Strategic Analysis Of EBay Inc

Corporate Objective

This assignment requires students to conduct a strategic analysis of both the internal and external environment relating to either one of the following companies or a company of your choice.

• Manchester United FC

• Ocean Park

• Ebay

• Amazon

• Dyson

• Victoria Beckham

• Warner Bros

eBay Inc. is an e-commerce organization that intends to serve their products to their customers. They emphasize on customer-to-customer and business-to-customer trading approach to accomplish their objectives. The concerned group is found in the year 1995 and earns annual revenue in millions. They have expanded their business in over 35 different countries and also manage online auction and shopping websites to provide an opportunity to their customer to access their products through the internet (Ebayinc.com 2016). According to the IMRG / Capgemini Report, 10.7% of the total retail sales of eBay are obtained for the online trading approach (Gomez-Herrera et al. 2014).

In the assignment, the current corporate strategies that are undertaken by eBay will be discussed which is followed by the external and internal analysis of the organization. This will provide detailed information about the organization’s activities to obtain maximum productivity and profitability.  Moreover, the competitive strategies of the concerned organization along with their strategic choices will be explained. Lastly, the assignment wrapped up with the strategic evaluation of the objectives taken for the betterment of the organization.

Current corporate strategy: The primary purpose of eBay is to provide a platform where the buyer and the customer can trade anything from fashion apparels to electronic appliances. In addition, Neugebauer et al. (2015) depicts that another corporate strategy is to become a diversified organization, where they cannot only offer different products to their customers; however, they also try to develop a strong customer base and global reach. Implementing effective management strategies also considered as their corporate strategy. These plans include representing their items accurately and genuinely

PESTLE Analysis

Figure 1: PESTLE Analysis

(Source: Created by Author)

Political: The political factor of eBay comprises of globalization that makes the concerned organization to compete with their other competitors like Amazon. Devine et al. (2015) illustrates that the government bodies invest highly in ICT infrastructure that provides eBay a faster and reliable internet facility. eBay must have to consider the Marketplace Fairness Act to explain all the sales tax. The labor planning intends to increase the rate to 50paise and cut down the corporate tax to 25paise (Smith 2016).

External Analysis

Economic: Economic factor comprises of the exchange rate and global financial condition. Their revenue has risen to 14% that increases their value of the share to 63cents from 56cents in the year 2014 (Kemper and Breuer 2015). However, emerging markets also drive their one-quarter of their annual revenue. The maximum sales they are getting are from selling the electronic appliances that are followed by the fashion apparels and other.

Figure 2: Revenue earned by product category

(Source: Devine et al. 2015)

Social: eBay also values the social growth of the society. As a result, they emphasize on employing highly skilled and educated people for their organization. In this way, not only the people get appropriate jobs; however, it also benefits eBay with maximum productivity.

Technological: eBay has numerous interfaces and tools that help to define the retail interfaces. Seaman (2015) depicts that iintegrated business user tools comprise of content and experience management, search and merchandising, personalization, testing and optimization, campaigns and promotion. Various devices are also used that are Smartphone, web, tablets and kiosk. In addition, eBay pays a higher amount to their skilled workforce to accomplish the trading flawlessly. According to Sengupta and Sengupta (2014) eBay also adopt omnichannel or integrated marketing to implement updated technology.

Legal: eBay follows the Data Protection Act, UK and it is the most important legal consequence. EU Electronic Commerce Directive and Electronic Signature Law are also followed (Turban et al. 2015). The former law works for the development of electronic commerce within the information society and the latter law ensures that the customer adopts all the written content in the contract or the bills that are given to them.

Environment: The concerned organization initiatives the eBay Green team that values the environmental factor in order to maintain the sustainability. They also recycle the products and emphasize on waste management. eBay believes that more consumption means more CO₂ emission and more polluted atmosphere (Malaga 2013). They encourage people to buy green products and bids for already sold products.

Porter’s Competitive Forces

Figure 3: Porter’s Competitive Forces

(Source: Created by Author)

Competitive Rivalry in the organization: The intensity of the competitive rivalry is medium to high. They face competition from both offline and online traders. Moreover, Ellram, et al. (2013) portrays that they offer a reasonable cost on their branded products that makes them ahead of all the competitors like Amazon and Yahoo.

PESTLE Analysis

Figure 4: Competitiveness of rivalries

(Source: Chen and Chang 2014)

Bargaining power of customers: There is a HIGH threat that eBay is facing as there are many competitors, who can investigate through search engines and compare the price of same products that their competitors are selling. Haucap et al. (2013) states that it also relies on the fact that they not only demands huge variety of goods; however, they are also looking for extra service they are providing like one-day delivery, gift coupons and maximum discount. 

