The founder of the online auction site “ eBay” is a computer programmer Pierre Omidyar in San Jose, California, established on September 3, 1995. The primary function of eBay is online auctions and uses to reach a wide range of individuals all over the world.
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The website took off quit quickly so Omidyar hired Jeffery Skolls as president to handle the day to day operations. The former president of eBay’s Marketplaces, John Donahoe is the current president and CEO. Donahoe joined the company in 2005 and managed to double the profits and revenues for his unit. The company is posting a net income of $1. 78 billion and revenue of $8. 54 billion for 2008, which is up from the posting of 2007 that are a net income of $348 million and revenue of $7. 6 billion (Dess, 2010). Since its beginning in 1995, eBay has enjoyed strong revenue growth and was a dominate player in the online auction industry (Dess, 2010). ”
Strengths: There are three main strengths to how eBay has been successful: products, sense of community, and aggressive expansion. “ eBay had an array of product categories and trading platforms that offered a range of pricing formats, such as fixed pricing (Dess, 2010). A sense of community, a trust between buyers and sellers is the primary means to all of eBay sites and platforms.
Third is its ability to aggressively expand “ to compete effectively and create a global trading platform (Dess, 2010). Weaknesses: One of eBay’s major weaknesses is its inability to expand and compete in certain international markets (Dess, 2010). One example of this is their ability to expand into the Asian market place; eBay has yet to understand the Asian population and also has Ifailureto compete with firms that are already there. Opportunities: eBay has plenty of opportunities; the biggest being their ability to purchase firms that enhanced the overall appeal of eBay.
Like PayPal, Rent. com, and Skype are just a few which brought opportunities to them. Threats: The biggest threat to eBay is its competition. Some of their biggest competitors are Amazon and Yahoo. Also eBay’s has other threats aboard especial in Asia where they are currently trying to expand with little success. This is due to their primary competition in Asia is well established.
PORTER’S FIVE FORCES MODEL
Threats of New Entrants: As pointed out in Chapter 2, technologywill always have a huge impact this industry.
Since its establishment in 1995 technology has changed, it has broadened and expanded creating the everlasting threats of new entrants. Bargaining Power of Buyer: The buyer power is high when there is a high concentration of buyers relative to suppliers (Dess, 2010). This could go either way for ebay. Bargaining Power of Suppliers: The bargaining power of suppliers is greater when the threats may raise prices or reduce the quality of purchased goods and services (Dess, p. 59). This is hard to say since the organization is solely based as an auctioneer website.
Substitute Products/ Services: As other firms try to develop substitutes, it will be hard for eBay to uphold their aggressive advantage. Intense Rivalry: As stated in the chart in our text book page 63, rivalry is intense when competition is high and growth rate of the industry is slow.
eBay has some basic strategies that it follows to make it successful throughout the industry. First it has no time limitations; a bid can be placed at any time. Second there is no geographical restriction; sellers and buyers can partake from anywhere.
Last they have a large network economy; having one of the largest number of bidders and sellers (Dess, 2010).
ISSUES AND CHANLLENGES FACING THIS COMPANY
A competitive advantage eBay has is the fact they been around for some time and are well established. One of the major challenge that eBay is facing is their inability to be successful in the Asian market place. It has had numerous attempts to penetrate this market and failing every time. They also have some competition from firms like Amazon and Yahoo. As well as Asian based markets places, GMarket and Taobao.
COURSE OF ACTION RECOMMENDED
The problem that eBay will always have is that technology is never ending. They will continue to see the market share develop and change. Here is some course of actions I would take to continue to be successful: 1. Creating options and targeting distinct market niches would enable eBay to distinguish itself from competitors (Dess, 2010). 2. I would start to develop a department that would specialize in Asian affairs. 3. I would also advice the purchasing of one of the Asian firms.
I found thiscase studyinteresting and easy to grasp.
I am a big supporter of eBay and use it daily. I believethey have found their niche here in the states. However, I did find it interesting how they are struggling in the Asian markets. Developing the Porters Five Forces Model and looking at ways to develop strategies to gain momentum to be successful. I can see where companies of a similar firm would be easy to start and constantly be a thorn in their side.
- Dess, G. , Lumpkin, G. , & Eisner, A. (2010). Strategic Management (5th ed. ) New York: McGraw-Hill Irwin.