Strategic mgt of Ebay
- 1. EBAY: IN A LEAGUE BY ITSELF 1
- 2. GROUP MEMBERS • Farah Naz • Sidra Kousar • Javeria Mehmood • Faiza Tariq 2
- 3. SLIDE LAYOUT • Introduction • Ebay business model • Competitors • Present and future problems • Internal audit • External audit • Swot matrix • CPM • Space matrix • Grand matrix • Conclusion • Recommendations • Current position 3 • References
- 4. INTRODUCTION • eBay Inc. is an American internet consumer to consumer corporation • An online auction and shopping website • Founded in 1995 • Pierre Omidyar, the founder of eBay • Headquarter San Jose, California, U.S • Today, the eBay community includes more than a hundred million registered members from around the world. 4
- 5. E EBay’s Mission Statement “eBay's mission is to provide a global trading platform where practically anyone can trade practically anything” 5
- 6. WHAT THEY SELL! • Millions of items listed on eBay • eBay used to buy and sell items in thousands of categories • Collectibles like trading cards, antiques, dolls, and house wares to practical items like used cars, clothing, books and CDs, and electronics. • Auction-style format or a fixed price through a feature called Buy It Now. 6
- 7. WHERE ARE THEY… • Currently, eBay has local sites that serve Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Ireland, Italy, Malaysia, the Netherlands, New Zealand, the Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States. 7
- 8. IN STARTING…. • Initially conceived as online marketing place • Person to person trading community • 94.9 million registered users from more than 150 countries • Registered users ranged from school, college students to Fortune 500 companies such as IBM, government agencies e.g. U.S Postal Service 8
- 9. KEY SUCCESS FACTORS IN ONLINE RETAILING • Challenge is to generate traffic on website • Tactics used to generate traffic were: • Partnering with search engines • Direct e-mails • Online advertising at portals • Print and television media 9
- 10. CONT….. • Providing extensive product information • Easily navigable site • New things happening on sites, to keep customers coming back 10
- 11. ONLINE AUCTIONS • Endured through out the history • Convenient way to find a buyer • Collect difficult-to-find items • Purest markets, buyers and sellers arrive at a mutually agreeable price • Works in the same way as traditional auctions 11
- 12. CATEGORIES.. • Business to business auctions • Business to consumer auctions • Person to person auctions • eBay is pioneer of person to person online auction • 6.5 million customers used online auction in 2002, Forrester Research 12
- 13. WAYS TO GENERATE REVENUE • Charging sellers for listing their goods/services • Charging a commission on all sales • Selling advertising on their websites • Selling their own new or used merchandise • Selling their own goods or allowing other sellers to offer goods in fixed price format 13
- 14. AUCTION TYPES • Auction-style listings: Allow the seller to offer one or more items for sale for a specified number of days. The seller can establish a reserve price • Fixed price format Allows the seller to offer one or more items for sale at a Buy It Now price. Buyers who agree to pay that price win the auction immediately without submitting a bid. 14
- 15. ONLINE AUCTION USERS Six categories • Bargain hunters • Hobbyist/collector buyers • Professional buyers • Casual sellers • Hobbyist/collector sellers • Corporate and power sellers 15
- 16. EBAY AUCTION WORKING • Users registration • Users provide both credit card number and bank account information • Single bid or automatic bidding (proxy bidding) • Insertion and final value fee for sellers • Auctions fees different for different goods 16
- 17. EBAY ACQUISITIONS • The Gifts Project, Group purchasing of gifts • Milo.com, Shopping Engine • Magneto, Electronic Commerce • Skype limited, voice over internet protocol • PayPal, Ecommerce payment systems • Butterfield & Butterfield, Auction house • Half.com, fixed price format 17
- 18. PAYPAL • Safe, easier way to pay online • Pay without exposing credit card numbers to merchants • 100% protection from unauthorized payments • 24/7 monitoring to help prevent fraud • One account and one password • No need to retype credit card information 18
- 19. FEED BACK FORUM • 1996, eBay pioneered a feature called feedback forum • Build reputation with in its community • Comments about trading partners • Helps in overcoming hesitance about trading over internet • February 9,2004, additional feature of withdrawal of feedback comment 19
