This assignment gives an in-depth understanding of strategic management tool and techniques and how they help an organisation in developing its future growth strategies. It studies strategic management in reference to eBay Inc which is a market leader of world’s online market place. First part of the assignment conducts an environmental analysis for eBay using strategic tools like SWAOT analysis, PEST analysis and Porter’s five forces analysis. The outcome of SWOT analysis shows that strengths and opportunities of eBay outnumber its Weaknesses and threats; this predicts future growth and profitability. PEST analysis for eBay analyses the external factors that affects its operations. Porter’s five forces analysis for eBay shows that they feel minimum pressure from competitors; substitute products and suppliers however are affected by change in customer preferences.
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Second part of the assignment evaluates the resources and core competencies of eBay that leads to development of competitive advantages that competitors can neither imitate nor substitute. Resources analysis of eBay reveals that it has around $44.48 billion of tangible assets and $10,208 million of goodwill and intangible assets. Innovation forms the base for its high brand reputation and its 33,000 employees across the globe are seen as the most precious assets of the company. E-auction, unique business model and unmatched brand reputation are identified as the core competencies of the company which helps them retaining their competitive advantage and huge market share.
Third part of the assignment focuses on recommendation for future development. TOWS analysis is performed for eBay in order to formulate strategies that can help them in maximising their strengths and minimising their weaknesses in order to take advantage of opportunities and avoid threats. Market development, strategic alliance and new pricing strategies are seen as the most sustainable, feasible and acceptable future growth strategies to enter new markets of developing countries like India and China.
Introduction.
Environmental Analysis for eBay.
SWOT Analysis for eBay.
PEST Analysis for eBay.
Porter’s Five Forces Analysis for eBay.
Resources and Competence Analysis for eBay.
Recommendations for future Development.
TOWS matrix for eBay to generate strategic options.
Recommendations.
References.
Appendices.
Strategic management is the process of systematic analysis of factors related to the external environment (competitors and customers) and the internal environment (organisation itself) in order to ensure that optimum management practices are maintained (Ansoff, 2007) . The primary purpose of strategic management is to attain an alignment between strategic priorities and corporate policies. eBay Inc. commonly referred to as ebay was founded in year 1995 by Pierre Omidyar (eBay Inc, 2015). It is an American multinational corporation and e-commerce company. It uses internet to provide business-to customer and customer-to-customer sales services. It is a multi-billion dollar company with offices across the global and headquarters in San Jose, California, United States. It comprises of three different business units with their own distinct brands (eBay Inc, 2015). eBay helps businesses and individuals in buying and selling online, PayPal is considered a leader in digital payments transactions, eBay Enterprise provide customers with digital marketing, commerce and retailing services.
Environmental analysis is defined as the systematic process of identifying various environmental factors in a business, studying their possible impacts and formulating strategies in order to benefit from them (Freeman, 2010). A company’s environment or marketing environment comprises of all the factors that affect its ways of working. An in-depth analysis of marketing environment helps taking best advantage of positive factors and minimising the affect of negative factors (Baines, Fill, & Page, 2013). Internal environment, micro environment and macro environment are three parts of a company’s marketing environment (Adler, 2010). Figure below shows the different components of each part.
Various strategic management tools can be used to perform environmental analysis for ebay.
Swot analysis is a strategic management tool that helps analysing a company’s strengths, weaknesses, opportunities and threats (Pahl & Richter, 2009). It the strengths and opportunities combined together outnumbers weaknesses and threats then the outcome is considered positive and predicts future growth. Swot analysis for ebay is shown below.
