The Growth of eBay - Essay Example

?Introduction On January 2008 Meg Whitman stepped down as CEO of eBay, this despite the fact that the company, since Whitman’s leadership grew from afledgling company to a major player in E-commerce. However, despite the apparent growth of eBay, it manifested losses in some of its departments, specifically on its online auctions. Moreover, some of its acquisitions were not doing as well as expected. Its synergies with its customers were also starting to be diminished, with less than flattering observations about the bureaucracy pervading the company. Under new management, improvements to online maneuvering in the website improved and the clients were able to improve on the marketing of their products. However, other issues were still seen like the one-sided feedback system favorable to buyers only. Other online options for businesses also competed with the eBay. Amazon also emerged as one of its major competitors. Other issues which the company faced included fewer consumer-friendly payment features for eBay as compared to Amazon; presence of counterfeit merchandise; and bad management choices all. SWOT Analysis Strengths eBay is the world largest online auction websites and it was the first company that came up with the idea of online auction. And because of its unique way of trading, eBay has given the chance for buyers and sellers from all over the world to buy and sell items by going online and without having them to meet up. Diversifying has become one of the major components for eBay. Not only it diversified its products, but eBay also diversified its target markets from, individuals to small or big companies. Moreover, from the past couple of years, eBay did some acquisitions over some other companies, such as, PayPal, StubHub, and Skype. With all of these acquisitions, it made eBay as a bigger and better company, and one of the big successes of these acquisitions was with PayPal. By having acquisition with PayPal, it eases the payment method for eBay buyers and sellers. Since eBay's business is based on online shopping, eBay has the benefit of having no inventory costs. Weaknesses Most of eBay's businesses are online based, and that might be the weaknesses that eBay have. In order for people to trade, sell, or buy on eBay, they need to have internet connections, and relying on internet might seem convenient, however, there is also a downside of it. For example, there is a possibility that might occur to eBay, like the server and system breakdown, and that will affect the trading process for eBay sellers and buyers. Moreover, the way eBay do business might lead to online frauds. Sellers and buyers don't really get to chance face to face, all they can do is by communicating by emails, and because of that sellers are more likely to cheat or scam when they receive the money. Opportunities The number of internet users is increasing rapidly all over the world, especially in the developing countries. And because of that, there is an opportunity for eBay to expand its business to developing countries. There is also an opportunity for eBay to do product development for its business services, by combining fixed-price sales with the online auction sales. With that way, customers that like to do auction can still do online auction on eBay, while the other customers who dislike auction have the chance of buying items with fixed-prices. Threats Many big companies, like Wal-Mart, Best Buy, and Target, are starting to enter the online shopping program, and with these big competitors entering the market, eBay might lose some of its market shares of online shopping. And also since eBay is expanding its business into other countries, eBay might have more competitions with the foreign retail stores. One of the biggest threats that eBay might have to face is the scammers. Since eBay buyers and sellers don't really get to meet face to face, it is more likely that there will be security and fraud issues. Driving Forces 1. Customers looking for bargains: Consumers are looking to save money by purchasing surplus and used goods. Auctions allow customers to browse items for sale by individuals and institutions looking to quickly move merchandise at a discount. The items are not always used or damaged but are almost always sold at a price less than that of a traditional retailer. A good site will allow the buyer to filter out undesired items and return results focused specifically for what the buyer is looking for. This simplifies the process by eliminating the need to scroll through lines of unrepeated items in search of the desired items. 2. Consumers are more comfortable with ecommerce: In general consumers have confidence that when purchase items online they will be satisfied with the transaction. Internet commerce has evolved from a shady backwater of fly by night retailers and untrustworthy individuals to a major component of everyday commerce. People can trust that they will get what they pay for, their payment information will be secure and ay conflicts will be resolved in a professional manner. 3. Individuals are looking to sell: People are looking to sell unwanted or surplus items they have around the house. Online classified and auction sited allow an individual to offer their items to a large audience and many times receive a better price that they would have if they sold it locally or took the tax write off from a donation. The preponderance of digital cameras and home internet connections mean that the barrier to entry into online selling is virtually nonsexist and when working through establishes sites such as Amazon, Craigslist or EBay. 4. Economic Factors: People who never would have considered purchasing or selling items online are more willing to do so in the current economic downturn. Families who can no longer afford to take a trip to the mall are instead browsing online from their homes. Even if their browsing is mere window shopping there still remains a potential for a sale sometime in the future. 