- 20. EBAY BUSINESS MODEL • Model was built around three profit centers • Domestic business( auction operations with in U.S) • International business( auction operations outside U.S) • Payments (e.g. PayPal) • 2003, 31.7% revenue growth from U.S operations • 34.6% international share • 33.8% from payments 20
- 21. ELEMENTS OF BUSINESS MODEL • Largest online trading forum • Compelling and entertaining environment • Trust and safety programs e.g. Safe harbor • Cost effective, convenient trading • Strong community affinity • Intuitive user interface, fully automated 21
- 22. EBAY STRATEGY EBay's strategy to sustain growth rested on five Elements: • Broaden existing trading platform • Foster eBay community affinity • Enhance features and functionality • Expand value added services • Continue to develop U.S and international markets 22
- 23. STRATEGIC ALLIANCES Impressive portfolio of over 250 strategic Alliances: • America Online (AOL) • Yahoo • IBM • Compaq • Walt Disney 23
- 24. CONT… For value added services: • Leading shipping services (USPS and UPS) • Tradesafe and I-Escrow • Mailboxes • iShip.com 24
- 25. COMPETITORS Main competitors of eBay are: • Amazon.com Auctions • uBid.com • Yahoo Auctions 25
- 26. AMAZON.COM Strategy is to “ be the world’s most customer centric company where customers can find and discover anything they may want to buy online” • Customer base of 35 million users in over 150 countries • Created in July 1995 • Internet’s number one music, video and book retailer 26
- 27. CONT.. International sites: • www.amazon.de ( Germany), • www.amazon.co.uk (United Kingdom) • www.amazon.ca (Canada) • www.amazon.fr (France) 27
- 28. CONT… Strategic alliances: • Border Books • Ashford.com • Drugstore.com • CarsDirect.com • Sotheby’s • Co-branded toy and video game online store with Toysrus.com 28
- 29. UBID.COM Mission is to: “be the most recognized and trusted business to consumer market place, consistently delivering exceptional value and services to its customers and supplier partners” 29
- 30. CONT… • They started consumer to consumer auctions but discontinued in 2002, due to the costs associated with fraud and concerns over product quality • Founded in April 1997 • 14.7 percent share of revenues in online auction market 30
- 31. YAHOO AUCTIONS • Launched in 1998 • User base grew from 120 million to 180 million during 2000 • 2004, offered auctions in China through joint venture with dominant Chinese web portal, Sina 31
- 32. PRESENT AND FUTURE PROBLEMS • Too many Sellers as compare to Buyers • Security( of the auction process and payment) • Fraud( through users in the auction process) • Necessity to accommodate power sellers( businesses) • Changes in number of categories • Expansion in terms of different types of sellers • Apart from system related issues, integration of professional sellers is most urgent issue 32
- 33. INTERNAL AUDIT 33
- 34. SWOT ANALYSIS 34
- 35. STRENGTHS • Most well known online auction company in the world. • Recognizable Brand Name • Over 250 Alliances • Publicly Traded • Partnerships with international companies • Global reach • eBay University • Entertaining site • Over 27,000 different categories • Zero inventory held by company 35
- 36. CONT… • No need for the traditional sales force • Strong auction community of loyal customers. • Excellent financial situation. • Strong customer service. • Percent of revenue in international markets increasing significantly. • Have a fair payment system that encourages merchants to list products. • Experienced management team. 36
- 37. WEAKNESSES • Weak promotional and marketing activities • eBay does not pay dividends on their stock • Some customers feel the website is cluttered • eBay’s position in the business to business (B2B) market is weak. • eBay has very little debt, therefore the company is not taking advantage of low interest rates to expand. • eBay has a higher tax rate since they do not take advantage of depreciation as well as other companies. 37
- 38. CONT… • The company relies too much on word of mouth advertising, assuming everyone already knows about eBay. • Longer transaction times, since many merchants will not receive payment until a buyers check clears. • Open to fraudulent activities • System breakdowns could affects trading activities 38
- 39. IFE MATRIX 39
