Ebay Case-Latin AmericaEssay Preview: Ebay Case-Latin AmericaReport this essayAssuming that eBay makes the decision to go Latin America, prepare a roadmap for eBays expansion in this region during the next five years. Specifically, what should be the sequence of entries in the six major Latin America countries in Exhibit 6? Use relevant facts from the case to support your decision.
The six major Latin America countries are Brazil, Argentina, Mexico, Colombia, Venezuela, and Chile. Although eBay was the largest online trading company by developing a web-based community in 2001, it was not well recognized in the Latin America region. The language, currency exchange, and lack of knowledge of the region are the main challenges which eBay were facing. In early 2001, eBay bought iBazar which allowed them to step into a Latin America market – Brazil. However, the acquisition was driven by the European market. Thus, Latin America wasnt the main focus of this action. But Brazil was a good start. Brazil was already among the top twenty global e-commerce markets and representing over half of the regions e-commerce activity.
The acquisition of iBazar made it possible to get a much better user experience, but the company became a threat to its profitability. In 2004, its profits were slashed to a third of what it reached on a typical day. But eBay has since developed a significant business. With a total $7 million investment, eBay has acquired most of its business for its products and services to date. Additionally, its acquisitions of eBay Services, a software company for Internet-based mobile applications, and the WorldCom Corporation have added a big strategic importance to eBay. All of these products have made many customers leave.
During this time, iBazar has been involved in a number of high profile cases: e-book shopping in Brazil, Chinese e-books in Mexico, and e-books in South America. In the early 2000s, iBazar launched its e-book shopping service in Mexico and in the United States. iBazar is now in the US, and has been able to get a foothold in this market. From the beginning, the market has been filled with problems of the consumer price, which is growing rapidly. For example, customers who like the price of ebooks are forced to pay a small fee to receive information about the price of ebooks printed, in the online ordering feature where all iBazar customers can buy ebooks from and store their purchases in the store. Moreover, customers in Mexico can choose to pay only 30% of what they wish for ebooks on a monthly basis. Furthermore, at any point in time prices are changing in many parts of the country and online shoppers can also opt out of shopping.
As a product & service, iBazar is the second largest e-book shopping service in Brazil by total revenue. From the beginning, iBazar was part of eBay and has been the company’s largest player in the online retailing space from 2008 to now. The company owns more than a billion dollars of online online sales and is now valued at around $2 billion. It even began an expansion of iBazar last year, which has resulted in it buying about two billion units in 2012.
In addition, in November 2000, iBazar purchased a large part of a private investor group. It acquired a number of large e-books company and online retailer and also started an eBay web store. It has also created the eBay Web store, which was launched by eBay on August 24, 2000. In November 2000, the company purchased 4 billion e-books from the private investor group at eBay. As an alternative to eBay, it purchased a number of large online retailers in the United States, France, and Canada.
In 1998, eBay was purchased for more than $14 billion, the third full quarter of its acquisition of eBay Services, a software company for Internet-based mobile applications, which helped lead to the acquisition of the largest e-book seller in Latin America. As well, it has
According to an IDC study, the internet user in Latin America area will grow 40 percent per year between 2001 and 2005. The online trade was expected to be worth $72 billion in Latin America by 2005. Mexico and Brazil would be the largely dominated. I would say Mexico is the second market that eBay will enter. However, eBay did not know much about the region, language, and culture. Therefore, eBay needed a partner before the second step. MercadoLibre.com and deRemate.com are the two main possible options.
In 2001, MercadoLibre.com became eBays exclusive partner for the Latin America region. MercadoLibre was established in 1999 in Argentina (Argentina would be the third market) and later expanded to Brazil, Mexico, and other South American countries. “MercadoLibre will acquire iBazar Com Ltda., the Brazilian subsidiary of iBazar SA, which was recently acquired by eBay. In return eBay will receive a 19.5% ownership interest in MercadoLibre”. From my point of view, Colombia will be the next market, because it has a larger internet user group compared to Chile and Venezuela. The last market eBay will enter would be Venezuela.
In fact, in November 2005, MercadoLibre acquired DeRemates operations. Therefore, MercadoLibre.com became the number-one online trading site in Latin America region. It is currently present in Argentina, Brazil, Chile, Colombia, Mexico, Ecuador, Peru, Uruguay, and Venezuela.
Bannick is convinced that eBays success in Latin America will require an enormous amount of learning. He plans to hire a consultant to conduct market research, and he has asked for your help. Beyond data and statements in the case, suggest the information about the general environment, competition, and consumers that Bannick should ask the consultant to collect. Use the three categories-general environments, competition, and consumers/users-to organize your answer.
Before an investment happens, the manager will do a lot of research about the target markets. In this case, Bannick knew he will require an enormous amount of learning. Therefore, the general environments, competition, and consumer are the areas of interest wants to know about before the decision making process.
General EnvironmentseBay is a leading e-commerce business. They are directly dealing with businesses or customers through the internet. Thus, the internet user in the Latin America region will have significant effect on their investment. “According to an IDC (International Data Corp.) study, the Latin America Internet audience would grow by an average of 40 percent each year between now and 2005, up from just 15 million in 2000.” The internet user population growth is a good sign for eBay investment. Also, Forrester Research predicts that e-commerce in the region will grow to $82 billion in 2004. The Latin America internet economy will be benefited by the business-to-business (B2B) trade. B2B online trade was expected to bring $76 billion or 93 percent of total business income in Latin America by the year 2004.
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E-commerce in Latin America faces significant challenges, but there are clear signs that the economic climate is dramatically improving The combination of aggressive efforts to stabilize currencies with liberalized trade policies will make Latin America – especially Brazil and Argentina – fertile ground for rapid adoption of global e-commerce.
From the government policies point of view, the e-commerce in Latin America gained from a rollback of protectionist policies. By the year 2004, Brazil lead the region by trading $64 billion online, and Argentina followed with more than $10 billion in online sales. The research done by IDC in 1999 showed nearly 85 percent of companies in Latin America were using or willing to evaluate e-commerce within the next two years. In conclusion, the general environment shows e-commerce has high potential growth. Latin America is a good market to invest in.
CompetitionFrom the case we know eBay acquired iBazar in the early 2001 and started to step into the Latin America market. However, iBazar was not the strongest player in Brazil. It had no other presence in Latin America. In Latin America, iBazar was the third of the four major players. The other local competitors were MercadoLibre, DeRmate, and Lokau. Since e-commerce is an international business, eBay was also facing other online trading company competed within the Latin America market. In the business-to-business region only, eBay is facing: Ariba, BidFreight.com, Bid4Assets, BizBuyer.com, bLiquid.com, Buyer Zone, CloseOutNow.com, Commerce One, Concur Technologies, DoveBid, FreeMakets, Iron Planet, Labx.com, Oracle, Overstock.com, PurchasePro.com, RicardoBiz.com, Sabre, Surplusbin.com, Ventro, and VerticalNet. At the same time, eBay also competed with the local current offline company. The competitors can easily launch an online site at a nominal cost using commercially available software. As I mentioned in the general environment section, there were nearly 85 percent of companies in Latin America using or willing to evaluate e-commerce within the next two years. As a result, the Latin America market will be the high competitive region.
Consumers/UserSince the Latin America internet users increased, the relative business grew as well. In 2000, there were less than half of Latin American consumers who had telephone connections. In Argentina, Brazil, and Mexico combined, only 111,000 consumers had broadband. However, “IDC found that Latin America Internet users spend an average of $53 per month on service fees and local phone charges, twice the amount