STRATEGIC MANAGEMENT PROJECT

On

eBAY.inc

By

MEENAKSHI

MBA HR

C-08

A0102314120

MBA-HR BATCH 2014-16

Department of Human Resources

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH

SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA

I. EXECUTIVE SUMMARY

EBay Inc. encompasses eBay.com, the online marketplace, PayPal, which refers to the online

payments platform, and Skype, the Voice over Internet Protocol (VoIP) offered by eBay’s

subsidiary Skype Technologies S.A. Corporate revenues are earned primarily from three

business segments:

(1) Market places,

(2) Payments, and

(3) Communications.

In order to analyse these three segments, the analysis will be provided based on three separated

segments which is absolutely depends on the case study given. As a matter of fact, this report

provides an emphasis on strategic analysis based on its external and internal environment

analysis and company analysis or resources, competence and culture. Two future strategic

options are suggested in regards to the resource based strategies. As mentioned before, this report

analysis information is only based on the case study given.

II. COMPANY PROFILE

VISION STATEMENT

Become the world’s largest person to person trading company.

MISSION STATEMENT

“We intend to continue to work toward our mission of creating the world’s leading ecommerce franchise by investing in our core Marketplaces segment and continuing to build our adjacent Marketplaces businesses”.

Mission Components Included Not included Description

Customers ● -

Products and Services ● ecommerce franchise

Markets ● Leader in the online

marketplace

Technology ● Leading in e-commerce

Concern for Survival ● -

Growth and Profits

Philosophy ●

Self-Concept ● Continuously Investing in

Marketplaces segment

Concern for Public Image ● -

Concern for Employees ● -

Therefore, there are only 4 components out of 9 general components of mission statements and

in this analysis the mission provided by eBay has lacking of 5 components. Based on table, the 5

missing components are; customers, Concern for Survival growth and profits, Philosophy,

Concern for Public Image as well as the Concern for Employees.

It is clear to say that EBay does not have complete mission statement because of lacking of 5

components mentioned before. In fact, eBay mission statement is too broad and unspecified.

PRODUCTS AND SERVICES:

• Key products and services:

– Online services for the sale of goods and services

– Online communication services

– Online payment and transactional credit services

– Online classifieds

– Advertising

• Global commerce platform and payment leader.

• The world's largest online marketplaces

• PayPal - flexible and innovative payment solutions

• eBay Enterprise - exceptional, engaging shopping experiences online and offline.

OBJECTIVE

• The objective of eBay was to develop the work ethics and culture of eBay as a fun, open and trusting environment and to keep the organization focused on the big picture objectives and key priorities.

• This fundamental belief created a completely new kind of marketplace, forever transforming ecommerce.

• In a letter to users, founder Omidyar characterized eBay as a “grand experiment…creating an open market that encourages honest dealings…to make it easier to conduct business with strangers over the Net.”

• The overall eBay aims are to increase the gross merchandise volume and net revenues from the eBay marketplace.

ORGANISATIONAL STRUCTURE

III. UNDERSTANDING OF THE PROBLEM

FOUNDER & CHAIRMAN OF THE BOARD: Pierre Omidyar

PRESIDENT&CEO: Devin Wenig

SR. VICE PRESIDENT & FINANCIAL OFFICER: Gary F Bengier

SR. VICE PRESIDENT, CORPORATE COMM.: Michael K. Wilson

PRESIDENT PAYPAL: Scott Thompson

CHIEF TECH. OFFICER: Steven P. Westley

SR. VICE PRESIDENT, LEGAL AFFAIR: Michael Jacobson

SR. VICE PRESEDIENT HR: J effery S. Skoll

A. INDUSTRY ANALYSIS

EXTERNAL FACTOR ANALYSIS

1. PORTER’S FIVE FORCES ANALYSIS

ANALYSIS:

Industry Trend:

1) Mobile – more sales will occur using mobile devices and companies need to make sure that their sites are updated to be mobile

2) Free and faster shipping- this is the trend and companies need to keep up to compete.

3) Business without borders – companies will need to go global to continue to grow.

4) Content marketing is essential - marketing through content on websites emphasizing product information to engage customers

5) Growth of guided discovery – more online businesses will engineer the right mix of “guided discovery” to provide relevant suggestions to help consumers make purchases.

Supplier: low power

Rivalry: high among the competitors

New Entrance: medium

Substitutes: very high

Buyer: high buyer power

6) Consumer driven demand and personalization – businesses will empower customers to personalize, design or modify products that they want to purchase. This will increase efficiency and benefits both consumers and businesses

7) It’s still about the brand- businesses will go back to the basics of building a brand.

