EBay: SWOT Analysis - Essay Example

xxxx College: xxxx xxxx 16 August, Introduction eBay is an international firm which deals a huge variety of items for sale and purchase which includes a variety of collectibles in the field of electronics, fashion, motors, antiquates, sports, household items, movies, music and games etc. The firm uses Pay Pal for payment which is one of the fastest, secure, and the largest online transaction medium. The successful purchase of the rights of Skype in 2009 for an amount of 2.75 billion dollars has provided a competitive advantage to eBay (Washington Post, 2009). Approximately 430,000 people today in the USA come up with all of or even the majority of their own existing through this web site (Lewis, 2008). The actual goal of eBay was to promote the task ethic and traditions associated with the exciting, wide open as well as trustworthy atmosphere to achieve and maintain the main concerns of the organization. For this it has successfully kept its customers protected from other rivalries by providing a smooth open trading forum for sale and purchase. This paper is an attempt to familiarize the audience about the success of eBay with a brief touch of its SWOT analysis, Porter’s Five Force Model, and Value Chain Analysis. 1. eBay: SWOT Analysis 1.1 Strengths 1.1.1 Brand. The fame of eBay brand is consistently increasing over the years and now the brand has become a source of benefit to it. The brand is widely appreciated throughout the world because the firm is expanding its areas of operation on global scale and thus public has its great awareness and recognition. The company has estimated greater revenue in near future due to the wide recognition of equity of eBay brand. In addition to this, eBay’s trademark, copyrights, patents, and domain names will also help the organization to get a competitive advantage over its rivals. In turn, eBay will enjoy extra sales and earnings. 1.1.2 Market Leadership. eBay offers the best and leading online auction services to the community on global scale. It is the leading company of auction industry as still it possesses 17% online market share and it will enjoy its leading place in various ways. Top rank position will enable the company to increase its brand recognition and greater impact on auction industry. eBay can easily combat the competition from any of its rivalry or new entrant by using its leading seat. 1.1.3 Strategic Assets and Earning Growth. eBay is possessing great strategic position in the market and this status provides it a competitive advantage over its rivalries. In 2010, the eBay’s overall worth of sold products was $62 billion which was more than $2,000 every second (http://www.ebayinc.com/who). The company’s net revenue remained 2.5 and 2.8 billion dollars in first and second quarters of 2011 respectively. The potential of growth is estimated to increase significantly by December 2011 i.e. 17.40% which would be four times than of June, 2011. 1.1.4 Pay Pal. eBay has successfully kept its customers stay in touch with it by the acquisition of Pay Pal. The possession of Pay Pal has not only increased the numbers of customers but it also developed the confidence level of buyers on eBay manifold. 1.2 Weaknesses 1.2.1 Advancements in Technology. Since latest technologies are easily available in the market, therefore the auction market has been converted into replicated environment. Due to this trend, the auction industry is getting restricted to internet only. In order to ensure the auction more convenient, eBay must work on its user interface working environment. Although it is already producing great revenue, however, by doing so, customer level of confidence on eBay will be improved as well as the traffic of visiting users would also increase. 1.2.2 Expectations. eBay’s track record over the years has increased the customers’ level of expectations manifold. In current scenario it seems to be improbable that eBay will keep on producing the same upshots. Therefore, if eBay goes to do so, it means firm is forced to set an aggressive strategy which it may not maintain in future. 1.2.3 Advertising Revenue. eBay offers a strong internet based platform for purchase of services and tangible products. On daily basis, millions of passionate customers deal with millions of such services and goods. This huge set up also provides valuable advertising revenue to eBay. Since in near future, eBay is going to explore and dominate some new markets, therefore it needs to increase its advertising revenue as it has been remained flat during last few years. 1.2.4 Litigation. In order to maintain the customers’ satisfaction and confidence level high, eBay will have to keep itself away from all kinds of litigations e.g. issue of MercExchange. 1.3 Opportunities 1.3.1 International Expansion. Presently eBay is receiving 30% of its revenue through international markets. In future, in order to maintain its number one position, eBay can internationalize its products. 1.3.2 New Markets. In order to expand its business, eBay could seek new markets where currently it has no strong influence. Diversification into new markets will enable the company to increase its profit. Skype divestment is an example of such opportunity. 1.3.3 e-Business. With day by day technological advancements, the use of internet and e-Business is increasing and is expected to increase a lot in future. This trend will provide a good opportunity for eBay not only to increase its number of customers but also to keep them connected with its business. 1.4 Threats 1.4.1 Competition. The environment is becoming very much competitive day by day in auction industry. Presently Yahoo, Google, Amazon.com, AOL Times Warner, MSN, and uBid are the main rivalries of eBay and their joint business strategies could minimize the eBay’s market share. 