EBay Inc. - Online Auction Site & Marketplace, Essay.

About eBay Inc.

Question:

Describe the Strategic Analysis of Ebay Inc?

eBay Inc. is one of the largest and widely used online auction site and popular market place allowing customers to buy and sell almost everything. eBay provides an international platform with diverse and passionate community of people trading online each day. The website is regarded as the world’s most valuable Internet retailer having tremendous market capitalization (Standifird, 2001). The focus of the company is to achieve excellence and strive for perfection in strategic management for improving and enhancing strategy of the organization so as to target for sustainable company’s growth. The corporate revenues for eBay are generated primarily from three of the business segments like marketplaces, communications and payments.

eBay offers a huge variety of services and features that will enable the customers and members to buy, sell and exchange conveniently and quickly. Buyers associated with the online platform or website have dual options to purchase items in a format of auction or purchasing them at fixed price by implementation of the feature called Buy-It-Now (Melnik, 2002). Another supporting eBay company, Half.com also offers fixed price products of similar variety.

eBay is dedicated towards environment having various competitive and resource utilization policies which inculcates numerous services that are prepared to enhance the trading experience. The toolkit and storehouse of marketing services have online payments and transactions via the mode of PayPal, a huge array of Buyer and Seller tools, Developer Programs (Allio, 2006) for the community who is willing to develop the solutions of their own.

The company is all set with strategic approaches to uphold the mission of the company that is to provide a global trading platform where in practical terms, anybody can trade almost anything. eBay have introduced various innovative tailor made creations for a business oriented internet marketing and hence is ruling the charts at an international level.

The mission of eBay is widely supported by present strategies and techniques employed within the organization to build up internal and external relations. The inherent concept of eBay like over the foundation that practically anything can be bought or sold via internet and its hurricane use. The strategies for the company revolves around establishing large user base, creating a strong brand image, concentrating on global and local issues, broaden the trading platform, to enhance features and functionalities of the site,            to maintain a strong community affairs (Shah,, 2002) etc.

The study will focus upon every description of the strategic functioning of the company and the future prospects that will aid in development of the company to achieve the missions.

The strategic mission of eBay is to provide the community with a friendly internet platform to foster convenient trading. The company aims at catering to bargain hunters, customers, hobbyist, professional buyers, collector sellers, casual sellers, corporate sellers, power (Anderson, 2004) etc. The key business model for eBay comprises of principles and elements aiding in company’s success and development. The business model comprises of a position of eBay as largest online trading forum with a conglomerate of critical mass of buyers, sellers and diversified range of items. The business model also have a compelling and entertaining environment for trade based over strong values, code of conduct and the established procedures and rules to facilitate a smooth and complete communication between buyers and sellers. The established trust and safety of the stakeholders is a pillar of business model in which eBay utilizes Safeharbor program (Song, 2007) to provide guidelines for resolving disputes, giving training, teaching warning and suspension system. The model is based over cost effective trading system which is highly convenient for the users and stakeholders of the company. A committed and strong affinity is the foundation over which the business model of eBay is based over. Another element of success is a strong and transparent user interface which is really easy to navigate and is fully automated by the use of arrangements and effective structure.

Throughout the history of the company with stories of development, regeneration and experimentation (Wingo, 2004) have formed major ingredients being instrument in responding to the competitive era and age of innovation. The three of the main strategies aimed by eBay are to build strategic partnerships at every level of value chain; to seek customer feedbacks for a future development and scope; and to work upon the information collated by monitoring the external environment. A priority strategy for eBay is to broaden the product line and the services reaching to an aim of almost 3000 categories. They also utilize real time interface between the buyers and the sellers by using the services of bulleting boards or content specific chat rooms (Afuah, 2000).  The innovative step to collaborate with local and domestic auction sites is one of the most innovative technique so as to cut shipping and delivery charges.

There are some of the building blocks of the company on which the foundation is based over. Time pacing involves sense of procedures that may impact real time interfaces affecting the credibility of the company. Every problem, shortcoming or downfall is managed quickly with corrective steps and a sense of urgency. With the edge of time, the present business model of eBay is competitive but the company needs to amend some of the strategies by business expansion. The increasing use of internet and online retailing or auction attributes to enhancements of public relations. There are some aspects contributing to the development and success of eBay including persistent marketing, well spent funds, commitment, detailing, record keeping, customer service, utilizing junk, polished listings (Pavic, 2007), etc. contribute in having an edge over other sites in the business. There is an edge of chaos with the competitor Amazon.com which is profit oriented and with eBay being trade oriented and trade centric.

