EBay’s strategic decision on the acquisition of PayPal

Topics: EBay, Electronic commerce, Strategic management Pages: 7 (2054 words) Published: March 12, 2014
EBay’s strategic decision on the acquisition of PayPal Introduction:
Aim of this report is to critically analyse EBay’s strategic decision on the acquisition of PayPal before it occurred. The report will analyse the company and its operating environment, this analysis will discuss the external and internal factors, of EBay and the implications of their environment in relation to the factors analysed. This in-depth analysis will be aided with analytical tools such as PESTLE, SWOT, and the use of rich picture. Subsequently with the analytical findings, suggested strategic options will be discussed which EBay may have opted to choose. EBay’s History:

EBay was established in September 1995 by Pierre Omidyar as an online auction website in the United States; by 1997 the site posted two million auctions creating the name EBay rather than AuctionWeb and branched out from collectibles into different goods within the market. EBay is now becoming the biggest online marketplace providing a facility for buyers and sellers to communicate, consequently generating millions of customers in foreign markets as well as the United States (eBay Inc). EBay’s Internal and external environment

When a company is faced with its external environment changing within its industry it provides the company with opportunities to reconsider its strategies to help maintain its competitiveness (Giesen et al 2010). Therefore analysing EBay’s environment before the acquisition of PayPal will help aid the understanding of this decision implemented, exploring and discussing both internal and external factors which may have had an influence upon EBay’s strategic decision. The analytical tools of PESTLE and SWOT are going to be used as these methods helps decision making, planning, evaluating and the development of products or services due to the exploration of a company’s environment (Gorgenlander 2001). PESTLE analysis examines a company’s environment and helps identify possible market growth, potential strategic positioning and the possible direction of the organisation. SWOT is used after to measure and identify a company’s internal and external, strength, weaknesses, opportunities and threats (Henry, A 2008). Each analytical tool is being used due their validity on providing an assessment of a company’s environment. Below are the factors most relevant to EBay when the company had to consider on its strategic route of direction. Looking at PESTLE appendix 1.1 its states that one of EBay’s political factors were its operating and is expansion towards foreign markets. The expansion for EBay was to enter and penetrate merging markets in order to generate greater customer base and usage of the EBay service (eBay inc). The implication of EBay trying to enter and expand into other markets, have some restrictions due to EBay being an online business, countries that EBay wants to enter into may have polices affecting the company, such as data protection. Data protection varies upon countries or political nations such E.U regulations on data protection and privacy; therefore EBay needs to consider the implications of government policies in support of or against online websites (Singh, 2010). At the start of the dotcom era national governments had not intervened with the e-commerce industry, however the implications that EBay face are regulatory bodies and processes to ensure security, data protection and privacy are passed on web sites ensuring the development of customer security in countries are placed also enabling more cost for EBay (standard- smith, B. & Kidd, P.T., 2000). The Economy in early 2000’s for emerging markets were developing again such as Asia, this meant that foreign markets had sustainable growth creating a demand of more people and businesses from different countries wanting to trade and spend. This consequence allows EBay to enter these emerging markets and growing globally which they were reaching, within this period. The implication...
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