1.4.2 Interest and Foreign Currency Exchange Rates. Current variable interest and foreign currency exchange rates is a significant external factor which may affect the performance of eBay a lot. 1.4.3 Consumer Confidence. Maintaining the confidence level of customers is paramount for any firm. Any negative advertising, litigation, lapses in security issues related to online shopping or selling, or leakage of information are such permanent factors which may affect the confidence level of a customer at any time. 1.4.4 Seasonality. Auction industry depends on seasonal factors. Some people use internet on weekends and there are people who have to wait for its use for special occasions like Christmas etc. Figures show that eBay generates more revenue in first and fourth quarter of the year. Any low grade performance in first and fourth quarter could lead the company to a failure year. 2. eBay Five-Force Analysis 2.1 Rivalry in the Industry Since mostly the auction industry has low barriers, therefore numbers of competoitirs exist in the market and thus gravity of rivalry is high. Google, Yahoo Auctions, Amazon.com and uBid are some leading competitors for eBay. Beside these companies, eBay is facing the challenge from traditional merchandise stores and realtors. These companies and traditional stores continuously stay in touch with their customers and therefore provide best possible services at minimum cost. Moreover, the rivalries are also expanding their areas of operations horizontally and exploring the new markets by introducing innovative trends. Uniqueness of eBay’s brand and its global recognition provides it a big edge to attracting the customers. eBay’s brand recognition guarantees the safety and security of transaction which is most vital element in auction market (Duh et al, 2001). In order to remain successful, eBay needs to keep an eye on its competitors and to introduce new ways of auctions. 2.2 New Entry Since auction business is mostly linked with online media; therefore the threats from new barriers are quite high. After the entrance of several traditional industries, the market of online auction is changing rapidly. New companies can easily enter in the market by making just a website or even through an online blog. However, few hurdles exist from government side. For example, government cannot allow bidding for specific products like weapons, sensitive devices, or security related things which are generally used by secret agencies. Although eBay has no direct influence with transaction, it only provides a working platform for buyers and sellers; however, it strictly follows the government regulations as it has created a sequence of blocks to put off the trading of an item which may go against the laws of local government. Although auction industry provides more opportunities to the companies due to its fast growing nature (Thompson, Strickland, & Gamble, 2005), however, it is always very hard and tough for any new entry to dominate a market where brand recognition and safety related issues are paramount. Also customers always show hesitation in purchasing an item where they feel any doubt especially with respect to the product of any new entrant. 2.3 Product Substitution In current scenario, auction business is mainly run through online media and it does not have many substitutes. The other leading option of selling the products is direct method i.e. to keep them for sale without putting them for auction. The other alternative to sell the same item through online media and for this purpose number of opportunities are available. However, till the time eBay maintains its positive image and brand recognition, so far none of these substitutes can create a real challenge for eBay. 2.4 Bargaining Power of Suppliers Global auction marketplace comprises of countless suppliers for eBay. For eBay, a potential supplier is a customer who possesses something to sell. In auction market suppliers have more powers in terms of dealing with high-end products. Although both the purchasers and vendors need safety measures for their products, auction market always find it harder and riskier to sell high-end items with proper protection. In order to attract the new customers and to keep them protected from other companies or merchandise stores, eBay should keep its charges low. 2.5 Bargaining Power of Buyers The limitless numbers of buyers is one of the biggest reasons of eBay’s dominance. Each and every product put for auction on eBay can be seen by millions of customers throughout the world. It means that buyers do not possess any direct influence on eBay. Nonetheless, eBay has launched the customers’ feedback program on their website to listen their customers with respect to different dimensions like suggestions, positive or negative views, and handling of complaints. This program helped the firm to get rid of the bad dealers. High-end items generate significant revenue to eBay, therefore, eBay has more inclination towards such buyers who deal high-end items. In terms of high-end products like cars and real estate, the auction expects more safety issues, that are why buyers have a bit powers in such high-end items. In order to rectify any risk factors, eBay has taken necessary measures in its insurance policy. 3. eBay Value Chain Analysis eBay has no direct influence on any transaction. It only provides a system of tools to the users to make transaction possible, thus the value chain of eBay is very lean. eBay actually facilitates its customers to get their tangible products in a secured system. Rather it has virtual value chain. Although the main system of tools and technologies of eBay are centralized, however, in order to rectify some global level issues e.g. shipping of goods, description of products in local languages, and transaction of payment in local currencies, the company has decentralized its value chain configuration. For this eBay established independent subsidiaries. These subsidiaries maintain and strengthen the virtual ties of customers and take them to the real business. The value chain analysis of eBay is associated with five components i.e. inbound logistics, operations, outbound logistics, services, and sales and marketing. 3.1 Inbound Logistics eBay is an online forum of business where sellers and buyers remain involve in business through online media. Inbound logistics include the receiving and storing materials for distribution of production e.g. registration and provide information. 3.2 Operations This component involves in transformation of inputs into finished products. It includes categorized products, building database and Pay Pal. 3.3 Outbound Logistics It entails storing and distributing the finished products like moving of products and shipment of items to wholesalers, retailers, and lastly to buyers. 3.4 Service The fourth component of value chain of eBay is service which deals with the maintenance and repair of firm’s goods and services. This area includes all services such as installation, after-sale services; complain handling, training and so on. 3.5 Sales and Marketing It is the last component of value chain analysis which includes the promotion and marketing of products e.g. advertisement. 