Case Study of eBay (King of Online Auction Industry)

Time Context: 2000 - Present Summary: eBay was founded in Pierre Omidyar's San Jose living room back in September 1995. It was from the start meant to be a marketplace for the sale of goods and services for individuals.In 1998, Pierre and his cofounder Jeff Skoll brought in Meg Whitman to sustain the success. Meg had studied at the Harvard Business School and had learned the importance of branding at companies such as Hasbro. Meg culled her senior staff from companies such as Pepsico and Disney, created an experienced management team with an average of 20 years of business experience and built a strong vision for the company -- that eBay is a company that's in the business of connecting people, not selling them things. They quickly shed the image of only auctioning collectibles and moved into an array of upscale markets where the average sale price (ASP) is higher. ASP is a key metric in determining eBay's transaction fees, so increasing the ASP became an important item. By forging partnerships with namebrands such as GM, Disney and Sun, eBay has managed to do exactly that. Sun has sold $10 million worth of equipment and it now lists between 20 and 150 items per day. eBay has built an online person-to-person trading community on the Internet, using the World Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated way. The items are arranged by topics, where each type of auction has its own category. eBay has both streamlined and globalized traditional person-to-person trading, which has traditionally been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interface. This facilitates easy exploration for buyers and enables the sellers to immediately list an item for sale within minutes of registering. Browsing and bidding on auctions is free of charge, but sellers are charged two kinds of charges:

When an item is listed on eBay a nonrefundable Insertion Fee is charged, which ranges between 30 cents and $3.30, depending on the seller's opening bid on the item.

A fee is charged for additional listing options to promote the item, such as highlighted or bold listing.

A Final Value (final sale price) fee is charged at the end of the seller's auction. This fee generally ranges from 1.25% to 5% of the final sale price.

eBay notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price, and the seller and buyer finish the transaction independently of eBay. The binding contract of the auction is between the winning bidder and the seller only. Mission Statement: eBay's mission is to provide a global trading platform where practically anyone can trade practically anything. Vision Statement: Our business model is a little unusual. We don't build cars. Or computers. Or yo-yos. But we build something just as important. Communities. We've created a place where people can come together. Exchange ideas. Share experiences. And expand their own businesses. It makes our users feel like they're part of the family. And that feeling goes double for our employees. That's what's so great about eBaywe're literally changing the face of commerce every day. I. Statement of the Objective To maintain their position as the leader in the online auction industry II. Central Problem How to maintain the position as the leader in the online auction industry?

III. Areas of Consideration (SWOT)

Strengths

Weaknesses

Opportunities

Threats

 The leading global brand for online auctions. eBay term becoming

eBay unable to check the contents of auction and auction items

Expansion of big-

Internet Fraud

ticket items (e.g. real The entrance of new estate, autos) Rising internet usage/ demand world wide Expansion into fixedprice auction format competitors (online retailers) Well established competitors exist in some foreign markets like Amazon, Yahoo and Google

more common among Cant be able to stop people same like Google. Strong management team Excellent financial condition Broad product variety some illegal or fake transaction eBay is not currently pleasing many small sellers

IV. Alternative Courses of Action 1. Enhancing website features and functionality Advantages: It will attract new members to sign in Inconvenient for the users The website will be more well-known

Disadvantages: May incur cost by hiring a professional to enhance their website Maybe some of the user do not wants their features May get negative feedbacks

2. Broadening the companys trading platform Advantages: Can promote new product categories

Can grow existing product categories Can offer services for specific regions

Disadvantages: Too many variety of products May increase illegal or fake transaction Other competitors offering the new product or services offered

3. Developing international marketplace by actively marketing and promoting the website in selected countries Advantages: Maintain the vitality of the eBay community It will be more well-known Attract new members/users and buyers

Disadvantages Increase research and development cost Increase advertising expense It is not only costly but also timely since it will need time to research

V. Strategy Formulation I therefore conclude that the best solution for the problem is alternative number 2 because among the three alternative courses of action, it is the most efficient and effective to maintain their position being number 1 in the online auction industry. Because the other two alternative courses of action may increase the expenses of eBay compare to broadening their trading platform, they may incur some cost but not that costly compare to the other two. They only need additional attention to another category of product. Also, by broadening their trading platforms it may attract members and can also be well-known to others, which are the advantages of the two other alternative courses of action. There are also some advantages that eBay can get that are also advantages of the other proposed solution if alternative number 2 was implied to the company. VI. Plan of Action 1. Gather some data that can be use for the broadening of trading platforms.

2. Discuss the following data with the Boards of Director with regards to the benefits to the company. 3. Implement the strategy 4. Advertise the new product categories, services etc.

VII. Potential Problems 1. What if the company did not approve because of too many products to be handled? 2. What if other competitors already offering their new product categories and services? 3. What if applying this strategy it will lose their position of being number 1? VIII. Contingency Plan 1. Revised the plan that is only extent to the capability of eBay. 2. They can include additional services or to the new product categories that is not covered by other competitors. 3. Try another new product categories or services and let go the unprofitable categories.