TWOS analysis of eBay focuses over identifying, analyzing and working upon opportunities and threats available for the organization before internally identifying the strengths and weaknesses of the company. This helps in developing and preparing the company prior to carrying an internal monitoring session for a final review.

The threats for the company pertains to the costs that may not be controlled by eBay. The delivery prices and credit card extra charges cannot be controlled leading to enhanced prices. This can also result into escalated overall cost of auction items. Attack in the online business by some illegal organization is a huge threat for online auction site. Malicious and unsuspecting emails are sent to take private information like passwords for the purpose of misuse. Competition is another threat with international competitors having both global and domestic control. There have been reduction in uniqueness in the business model which have led to less excitement among the new customer base.

eBay should utilize every present opportunity available in the forms of mergers and acquisitions. Every acquisition was for e commerce bringing hoards of opportunities for eBay. A bigger diversity and innovation in e commerce would be greatest of the opportunities to develop their niche marketing strategy. The growth in number of mobile application users can help eBay to tap this tremendously amazing opportunity to extend their business in the realm of convenient online shopping. To sustain the current growth and the levels, eBay can open various online marketplaces in growing economies of Europe and Asia. eBay can use the opportunity of changing lifestyles and internet adoption foe a continued market penetration and expansion (Schonfeld, 2005) of the customer base. The growing trend of search engine advertising have opened various platforms for progress of eBay. The acquisition of Skype have opened features for multi channel operations to promote change and drive growth along with growth in financial sector with PayPal.  

eBay's Strategic Approaches

Weakness of the company lies in many fraud cases due to system or human error including theft spoiling the C2C business model (Wood, 2001). In the past times, eBay and PayPal, both the brands have encountered shutdowns due to system breakdowns. eBay have performed badly in penetrating some of the foreign markets like Japan which could have tremendous scope. eBay also fails to give an in depth analysis and description of the products which might lead to confusion. There were plethora of shipping scams and delivery issues. The operational margin is also on a declining trend forming another weakness for the company. There are no further growth strategies revealed by the business of the company and the top management is unsure that whether the company should become a retailer or develop new products or services by acquiring new business.

The strengths of the company is that it is recognized as largest online auction site with over 94.9 million users which are registered in across 150 countries (Cabral, 2010). eBay is a recognizable and widely spread brand name having unique logo with a mix of colors and paying heed to branding strategies. Top notch international companies have alliance with eBay in some or the other project summing up to a total of over 250 alliances including PayPal, Microsoft, Yahoo, Walt Disney, America Online, IBM, TradeSafe, UPS (Mahadevan, 2000) etc. The organization has a global reach as people from all over the globe are connected either directly or virtually with eBay. With a wide array of variety, the consumer base is exponentially high as they are provided with over 27,000 different categories resembling the tag of Walmart of the Internet. The company take fullest advantage of the customer relationship management either in providing information or in consuming information. As a matter of strength, eBay has acquired Hunch which is a taste preference graph (Nuttavuthisit, 2010) and is also marketing their launched application of mobile scanner with the help of Best Buy. eBay have used innovative technology utilized in online retailing function. The customer experience of eBay is made flexible and user friendly including online auction, easy customer transaction, introduction of Skype to have a new interface to build buyer seller relationship. Therefore, the strengths can be summarized as geographically diverse business, safest mode of fund transfer, economies of scale etc.

To carry out the PESTEL analysis it is required to dwell deeper into the theoretical aspect of the company.

Political: eBay have not been much affected by the political policies in a region. Globalization have had a positive impact to expand internationally and open up to new potential markets. Regulatory proceedings relate with the security issues of the online shopping. There have been marketplace fairness act and some government interventions intruding in the process.

Economic: Instability and fluctuations in the market with exchange rates and such issues have affected eBay in a bad way. Taxation policies if introduced might affect the company and the trend of online sales.

