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Corporate Strategic Position Analysis

Yeditepe Üniversitesi Social Sciences InstituteSummer 2015

Associate Professor Dr. A. Sera Özbaşar

Strategic Management Course Term Paper

You can expand the spaces under each topic to type in your data

Student name and last name

Seda ÇELEBİ

School ID

20134012033-Y

Name of the corporation

eBay Inc.

Date of assignment delivery

02.08.2015

Year of establishment and very brief history

eBay (NASDAQ: EBAY) was founded in 1995 by Pierre Omidyar in San Jose, California, US. It is an American multinational corporation and e-commerce company, providing C2C -Consumer to Consumer & B2C – Business to Consumer sales services worldwide through the internet. The management team established a strong vision for the company such that eBay was meant to be in the business of connecting people to buy things from each other rather than selling them things directly. The eBay Marketplaces is the second largest e-commerce company in the United States by gross merchandise value, second only to Amazon.com Inc. It has over 157 million active buyers, 25 million active sellers and 800 million live listings.

Popular items on eBay sell every: 2 seconds a car 3 seconds hand-bag 5 seconds women clothing 9 seconds CD or football shirt

Areas of activity

1. Which business areas do they operate in? Their approximate market shares in these businesses?

Auction: Millions of collectibles, decor, appliances, computers, furnishings, equipment, domain names, vehicles and other miscellaneous items are listed, bought, or sold daily

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on eBay. Generally, anything can be auctioned on the site as long as it is not illegal and does not violate the eBay Prohibited and Restricted Items policy. Services and intangibles can be sold, too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts.

C2C: EBay and Amazon.com are two prominent third-party C2C providers. EBay is a top auction site where individuals can list goods for customers to bid on. Amazon.com is the world's largest online retailer. The company operates as both a B2C and a C2C market, meaning it markets goods directly to customers and allows users to sell goods themselves. These C2C facilitators earn fees or commissions by allowing sellers to list and sell goods through their websites.

The company’s key products and services include the following: Online services for the sale of goods and services Online communication services Online payment and transactional credit services Online classifieds Advertising

Market Share by 2013: [22]

Market Share by 2014:

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The key brands that the company has and operates are a number of subsidiary websites that are under the EBay umbrella. These companies include:

EBay's fixed price media marketplace Half.com EBay’s payment solution Paypal.com: Bought by EBay in Oct. 2002 for

approximately $1,492,504 EBay’s low cost connectivity communication platform Skype.com: Bought by

EBay in October 2005 for $3B EBay’s credit at point of sale payment solution Billmelater.com: Bought by EBay

in October 2008 for $910M EBay's marketplace to buy and sell tickets for events Stubhub.com: Bought by

EBay in February 2007 for $292M EBay's online shopping comparison website Shopping.com: Bought by EBay in

August 2005 for $634M EBay's apartment listing service platform Rent.com: Bought by EBay in February

2005 for $415M EBay’s Swedish online auctioneer Tradera.com: Bought by EBay in 2006 for

$48M EBay’s green marketplace Worldofgood.com

2. Who are their local and global competitors? Briefly compare their positions.

eBay is a global company; therefore, its competitors are also global scale companies. First briefly we look at comparison of eBay and Amazon, which are both national competitors, then we are going to compare international competitor of eBay: Alibaba (Taobao).

Amazon and eBay are two giant platforms that online retailers use to maximize reach and sales. eBay is only a marketplace, but Amazon doubles as a fierce competitor. They are distinct in many other ways, such as Amazon’s Buy Box and eBay’s auction feature. However, in terms of pricing strategies that help their sellers succeed, the two are mostly similar to each other.

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Although Amazon’s massive market share is much more than eBay’s, it’s important to note that eBay accounts for 19% of global ecommerce, which is still a considerable amount. After nearly 20 years in business, eBay’s original claim is still alive and well. The auction feature attracts many consumers looking to get a good deal. eBay sellers that want to catch shoppers’ attention do so by setting their starting bids low to grow interest. But this is tricky because setting it too low runs the risk of it never reaching a fair market price. On the other hand, the lower the starting price, the higher it will appear when shoppers search for it. Whether an item is immediately available for purchase or not, pricing is still the key on eBay and Amazon.

One factor that makes selling on Amazon very different than eBay is the Buy Box. It accounts for 70% of sales because it easily allows a shopper to add an item to his/her cart without going through dozens of listings for the product they want from multiple sellers. Naturally, sellers on Amazon try their hardest to win the Buy Box. The only thing that holds them back is a top secret algorithm that Amazon uses to determine the winner. There are many factors that go into winning, such as consistently having products in stock, fulfillment method, a high seller rating, and a low price. Retailers that want to win the Buy Box must study up on the competitors who have won it in order to A/B test* their own selling strategy and learn what combination of factors lead to success.