- 40. INTERNAL STRENGTHS WEIGHTS RATING WEIGHTED SCORE Well known auction company 0.1 4 0.4 Loyal customers 0.04 3 0.12 Financial situation 0.1 3 0.3 Fair payment system 0.03 3 0.09 Global market 0.05 3 0.15 Management system 0.1 4 0.4 Zero inventory 0.05 3 0.15 Customer service 0.03 4 0.12 International markets 0.02 3 0.06 Over 250 alliances 0.2 3 0.6 eBay university 0.2 3 0.6 Over 27,000 different 0.08 4 0.32 categories TOTAL 1.0 40 3.31 40
- 41. INTERNAL WEAKNESSES WEIGHTS RATING WEIGHTED SCORE Weak promotional and marketing 0.1 1 0.1 activities Website is cluttered 0.08 2 0.16 Weak in B2B 0.2 1 0.2 eBay has very little debt, therefore 0.1 1 0.1 the company is not taking advantage of low interest rates to expand eBay has a higher tax rate since they 0.05 1 0.05 do not take advantage of depreciation as well as other companies The company relies too much on 0.07 2 0.14 word of mouth advertising, assuming everyone already knows about eBay. Longer transaction times, since 0.1 1 0.1 many merchants will not receive payment until a buyers check clears. Open to fraudulent activities 0.2 1 0.2 System breakdowns could affects 0.1 1 0.1 trading activities 41 TOTAL 1.0 11 1.15
- 42. EXTERNAL AUDIT 42
- 43. OPPORTUNITIES • Changing lifestyles of people • Acquisition of Yahoo.com • Continued international expansion • Increasing use of the internet • Expand community services • Foreign markets especially in Asia are improving • Market development in new and emerging markets like China and India • Market penetration/ Improve market services in current markets 43
- 44. THREATS • Success attracts greater competition • Attacks by illegal practices might happened • Some cost like credit card charges cannot be easily controlled by eBay • Transportation systems could be poor • Future taxation • Fluctuations in currency and exchange rates • Rapid growth of Amazon.com • Increasing number of online stores 44
- 45. EFE MATRIX 45
- 46. OPPERTUNITIES WEIGHTS RATING WEIGHTED SCORE Changing lifestyles of people 0.2 3 0.6 Acquisition of Yahoo.com 0.04 3 0.12 Continued international expansion 0.1 3 0.3 Increasing use of the internet 0.2 3 0.6 Expand community services 0.08 3 0.24 Foreign markets especially in Asia 0.1 2 0.2 are improving Market development in new and 0.2 3 0.6 emerging markets like China and India Market penetration/ Improve market 0.08 3 0.24 services in current markets TOTAL 1.0 23 2.90 46
- 47. THREATS WEIGHTS RATING WEIGHTED SCORE Success attracts greater competition 0.2 3 0.6 Attacks by illegal practices might 0.04 3 0.12 happened Some cost like credit card charges 0.1 3 0.3 cannot be easily controlled by eBay Transportation systems could be 0.2 3 0.6 poor Future taxation 0.08 3 0.24 Fluctuations in currency and 0.1 2 0.2 exchange rates Rapid growth of Amazon.com 0.2 3 0.6 Increasing number of online stores 0.08 3 0.24 TOTAL 1.0 23 2.90 47
- 48. SWOT MATRIX 48
- 49. Strengths Weaknesses Leading Global Brand for auctions Fraudulent Activities SWOT Matrix Customer Relations Management System Breakdown on trading activities Known Generic Brand for e-commerce Opportunities SO WO Acquisitions provide new business Global Expansions Online Banking strategic opportunities Maintain simplicity of interaction with Diversify products Market Development the online community’s capability Systems for Online verification of Market Penetration/ Diversification products Strategic alliance with courier companies Penetration of all types of market Threats ST WT Attracts competition Acquisition strategy – global Alliance to postal services expansion Illegal Practices Authentication of consumers identity Use online security options for Credit Card charges not controllable verification and authentication by eBay Reinforce marketing management and systems 49
- 50. PROPOSED STRATEGIES: • Market penetration • Market development • Product development • Diversification • Acquisitions • Alliances 50
- 51. COMPETITVE PROFILE MATRIX 51
- 52. KEY SUCCESS WEIGHT EBAY WEIGHTED AMAZON WEIGHTED YAHOO WEIGHTED UBID WEIGHTED FACTORS SCORE SCORE AUCTIONS SCORE SCORE BRAND NAME 0.15 4 0.6 4 0.6 3 0.6 3 0.6 QUANTITY OF 0.3 4 1.2 3 0.9 3 0.9 3 0.9 BUYERS AND SELLERS CONVENIENCE 0.1 4 0.4 3 0.3 3 0.3 3 0.3 CUSTOMER 0.1 4 0.4 3 0.3 2 0.2 2 0.2 SERVICE SPEED OF 0.05 3 0.15 3 0.15 2 0.10 2 0.10 TRANSACTION ERROR RATE 0.05 2 0.10 3 0.15 2 0.10 2 0.10 LOW 0.1 2 0.2 2 0.2 2 0.2 2 0.2 INVENTORY/C OST GLOBAL 0.15 4 0.6 3 0.45 3 0.45 1 0.15 DISTRIBUTION WEIGHTED 1 27 3.65 24 3.05 20 2.85 18 2.55 TOTAL 52
