Taobaos Success free essay sample

The most successful C2C E-business platform in China Chenlei Shi 865313 IT IS 600 Professor Robert Testa, Jr. September, 18, 2010 Taobao’s Success 2 Abstract With the great speed of economic globalization, E-Business is developing in a surprising speed through the wide-spread of information technology. Nowadays, there are a lot of big E-business corporations such as Amazon, E-bay focus on different E-business model and field. However when these international companies carving up the global market, some local enterprises also growing up and want to share this big cake.Taobao (www. taobao. com), a Chinese-based company which is a leading platform for C2C personal transactions, was founded in 2003 by the 450 million investment from world’s best B2B company——Alibaba. Taobao is a typical example of China E-business style. Taobao paid a lot of efforts in order to China and Asia’s market dominance, during a lot of difficulties and challenges especially in the competition with E-bay. We will write a custom essay sample on Taobaos Success or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page But some problems still exist in Taobao’ credit system and logistics model. These tough problems also exist in each E-business companies.Hence, how to fix these problems still needs development of information technology. Taobao’s Success 3 Taobao’s background and business model In May 10, 2003, Taobao was founded by Alibaba Group and specialized in C2C e-commerce (Consumer to Consumer Model). Alibaba was founded in Hangzhou in 1999, after nearly a decade of development, has grown into the worlds largest online trading exchange market and the business community. Up to now, Taobao is the biggest Internet retail and business district in Asia, own more than 200 million registered users, accounting for 80% of online shopping market in China.Merely in 2009, transactions amounted to 50 billion dollar. However, if the Taobao’s success only attribute to its excellent â€Å"pedigree†, it would be ridiculous. Today’s Taobao E-business is more than just buying and selling of products and services through the means of digital media, E-business encompasses e-commerce and a whole lot more. For example, its E-business includes both front and back-office applications that from engine for modern business. Unlike some other corporate entities-based business, Taobao is redefining old business models through the aid of technology. Their business are the use of Internet and other networks and information technologies to support electronic commerce, enterprise communications and collaboration, and Web-enabled business processes both within an internetworked enterprise, and with its customers and business partners. Taobao’s Success 4 The competition with E-bay E-Bay is another famous C2C business platform, and in Sept. 27, 1999, e-Bay established eBay-Each. net in order to the expansion in China market. EBay-Each establishment was even earlier than the establishment of Taobao(May, 2004).Thus, at first, Taobao had to face that they lost not only the opportunities and but also a great part of flow market. But in 2004, merely after Taobao’s establishment one years, Taobao surpassed Each. net and been the first C2C platform in China. Then in 2006, it became the biggest shopping online website in Asia. So let us make some comparison between Taobao and Each in several aspects. First, in business strategy, both eBay each. net and Taobao choose free business at first. But eBay-Each. net gave up this attractive business strategy and began charging to the virtual shop. However, when eBay-Each found they were losing their customer rapidly, they return to their former strategy to avoid more losing. Taobao always adhere free charge so that absorbing more customers and virtual shop. Second, Taobao was the first platform which use third-party payment platform——Alipay. That means Taobao pay attention to safety problem. With the introduction of the real-name authentication system, Taobao made distinguish between individual users and the business user authentication. But eBay-Each did not used PayPal system in China market because of a variety of reason.Until 2005, this Taobao’s Success 5 problem was solved by eBay-Each, but without doubt, eBay-Each lost its advantage in credit transaction. Third, eBay-Each used advertisement blocking tactics to fight Taobao. In 2003, the biggest three portal in China (Sohu, Sina, 163) made a deal with e-Bay that they would never use Taobao’s advertisement. To fix this problem, Taobao use a lot of traditional medium such as newspaper, TV or subway stops, bus, road advertising. Moreover, Taobao also made a co-operation with Yahoo, using Yahoo’s search bid, investing 2 million keywords.Then Taobao increased the keywords to 3 million, and the hits up to 6million in one day. That made Taobao beyond its opponent in two key indicators, accounting for the initiative in future competition. Furthermore, another difference in Taobao’s advertisements, their membership in the trading process could feel lively culture of family. Fourth, eBay-Each and Taobao had a significant understianding