PEST analysis is a business management tool that helps analysing the political, economical,

socio-cultural and technological factors affecting the overall functioning of an organisation

(SWOT analysis and PEST analysis, 2014). PEST analysis for eBay is shown below:
Political: This element of PEST analysis evaluated the political factors that affect eBay. eBay
has its operations in almost 37 countries across the globe thus is affected by different government
laws and regulations of each country. However E-commerce as of now is not that much affected
by national governments (Adler, 2010). They are greatly affected by taxation laws, employment
laws, security regulations related to online payments etc (Armstrong, 2012).
Economical: Like all other businesses eBay is greatly affected by the overall world economical
conditions. They are affected by economical factors like inflation, unemployment, rate of
interest, currency fluctuation and changes in taxes (Marketing Mix, 2013). Changes in
economical conditions directly affect consumer buying power which in turn has direct influence
on eBays overall business ( Bizning Vakil, 2012).
Socio-Cultural: eBay overall business if greatly affected by changing customer preferences,
changes in lifestyle trends and consumer buying patterns. Researches reveal that there has been a
significant rise in the number of consumers preferring online retailing as compared to offline
retailing (Armstrong, 2012). There has been a huge shift in consumers ways of buying and
selling products with so much information available to them at the click of a button.
Technological: Rapid advancement in technology has shown a huge impact on all business
across the world (Armstrong, 2012). eBays complete business model is based on internet thus it
is greatly affected by technological factors like security threats, server breakdowns and changes
in terms of online payments.

Porters five forces model is a tool that helps analysing the external competitive environment of
an organisation (Porter, 2008). Porters five forces analysis for eBay is shown below:
Threat of new entrants: Medium; E-commerce industry provide low barriers to new entrants
(Frobes, 2014). It requires high investment in order to compete on a large scale. Online payments
are seen as a complex processes.
Threat of Competitive Rivalry: Medium to High; Both online and offline companies compete
with eBay. It faces high competition from big online players like Amazon and Alibaba (Frobes,
2014). Less entry barriers result in development of a number of new online companies operating
on same business model as eBay
Bargaining power of customers: High; with too many options available customers enjoys high
bargaining power ( Bizning Vakil, 2012). E-commerce companies have to offer fewer prices in
order to attract more customers. Customer today has ample of information related to the products
thus they know where they can get what they desired at best price.
Bargaining power of Suppliers: Low; eBay is a big brand name and suppliers all over are eager
to get associated with it (Frobes, 2014). Millions of sellers make product listing on eBay thus
bargaining power of individual suppliers is very less.
Threat of Substitute product: Low; eBay has a unique business model where numerous products
are sold thus they do not feel any threat from substitute products (Frobes, 2014). They can easily
change to different products to meet changing needs of customers.

Swot analysis is a strategic management tool that helps analysing a companys strengths,
weaknesses, opportunities and threats (Pahl & Richter, 2009). It the strengths and opportunities
combined together outnumbers weaknesses and threats then the outcome is considered positive
and predicts future growth. Swot analysis for ebay is shown below.
Strengths
Giant online marketplace: 105 million active

Weaknesses

users and 150 million live listings

Extensive global presence: Present in 37
countries
Economies of Scale: Very less investment with
high earning
Strong business model: Acts as an intermediate
between sellers and buyers. A unique business
model that serves as a competitive advantage
Brand reputation: A multi billion brand with
huge brand loyalty
Strong payment methods: Uses PayPal which is

High Fees: Market research reveals that eBay

charges comparatively high fees when compared
to other online service providers. Sellers are
hardly able to make profits.
Scams: A number of shipping scams and frauds
have been reported lately as no IT system can be
100% secure.
Lacks strong future growth strategies

considered a secure and convenient payment

system
Localisation: Displays in local languages and is
adapted to local product offerings
Opportunities
Growth of online market: Reports indicate

Threats
Online Security: As the model is completely IT

remarkable growth in online market. It is an

bases its always open to security threats

emerging market and provides ample

Increased Competition: High competition from

opportunities.

big brands like Amazon and new entrants

Developing economies: Countries like India and

Changing economies and exchange

China present good growth opportunities

rate: Changes in economical conditions affects

Change in customer preference: Customers

exchange rates which in turn affects eBay.

today have less time thus prefer to use online Other IT related issues like server crash, hacking

marketplace which helps saving time.

