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The Strategic Position of E-Bay - Essay Example

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This report aims to recommend the most efficient strategic direction that eBay can take in order to cope with its maturing market. In order to do so, it will look at the strategic direction of the company through the use of strategic management techniques…
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The Strategic Position of E-Bay
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Download file to see previous pages In the end, this report recommends that eBay develop and implement a business to business exchange.
The success and even the mere survival of a business organization are strongly linked to its ability of utilizing its core competencies in crafting an efficient strategy as a response to the trends and challenges in its business environment. The phenomenal success of eBay is one of the most documented dotcom stories as it features the specific factors that an online retailer needs in order to survive. However, with the maturity of its market, the online auction store is threatened by a market slowdown and other environmental pressures (Thomson, Strickland, and Gamble 2006). Thus, the organization needs to put in place a strategy which can bolster its growth.
The financial situation of eBay can be best understood by using an annual statement analysis which considers the trend and the significant financial ratios of the business organization. Appendix 1 highlights the computed financial ratios of eBay based on the audited annual report that it filed in the SEC during 2005.
During 2005, eBay generates total revenue of $4.55 billion, a double digit growth of 39% from the 2004 level. Of this, 82% accounts for gross profit, 32% translated into operating income, and 24% is recorded as net profit. eBay finances its resources with less risky equity. In fact, the company has a resource structure of 15:85 in favor of stocks. This implies that the online auction firm has a relatively smaller amount of interest obligation which it can easily pay with its huge income. The company can more than pay off its immediate obligation, having a current asset account which is more than twice its current liabilities. eBay, though, has a low return to equity of 11% (see Apendix 1).
3.2. Marketing Analysis
The phenomenal success of eBay is directly linked to its efficient marketing strategy. The business organization segments its market according to their interests into six categories namely, bargain hunters, hobbyist and collector buyers, professional buyers, casual sellers, hobbyist and collector sellers, and power and corporate sellers (Thomson, Strickland,& Gamble 2006). Being an online operator, eBay has succeeded to provide a user friendly website with unique features to make buying and selling easier and more convenient to customers. As a global player, eBay captures each locale through the use of customized platform that reflects the unique culture, values, and language of each country (eBay 2007). The company succeeds in satisfying the needs and wants of its various customers through the provision of venue where buyers and sellers can find the items that they want with the price that ...Download file to see next pagesRead More
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