The Threat of new Entrants: This threat has HIGH intensity to occur as formulating an internet based business platform is easy and requires less cost. This virtual e-business is attractive, where there is a very high chance to obtain maximum profitability. eBay is safe from new entrants as new entrants will need a huge budget to initiate their business; however already established players like Amazon, Apple and Alibaba have the potential to lead eBay (Nillesen,  et al. 2014).

Bargaining Powers of supplier: The threats in this context are small to medium. According to Chen and Chang (2014), the primary reason behind this is that there are millions of sellers, who enlisted their products in eBay and hence the bargaining power is limited. Moreover, eBay also has to make the price of their product unchanged or small; as the increase is price may be unsatisfactory to sellers that could lower their product listing in the marketplace.

Threats of substitute products: The products range that eBay is providing is expanding day-by-day, and hence the risk of substitute products is LOW. Moreover, Ofili (2016) mentions that they keep on introducing new product matching with the current trend of the customer in order to attract them and motivate them to purchase from them.

SWOT Analysis

Figure 5: SWOT analysis

(Source: Created by Author)

Strength: The strength of the concerned organization is that it is a recognizable brand name and largest online auction platform where there are 100 million registered used from over 150 countries. They also have numerous alliances like IBM, I-Escrow, TradeSafe and Walt Disney (Harrison  et al. 2013). Their strength also relies on the sense of community that makes their customer on top priority. 

Weakness: Compared to their power eBay does not have much weakness. However, they are unable to measure illegal activities on their site and ability to penetrate foreign markets. According to Danish (2015) customers claim that 12% of the events signify fraudulent transactions and they are failed to take over their trading approach to the most crucial international markets like Japan. Moreover, some of their products lack in-depth description, which led to wrongly sold products. 

Competitive Analysis

Opportunity: There is an opportunity for eBay to inaugurate new stores in other countries to sustain their current growth levels. People nowadays using the internet more to accomplish their daily work like purchase products and paying bills (Garratt and Troger 2012). Thus, eBay has opportunity for continuing their market penetration and expansion. 

Weakness: Ngo-Ye (2013) depicts that there are numerous hackers with the intention to hack the financial details of the registered customer like the credit card details and others. Several customers also get affected by such type of fraud activities. Another aspect is the growth in a number of online trading stores that make eBay harder to encompass a competitive edge in the market.

Organizational resources – eBay have tangible and intangible resources in their organization.

The tangible resources comprise of financial, technological and physical resources. eBay have permitted leverage of 3x EBITDA, which is Earning befog interest, taxes, depreciation and amortization. Their current market capitalization is $28.82billion (Rigby et al. 2013). However, the values decrease from the previous year.

Image 6: Market Capitalization of eBay

(Source: Garratt and Troger 2012)

Concerning the technological resources, eBay has a genuine auction-board that helps them to initiate their business. Moreover, they have advanced software tools to support their trading approach. These software tools are eBay.com, Half.com and Rent.com. Sun Technology helps their programming and software instruments and implements improvements to provide ease in listing products and visual search (Serenko and Turel 2015).

Intangible resources – It comprises of the organizational and innovation perspective. Corporate resources signify the active executive team, who utilizes their knowledge for the betterment of the organization. eBay also emphasizes on adequate payment and communication procedure so that more customers can get attracted to them. Dobni et al. (2015) depicts that formerly eBay accomplishes their payment systems with PayPal; however, they now complete this phase on their own. Moreover, they use Skype facility for effective communication with their associates. Innovation comprises of highly efficient software and computer engineer for developing their existing codes and software system. This helps them to reach their organizational goals flawlessly. Introducing “Best Match” searching tools is another aspect of their innovation that allows embedding of the item listing in another internet (Danish 2015). They are the first e-commerce site to won the National Media of Technology and Innovation

eBay proceed with customer-to-customer and business-to-customer model to accomplish their trading procedure efficiently. They provide extra facility to their customers by allowing them to post their products after the registration. They also provide an entertaining environment to their employee that motivates the employee engagements within the organization (Van Vliet 2014). Moreover, they also initiate programs like Safeharbor to take proper steps for the users with the intention to violate the rules and regulations of eBay (De Chavez 2012). They also have cost-effective trading and strong interpersonal relationship with their stakeholders. Their interface are immensely interactive that allow the users to use their e-commerce site easily and is arranged by topics.

Porter’s Competitive Forces

Market segmentation – The market segmentation of eBay Inc. is based on the different age and income group. It is an online platform and hence it targets the young age group, who spend most of the time with their smart devices. They value internet facility more than shopping in real infrastructural shopping hubs. As a result, eBay takes proper measures to trade online. However, Haucap and Heimeshoff (2014) mentions that people in the United Kingdom uses internet facility up to the age of 75 and they prefer this shopping platform as they get a broad range of products under a single roof. Concerning the income factor, they consider all income groups. They have all kind of product in every price range. Hence, eBay segmented their business in such a way that they can cover all the community.