- 53. ANALYSIS • eBay ranked ahead of all the others. • ranked each category based on the information provided to us in the case study. • Three categories they were on top of; Quantity of Buyers and Sellers, Brand Name, and Global Distribution • This analysis shows that a company does not have to be better than its rivals in every category, just as long as they are ahead in the most important ones. 53
- 55. FINANCIAL RATINGS COMPETITIVE RATINGS STRENGTH (FS) ADVANTAGE (CA) Return on 6 Investment Market share -1 Leverage 2 Product quality -2 Liquidity 6 Customer loyalty -2 Working Capital 5 Technological -3 know-how Cash flow 6 Control over -5 suppliers and Exit from market 4 distributors Competitors -2 Risks 4 capacity Financial Strength 4.7 Competitive -2.5 average Advantage Average 55
- 56. EXTERNAL DIMENSIONS 56
- 57. INDUSTRY RATINGS STABILITY RATINGS STRENGTH (IS) POSITION Growth potential 5 Rate of inflation -1 Financial stability 4 Technological -4 changes Rivalry among 4 Price elasticity of -3 competitors demand Resource utilization 4 Competitive -4 pressure Profit potential 6 Barriers to enter into -6 market Industry strength 4.6 Stability position -3.6 average average 57
- 58. CALCULATIONS: • X axis: Industry strength + Competitive advantage 4.6 + (-2.5) = 2.10 • Y axis: Financial strength + Stability position 4.7 + (-3.6) = 1.10 58
- 59. Quadrant 2 Quadrant 1 ( Conservative) (Aggressive) Quadrant 3 Quadrant 4 (Defensive) (Competitive) 59
- 60. PROPOSED STRATEGIES • Market development Company can develop its market, by moving into China and India • Product development • Market penetration • Diversification strategies ( Related & Unrelated) • Integration strategies( vertical & horizontal) 60
- 61. GRAND STRATEGY MATRIX 61
- 62. • Four Quadrants • Two dimensions • X-axis: Strong Competitive Position Weak Competitive Position • Y-axis: Rapid Market Growth Slow Market Growth 62
- 63. Rapid market growth Weak strong competitive competitive Position position Slow market growth 63
- 64. PROPOSED STRATEGIES • Concentration on current markets and products • Firms with excess resources can integrate horizontal or vertical • Intensive strategies • Integration strategies • Related diversification 64
- 65. CONCLUSION • Company is in strong financial position • Achieving its targets successfully • Have acquisitions and alliances with different companies to run effectively • Expanding its value added services with the help of PayPal, and other companies e.g. iShip.com • Developing international and U.S markets • Company is trying to stay in touch with customers and hold group meetings known as VOICE OF CUSTOMER. 65
- 66. RECOMMENDATIONS • eBay must develop their strategies to ensure great demand, high profit return and to meet their target market • Put up securities to ensure that no fraudulent activities can happen through authentication and verifications 66
- 67. Maintain global growth initiative • Acquisitions (develop new markets) • New markets • New products • Adopt into different cultures Technological development • Rapid application development • Selling new applications/programs • Creating standards for the industry • Program interface and developers programs 67
- 68. Security • Back up systems • Online verifications • Enhance trustee services • Online banking improvements • Enhance after sales services Reinforcing the Marketing department • Improve image through advertising • Global branding to make eBay a generic brand 68
- 69. CURRENT POSITION OF EBAY • In 2010, the total value of goods sold on eBay was $62 billion -- more than $2,000 every second Q3 2011 Overview • Revenue for the third quarter ended September 30, 2011, increased 32% to $3.0 billion, compared to the same period of 2010. • The company reported third quarter net income of $490.5 million • Since Q1 2007, the company's revenue from all sources other than Marketplaces transactions has increased from 37% of eBay Inc.'s total revenue to 54% as of Q3 2011. 69
- 70. Strong Company … Getting Stronger • $5.8 billion in cash and cash equivalents and non-equity investments on balance sheet at the close of Q3 2011 • $809 million in operating cash flow in Q3 2011 • $526 million in free cash flow in Q3 2011 70
- 71. REFERENCES • www.ebay.com • www.wikipedia.org/wiki/EBay • www.ebayinc.com/history • www.ebayinc.com • www.google.com • FeeUpdate2010.html • http://www.ebayinc.com/content/fact_sheet/ebay _inc_corporate_fact_sheet_q3_2011 71
- 72. 72