The eBay Case Analysis, Case Study Example

Company Overview:

Internet trading has now turned into a very big business and there are many online marketing websites and strategies that you can find over the web. One of the most popular online shopping sites is eBay because it provides great trading platforms, effective online payment options and services and functional communication tools. Online shoppers are provided with high quality goods and superb services. Through the years, the company was able to establish a strong position in the marketplace and reliable brand value. However, due to the company’s involvement in different litigations as well as its transition from being an auction site to a fixed pricing store, eBay is currently facing great risks from internet fraud. This could mean the destruction and corrosion of the company’s competitive edge. The given paper critically analyses the internal and external factors impacting the company growth profitability and discusses the current market status of eBay considering various marketing aspects and evaluation techniques.

EBay vision/mission and Objectives:

Vision

Ebay intends to accomplish own mission of a creating a whole new world of innovative online market place by advancing and widening the operations across multiple formats, geographies and categories (BizWire, 2011).

My Vision statement for Ebay

EBay’s aims to become the world’s leading online auction destination, seamlessly connecting buyers and sellers as well as building long-term trust between them and be a positive force of change in communities across the globe.

Mission

Ebay’s mission is to render an international trading platform where anyone can trade anything practically. (BizWire, 2011)

Objectives

Ebay aims to expand in all possible primary areas like communication, formats, services and multiple geographical marketplaces with internet as the main means of interaction with customers.

Proposed Vision and Mission statements

Vision

Ebay intends to provide all the needs of its consumers by supplying the quality products via highly effective online services and thus become one of the top most e-commerce industries maximizing the consumer trust on online community.

Mission

Ebay intends to overlook the entire online marketplaces via advancements and expansions to provide a considerable sense of online community to its sellers as well as buyers. Also, bring a secure online experience in order to achieve consumer trust and raise profitability.

External Opportunities and Threats

Opportunities

Expanding e-retail market and subsequently the need for safe payment systems is rendering a wide range of opportunity to eBay in an international platform. During the recent years, the Chinese government has greatly financed the level of high-speed internet access in the country. According to trade estimates, in 2009, China’s e-commerce market represented RMB263 billion, which is roughly around $38.5 billion. It represented a year-on-year increase rate of around 105%. Also, it is expected that every year there are around 30 million Chinese consumers that goes online to shop for the first time. Therefore it is estimated that by 2015, these consumers would be spending about $1,000 in a year, the amount of what Americans are spending online now (Corp., 2011).

According to industry estimates, China’s B2B market is anticipated to persist on growing speedily in the next few years because of the country’s economic growth and increasing e-commerce infiltration. The business-to-consumer (B2C) has also been rising due to the fact that retailers are enhancing e-commerce platforms as extra channels to get customer to purchase their products. The B2C transactions are also rising because there are more individual capitalists that are experiencing success on the existing C2C websites like Taobao.com.

PayPal partnered with China UnionPay Co in March of 2010. This electronic-payment service provider has allowed the Chinese consumers to shop from and make payments to merchants that are overseas. This collaboration is anticipated to assist eBay in expanding its business to China’s huge consumer market.

After the economic calamity in the US consumer spending has gone down. Household budgets are now tight and people are searching for all the chances for ways to save on each and every possible purchase. In the US, home savings in 2009 boosted by 51.6% and the private last utilization decreased by 4.7%. According to consumer survey done by Datamonitor’s, most respondents across the 15 countries surveyed agreed that they had been “making efforts and finding ways to save more money” during the time of the recession. The state for many distributors and suppliers has turned out real bad. Many of these suppliers and distributors are stuck with surplus product that are either using up expensive space at warehouses or gathering dust in retail stores. eBay approximates the international secondary market to be worth $500,000 million (Highfill & O’Brien, 2011).

Threats

The increase in rate of sales tax is one of the high time threats of ebay. The very complex increment in sale taxes is rather discouraging the buyers and in turn is raising the product prices and forcing the enormous burdens on both sellers and buyers of the organization. This has rather made sellers to track millions of taxing jurisdictions. Moreover the small scale online retailers will have to follow the varying changes in sales rates and rules for various tax jurisdictions.

Also increasing internet fraudulent activities is another problem of considerable litigation which has forced both buyers and sellers to rethink on online purchases. The effective elimination of fraudulent activities would cost eBay a very high price and hence these expenses of monitoring or preventing the fraud activities are again a burden on the company and will apply enhanced compensation for the problem solvers. All in all, all these factors are likely to bring unfavorable results for eBay business and revenues (eBay, 2011).

Ebay competitive profile MATRIX

As per the competitive profile matrix of ebay, it indicates that the strong points of the company compared to its competitors are its expertise in technology, innovation in products, brand name and billing accuracy and also the advertising strategies. The warranty period and sales, customer services are the weak points of the organization.

Ebay external factor evaluation MATRIX

As per the total weighted score, the ebay business indicates that it has a considerable external capability to respond for every type of external attributes of the company.

