eBay Globalization Strategy

*For the interest of this case, we will focus on the sixth strategic objective.

eBay’s International Expansion

        eBay began expanding in 1999 and has ambitiously captured market-share in a variety of international markets.  There are several key reasons why eBay has had success.  Most probably, the key reason for success was a varied market strategy based upon the country they were entering.  Other key reasons include;

• Entry into markets that made good business sense.
• Entry into markets that could generate the necessary revenue to sustain a community.
• Entry into markets that already were internet savy and had largest e-commerce activity
• Entry into markets that had a culture of trading

One other key strategy that eBay used was leveraging and layering.  Once they entered a market and began operations, they looked at the next logical entry market.  From a sound business strategy, they continually assessed and strategized their next intelligent steps.  Once they mastered the “language barrier”, which really creates the complexity and cost, they were able to layer yet another successful growth opportunity.

        

Strategic Issues and Problems

eBay’s senior vice president of international, Matt Bannick, is currently faced with the decision of whether to seek entrance into emerging market of Latin America which iBazar Brazil provides access to, or to hold off until such time eBay has resources (bandwidth) to better enter this market.  The decision is difficult as many other factors exist such as completing current acquisitions of Korea and southern Europe, and the economics’ of targeting Latin America.  IBazar’s weak presence and weak understanding of the Spanish language in Latin America will dilute the possibility of eBay to look towards organic growth and force them to acquire a local competitor which serves and understands the Latin America community and language better.  Bannick will be in charge of making the recommendations that will provide the best outcome given the current information for this situation.  Below is a list of possible scenarios:

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“Options for Latin America” (ALTERNATIVES)

1. Organic growth of iBazar Brazilian operation into Latin America
2. Growth through Acquisition of a competitor
3. Get rid of the iBazar Brazilian operation completely (increase cash flow)
4. Sell it for equity in a competitor for future acquisition
5. Shut it down!!!

As you can see there are five possible ways eBay can address the problem of whether the timing is right to pursue growth in the Latin America market at this time and how to go about it.

The first assumes that eBay will retain iBazar’s Brazilian operation and organically growing the business using the “Greenfield” entry mode.  Since iBazar is not a dominant player in the Latin America market eBay would be hard pressed to use this growth strategy and face the following challenges: such as developing new content in a new language, technical support, management and bandwidth, meeting the needs of the Latin America consumers, and legislative and regulatory restrictions.  Another thing that eBay will have to consider is whether pursuing this strategy will generate revenue sufficient to sustain operations and justify presence.  Furthermore, Latin America was likely not a region that would show sizable profitability any time soon.  Also the percentage of users with access to the internet was in the 20% range compared to 97% in the United States.

The second option was to grow operations in Latin America through acquisition of the top two competitors in this market.  The two candidates are  and .  If eBay were to go this route they would benefit from achieving a strong position, in a short time. They would acquire a management team with skills and experience in the target market and reduce the time it takes to start a new operation and gain a customer base.  On the downside eBay would still have to leverage some of it current management and bandwidth to tend to the operation, and fall away from its model of going into locations with the largest e-commerce potential.  This would be especially true since Latin America has a small number of its population online, and is not showing signs of profitability in the near future.

The third option is to get sell iBazar Brazil for CASH$$.  This would benefit eBay in two ways: they would not have to use resources in entering the Latin America market at this time and will be able to focus on their current acquisition and core business.  Also they will add positive cash flow to their balance sheet.  The only danger in selling would be that eBay may be in danger of loosing the Latin America market if they do not move in when the time is right.

The fourth option is to sell iBazar Brazil for equity in a competitor.  This would benefit eBay in two ways: the will not have to worry about the Latin America market at this time, continuing focus on current acquisitions, and will still have a stake for acquisition in the future when eBay is ready to enter the Latin America market.

The last option is just to shut down iBazar Brazil and take a loss.  We do not see any positives in this and wouldn’t recommend it with the other four choices available.

Recommendation

After reviewing the case we would recommend that eBay should sell iBazar to one of its competitors for equity in their company.  This would allow eBay to focus on their core operations and acquisition while still having a stake in the Latin America market for future expansion.  This also falls in line with their goals, which is “to create the world’s largest global trading community and to help people trade practically anything on earth.”   We further evaluated this recommendation against an initial SWOT Analysis to determine if their initial strengths/weaknesses would sustain this strategy and it is clear that they would.   Additionally, the table in appendix A suggests reasonable internet penetration, which would support this recommendation and choice of strategy.  

If eBay wishes to fulfill their initial Vision, they will have to eventually look at Latin America.  This is a future emerging market and one that they are considering in their list for future expansion.

 

Appendix A – Estimated Market Usage Potential

Current population statistics support the above table, however, the 2004 estimates are more closely aligned with 2003 Actuals.   This suggests that population growth was not as high as expected.   Therefore, our projections took that into consideration and usage expectations were decreased.    

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