• Supplier: Low supplier power because a large base of supplier in existence. The ease of being supplier is high. Switch cost is high because the feedback and custom system.

• Buyer: high buyer power because they can compare the price with others easily. Secondly, people can buy goods from somewhere else very easy, low cost of switching. Thirdly, compose price among sellers with eBay.

• Rivalry: high because the similar large scale in operation and infrastructure among major competitors. Second, large competitors like amazon has in place logistic & supply chain (warehouse/ inventory management) make it hard for ebay to catch up. Third, ebay can’t enter some international markets such as china & japan due to the strong market power from local competitor/market leader.19% in e-commercial market and 2% in global retail.

• Substitutes: very high because a great number of alternative options: groupon (group buy); flash sells; retail (Walmart); classify fields (gifts).

• New entrance: middle because easy to enter which is for easy and economies of scale is high, brand equity, customer service, feedback system, in place by the existing major players which are for high

2. PEST ANALYSIS:

Political, Legal , and governmental forces

OPPORTUNIT

Y

THREA

T

-Legislation is in effect which requires collection of taxes beginning .This new legislation may cause a reduction in trading activity that would negatively affect several business segments.

-In addition, tax compliance will increase costs. ü

-Legislation has also been proposed to prohibit sharing of certain information over the Internet ü

Economic forces

-The resources of existing competitor firms are larger and as a result, competitors could weather an economic downturn

ü

-The company continued its turnaround strategy in a harsh climate for consumer spending

ü

-Weak global economic conditions, in addition to the mortgage and worldwide credit related financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns

ü

-Profitability is also affected by currency exchange rates ü

-If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income

ü

-Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar

ü

-Declining economic environment ü

- The revenue drop was attributable to the impact of the stronger.

ü

-Dollar and the lingering weak economy with high unemployment

ü

Social , Cultural , and Demographic forces

-Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.

ü

Breaches in data security are on the rise ü

Technological forces

Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level

ü

Competition is intense in communications services and subject to rapid technologicalChange

ü

- The need for substantial resource investments in Technology and marketing in order to remain competitive.

ü

B. COMPETITIVE ANALYSIS:

eBay is active in three different categories such as; Business segment I:Marketplaces, Platforms,

and Services; Business Segments II: Communications; and Business Segments III:

Communications. Generally, E-Bay competitors include: online and offline retailers, distributors,

liquidators, import and export companies, online and offline auctioneers, catalogue and mail-

order companies, classifieds, directories, search engines, products of search engines, virtually all

online and offline commerce participants (consumer-to-consumer, business-to-consumer and

business-to-business), and online and offline shopping channels and networks. However,

Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay

The summary of each category of segments comes as below:

1- Market place: competitors in this field includes traditional department, warehouse, discount,

and general merchandise stores, emerging online retailers, online classified services, and other

offline and online home shopping networks such as Wal-Mart, Target, Sears, Macy's, J .C.

Penney, Costco, Office Depot, Staples, OfficeMax, Sam's Club, Amazon.com, Buy.com,

AOL.com, Yahoo! Shopping, MSN, QVC, and Home Shopping Network. Companies such as

Google Base and Microsoft Live Expo also offer similar online services and classified ads.

2- Payments: The Payments segment competes against other online Payments services and

offline Payments methods, such as cash, check, money order, and established credit card

merchants. Pay me later is funded by CIT Bank and Bill Me Later is responsible for all functions

related to the account. Additional revenues are also earned from advertising and revenue-sharing

contracts with third parties that provide transaction services to eBay and PayPal account users.

PayPal is a recognized global leader in online payment solutions with 70 million active accounts.

PayPal generated $60 billion in net total payment volume in 2008, an increase of 27 percent over

2007. The Payments segment competes against other online payment services and offline

payment methods, such as cash, check, money order, and established credit card merchants

3- Communications: Communications segment’s competitors have larger amount of resources

compare to Skype. The Communications segment faces competition from local telephone or

cable companies and other VoIP providers. Traditional Communications companies offer

bundled services, such as cable or satellite television, along with internet and voice

Communications services.

SWOT ANALYSIS

• STRENGTH:

Economic Scale

The huge user base brings eBay economic scale. For example, eBay made heavy investment to establish its IT system and gain customer relationship knowledge.

Diversity in Products

The huge user bases also diversified the products sold on eBay.

Strength in Technology

Innovative technology such as its payment system - Paypal

Brand Reputation

EBay’s successful operation and its globalization have already gained it critical reputation.  

