Strategic Management for eBay - Example

Strategic management xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Instructor xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Instructor Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 General environmental Analysis 3 3.0 Industry Analysis 4 3.1 Dominant economic factors 4 3.2 Forces of change 5 4.0 Competitors Analysis 6 5.0 Internal environmental Analysis 9 5.1 Core competencies 10 5.2 Value chain 11 5.3 Resources and capabilities 12 6.0 SWOT Analysis 13 6.1 Strengths 13 6.2 Weaknesses 13 6.3 Opportunities 14 6.4 Threats 14 7.0 Recommendations 14 8.0 Conclusion 16 1.0 Introduction EBay was founded in the year 1995 has grown significantly to become one of the great success story especially in today internet era and it is now considered to be the globe leading online market place. Since the beginning of the company, eBay has witnessed huge growth rate with an enhance market share (Archibald 2003). The company mission statement state that “the company aims at providing an international trading platform where anyone can trade practically anything”. Currently, over 100 million individuals use eBay internationally and more internet users use more time on the eBay website. Virtually, anything can largely be traded on eBay and in a day more than a million of items listed are either listed in the auction list of given a fixed price offer. EBay source of revenue are from features, listing, advertising and paid transaction fees which largely include both fees collected from PayPal usage and selling part (Archibald, 2003). The major issues being faced by eBay is competition, increased fraudulent cases and poor customer services (Bajari and Ali, 2003). EBay wants to have significant highest users so as to be the market leader in this industry. With increased competition in this industry, eBay wants to limit the power drop off points while at the same time ensuring this does not pose threat in future. 2.0 General environmental Analysis EBay is involved in global internet auctions and is considered to be one of the successful companies in this industry. The current business environment exposes the eBay to a very competitive market with the emergence o many other e-commerce business like Amazon.com. Based on technology and demography it is critical for the company to come up with efforts so as to maintain its initial position in the online auction industry (Bajari and Ali, 2003).. The company information communication and technology is well structured and is able to accommodate change. Clearly, the interaction between businesses to business has been working efficiently assisting suppliers in their endeavors. The company has created an environment that aims at prioritizing their customers’ needs through raising the customer retention. Additionally, the company have initiated strong measures of their process performance to ensure there is increase of overall efficiency throughout their financial year (Bajari and Ali, 2003).. The company is involved in increasing technological advancement through encouraging their employees to experiment and adopt creativity. This has been important in enhancing organizational culture which aims at increment of productivity through implementation of the company SMART objectives. 3.0 Industry Analysis In order to fully understand the online auction industry, it is very important to consider the dominant economic factors, industry trends, five competitive forces and industrial key factors. 3.1 Dominant economic factors Overall profitability, market size and market growth rate are the three key economic indicators that ca n be used to describe the online auctioning industry. The market size of this industry has been significantly changing as technology continues to advance (Bazeley, 2005). The total market value of online auctioning had reached 107.2 billion in 2004 with a market forecast of 345.6 billion in 2013. Evidently, the online auctioneering industry is currently very lucrative with potential for high profits (Bazeley, 2005). Recently, the growth rate has highly been criticized due to increased fraudulent cases. Despite these challenges, the industry is expected to increase in growth with improved technology and internet usage. Profitability in this industry is also expected to increase as the globe engages in improved technology and global business environment. Nevertheless, for companies in this industry to increase their profits, it is important they diversify in their product offerings (Burke, 2003). 3.2 Forces of change Based on the threat of entry, the main concern here is government regulation to ensure online auction are not violated. EBay have developed blocks that take cares of the legislative side of law. Due to the law barriers to entry, competition is high in this industry (Burke, 2003). EBay attracts its customers through provide best services at low price not forgetting its ability to expand its market horizontally. Based on threat of suppliers, the suppliers in the online auction do not as much power compared to other industry unless they are dealing with high end items (Burke, 2003). Further, there are limitless numbers of buyers since most transaction is done online and this has enabled eBay more profitable and powerful. Finally, there are few or no substitutes to trading online. Increased internet usage has opened market for all items to trade. Therefore, it is evident the threat of substitute being low has enabled eBay keep a positive appeal and image (Crithlow, Curran and Glynn, 2012). 