|
Strengths |
Weaknesses |
|
Giant online marketplace: 105 million active users and 150 million live listings Extensive global presence: Present in 37 countries Economies of Scale: Very less investment with high earning Strong business model: Acts as an intermediate between sellers and buyers. A unique business model that serves as a competitive advantage Brand reputation: A multi billion brand with huge brand loyalty Strong payment methods: Uses PayPal which is considered a secure and convenient payment system Localisation: Displays in local languages and is adapted to local product offerings |
High Fees: Market research reveals that eBay charges comparatively high fees when compared to other online service providers. Sellers are hardly able to make profits. Scams: A number of shipping scams and frauds have been reported lately as no IT system can be 100% secure. Lacks strong future growth strategies |
|
Opportunities |
Threats |
|
Growth of online market: Reports indicate remarkable growth in online market. It is an emerging market and provides ample opportunities. Developing economies: Countries like India and China present good growth opportunities Change in customer preference: Customers today have less time thus prefer to use online marketplace which helps saving time. Impact of social media: use of social media helps in attracting more customers Acquisitions and Mergers: Skype deal opens more opportunities |
Online Security: As the model is completely IT bases its always open to security threats Increased Competition: High competition from big brands like Amazon and new entrants Changing economies and exchange rate: Changes in economical conditions affects exchange rates which in turn affects eBay. Other IT related issues like server crash, hacking etc. |
Table.1. Source: Made by Student (2015)
SWOT analysis for eBay predicts high future growth however they have to work on their future strategies in order to align with changing business needs.
PEST analysis is a business management tool that helps analysing the political, economical, socio-cultural and technological factors affecting the overall functioning of an organisation (SWOT analysis and PEST analysis, 2014). PEST analysis for eBay is shown below:
Political: This element of PEST analysis evaluated the political factors that affect eBay. eBay has its operations in almost 37 countries across the globe thus is affected by different government laws and regulations of each country. However E-commerce as of now is not that much affected by national governments (Adler, 2010). They are greatly affected by taxation laws, employment laws, security regulations related to online payments etc (Armstrong, 2012).
Economical: Like all other businesses eBay is greatly affected by the overall world economical conditions. They are affected by economical factors like inflation, unemployment, rate of interest, currency fluctuation and changes in taxes (Marketing Mix, 2013). Changes in economical conditions directly affect consumer buying power which in turn has direct influence on eBay’s overall business ( Bizning Vakil, 2012).
Socio-Cultural: eBay overall business if greatly affected by changing customer preferences, changes in lifestyle trends and consumer buying patterns. Researches reveal that there has been a significant rise in the number of consumers preferring online retailing as compared to offline retailing (Armstrong, 2012). There has been a huge shift in consumers’ ways of buying and selling products with so much information available to them at the click of a button.
Technological: Rapid advancement in technology has shown a huge impact on all business across the world (Armstrong, 2012). eBay’s complete business model is based on internet thus it is greatly affected by technological factors like security threats, server breakdowns and changes in terms of online payments.
Porter’s five forces model is a tool that helps analysing the external competitive environment of an organisation (Porter, 2008). Porter’s five forces analysis for eBay is shown below:
Threat of new entrants: Medium; E-commerce industry provide low barriers to new entrants (Frobes, 2014). It requires high investment in order to compete on a large scale. Online payments are seen as a complex processes.
Threat of Competitive Rivalry: Medium to High; Both online and offline companies compete with eBay. It faces high competition from big online players like Amazon and Alibaba (Frobes, 2014). Less entry barriers result in development of a number of new online companies operating on same business model as eBay
Bargaining power of customers: High; with too many options available customers enjoys high bargaining power ( Bizning Vakil, 2012). E-commerce companies have to offer fewer prices in order to attract more customers. Customer today has ample of information related to the products thus they know where they can get what they desired at best price.
Bargaining power of Suppliers: Low; eBay is a big brand name and suppliers all over are eager to get associated with it (Frobes, 2014). Millions of sellers make product listing on eBay thus bargaining power of individual suppliers is very less.
Threat of Substitute product: Low; eBay has a unique business model where numerous products are sold thus they do not feel any threat from substitute products (Frobes, 2014). They can easily change to different products to meet changing needs of customers.