Users Data Base

The giant user base and large volume of transactions give eBay huge data base.

• WEAKNESS:

Inability to measure illegal activity on site

The hugest online auction market, large number of customers, and lots of categories of goods are eBay’s core competencies. However, these core competencies are also eBay’s weakness. People can easy to join eBay, and eBay did not check their customers very seriously. EBay is very difficult to manage their customers because all of It is easy to get two, three, even more ID in eBay. So it is hard to controlling fake or illegal auctions. eBay has taken many precautions to prevent illegal activity on their site.

Technology malfunctions

As with many technology companies, systems breakdowns could disturb the trading activities of eBay. In the past both eBay and its payment brand Papal have encountered shut downs and outages. As technology improves such a weakness is less and less of an issue.

Cost of shipping

Another problem with eBay is shipping cost. One is the price and other is the delivery time. Sellers would increase the cost of shipping as much as twice the price of the product. It is also expanding on foreign countries in which can be threatened by local competitors. Delivery time is a crucial factor for any of the online company includes eBay. Different delivery time cost different but will all affect the satisfaction of the customers.

High fee

eBay’s fees for the sellers has risen significantly over the years. The firm receives fees on listed goods, sold goods, some adornment fees and PayPal transaction fees. The sellers often make zero profit on their low price products sold on eBay due to its high fees. The mode of eBay fee system

is that when new business consortium is going to come in, start an alternative to eBay, and put eBay out of business with a year. They will do this by allowing sellers to list for free. Since the site takes a percentage of every sale, it is to their interest to list as many lots as possible. No

Further growth strategy

eBay hasn’t unveiled any plans on how the business is going to sustain its growth. Firm’s top management team is unsure whether eBay should become a retailer or to introduce new products and services and how to do that: developing its own products or acquiring new business. As a result, there is high uncertainty over eBay’s future and business direction.

Inability to penetrate some foreign markets

Penetration in foreign markets is crucial to the success of online auctions. EBay has done an outstanding job of penetration in foreign markets. However, they have been unable to take over one of the most crucial foreign markets, like Japan. Japan is one foreign market that is on the rise. They are becoming more prosperous and use of the internet is growing. If eBay is not able to gain ground in this market it could hurt its foreign market standing.

Lack of in-depth descriptions for products

eBay is regarded as lack of in-depth descriptions for product. But its competitor amazon has these outstanding features. Amazon boasts in-depth product descriptions for all merchandise sold on their site. The lack of description in products could be a factor in the amount of counterfeit and wrongly identified products that are sold to customers.

CONCLUSION

To tackle on their weakness, eBay should consider:

Make it more difficult for scammers to be able to take people’s money. The fact that they do not have much protection amongst scammers on their website hurts them because consumers do not believe that it is are liable website.

Technology malfunctions are always going to be a factor when dealing with websites and online shopping. eBay must take measures to keep malfunctions as low as possible to retain happy customers and to keep hackers out of personal PayPal and eBay accounts.

The recommendation is to control the price of shipping. A lot of sellers on eBay charge whatever they want for shipping while others do not even charge for it.

Revise and adjust the fee system. And all the fees and details should be shown explicitly on the 'Preview Listing' page.

• OPPORTUNITIES

Mobile usage

Mobile usage is expected to grow over the forthcoming years. The increase in mobile usage will present eBay with an opportunity to boost the number of users it has, as well as its revenues and profits. It is predicted that future Internet usage will be boosted by factors such as the adoption of broadband technology. The NFC payment system presents an opportunity for the payment processing arm of the company to attract customers in using the system for eBay’s purchase as well as others.

International expansion

eBay has already had some success in its international expansion efforts. Revenues derived from international activities currently account for around 30% of the company’s overall revenues.

New markets

eBay could seek to diversify into new markets in which it does not operate at present. The company could look to diversify into markets where it can leverage the technological know-how and brand name it possesses to its benefit. Diversification into other markets will give the company the opportunity to generate increased revenues and profits.

Market penetration

eBay could also choose to penetrate the market to a greater depth in order to generate revenues and profits in the future. Although eBay has around 160 million registered users at present, there are many millions more Internet users in the world that could potentially become eBay users. This represents a very large untapped market for the company. eBay should look to pursue a business strategy that will allow it to capture as much of these potential eBay users as possible.

Increase services portfolio thru acquisition.

Changing lifestyles (people are using the internet more and more to pay bills, talk to family and shop. EBay can use this opportunity for continued market penetration and expansion.