4.0 Competitors Analysis Amazon.com is one of eBay competitors and is closely tied with e-business phenomenon. Amazon continues to grow significantly with its revenue rising from about $160 million in 1997 to 3.9 billion in 2002. On the other hand, eBay has a slower and focused growth path(Crithlow, Curran and Glynn, 2012).. As opposed to Amazon.com that has diversified its operation within the market, eBay company business has always focused on auctions. Despite the rapid growth in the company, eBay revenue growth are smaller compared to eBay and it stand at $750 million (Crithlow, Curran and Glynn, 2012).. Focusing on Initial Public Offers (IPOs), both eBay and Amazon has provided considerable amount of contrast. The first day of its IPO, Amazon stock rose from $18 and $30 compared to eBay share which also priced at $18 but its closing price was $47.37 (Crithlow, Curran and Glynn, 2012).. Since then the share prices of these companies have gone in opposite directions with Amazon share path giving an indication of rise and fall whereas eBay path reflecting consistent profitability. Figure 1: Amazon stock Figure 2. eBay stock path From the above graphs, Amazon rapid growth in the initial years was a strategy to distance the company from its competitors thus ensuring long term viability. On the other hand, eBay focus was to become profitable and did not care of becoming the largest e-business company (Dimitrov, 2008). In their competitive strategies whereas Amazon wanted to use cross selling to leverage its larger customer base through encouraging them to be buyers or sellers of its auction services, eBay key focus was to deal with smaller businesses as well as collectors (Dimitrov, 2008). At this point, variable mechanisms were largely being projected as the dominant form of e-business in the future. EBay had a higher and stronger competitive edge as compared to Amazon in the sense that it offered something unique and thus it had ease in building mass of sellers and buyers making Amazon venture not successful. From the table below, eBay currently dominates in all aspects and thus it can be termed to be the market leader in online auctioning. EBay has and continues to have a dramatic and clear edge over its competitors (Fish, Schoenfeldt andShaw, 2003). 5.0 Internal environmental Analysis It is quite evident that the strategic statement that largely describes eBay’s activities can effectively be formulated to suit the company internal environment. EBay allow its customers to create their own individual online and auction stores in order they can be in a position to sell as well as buy used and new products. This process has largely been facilitated by the ability to create community of interests, provision of a safe and secure transaction services and finally, peer review process in today global market place (Gambles, 2009). Clearly, individual online and auction stores largely remove any kind of physical barriers between the sellers and buyers. Both the community of interest and peer review assists in the creation of added value by way of base of additional information and creation of confidence simultaneously. Finally, the global business environment opens new markets for the company (Gambles, 2009). 5.1 Core competencies EBay has various core competencies that contribute significantly to the organization. These attributes include brand identity, customer service, business model and product offering. Based on the brand identity and business model creates a competitive edge that is widely exploited by the organization (Hillson, 2003). Due to the diverse and widespread nature of the product offering, it assists the company to develop a more sustained competitive advantage for eBay. EBay is widely known for its brand recognition as an online site as compared to its competitors Yahoo!, Amazon.com and Overstock.com (Hillson, 2003). This has enabled the company to position itself strategically thus successful in the online auction industry. EBay has been more successful in their choice of business model as this model does not only include the company mode of payment but also the community in which they do the business. The open communication (Hillson, 2003). 5.2 Value chain Concerning the organization business value chain, eBay has built both effective support and primary activities. Its key activities include linking its buyers to the right suppliers with great help from information system. The company information system assists in improving the primary activities through making searches for goods easier (Kazmi and Ahmad, 2002). Additionally, the different categories offered by the company make both listing and shopping easier for its different users. The acquisition of PayPal and half.com has assisted in improving both the support and primary activities since it has enabled the organization control their financial transactions thus creating a more competitive edge ahead of its competitor Amazon.com (Kazmi and Ahmad, 2002). 5.3 Resources and capabilities EBay has well structured and developed resources and capabilities. Right from its human resources, organizational infrastructure, procurement to technology, and the company has maintained effectiveness and thus increased success. The diversity among its employees is a key resource as it has assisted the organization to have widespread ideas and creativity (Kazmi and Ahmad, 2002). Well structured and positioned information systems have assisted eBay employees achieve the company mission and value statements. Based on its customer service 6.0 SWOT Analysis For EBay, SWOT analysis is very important as this analysis assists the organization develop strategies that will ensure it remain the market leader in the field of online auctioning. 6.1 Strengths EBay offers one of the renowned online market place that largely operates in an international scale. Due to this EBay is ranked as the most common online business that is popular with its customers (Kazmi and Ahmad, 2002). Additionally, the company has diverse product categories within the online market place thus providing choices to the different demographic groups within the global marketplace. Over years, eBay have and continue to demonstrate a use of technology as a way of innovating the e-business retailing function. The company enjoys developing an online auction idea as well as the use of technology within the customers transaction continues to create an experience that is friendly to all consumers globally. Clearly, new and improved technology by eBay continues to create an interface between sellers and buyers relationships (Laudon, 2006). 