CASE STUDY

Group Members Grace Chu Eyo Chay Ni Rachel Gomez

Monday, 10th Feb 2014

BACKGROUND

eBay is an American Multinational Internet Corporation

Founded in 1995 by Pierre Omidyar

Online Auction Website

Phenomenal Growth

Net Worth

First Item Sold on eBay

Sold for USD 14 – A laser pointer that was broken

Most Expensive Item Sold on eBay

Giga-Yacht, Sold in 2005 for $140 million

TODAY on eBay

Determining eBay’s Strategic Position

PESTEL

PORTER 5 FORCES

SWOT ANALYSIS

PESTEL ANALYSIS

Political

Economic

Social

Technological

Legal

Environment

Political

Globalization able to break into a new market which previously closed challenges from foreign competitors

High government investment on ICT infrastructure faster, better and more reliable internet access user

Marketplace Fairness Act US state sales tax Increase the price of a product or service people would probably stop buying internet retail sales could decrease by up to 24% (Austan Goolsbee, 2000)

Government Intervention China’s internet regulators have made it difficult for foreigners to participate

fully, giving local Chinese e-retailers an advantage from the offset (Dean, The Wall Street Journal, 2006)

Economic

Exchange rate conduct significant business outside United States but profitability is

reported in US dollar

Global economic condition weak economic condition would limit the growth of revenue change in consumer purchase pattern

Social

Lifestyle and attitude vary from country to country they have to set different target, product or consumer categories * eBay failed to break into China market, the hottest market as they did not

localize their services

Increase in online social networking people are rely on internet can get everything easily from online shopping an opportunity to increase market share

Technological

Growth of internet lower the barriers of entry more competitors growth of internet user will increase public online consumption

Rapid development of high-speed network service eg: broadband broadband internet connection were used by 42% of

household, up from 32% in 2012

Third party online payment system PayPal provide a safe, easy and secure way to make and receive payment online reduce the risks of transaction

Legal

Strategy developed which have to comply with different legal obligations domestically and internationally The European Sales of Goods Act Data protection act in UK Federal Trade Commission in USA EU Electronic Commerce Directive The Electronic Signatures Law Increase the use of e-commerce of both consumers and business ensure a certain level of security in online shopping costs for online business

Environment

Global warming and pollution awareness increase globally more online shopping have to be more ‘green’ to attract consumer

eg: eco-packaging, work environment

Porter’s Five Forces

Bargaining Power of Customers

Threat of Substitutes

Bargaining Power of Suppliers

Threat of New Entrants

Rivalry among Competitors

Bargaining Power of Customers

High Bargaining Power

Other Options

Online or Retail Stores

Price Comparison

Threat of Substitutes

Low Threat

eBay is more convenient

Substitutes cannot have much variety

Bargaining Power of Suppliers

High

Low fees and commission

Threat of New Entrants

High

Low Entry Costs

Depend on individual interest

Rivalry Among Competitors

High

Shopping Outlets or Online Retailers

Differences between eBay & Amazon

Auction Site More Towards Fix Price

More Interaction between Buyers and Sellers

Less Interaction between Buyers and Sellers

Pay-Pal Facilitates all its payments

Middleman Middleman and also a retailer

Revenue of eBay vs Amazon

2009 2010 2011 2012 2013 $-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

eBayAmazon

Reve

nue

(mill

ion)

Net Income of eBay and Amazon

2009 2010 2011 2012 2013-500000

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

Ebay Amazon

Net

Inco

me

in K

STRENGTHS 1) Global Reach 2) Recognizable Brand Name3) Wide Variety of Products4) No Inventory Holding5) No sales personnel

WEAKNESSES1) Technology malfunction2) Product Description Lacking

OPPORTUNITIES 1) Critical Foreign Market Not

Penetrated2) (CLOP internet based purchase)3) Growth Through Acquisition

THREATS 1) Fraud2) Increased Competition3) Old and New Technology4) Small entry barrier to industry

SWOT ANALYSIS

QUESTIONS

Analyze the marketing environment and the forces shaping eBay’s business over the years.

How has the change in the nature of eBay sellers affected the creation of value for buyers?

Do you agree or disagree with Donahoe that eBay’s current strategy doesn’t mean that certain sellers will lose?

Is eBay doing the right thing by sticking its current strategy? What changes, if any, would you recommend to Donahoe?

REFERENCES

http://en.wikipedia.org/wiki/EBay

http://www.marketwatch.com/investing/stock/ebay/financials

http://www.marketwatch.com/investing/stock/amzn/financials

http://dspace.iimk.ac.in/bitstream/2259/510/1/543-549.pdf