Resource Based View (RBV) of strategic management helps identifying an organisation’s sources behind its sustained competitive advantage (Acosta, Colomo-Palacios, & Loukis, 2011).eBay is the world’s largest online marketplace which provides its users with a convenient platform where they can buy and sell their products. The evolution of strategic management over time has made it possible to analyse the resources and core competencies of an organisation which final lead to the development of competitive advantage (Hana, 2013). Strategic management has identified a strong relationship between an organisation’s resources, capabilities and core competencies (Nilsson & Rapp, 2005). Resources are defined as the sources of an organisation’s capabilities; capabilities future acts as an organisation’s sources of core competencies which in turn forms the basis for its competitive advantage in the marketplace (Abraham, 2012).
Resources: Resources of an organisation can be both tangible as well as intangible. Tangible resources are resources that are physical can be observed and quantified (Graham, 2008). Tangible resources of eBay include its financial assets of $44.48 billion till Q3 of year 2014 (ebay inc, 2015). Its physical assets which include its buildings, product lines, machinery, technological hardware and service equipment amount to $ 2,760 million as declared in eBay Inc. Annual report of year 2013 (Stock Analysis on Net, 2013). eBay has a strong portfolio of technological assets and organisational assets (ebay inc, 2013).
Intangible resources are resources that cannot be quantified; they are deep rooted in organisation’s history and have accumulated over time (Abraham, 2012). As these resources are not easily visible it becomes difficult for competitors to understand, imitate or substitute them. Thus, a competitive advantage that results from an intangible resources is always more sustainable. Intangible resources include human resources, innovation and brand reputation (Freeman, 2010). eBay in its annual report of year 2013 has declared a good will and intangible assets of $ 10,208 million (Stock Analysis on Net, 2013). They have more than 33,000 employees across the globe, who are driven by a spirit of entrepreneurship and innovation along with a guiding sense of purpose. They strive for excellence and create a positive impact on customers, community and planet. Innovation is the key behind the remarkable success of eBay enabling it to each an unmatched brand reputation.
Core Competence: Core competence refers to an organisation’s resources and capabilities that server as a competitive advantage against its competitors (Ansoff, 2007). It emerges within an organisation over a period of time and defines its capacity to take actions. It helps adding unique value for its customers and represents only those resources and capabilities that have strategic values. eBay’s complete business model is an unmatched core competence and serves as prime competitive advantage for the company. It is recognised worldwide for its innovative ideas which cannot be imitated by any of its rivals. Its Brand reputation is another core competence that attracts high customer traffic towards its website. eBay considers its human resources as one of the primary forces that helped it develop a strong brand reputation in the online marketplace. E-auction service is another core competence of eBay which has brought considerable growth to the company.
Resources and competence analysis of eBay predicts high growth opportunities in coming future. The company however must emphasize more on developing strategies that can help them prevent frauds especially in customer to customer marketing of products. eBay recently has faced a number of legislation related to selling of counterfeit products. It must deploy effective screening processes in order to control the sale of counterfeit products. It must expand to developing economies and take advantage of ample opportunities presented by them. It is essential for them to formulate future growth strategies in order to meet the dynamic needs of online marketplace and further strengthen their technological portfolio in order to retain their competitive advantage.