A/B Test: In marketing and business intelligence, A/B testing is jargon for a randomized experiment with two variants, A and B, which are the control and treatment in the controlled experiment. Taobao, Alibaba’s most dominant brand and its best story, is eBay’s international competitor. A consumer-to-consumer (C2C) auction platform with over 231 million active buyers and more than 750 million product listings, Taobao is the most convenient, cheap, and secure way to shop for many goods in China. It is currently the largest online marketplace and tenth most visited site in the world. For perspective, 9.2 billion packages are shipped in China each year. Half are estimated to originate from Taobao. Let’s briefly explain Taobao’s rise, its fight with eBay for control of the Chinese C2C auction space, and three of the broader learnings that can be taken away from its victory.

“eBay may be a shark in the ocean but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose — but if we fight in the river, we win.” – Jack Ma, Alibaba CEO, 2003

In May 2003, Alibaba launches Taobao (淘宝), a small C2C auction platform with a clever name, “searching for treasure.” Starting with zero customers and a team of “ants” doing handstands to stay awake, Taobao immediately goes after eBay’s 85% market share. On a relatively tight budget ($12 million to eBay’s $100 million), by October 2004, Taobao’s market share is level with eBay at 45%. A year later, by December 2006, Taobao has completely overtaken eBay and owns nearly 80% of the market. Two weeks before ringing in the New Year, eBay CEO Meg Whitman announces eBay’s exit from China’s C2C auction sector.

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The vision of eBay was to capture market share in order to create profits, however, vision of Taobao was to protect Alibaba from eBay. Particularly, Taobao’s success was to know market advantage very well.

Taobao ate half of eBay’s marketshare in less than two years. Image Source: Stanford GSB, Taobao vs. Ebay Case Study

3. How did they perform financially in the past five years?

Changing payment model: Paypal acquired Bill Me in 2008 Allow purchases without using a credit (6 months to pay their bill in full) EBay’s receivable turnovers decreased over time while collection period went up. It might be a troubling signal for its investors.

Mission statement

Associate Professor Dr. A. Sera Özbaşar 2000-2015

eBay and AlibabaSimilarities Differences Both are world leaders Early and steady growth for the

past 10 years Similar mission: To extend global

reach Similar product lines

Different modes of entry:o Alibaba.com acquired a

competing firm, eBay started as a monopoly

o Alibaba has more focused strategies, eBay’s are more general

eBay, in 2008 has double the revenue, more than Alibaba

eBay has a great dedication to marketing that Alibaba has yet to achieve

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1. Write down their mission statement.

Several mission statements are available:

“eBay Inc. enable commerce by delivering flexible and scalable solutions that foster merchant growth”

“Pioneers communities built on commerce, sustained by trust, and inspired by opportunity. EBay brings together millions of people every day on a local, national and international basis through an array of websites that focus on commerce, payments and communications”

2. Briefly evaluate this statement.

A mission statement is a brief description of a company’s fundamental purpose. It seems that eBay’s mission is customer-oriented and provides more flexibility for the business to expand into other product markets.

3. If you cannot locate a mission statement write your suggested statement.

Vision statement

1. Write down their vision statement.

“Our vision for commerce is one that is enabled by people, powered by technology, and open to everyone.”

2. Briefly evaluate this statement.

Vision statement is one that’s kind of forward looking. In this vision statement, one can understand that eBay’s vision is human-centric while providing equal opportunity to the community. The fact that company is powered by technology means that it is offering smart services.

3. If you cannot locate a vision statement write your suggestion.

Effects of the General Environment

1. Political conditions

US Legislation, called the Marketplace Fairness Act, is in effect which requires collection of taxes after being passed in May 2013. This new legislation may cause a reduction in trading activity that would negatively affect several business segments, especially the small business vendors. In addition, tax compliance will increase costs such as the addition of tax department, accounting, and auditor. Legislation has also been proposed to prohibit the sales and sharing of certain information over the Internet, such as alcohol, credit cards, artifacts, and copyrighted products. The stronger restriction on the sales of copyright products will hamper Ebay from expanding its user's base. Furthermore, the stronger government censorship of products sales and data privacy protection policies might inhibit Ebay's from encouraging the development of online sales community.  

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Several other political effects have been also both advantage and disadvantage for eBay such as: Globalization (Advantage)

o able to break into a new market which previously closedo challenges from foreign competitors

High government investment on ICT infrastructure (Advantage)o Faster, better and more reliable internet access user

Marketplace Fairness Act (Disadvantage)o US state sales taxo Increase the price of a product or serviceo people would probably stop buyingo internet retail sales could decrease by up to 24% (Austan Goolsbee, 2000)

Government Intervention (Disadvantage)o China’s internet regulators have made it difficult for foreigners to

participate fully, giving local Chinese e-retailers an advantage from the offset (Dean, The Wall Street Journal, 2006)

2. Economic conditions

The resources of existing competitor firms, such as Amazon, are larger and as a result, competitors could weather an economic downturn. The company continued its turnaround strategy in a harsh climate for consumer spending. Global economic conditions emerge from the recession, as does consumer spending. The mortgage and worldwide credit related financial crisis are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns. Profitability is also affected by currency exchange rates. If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income. Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar.

