This report seeks to evaluate the major issue facing eBay with regards to its international strategy. This will be done through the analysis of eBay’s competitive environment using the Porter’s 5 forces and positioning in the industry using the BCG portfolio matrix. Following which, we will proceed to identify the sustainable competitive advantages of eBay using the resource-based view of the firm. The core competence of eBay will also be discussed. Through an overview of the above mentioned analyses, we will propose recommendations to address the problem faced by eBay.
From the case, our group has identified a major issue which is imperative to eBay’s future growth and sustainability.
EBay has been doing very well financially, as reflected by the growth in revenue of between 30 and 59% per quarter between 2004 and 2006. This growth however, is largely supplemented by eBay’s dominated markets such as in North America and Europe.
According to the world internet usage and population statistics in 2006, North America was shown to be about 70% penetrated in terms of internet usage, whereas the world’s biggest market, Asia, with more than half of the world’s population, was only 11% penetrated. In addition, Asia was witnessing a tremendous growth in internet usage due to rising affluence and globalization. Bolstered by these statistics, Asia is definitely an area of vast potential for eBay to exploit.
However, eBay has been struggling with its strategies in Asia as shown by its failure in Japan and its inability to effectively compete with Taobao in China and Gmarket in Korea. Hence, the main issue facing eBay is: how eBay can successfully break into the attractive Asian market, despite strong local competition and lack of market share.
Focus of the Case
The focus of the case is on the international strategies implemented by eBay with regards to its operations of its business units in Asia. EBay had pursued a global strategy where changes at a global level must be approved by eBay’s corporate headquarters in the United States.
However, from the case, it can be seen that eBay is gradually switching towards a transnational strategy with an inclination towards a multidomestic strategy as more efforts are being made to cater to the needs and wants of the local market such as using local language and currency options.
Competitive Environment of eBay
The Porter’s 5 forces are important for us in our analysis because it explains how we can create sustainable competitive advantages for eBay to compete effectively in the Asian market.
Firstly, there is a strong threat of new entrants because there are low barriers to entry. Unlike other industries that have high barriers to entry, such as having economies of scale or high capital start up requirements, the internet auction business is an attractive business for competitors because of the lower risk involved since there are low capital startup requirements. A competitor can easily choose from the numerous low cost web hosting options available to start an online auction business.
Secondly, there is moderate bargaining power of the buyers. In the case of eBay as an online auction website, the buyers are people who use eBay’s service either to list a sales item, or to search for an item they want. Buyers do have bargaining power over eBay because there are a lot of online auction alternatives to choose from such as Yahoo! Auction or Taobao. However, buyers do have different needs and preferences and some may prefer the secure transactions offered by eBay. For more expensive items, consumers are more inclined to using eBay because it is more likely to be authentic.
Thirdly, there is low bargaining power of the sellers. In this case, the sellers are referring to the internet service providers and web hosting companies because they are the ones who ‘sell’ eBay the right to use the their online resources for conducting the...