TOWS analysis is referred to as a variant of SWOT analysis (Baines, Fill, & Page, 2013). It helps in bettering understanding of the various strategic choices available to the organisation. TOWS analysis for eBay is present below:
TOWS Matrix for eBay
|
TOWS Matrix for eBay |
External Opportunities (O) |
External Threats(T) |
|
Growing demand for online retailing Acquisitions and mergers Growth in digital market sector Diversification Developing economies |
Security threats Changing economic conditions Currency fluctuation Sale of counterfeit products Emergence of small domestic players Competition from big brands like Amazon |
|
|
Internal Strengths (S) |
(SO) Using strengths to maximise opportunities |
(ST) Using strengths to minimise threats |
|
Online market place leader Huge market share Financial Stability Strong leadership Brand reputation Business Model Human resources E-auction Strong technological portfolio |
Expanding to new markets like India and China Expanding product portfolio Diversifying into new product markets |
Using Brand reputation to attract more customers Online verification to control sale of counterfeit products Strategic alliances to further increase market share Restructuring marketing and management strategies |
|
Internal Weaknesses (W) |
(WO) Minimising weaknesses to take advantage of opportunities |
(WT)Minimise weaknesses to avoid threats |
|
Weak control illegal and fraud selling of products Complete dependence on technology Comparatively high prices |
Brick and Mortar stores for eBay to enhance physical evidence element Altering pricing strategies to provide cost advantage |
Implement strategies that can better control frauds. Strengthen online payments security. Strategic alliances |
Table.2. Source: Made by Student (2015)
The outcome of TOWS analysis for eBay presents ample opportunities for eBay in international online market place. They must consider Market development, strategic alliance and pricing strategies as primary future growth strategies.
Market development, strategic alliance and new pricing strategies are the most sustainable, feasible and acceptable future growth strategies. They should consider countries like India and China for further expansion. Both these countries are developing economies with huge population thus provide ample growth opportunities. In order to take maximum advantage they should focus on developing strategic alliance with local enterprises that have better knowledge of local community preferences. As they enter these new markets they should emphasize on restructuring their pricing strategies as these countries have lower buying power owing to less stable economic conditions and low currency value. eBay enjoys a huge market share and has high brand reputation which can help them attract target customers in new markets. They should deploy strategies by which can control sale of counterfeit products which will further help them increase brand image and loyalty.
References
Bizning Vakil. (2012). External environment of EBay within the framework of Porters Five Force analysis.
Abraham, S. C. (2012). Strategic Planning: A Practical Guide for Competitive Success. Bingley: Emerald Group Publishing.
Acosta, P. S., Colomo-Palacios, R., & Loukis, E. N. (2011). A review of the RBV of the firm within the e-Business literature: What’s next? Interdisciplinary Journal of Research in Business , 1 (1), 45-52.
Adler, M. (2010). A Study of Marketing and Online Marketing Tools which Improve Online Success. Norderstedt: GRIN Verlag.
Ansoff, H. I. (2007). Strategic Management. Hampshire: Palgrave Macmillan.
Armstrong, S. (2012). Ecommerce versus high street retail: benefits and issues.
Baines, P., Fill, C., & Page, K. (2013). Essentials of Marketing. Oxford: Oxford University Press.
ebay inc. (2013). ebay inc blog.
ebay inc. (2015). Investor Relations.
eBay Inc. (2015). Who we are.
Freeman, R. E. (2010). Strategic Management: A Stakeholder Approach. Cambridge: Cambridge University Press.
Frobes. (2014). eBay Through The Lens Of Porter’s Five Forces.
Graham, H. (2008). Marketing Strategy and Competitive Positioning. New Delhi: Pearson Education India.
Hana, U. (2013). Competitive Advantage Achievement through Innovation and Knowledge. Journal of Competitiveness , 5 (1), 82-96.
Marketing Mix. (2013). The Essential 7P’s To An Effective Online Marketing Strategy. Retrieved 2015, from https://marketingmix.co.uk/
Nilsson, F., & Rapp, B. (2005). Understanding Competitive Advantage: The Importance of Strategic Congruence and Integrated Control. Hamburg: Springer.
Pahl, N., & Richter, A. (2009). Swot Analysis – Idea, Methodology and a Practical Approach. Frankfurt: BoD – Books on Demand.
Porter, M. E. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Simon and Schuster.
Stock Analysis on Net. (2013). Analysis of Goodwill and Intangible Assets.
Stock Analysis on Net. (2013). Analysis of Property, Plant and Equipment.
SWOT analysis and PEST analysis. (2014). SWOT analysis and PEST analysis.
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