Impact of social media: use of social media
helps in attracting more customers

etc.

Acquisitions and Mergers: Skype deal opens

more opportunities
Table.1. Source: Made by Student (2015)
SWOT analysis for eBay predicts high future growth however they have to work on their future
strategies in order to align with changing business needs.
Core Competence: Core competence refers to an organisations resources and capabilities that
server as a competitive advantage against its competitors (Ansoff, 2007). It emerges within an
organisation over a period of time and defines its capacity to take actions. It helps adding unique
value for its customers and represents only those resources and capabilities that have strategic
values. eBays complete business model is an unmatched core competence and serves as prime
competitive advantage for the company. It is recognised worldwide for its innovative ideas which
cannot be imitated by any of its rivals. Its Brand reputation is another core competence that
attracts high customer traffic towards its website. eBay considers its human resources as one of
the primary forces that helped it develop a strong brand reputation in the online marketplace. Eauction service is another core competence of eBay which has brought considerable growth to
the company.
Recommendation for future development:
Resources and competence analysis of eBay predicts high growth opportunities in coming future.
The company however must emphasize more on developing strategies that can help them prevent
frauds especially in customer to customer marketing of products. eBay recently has faced a
number of legislation related to selling of counterfeit products. It must deploy effective screening
processes in order to control the sale of counterfeit products. It must expand to developing
economies and take advantage of ample opportunities presented by them. It is essential for them
to formulate future growth strategies in order to meet the dynamic needs of online marketplace
and further strengthen their technological portfolio in order to retain their competitive advantage.

TOWS analysis is referred to as a variant of SWOT analysis (Baines, Fill, & Page, 2013). It
helps in bettering understanding of the various strategic choices available to the organisation.
TOWS analysis for eBay is present below:
TOWS Matrix for eBay

TOWS Matrix for eBay

External Opportunities (O)

External Threats(T)
Security threats

Growing demand for online

Changing economic conditions

retailing

Currency fluctuation

Acquisitions and mergers

Sale of counterfeit products

Growth in digital market sector Emergence of small domestic

Internal Strengths (S)

Diversification

players

Developing economies

Competition from big brands

(SO) Using strengths to

like Amazon
(ST) Using strengths to

maximise opportunities

Online market place leader

Huge market share
Financial Stability
Strong leadership
Brand reputation
Business Model
Human resources

Expanding to new markets like

India and China
Expanding product portfolio
Diversifying into new product
markets

E-auction

minimise threats
Using Brand reputation to
attract more customers
Online verification to control
sale of counterfeit products
Strategic alliances to further
increase market share
Restructuring marketing and
management strategies

Strong technological portfolio

(WO) Minimising weaknesses

(WT)Minimise weaknesses to

Internal Weaknesses (W)

to take advantage of

Weak control illegal and fraud

opportunities
Brick and Mortar stores for

Implement strategies that can

selling of products

eBay to enhance physical

better control frauds.

Complete dependence on

evidence element

Strengthen online payments

technology

Altering pricing strategies to

security.

avoid threats

Comparatively high prices

provide cost advantage

Strategic alliances
Table.2. Source: Made by Student (2015)

The outcome of TOWS analysis for eBay presents ample opportunities for eBay in international
online market place. They must consider Market development, strategic alliance and pricing
strategies as primary future growth strategies.

Recommendation:
Market development, strategic alliance and new pricing strategies are the most sustainable,
feasible and acceptable future growth strategies. They should consider countries like India and
China for further expansion. Both these countries are developing economies with huge
population thus provide ample growth opportunities. In order to take maximum advantage they
should focus on developing strategic alliance with local enterprises that have better knowledge of
local community preferences. As they enter these new markets they should emphasize on
restructuring their pricing strategies as these countries have lower buying power owing to less
stable economic conditions and low currency value. eBay enjoys a huge market share and has
high brand reputation which can help them attract target customers in new markets. They should
deploy strategies by which can control sale of counterfeit products which will further help them
increase brand image and loyalty.