5. Prevalence of broadband connections: Individuals are more likely to shop online if they are able to load web pages quickly. Faster connections allow individuals to become more immersed in the product offerings, lengthy buffering times and unloadable pages turn off potential consumers and send them to look elsewhere. Connections with higher bandwidth also allow sellers to include detailed pictures and video clips of their products which help to ease customer’s minds into being sure that their online purchase will suit their wants and needs. The more information a seller is able to load onto a webpage the less need there is for a brick and mortar store where the customer can come try out the product. This is especially useful for classified and auction sites where buyers and sellers almost never met face to face. 6. Growing Entrepreneurship: People without the capital to open traditional small businesses are drawing to the internet as a place where they can build their dreams. Auction and classified sites allow a entrepreneur to market their goods to a broad audience without the expense of setting up a physical location or website. Starting from a part time basis some sellers are able to develop enough revenue through these sites to make it their full time job. The age old dream of being one’s own boss drives people towards products like EBay and Amazon Marketplace. Key Success Factors The great idea from Pierre Omidyar created a network based medium for inefficient markets. The basic idea of EBay is to have a medium where people can conduct auctions in a trusted community. Here some of the main key success factors that contributes to the growth and strength of the company: the internet, partnering with shopping search engines, great business model, extensive information with products and users, partnering with services to assure payment and delivery protection, and Meg Whitman’s expertise. The internet allowed inefficient markets to connect buyers and sellers efficiently creating new markets that would otherwise be nonexistent. With a simple click of the mouse sellers were able to post their items. Also, buyers were able to find items easily since EBay partnered with powerful search engines like www.Google.com, www.Yahoo.com, www.mysimon,com, or www.streetprices, just to name a few. With the ease of finding items to buy it created efficient auctions and thus sells were easily made which allowed EBay to collect fees just as easy. EBay grew rapidly with their strong business model. “By developing the eBay brand name and increasing the customer base, eBay endeavored to attract a sufficient number of high quality buyers and sellers necessary to meet the organization’s goals.” (Thompson, Strickland, Gamble, p. C-287) EBay allowed for sellers to provide extensive information of their items with descriptions and images. This made for easing researching, creating a one stop shop. Also, buyers had the confidence to purchase since there was feedback of sellers made available with a rating capability. The trust of making purchases was strengthened by the partnerships eBay had with PayPal and delivering services like United States Postal Service. The last key factor that made all the other key success factors happen is credited to Meg Whitman. With her expertise she grew the company from 30 employees to over 1,500 with her time with eBay from 1997 to 2008. Suggestions 1. Create an advisory team from power sellers and frequent buyers 2: eBay needs to update its payment systems and make them more consumer- friendly 3: eBay needs to shake-up its management style and make it more aggressive, driven, and innovative. 4: eBay needs to maintain a more consumer-friendly set-up in its management processes. 5: eBay should expand its markets Justification Justification for Recommendation 1: Both EBay and rival sites Amazon and Craig’s List rely on sellers to provide the product and content that fuels commerce on their platforms. Without willing sellers there would be no customers and thus no revenue created from the operation of the site. EBay has seen an exodus for a long time of high volume sellers opting for other platforms such as Amazon. One of the main reasons for the movement was the feeling among merchants that corporate management at EBay cared little about how their policies affected the many small business people who relied on the site to make their living. Justification for Recommendation 2: eBay needs to expand its payment systems to encompass more consumer-friendly options. Payment cannot be focused on credit cards or PayPal alone. Other payment systems which can serve consumer needs must be made available, like sending checks or cash payments through couriers, banks, and personal meet-ups. Some developing countries have adopted ways of sending and receiving cash to and from customers. Electronic links through cell phone companies have been made where buyers would send cash through Western Union, telecommunication companies, and couriers and these companies would immediately transmit the cash to the seller at whatever branch is nearest to his access point. This option should also be made available in developed nations, especially in these times when poverty levels have reached all time lows in the US and other developed nations. Justification for Recommendation 3: Its management style may have worked 5 or 10 years ago, however with many innovations and updates being done on other businesses, eBay management has to adapt some aggressive management styles which would be relentless and persistent in its drive to compete and to recapture the gains it has made since its inception. If changes in management need to be implemented to achieve these ends, then such changes must be carried out. If these changes are not carried out, the company will be competing against companies which are willing to make the changes, and which would eventually overtake eBay in its place in the business echelon. Aggressive management styles include risky business moves which would normally be unconventional for the company, but would potentially bring forth major profits for the company, as well as its sellers. Justification for Recommendation 4: The consumers are the very essence of the company – eBay needs to put that in mind always. Therefore, it is important for the company to conceptualize ways for consumers to buy and sell their products to their benefit. The process must be less bureaucratic and less tedious for them. The company must help them market their products in the best possible light, alongside the current options in the Ecommerce practice. Link-ups with social networking sites like Facebook and Multiply.com can help the sellers advertise their products allowing their products to be advertised in a more popular and accessible media. These consumers must also be allowed to design their pages and their advertisements in order to ensure that buyers would be drawn to their products. Justification for Recommendation 5: Almost half of eBay's revenues came from the international sales, and this number has been increasing drastically over the past few years. And since eBay have expanded its business only in a few countries, it is recommended that eBay should continue expanding its business into a larger market, especially in developing countries. There are many countries in this world that are in the phase of developing; however, Asia would be the only continent that suits the best for eBay's expansion. Unlike in other continents, the numbers of internet users in Asia are increasing at a fast rate. Take China, South Korea, Singapore, and Taiwan as examples. These countries have developed good technology systems and are very populous regions. Consequently, internet users would likely come from these countries. As for cost, eBay has an advantage since eBay's businesses are based on the internet. In other words, the cost for eBay to expand will be low. And to ease the shipment process for eBay users, eBay could develop partnerships with delivery companies that can cover all countries in the world, such as UPS or FedEx. Read More