Ebay Internal strengths and weaknesses

The effective business strategy that helps eBay in expanding its customer base as well as its revenue, works on a specific business tactic that unites the consumers and the traders in a safe virtual marketplace. This type of business model ensure better trading practices that doing business on traditional marketplaces, which have the tendency to be divided with limits in the variety of available goods. The eBay way of trading also allows for decrease on transaction expenditures on per sale basis. Furthermore, eBay sustain zero inventories, this means there are also less inventory costs (Robinson, 2011).

Another good thing about eBay is that it provides consumers with new and scarce goods. Even those hard to find vintage items can be found on eBay, and this is one of the main reasons why this online marketplace is very popular. eBay is also one of the biggest online marketplaces and it has gross product volume of about $61,819 million in 2010. This is the total of the value of products sold in all eBay marketplaces for 2010. On a daily basis, it is estimated that eBay sells over 3 million goods across 50 thousand categories. The effective business model incorporated by the company has provided it with flexibility and cost-efficiency, which effectively aids the company to continuously improve the number of its members and consumers without the need to significantly add anything to its cost structure. This means there is increase in the revenue base of the company.

Increasing revenues with the development of online display ads and classified promotion revenues in the US $5.9 billion during the first quarter of 2010. This is an obvious increase of about 7.5% during the same period in the previous year. This is actually the highest first-quarter revenue level ever for online shopping industry. Shopping has now totally taken a new leap, and this is because of the advent of the Internet and the presentation of the latest innovations in technologies. Consumer access has now expanded and they have greater access to information and entertainment. eBay produces substantial revenues from advertising, publicity and classifieds. Trading services and other profits reached $45.5 million, or about 4%, in 2010 in comparison to 2009, and represented 12% of total net revenues in both 2010 and 2009. The enhancements in marketing services and other revenues was mainly attributable to eBay’s promotional and classifieds businesses, partly compensated by the segregation of marketing services and other earnings attributable to Skype. (eBay, 2011)

Weaknesses

Company’s incapacity to oppose the sale of counterfeit goods

Though online trading has proven a success for many retailers because it helps increase their revenue while decreasing their cost, it also resulted in the development of online selling of counterfeit products. Sales of fake goods through online trading platforms like eBay and others has become uncomplicated because it will not be easy to trace the identity of the trader of these products. According to the critics and watchers of the industry, counterfeiting practices have cost the US economy of over $250,000 million a year.

Through the years, eBay also has been struggling to fight litigations against it with deference to sale of counterfeit goods through its website. In 2008, eBay needed to pay E40 million to Louis Vuitton Malletier because of the allegations that it has sold a counterfeit purse of the brand over its site. The company has ended up paying big huge fines to many other companies producing cosmetics and apparel brands because of the issue. The reason counterfeiting has happened or still happening on eBay is because the company lacks the essential monitoring tools to weed out such sales. In most cases, eBay is able to identify counterfeit goods only after they are included in the list. Because of this, there has been negative affect on the company’s image in media. This has also produced negative effects on the company’s reliability because the consumers and the rest of the public would naturally form negative perception. This will also taint the company brand image that will eventually affect the sales (Robinson, 2011).

Failed synergies between eBay and its acquired entities

In 2009, eBay traded Skype to a group of investors for the amount of $2.75 billion. Skype was purchased by eBay in 2005 for $2.6 billion with the prospect that its Internet telephone service and innovative peer to peer (P2P) technology would harmonize the other sections of the company. eBay’s Acquisition of Skype did provide a high-growth business opportunity because the company generated $526 million in revenues and successfully added 129 million users in 2008. Skype has more than 480 million registered users and an 8% market share of international call minutes. The company though, soon realized that Skype, as a standalone company would do well, but when it became a part of eBay it slowly became difficult to incorporate its offerings with the company’s Internet auction and payments business trading (Highfill & O’Brien, 2011).

Ebay internal factor evaluation MATRIX

As the matrix shows, eBay’s greatest strength is customer loyalty and high brand recognition. eBay has become synonymous with online auction and competitors such as Yahoo! have failed to stop eBay’s dominance even with free or lower auction fees. Customer trust eBay because the company has larger number of buyers and sellers and its feedback system has become a reliable tool to gauge the trustworthiness of buyers and sellers. In addition, the company also offers buyer protection to all buyers which enhance their trust.

Since eBay is a marketplace system entirely populated by buyers and sellers who engage in transactions round-the-clock, any disruption would not only affect customers’ trust in the company but will also result in significant financial losses to the company. eBay also has a difficult task of preventing fraud which becomes even more complicated task given the decentralized nature of the company’s operation. Buyers and sellers deal directly with each other on eBay and eBay is a trading platform instead of being an intermediary between buyers and sellers. Monitoring hundreds of millions of buyers and sellers is extremely difficult if not impossible task, thus, it is in the best interest of the company to minimize fraudulent activities.

eBay’s total weighted score is 3.0 which is well above the 2.5 average score and indicates an internally strong company. This doesn’t come as a surprise because the company has taken extraordinary steps to ensure that buyers and sellers continue to trust the auction platform. The company continues to improve fraud-detection tools and offer buyer protection so that buyers are encouraged to continue using eBay as their preferred shopping destination.