Several economic conditions effects the trade of eBay:o Exchange rate

o Conduct significant business outside United States but profitability is reported in US dollar

o Global economic conditiono Weak economic condition would limit the growth of revenueo Change in consumer purchase pattern

3. Social and cultural conditions

Lifestyle Trends: the use of internet is growing further more mainstream along with the popularity of mobile usage. This is a great opportunity for eBay and will affect them very positively. Consumer buying patterns: Consumer might develop completely different buying

patterns meaning that they might start buying everything online and getting it delivered urgently. eBay could make use of this and find new markets.

Brand image: eBay’s brand image might suffer over time and their competition might then overtake their position as market leader.

Demographics: In some countries the population is becoming older and in some younger. Older generations might not show much interest in a service like eBay while younger generations generally show more interests in innovations.

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This means that Ebay should use different strategies to attract and capture this growing generation of older people.

Cultural capital is the wealth of knowledge that an individual has for a specific culture or set of cultures. Cultural capital can be considered a competitive advantage for business. How Taobao crushed eBay in Chinese market can be a clear example for this condition. In 2003, Alibaba’s CEO recognized eBay’s acquisition of EachNet.com (Chinese shopping site) as being a serious threat to its market share and launched Taobao. Alibaba would use Taobao as C2C website to compete with eBay and to address a small business market that lacked the distinction between businesses and consumers. Taobao used “a sense of community” for competitive advantages such as:

Encouraging online interaction- full contact information such as phones numbers and personal web pages

Categorizing goods to reflect Chinese Department Stores Establishing long-term, secure relationships with government officials and

cooperation with banking industry leaders

4. Technological conditions

Mobile advances in communication help people meet, share ideas, and offer goods/services at a local city or regional level. Competition is intense in communications services and subject to rapid technological Change. There's a need for substantial resource investments by eBay in technology and marketing in order to remain competitive, especially in regards to the biggest trend in mobile ecommerce and payment system such as NFC.

Several technological conditions influence eBay business: Growth of internet reduces the barriers of entry, but brings more competitors Growth of internet user will increase public online consumption Rapid development of high-speed network service Third party online payment system: PayPal provides an easy and secure way to

make and receive payment online and reduces the risks of transaction

5. Environmental conditions

Global warming and pollution awareness increase globally which pushes the company to be more ‘green’ to attract consumer and invest in sustainable technologies such as eco-packaging and work environment.

6. Legal conditions

Developed strategy has to comply with different legal locally and internationally The European Sales of Goods Act Data protection acts Federal Trade Commission in USA EU Electronic Commerce Directive The Electronic Signatures Law Increase the use of e-commerce of both consumers and business Ensure a certain level of security in online shopping

7. Others

Effects of the (Immediate) Industry Environment

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1. What are the critical success factors of the industry?

According to Forbes’ analysis, competitive rivalry within the industry, bargaining power of customers and the threat of new entrants are the three key forces which can pose a threat to eBay’s business. eBay faces huge competition from both online and offline sources, which restricts pricing increases on its marketplace. Due to relatively low barriers to entry, new companies continue to crop up in the global e-commerce market, further intensifying the competition. Investors are encouraged to watch out for the entry of Apple and Alibaba in the online payments space as it has the potential to disrupt the growth story at PayPal. In addition, Google holds significant bargaining leverage as it accounts for a significant portion of traffic on eBay sites; changes in Google SEO (search engine optimization) algorithm and SEM (search engine marketing) policies could impact transactions volumes on eBay in the future.

2. Threat of competitors

eBay faces competition in its marketplaces segment from both offline and online players. Customers can buy products from a wide range of retailers, distributors, auctioneers, directories, search engines, etc and hence the competition is intense.

Various factors such as price, product selection and services influence the purchasing decision of customers. E-commerce companies frequently engage in price-based competition to woo buyers, which limit their ability to raise prices.In the payments business, there is competition from sources such as credit and debit cards, bank wires, other online payment services as well as offline payment mechanisms including cash, check, money order or mobile phones. Considering the entry of newer players such as Apple Pay and Alibaba, the competition is expected to heighten in the online payments space.

3. Threat of new entrants

Established players can impact PayPal’s strong market share

The e-commerce market is characterized by low barriers to entry. It is relatively easy for newer players to enter the market and start selling products. Having said that, it’s difficult for newer players to gain brand recognition and attain high ranking on search engines.Newer players require significant marketing budgets to compete on a large scale and this restricts entry of newer players to an extent.The online payments market has relatively higher barriers to entry as there is intense competition between established players; additionally, security is a paramount during online payments and hence newer players which do not have the necessary brand recognition will find it difficult to attract new customers.However, established players such as Apple, Amazon and Alibaba have the potential to make a dent in PayPal’s strong market position.

4. Threat of suppliers

Impact of Google SEO algorithm changes and shipping providers’ policy changes is needed to be watched out.

Tens of millions of sellers list their products on eBay marketplaces; hence their individual bargaining power is limited.

However, sellers can also list their products on multiple platforms and sites, including Amazon, Etsy.com and various international e-commerce sites. Hence, if eBay

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introduces policy and pricing changes that are unsatisfactory to sellers, then it could result in lower number of product listings on its marketplace.