6.2 Weaknesses EBay model largely relies on technology which can result in alienating some of its marketing mix demographic groups although this is expected to diminish and thus minimal impact to the company success. Additionally, the company recognizes the potentiality of counterfeit products being listed in their auction and thus raising some legal issues (Malhotra and Birks, 2006). These legal issues may create negative perception among customers which may impact on eBay success. Due to its reliance on technology, the company recognizes there can be abuse from either the seller or buyer which may highly affects the business operations and the consumers and therefore the need to safeguard consumer operation through creation of strict procedures and policies. 6.3 Opportunities Clearly, acquisition of Skype moves the communication strategy to another level creating multi channel operations that can highly transform the current communication model to promote change as well as drive growth thus providing new ventures for the business. Additionally, growth through the company financial sector can further be developed within the PayPal function that is largely owned by EBay (McDaniel Carl and Gates, 2009). With the current dominance of domestic market by eBay, there is an increased opportunity to move into specialists markets and this can enhance potential contracts. 6.4 Threats Similar to other retailers, the current economic conditions will react and become a potential threat to the coming trading years where domestics markets will have less disposable income. Additionally, low confidence among online consumers may lead to a decrease in participation not forgetting increased media coverage of both transaction and identity fraud online. Finally, given the international nature of business of fluctuating exchange rates may possess as a threat to the company (McDaniel Carl and Gates, 2009). 7.0 Recommendations There are various strategies that eBay can adopt so as to significantly overcome its two main problems namely; poor customers service and the issue of fraudulent activities. It is necessary for the company management understand where the different problem stems from. Do these problems stem from technological, people, or organizational factors? Clearly, these problems largely affect EBay performance and strategy and if not significantly addressed they undermines the company brand image. Mostly, these problems stem from organizational factors which include the business culture and processes. Here, the company is focused in linking unaffiliated buyers and sellers together thus creating more challenges than success (McDaniel Carl and Gates, 2009). Firstly, eBay could introduce a membership fee to its users as this will enable the company generate more revenue and thus enabling them improve their customer services through hiring more of the customer representatives. Through improving its customer service, the company will be in a position to improve its value thus creating higher customer satisfaction. Secondly, EBay can engage in discrimination criteria against registering clients from regions with higher fraudulent listing. This will be important as it will assists in minimizing fraudulent actions that normally linked as one major challenge for online financial transactions. Thirdly, there is need for the company to create a more interactive automated system similar to humans. This system should be in a position to identify problem faced by unsatisfied clients and assists them to address their problems. This in turn assists the organization provide customers with better services (Todd, 2004). It is quite evident the solutions listed above are feasible from an operational, financial as well as technical stand point. The idea of introducing membership fee has various benefits and constrains. Some of its benefits are provision of cash buffer for the company which can be used to implement costly strategies. Additionally this solution assists in weeding out clients that are untrustworthy. It is evident that fraudsters do not largely venture in activities which require monetary investment from them (Todd, 2004). One constrain of this solution is that it limits multiple account by different individuals. Based on the second solution, it offer lesser chances of fraudulent activities thus reduced complains from it loyal customers. The solution also has constrains in the sense that the implementation of this proposed solution will significantly reduced fraudulent activities that are linked to financial transaction. Discrimination of certain region may create a bad brand image for eBay thus loss of revenue and income. Finally, the third solution benefits are closely linked to the users thus increased customer satisfactions (Wright and Patrick. 1998). 8.0 Conclusion EBay can be termed to have virtually monopolized the online auction, market due to its large network value, efficient operation, reputation for security and its low prices. The company has a strong competitive advantage in that when faced with competition, it largely relies on its community niche not forgetting its ability to buy out it competition as defined in its engagement with half.com and PayPal. These advantages have enabled eBay to be the market leader in the online auctioning. Additionally, their diverse nature has enabled the company to remain adoptable to ever changing and dynamic online market. The company ability to change its business model to suit the dynamic business environment ensures continuity of this organization. Finally, as long as eBay continues to aggressively maintain itself in this industry, it will dominate in this market due to good reputation of security. 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