Cost leadership – Cost leadership is a crucial strategy of an organization where the concerned team sells their products at a reasonable price compared to their competitive group while maintaining the quality of their products (Fager 2014). eBay have a wide variety of products at low cost to their customers as well as their sellers. They are aware of competitive response and price war compared to their rival organization.

For future personalization, marketing automation, sensors, geo-targeting, wearables, payments are future advancements in technologies that are crucial for online trading for eBay.  Their market shares are 8% in UK (Ebayinc.com 2016).  They have selected some of their strategies to incur maximum profitability. These strategies are:

Figure 7: Ansoff Matrix

(Source: Stone et al. 2014)

Diversification: To introduce diversification strategy, eBay brings PayPal in the year 2012. This increases their sale as they are safe for payment. People utilize this facility to pay in much safer way (Kumar 2013). It saves the cost and usability of the organization’s products and enhances their business approach. They also implement their communication through Skype.

Market Development: eBay intends to expand their business by entering into the numerous markets. Exampling a scenario, in Europe they enter their market by buying European Auction Website iBaazar in the year 2002 (Kocak et al. 2013). However, their competition like Yahoo prevented their trading in Japan and Taiwan.

Market Penetration: They take initiatives to open numerous stores in different countries to initiate their trading. Kumar (2015) depicts that they have broken the partnership with PayPal, and that decrease their sales. They have made the decision to start their payment department for accomplishing their safe payment procedures.

Product development: eBay desires to enhance their product range to satisfy the need of their end-users. They also strengthen their market position by improving their technological knowledge. Stone et al. (2014) illustrates that their product development also comprises of the employee compensation, contractor cost and depreciation on equivalent. They also develop their products matching with the latest trends in consumer’s preferences.

Sustainability – eBay does not only emphasize on the sustainability of the environment; however, they also value the sustainability of their products. Their goal for sustainability creates tremendous economic opportunity by empowering entrepreneurs and motivates the growth of the small and mid-sized business. This incurs a gain of $205 billion in the year 32013 that is increased in 2015 up to $300 billion. eBay have 52,000 micro-entrepreneurs and 2.2 million individual (Benn et al. 2014). Moreover, Kesavan and Ning (2014) depicts that they also promote greener commerce and invest in charitable giving. eBay also install new fuel cell plant and purchase 10% renewable power for the customers in many places like Germany, Dublin and others. They are continuously working on increasing the donor for the needy in the tome of emergency. eBay take initiatives to help people affected by the natural calamity in order to gain a reputation in the community.

Acceptability – As eBay is a modern organization and is serving their best possible services for so many years, the concerned group has gained acceptability across the world. Likhotal (2014) illustrates that they have millions of vendors and suppliers and have an association of more than 35 countries that also helps them to gain acceptability in the community. Moreover, eBay can take initiatives to start their business in new markets like the Middle East and Africa.

Feasibility – They have their products in every range and hence are feasible to their customers. von Brzeski et al. (2015) depicts that these products are done to satisfy every need of the consumers and are given in details their e-commerce site. The manufacturing of this product is also dome in ethical ways by less harming the environment.

Conclusion

From the entire study, it is concluded that eBay is serving their service in the market from the year 1995. They are the first e-commerce service in the market who sells authentic and genuine products to their customers. They also provide their customers to sell their products on their sites and bids for their desired value. This study also analyzes the internal and external analysis of eBay that is followed by the competitiveness of their organization. There is numerous e-commerce website with the same intention to serve their products to the end-users; however, eBay gains popularity with their sustainability strategy to promote a greener commerce. This will attract the users more towards them.

Moreover, they also segmented their market according to the broad range of their products range in every price so that every individual can purchase their product. It is also evident that it is difficult for new entrants to enter in the same field as they initially need a huge fund to initiate their business; however already established e-commerce organization can create an obstacle in their business approach.

eBay must have to develop their product to meet all possible desire of their customers from infants to older people. They also enhance their mission to ensure high demand, high profit margins in order to serve many more years in the market. They also use software like firewall and other security programs to avoid fraudulent activities. They can also implement the concept of big data to store their vast range of products and supplier’s details. Global growth and technological developments can also be another section where eBay can acquire more profitability. They can also create a user-friendly interface for their client so that the searching and purchasing procedures can be easily done.

Moreover, the concerned organization can enhance their security system by developing the backup system and online verification process to ensure the authenticity of every user. This is necessary to serve a safe and secure service to their customers for online banking services. They can also encourage corporate social responsibility by doing voluntary jobs. They can also encourage their employees to work for needy people in the community. eBay can also provide training to their employees to learn new technological skills so that they can work for the betterment of the organization.

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