There is relatively fewer number of postal and delivery services as well as shipping carriers; hence any pricing change or disruption in their services could hamper eBay’s ability to deliver products on time. Hence, these carriers hold some bargaining power.

The sources that generate traffic on eBay’s site can also be classified as suppliers. Search engines hold significant leverage as they account for over 20% of traffic on eBay if we account for both organic and paid search (according to SimilarWeb estimates). Changes in Google SEO (search engine algorithm) have a negative impact on traffic. eBay’ seller marketplace model leads to large amounts of unstructured data on the site, which is detrimental to its SEO efforts.

Additionally, several referring sites such as slickdeals.net, dealnews.com and social networks also bring considerable traffic to eBay and any changes in their policies could adversely affect the company’s top-line and profitability.

5. Threat of customers

Customers hold high bargaining leverage as they can buy from multiple sources

The huge competition in the e-commerce market allows the customers to win as companies have to keep their prices in check to attract buyers.Customers can choose from a wide range of offline as well as online players. A large number of companies have entered the e-commerce space with relatively niche product offerings. Hence, customers can always buy from some other website or some other store in case they are not satisfied with any one player.Since customers demand not only low prices, but also a large range of services and products, their bargaining power is huge.

6. Threat of substitutes

Large product range keeps this barrier low

eBay sells a vast range of products on its platform and hence there is no real threat from this porter five force.

Further, the product range continues to expand and eBay can easily introduce several different types of products to adapt to changing customer trends.

7. The effect of governments on their activities

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Social Responsibility Engagements

1. Which projects are they involved in?

eBay released first time three-year sustainability goals under the motto “Powering Giving” in 2012, to power the world’s largest platform for charitable giving. eBay’s approach to charitable giving is grounded in technology-enabled commerce. With PayPal, eBay and the rest of their global portfolio, they are pioneering new giving solutions that take advantage of each business’s unique assets to rally their customers in support of charitable causes. For example, following Typhoon Haiyan, they launched a fundraising campaign and used PayPal and eBay giving programs to enable their global community to rise over $23 million in the first 30 days after the storm. Under this initiative, the model eBay has created can be illustrated as in figure below:

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eBay is embedding charitable giving opportunities into commerce experiences across our portfolio so that they can harness the promise for shared value held by the intersection of cause and commerce.

eBay is also enabling nonprofits to raise mission critical funds in such way that, in addition to giving nonprofits access to their networks of potential donors, they are extending their business capabilities to charitable organizations to help them grow and thrive. In 2013:

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Through the emloyee engagement program, more than 33,000 employees around the globe Had a positive impact on eBay customers, communities and the earth, both through the work they do every day.

In 2013, eBay added 15 new GIVE Teams and 15 Green Teams, a 65% increase, and we launched Little Bits of Good, an internal platform to promote positive social and environmental actions.

Late in 2013, eBay launched Little Bits of Good, a digital platform where employees can connect and inspire each other to take actions that have a positive impact on the community and the environment. The site makes it fun and easy for employees to record daily actions, drive toward positive habits and see the collective impact of their efforts.

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2. What are their future involvement plans?

eBay’s social innovation team is grounded in the core notion that it can drive both business performance and social and environmental impact at the same time. Over the next year and beyond, eBay is planning to continue to work with its stakeholders inside and outside the company to lean into question of measurement so that it can better understand the impact it is catalyzing.

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3. If none what would you suggest them? State you reasons.

Ethical Values

1. Do they have an ethics statement?

“Do The Right Thing”“No financial targets, production numbers or other individual or corporate goal ever justifies violating the law or the Code.”

2. How do they approach ethics?

Be Open, Honest and Direct and conduct business with integrity; Always act in accordance with the Code and Company policies; Seek guidance from managers or other Company resources when needed; Report suspected violations of the Code, eBay Inc. policies, or the law to your

manager, a Business Encourage open communication free from the threat of retaliation.Managers at eBay have additional responsibilities and serve as role models. Managers lead by example by demonstrating a commitment to eBay’s Values every day and ensuring that employees feel comfortable asking for help and raising concerns.

3. If none what would you suggest them? State you reasons.

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Effects of Technology

1. States the level of technology (simple-average-high) briefly explain.

High - Since the company was founded in 1995, eBay Inc. has long led through innovation. It reinvented the concept of auctions, applying technology to help facilitate commerce globally. Now eBay is on a mission to help the beleaguered retail industry meet consumers’ rising expectations for a seamless, multiscreen, omni channel shopping experience. It’s acquiring companies, exploring emerging technologies, and offering new services that satisfy consumers’ shopping preferences while alleviating pain points for retailers. eBay’s Innovation and New Ventures group is dedicated to building the future and testing new technologies that could lead to the next $1 billion business opportunity.

eBay has established several startup incubator programs at its offices in the U.S., Bangalore, and Israel.

