Meg Whitman at EBay, Essay Example

Being a multinational company, eBay has a long history of triumphs and failures. Its development was connected with new people who formed direction board, new events that created current status of the corporation, transformation of goals and trends that shaped its image. Unlike other online and offline auctions, eBay is a unique tool of commerce that allows both buyers and sellers form certain kind of community, based on trust, cooperation, and mutual help. Its principals and values became an effective technique in getting new customers and, thus, increasing company’s profit.

When analyzing Meg Whitman’s concerns about purchase of Kruse International, one needs to consider several facts about similarities and differences of the companies’ politics towards customers, basic fundaments of their development, and the ways purchases take place. Though these two corporations are auctions, their major difference lies in the way items are sold and the way auction process is regulated. EBay is online auction, while Kruse is offline one, which is usually held in different parts of the United States. Secondly, the principal of purchase itself varies also. “The three most important keys of [eBay’s] success – community, community, community.” (Hill 3) This means that the process of purchase is concentrated between buyer and seller mostly, while eBay practically plays a role of the market and a guarantor of lawful sale. In its turn, Kruse International consists of not only “the investor, the collector, the enthusiast, the dealer, and the hobbyist”, but also of operating stuff, people who manage the company, and various managers who are involved in operating auction (Kruse International). Finally, major problem in eBay’s purchase of Kruse International lies in running two totally different auctions simultaneously under one brand name.

Acquisition of automobile auction was rather risky activity performed by eBay. Nonetheless, the approach they used can be considered as well planned and organized. Dean Kruse served as CEO under the authority of eBay. Such way of combining two companies performed rather good results. However, it did not solve most of the key problems and finally Kruse International was purchased back by its initial owner.

The major issue connected with such an expensive purchase (275 million) lies in rather incorrect choice of business running. For instance, Meg Whitman tried to use the same approach that was practiced during the purchase of Butterfield & Butterfield. Indeed, despite of the difference in mean sales volume, as “the average item at Butterfield was sold for $1’400, compared with eBay’s $47 average”, implementing its goods on eBay’s market brought much more benefits than losses. Moreover, though the price range was high enough, the categories of goods were somehow close to each other and, thus, were affordable to most of the eBay’s buyers. When it came to selling cars, the situation was totally different as the number of targeted buyers varied a lot. Being rather expensive, car is considered to be a luxury good. Additionally, the level of people’s perception is still not developed enough to purchase such expensive goods as cars. Their selling is connected with a kind of personal approach. Especially when it comes about selling of luxury ones. Overall, eBay’s approach was not bad, but inability to provide adequate control, combined with diminishing percentage of cars sold, made company’s Direction Board sell Kruse International back to its original owners.

Diversification of the market or simply product line could be one of the alternatives for running this type if business. For instance, Samsung Inc. practice diversification of the products in order to obtain customers in a variety of fields by mass production of electronic devices. Though this company does not have lots of common features with eBay, it could be a good example in developing marketing and managerial strategy. As written above, cars auction requires a lot of personal selling and, thus, support members taken from ordinary buyers can be of little help in convincing the prospect. Development of a new website under the authority of eBay’s brand name could propose totally new kind of service by means of satisfying clients, as if it was an ordinary auction held in real place with real people. Providing online help could be an effective tool on getting new buyers. Moreover, Kruse International could be managed by the same managers and involve little efforts from the side of eBay’s owners. Trying to make one single market that included goods from different categories had small conversion rate and, therefore, was not as profitable as it should have been.

Creation of the new website would not be really pricy activity considering the sum, by which Kruse International was purchased. The key problem in implementation of this plan would be in transformation of the basic principals of the company and in education of managers to run totally different kind of business. Another option for getting high profit from Kruse International and saving its original values could be in providing offline auctions with their online support. Thus, the company would operate as before and the only difference would lie in the change of Direction Board and stockholders.

Both options of product diversity could bring lots of benefits to eBay company. Implementation of the new website would bring absolutely other targeted audience and, thus, bring more profit to eBay company, enabling its future growth and prosperity. Secondly, it will not affect current customers and sellers who initially operate on eBay market. Providing various types of services PriceWaterHouseCoopers obtains a great number of clients by offering audit and assurance, financial consulting, business recovery, and other types of services. This company can also be considered as an example of diversification of services. By separating automobile auction from intial online auction eBay could:

1. Avoid great price range of goods
2. Increase conversion rates
3. Get new targeted customers
4. Minimize risks of negative complications of current buyers and sellers
5. Get market share in absolutely new type of market

In conclusion I want to emphasize the fact that buying Cruse International was a kind of risky activity that involved much of intrigue. On the one hand, it could be a great possibility to double the volume of eBay’s profit. On the other hand, it could lead to loss of huge sum of money. Time has shown that an approach of Meg Whitman was not very beneficial for the company. Probably eBay should not get involved in the process of purchasing offline auction as it does not match with its original principals and goals. Nonetheless, it could be very beneficial project, if more time and efforts were spent on its development and planning.

Works Cited

Hill, Linda. Farkas, Maria. (2005). “Meg Whitman at eBay”. Harvard Business School. “Kruse International” (2001). Retrieved 27 February, 2009 from <http:/ /www.kruseinternational.com/ about/history.asp>.