Social: Lifestyle changing trends and introduction of Internet in daily lives have an additional advantage for the company with changing buying patterns. The brand image of the company beneficially contributes towards the development and success at a global level.

eBay's Business Model

Technological: Rapid development of high speed internet services have led to public online consumption. The aid from third party online payment system have made the system smooth and efficient.

Legal: There are many acts in various regions like The European Sales of Goods Act, Federal trade Commission in USA, The Electronics Signature Law etc. to ensure security in e commerce.

Environment: With the help of eco packaging or environment work causes, the company have initiative to go green and attract more consumers.

The bargaining power of customers have become high with presence of various other options. There have been online stores and price comparison websites to make the consumers aware and active.

The threat of substitutes for eBay is however less as the organization is more convenient for the consumers. With a diverse range of products, there is least substitute options available for competitors.

Bargaining power of suppliers for eBay is high with low fees and commission charges. Also, there is low switching costs and a low concentration of supplier in this market.

The threat for new entries in the market is quite high due to low entry cost and high availability of options of online retailing. It further will depend upon the individual interests of the consumers.

Rivalry among the competitors is highly significant with Amazon.com being the most powerful threat for the company. There have been recent upsurge of sopping outlets and online retailing. This industry is pretty high and therefore, it is possible for a high competition.

eBay is all focused and determined to conduct the business to minimize all the impact over environment. The business activities of eBay of although have a minimal and negligible impact over the environment as all the processes are handled online in the form of auction or retailing but, the company constantly evaluates strategies for sustainable development and for energy conservation for reduction of waste in business operation. The business of the organization is all set to comply with legislative and regulatory requirements. Energy and water efficiency is aimed in the company to ensure and efficient consumption by the employees of the organization. Waste management with environmental friendly method can be used minimize use of hazardous products that may aid in supporting waste production. Recycling and reusing are also used in the company to adopt sustainable management.

Therefore, company can very well utilize their present strategies in betterment of the whole environment.

There are some of the core competencies of the company that have made it sustained as successful e commerce online auction website in the competitive business domain. With competence and competitive advantage, efficient distribution system with a sense of developed proprietary software adds a feather to the cap. This developed software for the company is scalable having full bodied user interface and a transaction processing system. The strategy of having a technique of daily update giving to active customers including both sellers and bidders provides convenience of sales online. With a loud spoken vision and mission to offer global trading platform on an anywhere, anytime service platform eBay has acquired various websites in many such countries aiming to extend the reach in emerging markets like Asia or Europe. An extensible strategy is adopted by the company for diversification and expansion of range of products (Gonzalez, 2009) and an enormous consumer base. Acquisitions and alliances with other companies aiming at customer satisfaction is another factor for competitive advantage. eBay’s value chain aims at sustainable management by supporting inbound logistics, operations, value creations, outbound logistics, marketing, sales, services (Tang, 2006) and other features. Support activities involves procurement of inventory management, technological developments involving lean management, customer relationship management etc., human resource management, firm infrastructure including management information system etc. the cost price issue influences the business with inflation rates, regulatory policies, exchange rates etc. Other competencies include translation software, business environment, logistics, customer needs and paying heed to operational obstacles occurring in the path. 

Building Blocks of the Company

Future of eBay lies in modifications and restructuring of their present strategies and to formulate a business plan for the near future having creative and cohesive strategies for contemporary era and rush of internet buying age.

There are many recommendations that must be keenly observed and analyzed by the company so as to successfully steer the direction of the company towards progress. Advances made in the hand held devices and its extensive use in the field of application have made EBay to reintroduce strategies and tactics for online auction (Katsh, 1999) to the live audience including person to person feeds. They must pay special heed towards their mobile applications by promoting in some other innovative actions in the domain and by advertising regarding the mobile applications. The need of the hour is to spend the resources in a rightful manner by spending on mobile devices and applications.

Partnering strategy with PayPal was to increase the market share and potential customer base. These partnering strategies must be highly focused in the near future to choose only from highly beneficial acquisitions or mergers.

There was use and implementation of evaluation rating tool and management system (Resnick, 2006) to check the progress on a stable path with a workable plan so as to match up achievable goals. These innovative tools must be continued with the company so as to mine the data for effective strategy matching and management.

