* Chapter 12: Country Evaluation and Selection
Read the case study “The Globalization of eBay” below and incorporate into your analysis responses to the following questions: 1. What is eBay’s core competency? How does it relate to its chosen strategy? 2. How would you explain how eBay has decided to configure and coordinate its value chain? 3. Would you characterize eBay’s value chain as virtual or real? Why? 4. Consider again your description of eBay’s strategy. Is it different from what it was ten years ago? Why? 5. What do the implications of the challenges identified in the case have for eBay’s strategy today and in the future?
THE GLOBALIZATION OF eBAY
On Labor Day 1995, Pierre Omidyar launched eBay---an online trading platform that permits peer-to-peer trading in an auction format. Essentially a Web-based forum, it provides an efficient market for buyers and sellers to connect. That is, eBay helps individuals and businesses buy and sell items in categories including antiques and art, books, business and industrial, cars, CDs and DVDs, clothing and accessories, coins, collectibles, computers and electronics, home furnishings, real estate, sporting goods and memorabilia, stamps, tickets, toys, and travel. eBay discovered that buyers were seeking used or vintage items that sellers were eager to supply, hoping to make a profit. The way eBay was structured naturally placed it in the position of intermediary; it acted like a sophisticated software program running on a bunch of networked Web servers that left much of the work to sellers and buyers. Operationally, then, eBay created an efficient distribution system that demanded virtually little supervision. Sellers paid eBay for the opportunity to design, set up, monitor, and supervise their particular auctions while buyers used eBay’s software to search for products and place bids. After the auction clock ran out, the seller contacted the winning bidder to negotiate payment and shipping terms. For this matchmaking service, eBay charges between 7 and 18 percent of the closing auction price. In 1999, net revenues topped $225 million. By 2006, revenues grew to $6 billion with net income of $1.1 billion. The company projects revenue near $7.5 billion in 2007. eBay linked its initial success to its core vision: to support interaction in the eBay community by providing a useful online platform to value-oriented buyers and sellers; to uphold the principles of trust and safety, guaranteeing low fraud losses and high transaction protection to its community; and to focus on market efficiency by delivering state-of-the-art information technology. Depicted as a Venn diagram, eBay saw its competitive advantage residing in the overlapping center zone whereby it could pioneer new communities around the world built on commerce, sustained by trust, and inspired by opportunity. eBay’s value proposition hasn’t changed since its inception. Management confesses surprise at how extensible its strategy has been to new products, services, and markets. eBay’s users generated a total of 588 million...