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eBay Inc.

is a US-based e-commerce company and global corporation that


provides consumer-to-consumer and business-to-consumer online sales
platform. Founded in 1995 by Pierre Omidyar, nowadays eBay employs nearly
12,000 people worldwide, including 6200 employees in the USA. More than 160
million people buy from eBay annually and the company generated the revenues
of more than USD 8.6 billion in 2015 alone.
eBays mission statement is to be the worlds favourite destination for
discovering great value and unique selection. eBay business strategy focuses on
benefiting from the first mover advantage via introducing innovative services and
regularly adding new features and capabilities to existing services with the aim of
enhancing user experience. The senior management led by CEO and President
Devin Wenig has made a strategic decision to transfer the business from an
online auction to become the largest online retailer, an area which is currently
dominated by Amazon.
The e-commerce company has certain weaknesses that include dependence of the
business on a range of products and services controlled by competitors such as
Google, an overall complexity of the business model and an absence of eBays
own distribution network to compete with Amazon.

eBay Porters Five Forces Analysis


eBay Porters Five Forces is an analytical model that explains five
individual forces shaping an overall extent of competition in e-commerce
industry. These forces are represented in Figure 1 below:

Figure 1 eBay Porters Five Forces


Threat of substitute products or services for each type of service
offered by eBay is significant. eBay services can be divided into three
categories: Marketplace, StubHub and Classified.
A great range of supermarket chains such as Wal-Mart, Tesco, Target,
Sainsburys and others represent a significant substitution for eBay
Marketplace. Moreover, the presence of e-commerce sites of all large
supermarket chains further increases the significance of this threat.

eBay StubHub is a online place where customers can buy and sell tickets
for sports, concerts, theatre and other live entertainment events.
Substitute services for StubHub include, but not limited to offline ticket
offices, online forums and websites selling tickets along with other types
of products and services.
For eBay Classifieds, substitute services relate to Yellow Pages and other
similar print advertising mediums. Media advertising, as well as,
advertising on a wide range of media platforms can also be mentioned as
substitutes for eBay Classifieds.
Rivalry among existing firms in industries where eBay operates is
highly intensive. This is primarily due to the impressive rate of industry
growth and increasing numbers of competitors operating in the industry.
eBay competes with a wide range of retailers, distributors, liquidators,
import and export companies, auctioneers, catalogue and mail order
companies, classifieds, directories, search engines, commerce
participants (consumer-to-consumer, business-to-consumer and
business-to-business), shopping channels and networks.
eBays major competitors include Amazon Inc., Alphabet Inc, Alibaba,
Yahoo Inc., Best Buy Co. Inc., Target Corporation, Chemours Co., Family
Dollar Stores Inc., Staples Inc., Priceline Group Inc. and others.
As it is illustrated in Figure 2 below, the number of eBay active users has
been consistently growing during the last six years. This is a clear
indication of eBays share growing in respective markets in the global
scale.

Figure 2 Number of eBays active users from 1st quarter 2010


to 2nd quarter 2016 (in millions)[1]

eBay PESTEL Analysis


Posted on September 22, 2016 by John Dudovskiy

The acronym behind the strategic analytical tool PESTEL stands for
political, economic, social, technological, environmental and legal
factors. eBay PESTEL analysis involves an analysis of potential effect of
above factors on the volume of revenues and growth prospects of the
business. It has to be specified that the range of factors covered within
PESTEL framework are the external factors for the business and the
company has little or no impact on these factors.
Political Factors

eBays financial performance and growth prospects can be affected by a


range of political factors that include political stability in the market, the

levels of bureaucracy and corruptions in the country, activities of trade


unions and home market lobbying groups and others. In 2015, eBay has
been caught into a political controversy and the company has been
accused of collaborating with hundreds of overseas retailers to defraud
the taxman of millions of pounds every day[1]. Specifically, non-EU
sellers on eBay and Amazon were not paying VAT tax in the UK or
elsewhere, causing the loss of millions of pounds annually.
In another political case in 2015, amid an intensifying national debate
over the use of the Confederate flag, eBay along with Walmart, Amazon
and Sears announced that they will stop selling the controversial flag[2].
This is due to the association of the Confederate flag with slave-holding
practices in the US and willingness of the business to avoid offending
customers segment who are sensitive towards the issue.
As it is illustrated in figure below, eBay has a solid annual lobbying
budget to pursue its political agenda to a certain extent and to contribute
to the creation of a political environment that is favorable for the
business.