Bid data analytics should be used in alliance with data mining strategies to be able to tap the enormous data in the retailing and auction involved in the website and lay its feet in one of the most discussed and innovative technology of the era.

The alliance between EBay, Microsoft and Yahoo have adapted to the increasing demands by giving added access to information reducing the online traffic. The future of this alliance lies in the hands of input given in security to reduce span and other attacks. Therefore, the alliances must be carefully monitored and maintained for further success and collaboration.

Conclusion

For eBay to record a high range of success in the business, it will have to clearly define a detailed plan of action and strategic capabilities by pondering over the recommendations and suggestions. A strategic alliance in the form of vertical integration with other firms must be the aim of the company to sustain competitive advantage and to maximize the strategic capabilities of the company. This will also focus on customer relationship to move forward in the online retail business.

References

1. Melnik, M. I., & Alm, J. (2002). Does a seller’s ecommerce reputation matter? Evidence from eBay auctions.The journal of industrial economics, 50(3), 337-349.
2. Allio, R. J. (2006). Strategic thinking: the ten big ideas.Strategy & Leadership,34(4), 4-13.
3. Shah, H. S., Joshi, N. R., & Wurman, P. R. (2002, May). Mining for bidding strategies on eBay. InSIGKDD’2002 Workshop on Web Mining for Usage Patterns and User Profiles.
4. Anderson, S. T., Friedman, D., Milam, G. H., & Singh, N. (2004). Seller strategies on ebay.UC Santa Cruz Economics Working Paper, (564).
5. Song, J., & Baker, J. (2007). An integrated model exploring sellers’ strategies in eBay auctions.Electronic Commerce Research, 7(2), 165-187.
    W
6. Standifird, S. S. (2001). Reputation and e-commerce: eBay auctions and the asymmetrical impact of positive and negative ratings.Journal of Management,27(3), 279-295.
7. ingo, S. (2004).eBay (TM) Strategies: 10 Proven Methods to Maximize Your eBay Business. Prentice Hall PTR.
8. Afuah, A., & Tucci, C. L. (2000).Internet business models and strategies: Text and cases. McGraw-Hill Higher Education.
9. Bland, E. M., Black, G. S., & Lawrimore, K. (2007). Risk-reducing and risk-enhancing factors impacting online auction outcomes: empirical evidence from ebay auctions.Journal of Electronic Commerce Research, 8(4), 236-243.
10. Warrington, T. B., & Caldwell, H. M. (2000). Building trust to develop competitive advantage in e-business relationships.Competitiveness Review,10(2), 160-168.
11. Pavic, S. C. L. K., Koh, S. C. L., Simpson, M., & Padmore, J. (2007). Could e-business create a competitive advantage in UK SMEs?.Benchmarking: An International Journal, 14(3), 320-351.
12. Schonfeld, E. (2005). The world according to eBay.Business 2.0, 6, 76-81.
13. Wood, C. A. (2001). What factors drive final price in Internet auctions? An empirical assessment of coin transactions on eBay. Annual Convention of the Institute for Operations Research and the Management Sciences.Miami Beach, Fla.
14. Cabral, L., & Hortacsu, A. (2010). The dynamics of seller reputation: Evidence from ebay*.The Journal of Industrial Economics, 58(1), 54-78.
15. Mahadevan, B. (2000). Business models for Internet based E Commerce: Ananatomy.California management review, 42(4), 55-69.
16. Nuttavuthisit, K. (2010). If you can’t beat them, let them join: The development of strategies to foster consumers’ co-creative practices.Business Horizons,53(3), 315-324.
17. Gonzalez, R., Hasker, K., & Sickles, R. C. (2009). An analysis of strategic behavior in eBay auctions.The Singapore Economic Review, 54(03), 441-472.
18. Tang, Y. H. (2006). Future of Patent Enforcement after Ebay v. MercExchange, The. JL & Tech., 20, 235.
19. Katsh, E., Rifkin, J., & Gaitenby, A. (1999). E-Commerce, E-Disputes, and E-Dispute Resolution: in the shadow of eBay law.Ohio St. J. on Disp. Resol., 15, 705.
20. Resnick, P., Zeckhauser, R., Swanson, J., & Lockwood, K. (2006). The value of reputation on eBay: A controlled experiment.Experimental Economics, 9(2), 79-101.