Hack-a-thons. Many companies have begun to stage hack-a-thons as a way to seed innovative ideas and identify top tech talent. eBay Inc.’s Battle Hack is a series of 10 hack-a-thons held in 10 major cities around the world. During these 24-hour coding challenges, teams of developers create applications that have a positive impact on their communities and use PayPal in some fashion.

2. How often do they need to renew the technology?

eBay seemed to have gone beyond being just an online marketplace to a technology developing company. eBay has also developed a technology called “Connected Glass,” which helped lead to the development of “shoppable windows” or “digital storefronts.” The most recent example of eBay’s Connected Glass was at the Westfield San Francisco Centre, which eBay powered for Sony, TOMS, and Rebecca Minkoff. The screens featured products that passersby could order with the tap of a finger and pay for using the PayPal mobile express checkout. The technology was designed to help retailers increase the return on their physical space, allowing them to feature additional products that may not fit in their stores, as well as generate sales when stores are closed.

As a technology company, eBay not only needs to renew the technology but also needs to invest more on R&D to develop technologies of future before technology becomes mature and expensive to adopt.

3. In your opinion what technological advances are likely to affect them in the next five years?

Technology leader companies are under increased pressure to stimulate growth through faster and smarter innovation. No one has unlimited resources, so it's critical to invest in the right technologies and application at the right time.

Several areas of emerging trends would be transformational in creating value for eBay such as:

Real-time decision making including tools that combine predictive analytics and decision capabilities to identify the best action to take during a customer interaction, based on the customer's needs and the organization's goals.

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New connections among channels using automatic content generation, scalable content recognition, and customer-centric natural-language questioning and digital personal assistants.

Digital extensions of physical investments: The creation of new revenue sources, such as subscription services, from incorporating digital features and data collection into physical products.

Innovation

1. What is their track record in innovations?

Guy Schory, eBay’s head of corporate strategic initiatives, spoke about those and other innovations eBay is developing at a conference hosted by Deloitte Consulting LLP in spring 2013. During his presentation and subsequent interviews, he shared several of eBay’s methods for building a culture of innovation:

Acquisitions have served as a critical component of the company’s innovation strategy. Since 2008, eBay has acquired over 37 companies, including GSI (now renamed eBay Enterprise), Braintree, BillMeLater, and Magento. eBay takes pride in integrating these companies in a way that retains their innovative cultures. “We look for companies that share our passion and vision, and whose mission we can supercharge by hooking them into our global platform with hundreds of millions of users,” said Schory.

eBay also makes a concerted effort to connect employees from newly acquired companies with other employees who previously joined from startups. “As part of our integration plans, we make sure to surround new entrepreneurs with a community of like-minded innovators within the company, both acquired and homegrown,” said Schory. “Joining a larger company can be a big change, so we try to give newly acquired startups a soft landing.”

Additionally, eBay Inc. likes to appoint entrepreneurs to leadership positions. “We’ve done this with many people, including Christopher Payne, who came from our acquisition of a company called Positronics and now oversees the entire North America business for eBay Marketplaces,” Schory said. Placing entrepreneurs in leadership positions inside eBay Inc. encourages other entrepreneurs to link up with the company, he adds. “They see we get their mentality and culture, and seek to create the structure for them to make a major impact.”

eBay has established several startup incubator programs at its offices in the U.S., Bangalore, and Israel. The company invites select startups to use its office space (for free) and mentors them. “By giving these startups tools and resources to help them grow and succeed globally, we create a connection with them,” said Schory. “This catalyzes new innovations that benefit our customers and help us identify talented minds to partner with.”

Many companies have begun to stage hack-a-thons as a way to seed innovative ideas and identify top tech talent. eBay Inc.’s Battle Hack is a series of 10 hack-a-thons held in 10 major cities around the world. During these 24-hour coding challenges, teams of developers create applications that have a positive impact on their communities and use PayPal in some fashion. The winning team from each challenge competes at the world finals, held at eBay’s headquarters, for a chance to win $100,000.

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“We’ve had thousands of developers participate and had hundreds of mobile applications and websites built,” said Schory. “Battle Hack gives developers a lot of exposure to eBay’s development tools and capabilities, and shows them how easily they can create applications using our technology.”

Hire it. eBay sent a resounding message to the design community in December 2013 when the company announced it had hired world-renowned artist John Maeda to lead design as chair of its newly created Design Advisory Board. Maeda had previously served as president of the Rhode Island School of Design, and before that, as the MIT Media Lab’s associate director of research. Schory said eBay’s hire of Maeda had “a massive impact on our ability to bring in top designers” and that the company continues to seek external thought leaders it can bring on board.

2. If none what would you suggest? Why?

As eBay prepares for its split with PayPal in 2015, eBay needs to invest more in R&D to grow new arms of technology innovations. The company’s future not only lies online but also in the world of physical retail, which still accounts for more than 90% of all commerce. That should be the impetus for the company’s retail innovation lab.