SWOT Analysis of Ebay

Strengths

• Excellent CRM (customer relation management)
• Prominent e-commerce brand
• Leading international brand

Weakness

• Slow online transaction
• System breakdown problems during online trading
• Online Fraudulent Activities

Opportunities

• Growing online shopping demand
• Market diversification and penetration
• Acquisition of new business opportunities

Threats

• Unbearable credit card charges
• Illegal practices
• Increasing competition and thousands of rising online shopping portals

SPACE MATRIX

Business Strength

The analysis indicates the ebay has to advance its pace of penetrating at the current market and improve its functionalities concerned with e-retailing

BCG MATRIX OF EBAY

The above analysis indicates that ebay, classified Ads, Amazon are some of the leading organizations bagging the larger market share. Though uBid and flea market seems to be dominating with higher market share but yet the growth seems low.

IE MATRIX OF EBAY

QSPM Matrix

Overall, as per the sum of total attractive score the result indicates that ebay should concentrate more towards market penetration and development.

Recommendations and Evaluations

Reliable market position and brand value that guarantees consumer loyalty even in the downturn has put eBay in a strong market position. Through the years, eBay has created a strong brand value. It concentrated on a speedy increase in the number of consumers and quantity of product listings. By the end of 2010, eBay approximately has 94.5 million active members in comparison to 90.1 million and 87.7 million active members at the end of 2009 and 2008, correspondingly. An active member is someone who needs to bid on listed products. During the first quarter of 2010, members have bought products totaling to more than $13,000 million across 50,000 categories. Over 25 million traders have more than 15 million listings in numerous formats on eBay. Increasing number of consumers has contributed to the development of the company enabling it to emerge as one of the biggest international online auction website, which is visible in 25 countries. In a recession, brand can act as a very powerful too, as retailers with a well-positioned brand have the opportunity to thrive and seize a bigger chunk of the market, in terms of customers. Strong customer base and market position provides competitive advantage and gives eBay considerable bargaining power.

Following are the recommendations that eBay can implement and overcome the existing problem in the system and emerge out an one of the successful organizations by improving the profit level of the company through the achievement of long and short term goals.

Recommendations to accomplish long term goals

• Ebay should grow its community and strengthen the brand which can fascinate more and rather new members and also would aid in maintaining the necessity of eBay community.
• Ebay must enhance its online portal functionalities and features by enforcing the provision of various personalization’s attributes like user own page creation which provides the features like own gallery and also let the sellers to highlight their selling items through photo catalog.
• Ebay should focus more on to community affinity and advancing community security and safety via service like insurance and user verification
• Advance the mode of payment by introducing innovative or prominent payment methods like PayPal or Moneybookers etc.
• Advance the selling process of modern gadgets or equipment as the fad of these advance technological items is spreading among youth.

Recommendations to accomplish short term goals

• The company must broaden its trading platform by growing the current product catalogues, introducing new product catalogues and offering various services for a particular region etc.
• It is even recommended for ebay to build the strategic alliance with various social sites like twitter, MySpace and Facebook to promote the value of various brands.

eBay is believed to have always done very well because it is concentrated on its main goals and it is very fast when it comes to grabbing onto opportunities. But, the limitations and threats mentioned could prove to be the Achilles heel for eBay. The best way would be to first pay attention of the email scams that are employing eBay names and scaring all the consumers off. Next there is the need to filter the content of eBay by keeping the scammers and illegal auctions away, and then assemble a shipping calculator of different delivery companies that a trader can use to include the right price of the shipping rather than traders using this failing to fill their pockets. eBay is relatively big; it has 62 million registered users though that is still a low number when it comes to the number Internet users from all around the world. Though the numbers of internet users are still growing and eBay could focus on making them members. They could do so in many different methods.

References

BizWire. (2011). Research and Markets: eBay Inc – An Essential 2011 SWOT Framework Analysis. Business Wire (English) , 13 (2), 12-90.

Cone, E. (2006). Inside eBay’s Innovation Machine. CIO Insight , 11, 34-63.

Corp., T. (2011). Company Spotlight: eBay Inc. MarketWatch: Technology; , 23-90.

eBay, I. S. (2011). eBay, Inc. SWOT Analysis. California: Business Source PRemier.

Highfill, J., & O’Brien, K. (2011). The determinants of sales on eBay: the case of baseball cards. Applied Economics Letters , 15, 34-89.

Robinson, L. (2011). Digitization, the Internet, and the Arts: eBay, Napster, SAG, and e-Books. California: Routledge.