To capital their opportunities, they should:

EBay can capitalize on the trend of NFC by enabling the process payment system in EBay’s exchange and earned service fees as it did with Paypal.

The company could look to further its international expansion efforts in order to capture a leading share in markets that at present are untapped but have a high potential to generate revenues in the future.

EBay should consider the retail markets. EBay has an access to hugest online marketplace in the world and is well placed to take an advantage of that by becoming a retailer. The company has its IT and CRM systems in place already and could easily stake out a market share from Amazon and other online retailers.

• THREATS

There are several threats that eBay faces. These threats include online security, competition from Amazon, exchange rates and regional low cost online retailers.

Online Security - PayPal stores customer information and that makes it a target for online thefts. The more customers PayPal has the more attractive it is to identity thieves.

Regional Low Cost Retailers – they can outperform eBay in providing faster and cheaper shipping and better knowledge about the home market.

Increasing competition from Amazon – Amazon’s online marketplace has significantly increased and is just behind eBay’s

Exchange rates – Part of eBay’s revenue comes from foreign operations. These profits if sent back to the US need to be converted to dollars and may be affected by exchange rates.

IV. ANALYSIS OF CURRENT STRATEGIES

1. CORPORATE LEVEL STRATEGIES

ANALYSIS:

Strategic Alliance:

Burger King entered a strategic alliance with eBay where Burger King Customers can earn points that can be used to bid for items on eBay.

EBay and Microsoft made a strategic alliance to expand their global online presence.

International Strategy:

eBay’s platform was the premier segment website in more than 18 countries and has 114 million registered members from more than 150 countries extended its operations to other countries, and rely on local sites that served Australia austral, Belgium, Canada, France, Germany, India, Ireland, Italy, south Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, and the united kingdom. In addition, eBay had built a presence in Latin America, China and India.

UPS: improve delivery quality Microsoft: expand online presence

Strategic Alliances

Registered members: > 150 countriesRely on local sites

International Strategy

2. INTEGRATION STRATEGIES

• Acquisitions can be categorized into three groups: horizontal integration, vertical integration, and corporate diversification.

• Acquisitions that helps eBay expands its business into areas that are at different points on the same production path can be counted as vertical integration.

• Horizontal integration includes the acquisition of additional business activities that are at the same level of the value chain in similar or different industries.

• Finally, diversification is for acquisitions that help eBay branching into new business opportunities instead of just expanding its existing business.

Vertical Integration:

PaypalShopping.comWhere, Inc

Horizontal Integration:

CraigslistStubHubBill Me Later

Diversification:

SkypeMeetup

V. RECOMMENDATIONS AND IMPLEMENTATION

New Policy for New strategies:

The manager should monitor the eBay progression of growth every week.

Technical Department should make a corrective action immediately, and improve after

sale services.

10 days training provided for current staff, 15 days for new staff per year. Training can

help the organization to increase efficiency as well as increase the level of motivation of

the employees.

A special reward is provided for the staff who achieved high performance in work and

complete attendance monthly.

PROPOSED STRATEGIES

1. Market penetration2. Market Development3. Product Development4. Diversification5. Acquisitions6. Alliances

Marketing Department

Company Objective: Ensure the effectiveness of virtual marketing through online advertising as

well as other media.

Supporting Policies:

1. Management is concerned with all those activities which are essential to determine and

satisfy the needs of customers so as to achieve the objectives of business

2. The marketing manager must scientifically study the demands of customers before offering

them any goods or services. Selling the goods or services is not that important, as the

satisfaction of the customer’s needs.

3. The Marketing manager must attract more and more customers to buy the firm’s products

and services.

4. The marketing department provides quality products to customers at reasonable prices and

thus creates its impact on the customers.

Reorganise:

Roles of Key Players for eBay organisation.

Project Manager

The Project Manager has the ability to provide resources as needed for the project and has final

say on determining the membership of the Project Team. The project manager also should be

able to organise efficiently partnership as well as the acquisition process.

Project Administrator

The Project Administrator is the leader in the effort to define, understand and measure the

process. He/she serves on the Project Team and is available to dedicate 20-30% of his or her time

to the reorganising effort.

Project Team

The Project Team is composed of managers and employees from each of the potentially affected

functional/divisional areas.

The roles of the Project Team in simplifying the processes include:

Participate in the creation of the "As-Is" Process Model.

Highlight major problems and issues, and recommend areas where improvements and

"Quick Wins" can be made.

Assist in addressing the immediate workload distribution problems.

Participate in the recommendations on how work should be completed.