Competitive Advantage

1. Attempts for cost leadership? If not what will be their major reasons?

A cost leadership strategy that eBay has is the ability to form alliances with numerous companies. An example of this strategy could be the alliance by eBay and Tom.com. In 2006, Tom.com and EBay Eachnet (eBay’s China Auction Site) decided to announce a joint venture agreement in China. The two companies would need to build a new China marketplace in 2007 to compete with China’s top auction site rival Taobao.com. EBay would have a 49% stake in the company and tom.com will have a 51% stake in the joint venture. In addition, EBay will contribute its Eachnet subsidiary, while Tom Online will contribute local management expertise, technology, and brand.

2. Attempts for product differentiation? If not what will be major reasons? What product differentiation would you suggest to them?

Some of eBay’s features to their cost leadership and differentiation strategy consist of offering all types of items, including innovative products. The ability of M-Commerce is a big plus for the online giant. By having the ability of a mobile application, users can use eBay on the go through their phones, PDA’s, and laptops. Being user friendly and simple is the way eBay will stay on top of the competition. Also, having the ability of online verification against fraud and counterfeit products makes eBay a number one source for buyers and sellers to stay loyal to the company by having the confidence in the company as they keep up with the industry standards.

3. Any attempts to focus on niche markets? If not what will be major reasons?

4. Any attempts for quick response?

5. Any attempts for internal – in house – product developments?

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6. Any attempts for concentric diversification?

Diversification is a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that new market. For example, a company that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers. The technology would be the same but the marketing effort would need to change.

Since eBay is a multi-business company offering a wide range of products that serve customers in many different markets, it might be claimed that it has been implementing concentric diversification as its main strategy. Such strategy makes eBay recognizable nearly in every country in the world.

7. Any attempts for conglomerate diversification?

The company markets new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers.

EBay’s low cost connectivity communication platform Skype.com: Bought by EBay in October 2005 for $3B, is an example of conglomerate diversification.

8. Any attempts for vertical integration?

Vertical integration is the process of buying out your supplier or customer, essentially someone in your supply chain.

eBay has adopted diversification by vertical integration, relying on merging together two businesses that are at different stages of production.

eBay collaborates with a number of businesses, forming a strong global corporation that offers diverse products and services. In 2002, eBay acquired PayPal, a simple, convenient and secured payment method that facilitates payments and money transfers. eBay’s acquisition of PayPal signaled to potential customers that their online transactions were completely safe—eBay was now not only the place where business took place but eBay also protected buyers and sellers from being ripped off.

Moreover, eBay’s collaboration with Skype since 2005 facilitates effective communication among traders. Communications: eBay saw a slowdown in membership growth, and believed that Skype, with its popular instant messaging and voice channels, could act as a strong method of communications between buyers and

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sellers on eBay. Although eBay could have built an IM or VoIP platform on their own, the technical challenges are not insignificant, and the marketing challenges – how many IM and VoIP systems do most users want – are even greater. Essentially, they bought out a good and well-positioned supplier. This is straight vertical acquisition.

9. Any attempts for horizontal integration?

Members: eBay saw a slowdown in membership growth, while Skype had tens of millions of active members (around 57MM as of the acquisition). eBay saw Skype as a way to bring many new members into the eBay fold. Essentially, eBay bought Skype for its users. This is straight horizontal acquisition, with cross-selling as a rationale.

10. Any attempts for flexibility?

By remaining flexible and adaptable, eBay has developed a technology platform that differentiates them from their rivals.

Analysis of Competitive Advantages

1. Itemize their competitive advantages. What additional competitive advantages will be suitable for them?

Bay Inc (NASDAQ:EBAY) has a huge competitive advantage because of its network effect, meaning that because so many people use eBay, other companies can’t really compete. Other e-commerce players have a tough time competing with eBay. For instance, there must be a link between two people in order for the business to work (a buyer and a seller), and it’s almost impossible to establish such a network when eBay’s business already works seamlessly. The company’s advantage isn’t measured in monetary terms but instead in people, and it’s that trust and loyalty that gives eBay a huge advantage. In addition, Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart sell significantly fewer products than eBay (think of the items and services sold by individual people that aren’t sold in stores.) Although Amazon and Wal-Mart Stores, Inc. (NYSE:WMT) are tough competitors, they can’t match eBay’s advantage of connecting two people for a transaction

2. Are these advantages sustainable? How their sustainability is continual?

These advantages are sustainable as long as they are supported with new technologies (technologies that provide better user experience in terms of interaction, payment, advanced and personalized search). Sustainability could be achieved with R&D to yield innovative services to the eBay users. This will make eBay always one step ahead of rivals.

3. Are these advantages durable? How can these be made durable?

No competitive advantage is durable if company does never innovate and / or make strategical merges to penetrate into new business to grow its service obtainable market.

4. Are these advantages imitable? How can their limitability be avoided?

What eBay has as advantages can be imitable. Imitability could be avoided by personalization. This can be achieved by big data analytics, to derive valuable

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insights out of customers’ data and monetize them with innovative new services and products.

eBay can apply big data techniques and technologies to allow it to understand how to better serve its online customers. The retailer generated product and category popularity could be scored by mining social media, which could be combined with a self-teaching semantic search capability honed by the clickstream data of millions of online shoppers. As a result, eBay can provide each individual customer with choices that would be attractive to them. My suggestion for eBay would be that it creates its own online shopping search engine just as Walmart did in 2013 and gained significant insight on customer data.