Annual Lobbying by eBay Inc.[3]

Economic Factors

There are many economic factors that may affect eBay revenues and
growth prospects directly, as well as, indirectly. The exchange rate
between USD and other currencies is a major factor affecting eBays
reported profits. For example, in 2015 revenues reached USD8.6 billion,
growing 5% annually on an FX-Neutral basis and down 2% on an asreported basis reflecting strong USD.[4]
A change in inflation rate is another economic factor with implications
on eBays performance in global markets. MercadoLibre is New York
exchange-listed online marketplace based in Venezuela and eBay owns
an 18 percent stake at the company. While MercadoLibre reports rapid
growth in local-currency terms, the vast majority of this is due to
runaway inflation. Specifically, in the fourth quarter of 2014,
MercadoLibre reported revenue increase of 104 percent in its Venezuelan
market. However, taking into account the fact that units sold rose a
modest 12 percent, most of the revenue increase was driven by massive
price hikes.[5]
Apart from above, eBay is affected by an additional set of economic
factors such as interest and tax rates, cost of labour, the rate of
unemployment, and monetary and fiscal policies of governments.

eBay Value Chain Analysis


Posted on September 27, 2016 by John Dudovskiy

Value chain analysis is a strategic analytical tool that that is used to


identify business activities important to create value and competitive
advantage to the business. The figure below illustrates the essence of
eBay value chain analysis.

eBay Value chain analysis


Primary Activities

Inbound logistics
eBay inbound logistics refers to ways in which the company acquires and
stores raw material to be used for the business. This includes but not
limited to the purchase of servers, other hardware products and a wide
range of technological items along with office suppliers and other items.
Due to the massive scope and scale of eBay business operations, the
economies of scale can be specified as the major source of value in
inbound logistics primary activities. Moreover, fostering strategic
relationships with suppliers is another key source of value in eBays
inbound logistics.
Operations
eBay operations revolve around technology-enabled commerce.
The full range of eBay technologies and services are divided into the
following three platforms:

1.

Marketplace refers to an online marketplace available at


www.ebay.com. This platform has more than 800 million listings at any given
time[1]

2.

StubHub represents a platform to purchase tickets to the games,


concerts and theatre shows and to sell tickets.

3.

Classifieds platforms include a collection of brands such as


Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Classifieds and others. Ebay
classifieds are offered in more than 1500 cities globally.

The full range of eBay business operations include the following


processes:
1.

Seller registering on eBay website

2.

Buyers bidding for a specific product offered by the seller

3.

A successful bid by a specific Buyer (or purchasing via Buy It Now)

4.

Buyer paying to the bank via PayPal or other payment methods

5.

Bank notifying eBay about Buyers purchase

6.

eBay notifying Seller about the payment by Buyer

7.

The delivery (shipment) of the product by the Seller to the Buyer

8.

Notification by the Buyer to eBay about the delivery of the product

9.

eBay passing seller accounts to the Bank

10.

Seller getting paid by the Bank


Outbound logistics
eBay outbound logistics refers to the practices of delivering products and
services to the end-users. Thanks to the nature of its business model,

eBay does not have to deal with wholesalers and distributors and
retailers. It is the responsibility of eBay sellers to ship products to
customers, but the company has to regulate and monitor the system in a
consistent manner.
Unlike its major competitor Amazon, eBay does not have its own
shipping and logistics system and the company is dependent on external
logistics vendors to ship items from sellers to buyers. Early in 2016 eBay
has announced a close cooperation with Uber Rush as an innovative and
efficient shipment services provider.[2]
Marketing and sales
Sales and marketing expense decreased by USD175 million, or 7%, in
2015 compared to 2014. Sales and marketing expense as a percentage of
net revenues were 26% and 28% in 2015 and 2014, respectively.[3] Until
its separation from eBay in 2015, PayPal a leading global payment
system was a solid source of competitive advantage for eBay in terms of
sales transactions. Currently, solid sources of value for eBay include an
effective utilization of social media marketing and viral marketing and a
sophisticated online sales system.

Service
eBay has a US customer service phone number that anyone can call to
24/7 to address their questions and concerns about eBay services.
Moreover, the company encourages its sellers to offer superior customer
services to buyers in order to maintain the positive reputation of the
brand. It has to be noted that the provision of efficient customer services
does not currently belong to the list of eBays competitive advantages.
Specifically, eBay is often criticized for the absence of live chat, direct
email and unity across international sites[4] among other issues