4. eBay: Strategy Analysis Today about 147 million people use this site in more than 30 countries across the globe. After 16 years, the company manpower strength has reached about 17,700 (finance.yahoo.com). eBay’s market share has exceeded that of even Amazon.com, helping to make it the world’s most worthwhile Internet retail outlet. In 1997, there have been 40 types of products available; the actual publishing associated with collectibles as well as antiques experienced a significant growth. Other categories with regard to these things were demanded by customers. At social level, the primary concern of eBay had been to ascertain confidence amongst remote control as well as unknown potential traders that could possibly in no way have interaction yet again. This had been done through the review programs pertaining to setting up reputations with online community subscribers who might make use of numerous applications for making their own ventures safe. The majority of acquisitions with auction web sites had been secured through good insurance policies. Top quality deals had been secured through an authorized escrow agency. A technology is definitely a vital strategy to obtain cut-throat edge against the rivalries. eBay managed the web based platform for the purpose of purchase as well as retail. eBay functions web based method to innovate, cut back expenses as well as to shield and preserve economical advantages. This specific achievement comes with internet marketing proceedings, good productions, Customer Relation Management (CRM), along with lots of various other technical advancements. eBay’s corporate strategy is entirely based on the idea that almost everything which can be sold can be assisted through this online media. “We help people trade practically anything on earth and conduct commerce through the Internet on a global basis” (Gopalkrishnan & Gupta, 2000) is certainly eBay’s business model. This strategy proved extremely effective and productive results as with the passage of little time, more and more people preferred to do their transactions through internet easily from their home just by the click of mouse. The salient features of eBay’s successful business and corporate level strategies can be summarized as listed below. Constructing an insurmountable customer base (established relationships with more 60 leading websites) eBay concentrated on local and international trading (business in more than 150 countries) Creating a strong brand Continually enhancing site features and functionality Maintaining a strong community affinity Recommendations Today the major concern confronting eBay is actually to learn how to broaden simultaneously its regional as well as international scale. According to CEO Meg Whitman, the organizational vision would be to “transform nations as well as metropolitan areas as well as towns as well as enable individuals to create a residing in methods they might not really before” and then to produce innovative business worldwide which the community has never ever observed (Whitman, 2008). Although technological advancements cannot be overlooked, however, in a modern scenario where even a normal individual could pick number of options to sale or buy a product through any online media or merchandise stores, eBay must focus to get the attention of consumer market. For this, a well planned advertising campaign may produce a considerable impact on its subscribers. Safe and secure transaction of products is the hallmark of auction market. But this facet of market is always under threat from various external factors. In order to increase the customers’ confidence, eBay needs to take additional measures in this regard. eBay can enhance this confidence level manifold by offering attractive insurance policies to buyers and sellers. eBay can obtain a lot of suggestions from its customers through its feedback program. Customers’ feedback and views always provide a realistic guideline to companies. eBay must focus on this aspect to set innovative and demanded strategies in future. eBay must emphasize upon building additional resources which enable vendors in a single region in order to effortlessly work together along with consumers within several nations. Skype must be used as a platform for transactional trust in terms of e-messaging. This would certainly contain even more progress associated with automated interpretation software program as well as refinements in order to transaction methods that could instantly transfer the payments through the buyer’s currency to that from the retailer. A lot more complicated probability is actually how you can bargain along with disparities within state policies throughout the globe. eBay should attempt to prevent policing it's website with regard to exercises which violate regional procedures as well as alternatively must offer preferred disclaimers inside a lot more globalize online community. It will turn out to be extremely sophisticated with regard to vendors in order to comprehend and comply with the wide range of federal government policies which may possibly affect their own conditions. In order to keep on development, eBay must additionally shell out resources as well as commit considerable assets in order to support dealers to understand these kinds of hard complications. Works Cited Duh, Rong-Ruey, Karim Jamal, and Shyam Sunder. Control and Assurance in ECommerce: Privacy, Integrity and Security at eBay. 2001, working paper, Yale University. eBay, Meg Whitman to Step Down as President and CEO of eBay January 23, 2008 Gopalkrishnan, J. and Gupta, V.K eBay: The world’s largest online marketplace: A Case Study Conference on Global Competition & Competitiveness of Indian Corporate, 2000 Hill, T. & R. Westbrook. SWOT Analysis: It’s Time for a Product Recall. Long Range Planning (1997). 30 (1): 46–52 http://www.ebayinc.com/who Lewis, E. The eBay Phenomenon. (2008). Marshall Cavendish books Porter, M.E. Competitive Strategy, 1980 Free Press, New York Porter, M. E. What is strategy? Harvard Business Review, November–December, (1996). 61-78. The value chain Porter, M.E. The Five Competitive Forces That Shape Strategy, Harvard business Review, January 2008 Skype Sale, Washington Post, November 19, 2009 Thompson, Jr., A. A., Strickland III, A. J., & Gamble, J. E. Crafting and Executing Strategy: The Quest for Competitive Advantage. (2005). New York: McGraw Hill/Irwin. Read More