gap in market positioning. EBay-Each have their global strategy and want to do business with the people who are 30-40years old. While Taobao’s strategy is localization, and its target population was also younger than its counterpart.Last but not least, Taobao encouraged their buyer and seller makes private transaction, and supported a convenient platform. One example is the communication tool for members in a timely manner Live Messenger. If the user enters a shop, just the owner is also online, then, they can chat with each other through sending and receiving messages. Live Messenger with a view transaction history, to understand Taobao’s Success 6 each other credit, personal information, avatars, multi-chat tool, chatting with other general features. In contrast, at first in order to preventing buyer and seller avoiding trading commissions, eBay-Each did not allow to leave the true underline contacting ways. That made a big security risk in future development. At the end, people knew the results about this competition in 2008, Taobao occupied approximately 80% share of the whole online shopping market, and began the biggest C2C e-business platform in Asia. EBay-Each switched their target, turning into the main global purchasing markets in transition in order to avoid confrontation directly to Taobao. Secrets of Taobao’s victoy in ChinaFirst of all, without eBay-Each effort in market cultivation in first several years in China, Taobao could not be growth at such amazing speed. The original reason of eBay’s failure probably was they were too successful in the past. So eBay totally copied the American model to China. That led a strategic error. EBay is a global strategic for high-salary and white-collar people to provide personal e-commerce platform in international trading. So did eBay-Each, their slogan was â€Å"to provide both a local and global online trading platform. † eBay CEO, Whiteman, once said: â€Å"Our 27 markets in the world are successful.In China, the 28th markets, we will still success with our firmly established policy. † Taobao’s Success 7 In detail, based on the comparison above, two fatal flaws led to eBay-Each collapse. Firstly, with Clayton M. Christense research, asymmetric information, although eBay hired native manager team, Yibo Shao and Haiyin Tan, the mother company still wanted to set up a global platform to meet different customer needs in China, that would inevitably lead to inherent strategic contradiction, because the two types of customer demand cannot be satisfied together. In additional, eBay-Each spent one year and a lot of money, at Sept. 7, 2004, completed the global eBay trading platform. Even in this situation, because of the mother company have an asymmetric information problem. They just exchanged executives again and again. Secondly, Service is not good. Probably it is unfair to use the word â€Å"not good† or â€Å"bad† to describe eBay. In some way, eBay-Each merely want to provide the best services in the world. But this all involved with its global business model. Because of C2C website should not only support a platform for seller and buyer, but also a safe Taobao’s Success 8 rading environment. A security third-party payment tools is essential. However, eBay’s best friend, PayPal support multi-currency payment, then, because of China’s foreign exchange control policy, PayPal delayed in introduction until 2005. This is only one example, other useful tools such as Skype (a tool could meet communication needs among customer) also cannot be introduction in China market. In contrast, Taobao’s original reason of this wining is its well-know background and flexible tactics. Taobao gain a lot of benefits from its mother company both on money support and human resource. Alibaba is a mature business group in B2C e-business field. It is worth noting that the C2C market in China actually is a mixed market. Some B2C also mixed in this market, that made Taobao was able to apply sophisticated Alibaba previously successful experience in China. Furthermore, Alibaba borrowed seven experts in e-commerce to play company’s executives. Another winning method is Taobao’s flexible policy.At the beginning, when eBay-Each mastered most of stock market, Taobao did not fight with eBay-Each for the existing stock, but mining incremental market in C2C business. That measure made Taobao captured almost 90% of new e-business users. New crisis There is no denying that Taobao can say currently the most successful Internet business platform, and its prospects for future development are promising people. Of Taobao’s Success 9 course, Taobao is also facing many problems. The most important problem is its credit system.As newly survey, Taobao still fights with reputation spam. Online shopping has become the younger generation’s main spending channel. Everything can be found at a cheaper cost and with home delivery, saving on cab fares. But individual’s accounts safety become more and more important in this time. Moreover, the 3G technology made Taobao have to upgrade their server for customer requirement. Taobao’s campaign will never end if they still want to expand their market.