Alliances

1. Strategic alliances

Technology Partners:

Power Reviews: A company that generates and syndicates reviews to drive traffic, increase sales, and create actionable insights

Order Groove: A company powers customer-centric subscription programs designed to convert shoppers into loyal subscribers, intending to increase annual spend, purchase frequency and customer lifetime value.

My Buys: Company offers a comprehensive product suite designed to enable retailers and brands to deliver customer-centric, personalized interactions to each individual consumer across digital channels

Monetate: delivers big data insights, personalization capabilities and targeted merchandising functionality, all founded in testing and analytics.

ForeSee: Uses multi-channel, predictive analytics in the measurement and analysis of the customer experience, intended to more effectively drive data-driven business decisions.

Digital Element: IP intelligence and geolocation technologies Certona: Omni channel personalization platform is designed to increase

engagement and conversion for leading retailers and consumer brands by leveraging real-time behavioral profiling and big data to deliver individualized content and recommendations.

Branding Brand: delivers mobile commerce sites and apps optimized for smartphone, tablet and in-store shopping experiences for leading retailers and brands.

Bloom Reach: Big data marketing applications, such as Organic Search and Mobile, are designed to drive revenue by consuming and analyzing billions of consumer interactions through both web-wide and site data, and utilizing its Web Relevance Engine to interpret demand and deliver relevant user experiences.

Bazaar Voice: Provides a social commerce platform that connects the voices of the marketplace to influence critical moments in the shopping experience.

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2. Acquisitions

Acquisition date

Company Business Country

July 16, 1998 Up4Sale.com Online auction US

April 27, 1999Butterfield & Butterfield

Auction house US

May 18, 1999 BillpointE-commerce payment systems

US

May 18, 1999 Kruse International Car-auction company US

June 22, 1999

Alando Auction house Germany

October 1999 Blackthorne Listing Tool US

June 13, 2000

Half.com Online marketplace US

December 12, 2000

Precision Buying Service [note 1]

E-commerce payment systems

US

January 8, 2001

Internet Auction Co. Online auction S. Korea

March 5, 2001

iBazar Online auction France

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Acquisition date

Company Business Country

July 8, 2002 PayPalE-commerce payment systems

US

January 31, 2003

CARad.com Online auction US

July 11, 2003 EachNet Electronic commerce China

January 24, 2004

mobile.de Vehicles classifieds Germany

June 22, 2004

Baazee.com Online auction India

August 14, 2004

Craigslist [note 2] Classified advertising US

November 10, 2004

Marktplaats.nl Classified advertising Nether

lands

December 16, 2004

Rent.com Classified advertising United

States

May 18, 2005 Loquo Classified advertising  Spain

May 19, 2005 Gumtree Classified advertising United

Kingdom

June 2, 2005 Shopping.com Price comparison service  Israel

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Acquisition date

Company Business Country

June 30, 2005

OpusForum.org Classified advertising Germa

ny

September 13, 2005

Skype Limited [note 3] Voice over Internet Protocol Luxem

bourg

April 24, 2006 Tradera Online auction Swede

n

May 30, 2007 StumbleUpon [note 4] Browser plugin Canad

a

January 10, 2007

StubHub Electronic commerce United

States

May 3, 2007 GittiGidiyor Electronic commerce  Turkey

March 9, 2006

Meetup.com [note 5] Social network service United

States

January 29, 2008

Fraud Sciences Online risk management  Israel

October 6, 2008

Bill Me Later Electronic Commerce United

States

October 6, dba.dk & bilbasen.dk Classified advertising  Denma

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Acquisition date

Company Business Country

2008 rk

January 8, 2009

Positronic Inc. Machine learning United

States

March 15, 2010

Magento Electronic Commerce United

States

June 23, 2010

RedLaser Mobile applications United

States

December 2, 2010

Milo.com Shopping Engine United

States

March 28, 2011

GSI Commerce Marketing/Fulfillment United

States

March 28, 2011

Where, Inc.Local Search and Recommendation

 United States

June 23, 2011

Alamaula Online Classifieds Argenti

na

July 7, 2011 ZongPayments through mobile carrier billing

 United States

September 8, 2011

The Gifts Project Group purchasing of gifts  Israel

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Acquisition date

Company Business Country

September 8, 2011

The Gifts Project Group purchasing of gifts  Israel

December 11, 2011

Zvents Local Events United

States

September 6, 2012

Svpply Social shopping United

States

September 6, 2013

Decide.com Price-Forecasting United

States

September 26, 2013

Braintree Payments United

States

September 27, 2013

Bureau of Trade Content / Commerce United

States

October 22, 2013

Shutl Rapid Fulfillment Service United

Kingdom

February 19, 2014

PhiSix Fashion Labs Virtual Clothing United

States

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3. Mergers

N/A

4. Joint ventures

eBay and Sotheby’s have launched their joint venture live auction website: find it at ebay.com/sothebys

5. License agreements

API License Agreement | eBay Developers Program

6. Management agreements

News July 2015 : Ebay's PayPal unit is buying Xoom for $890 million cash in a bid to expand into international money transfers. [21]

eBay’s board has approved a plan to separate eBay into two independent publicly-traded companies.

