An examination of eBay’s strengths, weaknesses, opportunities and threats, with a discussion of the company’s position as a middleman, or broker, being one of its greatest strengths due to the fact that it involves much lower costs than a traditional e-commerce business.
Introduction
Ebay was founded by Pierre Omidyar in 1995 as a marketplace for the sale of goods and services for individuals. Not only was it a novel idea, but it was utilizing an innovative technology – the Internet. E-commerce had not yet been established as an acceptable and understandable method of doing business at that time.
Today, one can find more than 18,000 categories of merchandise on ebay, including big-ticket items such as cars and real estate. Ebay is not so much an e-commerce site as it is a trading community, where buyers are sellers find one another and conduct transactions. Browsing and bidding is free, but ebay charges a fee for listing an item for sale as well as a fee for items that are sold. Additional fees are charged for special features in listings, such as bold listings or extra photographs (the first two are free).
Ebay currently has approximately 14,000 registered users around the world.
Strengths
By far, ebay’s greatest strength is that it was first – the first online auction site – an entirely new concept in commerce. Omidyar jumped in with both feet on the new technology bandwagon, opening up the world to the concept of electronic commerce. His decision to hire CEO and President Meg Whitman turned out to be a jewel of a choice, as Whitman herself is another of ebay’s biggest strengths. Building on her experience with Hasbro and Stride Rite, as well as her Harvard business education, Whitman has led ebay through a number of reinventions to the mammoth site it is today. The company earned a net income of more than $90 million in 2001, which was a 73 percent increase from the previous year. Ebay is hot, and its here to stay.
The Essay on Ebay Case Meg Whitman
In 1995, Pierre Omidyar founded eBay, an on-line company whose purpose was to facilitate an environment where people could not only exchange goods, but also have discussions, make connections, and form relationships. He carefully crafted a culture based upon, “trust, respect, autonomy, empowerment, and equality,” and sought for the eBay community and company to be reflective of those principles. ...
Whitman’s strategy has been rapid growth through adding new categories.
Yet another strength is that ebay is in the business of connecting people, not selling things. Therefore, it encounters no inventory or distribution costs whatsoever, which is highly unusual for e-commerce businesses. Ebay is only a broker, never actually taking possession of any merchandise, which places the company in a much more profitable position than some of its competitors, namely Amazon.com and uBid.
Weaknesses
One of ebay’s strengths is also its greatest weakness. Ebay is only a middleman, which means lower costs; but it also means less control and a definitive inability to monitor member activities outside the company’s site. Of course, ebay has rules of conduct that members are expected to follow, but some people find loopholes or – even worse – break the rules outright without a care. An example might be ebay’s very strict rule against selling listed items outside the auction.
It would work thusly: suppose you list an item and no one bids on it. After the auction ends, someone contacts you via your email address (which is available on ebay’s site to other members) and asks to purchase the item. You agree, and you conduct the transaction without ebay’s knowing about it, which means that ebay doesn’t receive its fee. Although such a transaction is against policy and morally wrong (depending on your morals), it could easily happen and ebay would never know about it, as long as the two parties involved didn’t notify the company.
Another “no-no” that is easily done despite rules against it is bidding on your own item to drive up the bid price. Let’s say, for example, you have two separate ebay accounts. You list an item under one account name, and bid on it under another, thereby increasing the existing bid price. When another bidder places a bid on your item, they end up paying more for it than they would have, had you not placed a bid as well. Thus, you make more money on your item. Even though users are required to register their contact information with ebay to open a user account, there are no controls in place to automatically check every time a bid is placed to ensure that a user isn’t bidding on his or her own item. This is called bid fraud, and it is taken very seriously by ebay.
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Please read the following rules before you bid. If you do not agree to any of them, don't bid on the auction. Violator's bid may be canceled and negative feedback's will be left on bidders who do not follow through. 1. Payment: Buyer is required to prepay. Payment by Credit Card (Visa/MasterCard/Discover), Electronic Check or Wire Transfer is available through Pay Direct, PayPal. com and Bill ...
Opportunities
When one examines the market, it is easy to see that there are millions of consumers who buy online – as well as who like to save money. In fact, a 2001 Ernst & Young survey found that 75 percent of online shoppers believe they save money by shopping on the Internet; 50 percent say it is more convenient (imagine, the stores never close), and 29 percent say it is simply more fun that traditional shopping (Canadian Bankers Association, 2001).
Today, you can find nearly anything on ebay, but the company continues to add categories and capabilities. One particularly smart move was adding upscale categories (such as fine art, antiques and automobiles) where the average sale price is higher. Because ebay charges a percentage of the sale price as its fee, one can easily see how higher ticket items would be extremely profitable.
Already, ebay executives have begun entering into strategic partnerships and acquiring other companies that can add customer value while enhancing profitability. Recently, for example, ebay purchased Paypal, an online payment system that enables users to transfer money via email using a bank account, credit card, or Paypal online account. What’s next? Maybe a stake in the U.S. Postal Service. Of course, that’s only a joke, but it does bring to mind the possibility of an alliance with one or another package shipping services – such as FedEx or Airborne Express. After all, what two major requirements must sellers on ebay have? A way to exchange payment and a way to ship the item. Paying for the service is already well taken care of. Shipping is a natural second choice for diversification.
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International expansion offers other opportunities for ebay. So far, Whitman has established sites in the U.K., Canada, Germany, Austria, Switzerland, Japan, Italy, France, Australia, and South Korea. There are many more countries yet to be conquered.
Threats
Competitor Amazon.com’s foray into the online auction world is a threat to ebay, as are other auction sites, such as uBid. Amazon has historically focused on market share growth rather than profitability, and relies upon its superior customer service and use of the latest technologies to accomplish this. While the company has yet to experience a profitable year in business, it is a household name and a very successful company in terms of sales.
Any company that holds a monopoly on its market – and ebay could someday come quite close to this state – lives in fear of being accused of anti-trust activity. Other than that, there are a few other regulatory issues that might or might not pose a threat to ebay. For example, since ebay’s purchase of online payment system Paypal, the company faces a host of regulatory issues dealing with banking, as many states have claimed Paypal is indeed operating as a bank.
Other potential regulatory issues are related to doing business in foreign countries. All companies involved in international commerce must ensure compliance with the trade laws of participating governments. This is especially true when shipping is a component of one’s business, because customs regulations differ from country to country. So far, ebay has no issues related to shipping because it is basically only a middleman, but should the company decide in the future to become involved in offering shipping services to its customers, this would be a definite consideration. The threat comes into play where there are frequent changes in governmental regulations among varying countries. If a company wasn’t aware of laws and standards, it could become exposed to heavy financial penalties.
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Do I thing business practices in Islamic country are likely to differ from business practices in the United States? If so how? Yes, I agree with this statement that business practices in Islamic country are differ from business practices in the United States. When a business organization is capable and qualified enough to meet up the national demand then they can operate business crossing to the ...
Bibliography
Canadian Bankers Association. “E-commerce comes of age: technology offers us a new way of buying and selling,” 2001. Available online at http://www.cba.ca/ENG/Tools/Brochures/tools_ecommerce3.htm.
Ebay website. Available at www.ebay.com.
Hoovers. “Ebay,” Available online at www.hoovers.com.
Kerstetter, Jim. “Meg Whitman,” Business Week. 15 May 2000. Available online at www.businessweek.com.
Useem, Michael. Leading Up. New York: Crown Business, 2001.