eBay Business Strategy


Posted on September 18, 2016 by John Dudovskiy

eBay has been continuously reinventing itself since its


founding in 1995 and its strategy places a great emphasis on the first
mover advantage. eBay business strategy can be described as service
differentiation with the focus on user experience of both, buyers and
sellers. Specifically, the most recent changes include improving the
sites search capabilities making finding items more structured. Instead
of listing all available items when a product is searched, there will now
be categories such as best value, brand new and others.[1]
Generally, for the past few years eBay business strategy has been marked
with a shift from a listings-based format toward a product-based format.
The pursuit of this business strategy has involved a collection of productrelated data from sellers to enhance user experience with the ultimate
aim of building machine learning capabilities to process a global,
accessible catalogue of things.
In other words, eBay business strategy is attempting to shift the role and
image of the company from e-commerce facilitator to an online retailer.
While this decision by CEO and President Devin Wenig may reflect the
overall tendency in the global market, eBay may find it increasingly
difficult to compete with Amazon, taking into account Amazons high
level of cost-effectiveness and competence in the delivery of goods. eBay
business strategy for a medium term perspective also includes improving
its ranking in Google search results via employing a structured data.
It is important to note that the business strategy of service differentiation
requires systematic financial investments in research and development.
From this point of view, it can be argued that eBay may find it difficult to
pursue this strategy in the future, since after the separation from PayPal

in 2015, eBay lost a solid source of cash flow and a powerful growth
engine.
SWOT is an acronym for strengths, weaknesses, opportunities and
threats related to organizations. The following table illustrates eBay
SWOT analysis:

Strengths
1.

First mover advantage

2. Sophisticated infrastructure and the global


scale of operations
3.

Brand value

Weaknesses
1. Dependence on products and ser
controlled by competitors
2.

Complexity of business model

3. Lack of clear business strategy an


competitive advantage

4. Organizational culture of experimentation


and entrepreneurship

4.

Absence of own distribution netw

Opportunities
1. Making a disruptive innovation in online
retail industry

Threats
1. Inability to compete with Amazon
retailer

2.

Engaging in business diversification

2.

Breach of security

3.

Formation of strategic alliances

3.

Crash of the website

4.

Engaging in acquisitions

4. Patent infringement and other la


against the company

eBay SWOT analysis


Strengths

1.

First mover advantage has been traditionally a major strength for


eBay. Apart from being the first platform in the world for online auctions,
eBay has a first mover advantage in a range of areas such as Seller
Performance Standards, eTRS, Verified Rights Owner Program and Feedback
Forum. Particularly, the first mover advantage in online auctions has enabled

the company to become a multi-billion company within a matter of a few


years and ensured market leadership of the business.
2.

eBay has a highly sophisticated infrastructure that enables global


scale of operations without any disruptions. At any given time it has more
than 800 million live listings and in 2015, about 59 per cent of transactions
between users on Marketplace and StubHub platforms take took place
outside of the US[1]. The presence of such an advanced global infrastructure
can play an instrumental role in terms of achieving global market penetration
of new products and services in an effective manner.

3.

Interbrand and Forbes estimate eBay brand value as USD 13.9


billion and USD 11.2 billion respectively.[2] eBays high brand value is an
effective indication of customer loyalty, negotiating power of the business
with various stakeholders and to a certain extent long-term growth prospects.

4.

An organizational culture of experimentation is an important


strength associated with eBay. Introduced by founder Pierre Omidyar, this
culture has enabled eBay to gain operational efficiency in a wide range of
business processes and procedures. The company is set to further benefit
from experimentation culture in the future with positive implication on the
bottom line.
Weaknesses

1.

Some of eBays competitors control certain products and services


that are important to its success. These include, but not limited to credit card
interchange, Internet search, and mobile operating systems. A potential
manipulation by competitors in terms of pricing, availability, terms or
functioning of these products and services can place eBay in a disadvantaged
position. For example, changes introduced in Googles search engine in 2014
damaged eBays search listings to a considerable extent, costing the company
the loss of more USD 200 million in revenues.[3]

2.

Complexity of business model is a noteworthy weakness associated


with eBay. The President and CEO of the company rightly acknowledges that
the brilliance of eBays model is its greatest challenge. Its a friction free
marketplace, which means sellers can sell anything they want, and that makes
it complicated[4]. In other words, eBay does not focus on a specific product

categories and this may create difficulties such as users being overwhelmed
with the abundance of offers

eBay Organizational Structure


Posted on September 20, 2016 by John Dudovskiy

eBay organizational structure is hierarchical due to the massive size of


the company that employs nearly 12,000 people worldwide. In 2015, a
major restructuring was introduced to the company by separating PayPal
from eBay Inc. The figure below illustrates changes to eBay
organizational structure as a result of PayPals separation.

eBay Organizational Structure


eBay Board of Directors comprises 11 members and Thomas J. Tierney is
the Chairman of the Board. David Wenig leads eBay executive team as
President and CEO and is closely assisted by other leaders in the
following positions: