Strategy Analysis of Ebay

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MGMT 314: STRATEGIC MANAGEMENT

ASSIGNMENT 1:
CASE STUDY – EXECUTIVE SUMMARY THE CHALLENGES FACING EBAY IN 2008: TIME FOR A CHANGE IN STRATEGY?

SUBMITTED BY: CHAN LAI FENG ONG AINA ONG EE LING ELAINE
MGMT 314 Strategic Management

3795457 3794106 3721668
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Table of Contents
Introduction ----------------------------------------------------------------------------------------------------------------- 3 eBay’s Business Model ---------------------------------------------------------------------------------------------------- 3 Strategic Issues and Analysis ------------------------------------------------------------------------------------- 3 - 5    Competitors Challenge ----------------------------------------------------------------------------------- 3 - 4 Over Diversification ------------------------------------------------------------------------------------------ 4 Incompetency of CEO ------------------------------------------------------------------------------------ 4 - 5

eBay’s Strategic Analysis ------------------------------------------------------------------------------------------ 5 - 6 Recommendations -------------------------------------------------------------------------------------------------- 7 - 8 Appendix ------------------------------------------------------------------------------------------------------------- 9 - 15 References ----------------------------------------------------------------------------------------------------------------- 16

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Introduction eBay, an online auction platform was founded by French born Iranian Pierre Omidyar in San Jose, California on 3rd September 1995. Meg Whitman‘s acting as eBay‘s President and CEO has generated increase revenue of $86 million in 1998 to $5.9 billion in 2008. John Donahoe and his top management faced the challenge to sustain and invigorate growth of legacy established by his predecessor. A major challenge facing him was the slow and sluggish growth in eBay‘s core business of online auctions, causing a drastic fall from 72% to 56% of generated revenues, highlighted by a 1% decrease in gross merchandise volume. eBay’s Business Model Management saw eBay‘s auction format as competitively superior to their rivals as it facilitates buyers and sellers meeting, information exchange and transactions from all over the world. It bypassed traditional trade thus lowering cost, providing a global reach (wider range of consumers) and 24/7 trading capability. Unlike brick-and-mortar stores, online retailers have various tools available to engage in non-price competition, including use of the ―Buy It Now‖ function, seller reserves, setting up a virtual store and featuring merchandise. eBay‘s business model greatly contributed to this decline in sales. They categorized their business model into three segments — Marketplaces, payments and communications. Acquisition of marketplaces segment: Rent.com, Shopping.com, Stubhub.com due to its similar business structure, classified ad websites Kikiki, LoQUo.com, OpusForum, Marktplaats.nl, Mobile.de, and Gumtree.com to leverage on its traffic to increase market awareness. Payment segment include acquisition of Paypal in 2002. Strategic Issues and Analysis 1) Competitors Challenge One of eBay‘s main competitors is Amazon. Amazon‘s strength lies in high customer satisfaction - customers appreciate its extensive reviews of each transaction item whereby product reviews were written by both professional and regular users. It focuses very much on servicing customers by providing them a wide variety

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of low cost merchandises and convenience. Amazon has also started to gain popularity by enabling consumers to sell their used products online. eBay met its direct competitor — Overstock. In 2004, Overstock amended its business model by launching an auction site to compete with eBay. The company‘s competitive advantage...
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