The transaction creates two pure-play industry leaders, each with significant scale and reach, in commerce and payments

Led by two world-class management teams, eBay and PayPal will carry forward our focus on innovation and strong commitment to our customers

A tax-free spin is expected to be completed in the second half of 2015, subject to market, regulatory and certain other conditions

7. Franchising

SOLD It® was founded so that everyone—from individuals, to businesses, to fundraising organizations—would have an easy way to sell merchandise on eBay. Like many service stores personalized attention, reliability, and expert skills are what makes iSOLD It eBay Franchise a trusted outlet for sellers and online buyers. The business formula is dedicated to turning unused or unwanted items into cash. iSOLD It became America’s highest volume eBay sales assistance network.

8. Other

9. If none what would you suggest? Why?

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Management Strategies

1. Any developments in organizational structure?

eBay’s board has approved a plan to separate eBay into two independent publicly-traded companies.

Accelerating pace of change in payments and commerce… separation best positions each business to capitalize on growth opportunities

Makes us more agile and focused to bring targeted innovation Reflects confidence we can preserve relationships and avoid dis-synergies

through arm’s-length operating agreements Enables optimal capital structures to match specific business unit needs Provides investors direct exposure to pure play commerce and payments

businesses

2. Attempts for reengineering in business processes

Split of eBay & Pay Pal, please see above

3. Which core competencies are available?

Innovative business model Large range of item Technology platform (website, pay gate, mobile) Globalization scale Marketing Partnership Customer service Brand eBay community

4. Any improvements in productivity?

Today eBay has the only “Digital Payments Platform” with scale:

The “digitization of payments” has arrived PayPal is the unquestioned technology and payments leader Unique global scale, trusted brand, and risk platform

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Accelerating volume growth with massive opportunities across online, offline, and mobile

Strategically positioned at the center of the dynamic payments landscape

5. Any major changes in their inputs?

N/A

6. Any attempts for legal but opportunistic behavior?

Split of eBay and Pay Pal: Provides investors direct exposure to pure play commerce and payments businesses

7. How their corporate performance measures yardsticks changed over time?

Corporate Governance

News - March 2014 - Activist investor Carl Icahn told CNBC on Wednesday that eBay has the worst corporate governance he's ever seen, and that's a symptom of how badly American companies are run. The billionaire investor has been trying to get the online marketplace for months to spin off its PayPal platform from its Internet retail business.

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News - July 2015 - It is almost time for eBay Inc. (NASDAQ: EBAY) to spin off PayPal. So investors may be asking themselves if eBay is now a value stock. Wells Fargo’s Matt Nemer has the answer to that question in the firm’s recent report. Wells Fargo believes the imminent spin-off of PayPal will create a unique value opportunity, as many growth-oriented investors likely sell shares of the remaining parent company. In the firm’s view, this sets up an interesting entry point, as eBay operates an arguably better business model than most retailers.

1. For transparency which methods are used?

N/A

2. If none, what will you suggest? Why?

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Certification

1. Which international certifications do they possess, since when?

The eBay website is a licensee of the TRUSTe Web Privacy Program. If Customer Support cannot answer your privacy-related questions, please use the TRUSTe Watchdog Dispute Resolution Process.

2. What any other certifications would you suggest?

Recommendations

1.What are your solid strategy recommendations for this company?

Be comprehensive, precise and up to the point.Use bullet heads.

AcknowledgementThis report, which has been prepared by me using the following references, is original and has not been submitted previously to fulfill requirements in another course. In preparation, I have not received any assistance from third parties except the related corporation’s staff and their published documents.

Name – Last name: Seda ÇELEBİ

Date:

Signature:

References

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porters-five-forces/9 http://www.ebayinc.com/sites/all/themes/ebayinc/images/si/

SI_2013_Annual_Update.pdf#page=3310 http://files.shareholder.com/downloads/ebay/392832196x0x793454/47F12875-9367-

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Barbu13 http://smallbusiness.chron.com/meaning-c2c-business-model-68968.html14 https://en.wikipedia.org/wiki/

Diversification_(marketing_strategy)#Concentric_diversification

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15 http://blog.bearing-consulting.com/2014/12/09/strategic-evaluation-ebay/16 http://blog.bearing-consulting.com/2014/12/09/strategic-evaluation-ebay/17 http://files.shareholder.com/downloads/ebay/3518399803x0x783992/e662a9ff-1f39-

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adds-independent-director.html19 http://time.com/12942/carl-icahn-ebay/20 http://247wallst.com/technology-3/2015/07/03/is-ebay-a-value-stock-ahead-of-paypal-

spin-off/21 http://www.sfgate.com/business/article/PayPal-to-buy-Xoom-for-890-million-cash-

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threat-to-amazon-and-ebay/

Associate Professor Dr. A. Sera Özbaşar 2000-2015