Ebay Case-Latin America

1. Assuming that eBay makes the decision to go Latin America, prepare a roadmap for eBay's 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 wasn't 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 region's e-commerce activity.

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 eBay's 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 DeRemate's 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.

2. Bannick is convinced that eBay's 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.

a. General Environments

eBay 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.

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.

b. Competition

From 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.

c. Consumers/User

Since 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