money before we do”
» Improve China, and develop the Chinese
entrepreneurial spirit
» Headquarter based in Hangzhou 20
Team 11 - Taobao

21. Inception Analysis Outcome
The battle|Chinese consumer:
In 2002, the Chinese consumer was not used
to the internet:
» No guarantee about quality, payment,
fraud and default
» No established legal system
21
Team 11 - Taobao

22. Inception Analysis Outcome
The battle|Chinese consumer:
Transaction Fees:
» eBay charged transaction fees
» Taobao charged no transaction fees
Advertisement:
» eBay advertised online
» Taobao advertised on TV 22
Team 11 - Taobao

23. Inception Analysis Outcome
The battle|Localization:
23
Taobao eBay
• Localized the website, by making it
more appealing to the Chinese.
• Imitated a noisy Chinese
department store.
• Chose the colors red and orange
which signify prosperity and festivity
• Unique navigation for men and for
women.
• Very noisy website with plenty of
information.
• Fixed prices, since Chinese prefer
new products over used products.
Therefore the auction model is not
so popular.
Team 11 - Taobao
• Adapted the current site. Translated
it to Chinese.
• Maintained western preferences for
clean and sparse websites.
• Focused on the auction model for
used products.

24. Inception Analysis Outcome
The battle|Web design:
24
Team 11 - Taobao

25. Inception Analysis Outcome
The battle|eBay:
» Applied their global strategy to an
undeveloped market. eBay misunderstood
the consumer.
» eBay underestimated the importance of
local culture.
» eBay had poor customer service, there was
no telephone line, only through email, did
not establish the rapport necessary for
Chinese business. 25
Team 11 - Taobao

26. Inception Analysis Outcome
The battle|Trust:
» Affect-based trust vs. cognition-based trust
26
Team 11 - Taobao

27. Inception Analysis Outcome
The battle|Taobao:
» Strengthening the comprehensive cooperation
with banks.
» Building the shopping platform by associating
with strong enterprises (sharing resources with
Sohu.com)
» Establishing an identifying secure trading
platform (National ID Card)
» Wangwang (seller-buyer chat)
» Cash Payments
» Alipay (payment intermediary)
27
Team 11 - Taobao

28. Inception Analysis Outcome
The battle|Alipay:
28
Team 11 - Taobao
Buyer Seller
Buyer Alipay Seller

29. Inception Analysis Outcome
The battle|Monetization:
29
Taobao eBay
• No Revenue Model
• No Transaction fees
• 80% of revenues from advertising
• 20% of revenues from collaborations
through Alibaba
Team 11 - Taobao
• Transaction fees (1-5%)
• Keyword auctions
• Ads
• 80% of revenues from transaction
fees
• 20% from ads

30. Inception Analysis Outcome
The battle|Monetization:
30
Team 11 - Taobao
“Free is not a business
model. It speaks
volumes about the
strength of eBay’s
business in China that
Taobao is unable to
charge for its products”
- Meg Whitman
“E-commerce was new in
China. People were wary of
scams. Chinese consumers
were not familiar with online
marketplaces, and merchants
were reluctant to sell online
without significant incentives.
They wanted the marketplace
to be free so they could dip
their toes in the water”
- VP Porter Erisman

31. Inception Analysis Outcome
The battle|Interim conclusion:
31
Team 11 - Taobao
“eBay may have
deep pockets, but we
will cut a hole in their
pockets.”
- Jack Ma

32. Inception Analysis Outcome
Comparison:
32
Team 11 - Taobao
Taobao eBay
Business practice and
management
• CDG • Shanghai Tang
• Tsingtao
Vision • Esquel
• Samsung
Innovation • Samsung
• Zara

33. Inception Analysis Outcome
Lessons learned:
33
» Understand the consumer
» Understand the market/country/culture
» Localize and adapt service or product to
the market
» Commitment and perseverance
» Continuous innovation
» Create and follow a strong vision
Team 11 - Taobao

34. Closure
Thank you
FOR YOUR ATTENTION!