Analyzing Ebay Strategies Essay

Custom Student Mr. Teacher ENG 1001-04 19 April 2017

Analyzing Ebay Strategies

ABSTRACT

A pioneer and a market leader in the online auction industry, eBay has been able to grow the business significantly in the last decade amidst turbulent times for many contemporary dotcom companies. eBay’s strategy to focus on a niche market and differentiate itself through strong brand management and continuous improvement in the roll-out of value-added services has enabled the company to defend the market leadership in the industry.

While many new competitors have entered into the industry, eBay continued to set its sight in serving and growing. Nevertheless, eBay’s story only illustrates the one maxim in spite all the technological hype in many dotcom businesses. That is, “Customer is King”.

There is no doubt that eBay holds the power in the online auction industry. An analysis of the key factors of their company was compiled to find out what the eBay strategy is, and how they are doing financially. Also an internal analysis of their strengths and weaknesses and an external analysis of their opportunities and threats have been provided. Finally, a strength assessment of the main competitors in the online auction industry has been determined to see how strong each competitor is. From its beginning in a San Francisco living room, eBay has grown to be in a league by itself.

Analysis of eBay’s Strategy and Business Model
Before eBay could begin to compete in the online auction industry a strategy and business model needed to be developed (Appendix A). eBay had to define the businesses they would be competing in and how they would compete in those specific businesses. They also needed to define how they would be a successful service to their customers.

CorporateLevel Strategy

eBay’s corporate level strategy was to become a diversified business. They wanted to diversify not only the products they offered but also their customer base and global reach. By using the eBay service you can find virtually anything you are looking for.

Business Level Strategy

eBay competes in the online auction industry using a broad differentiation strategy. Although they may not be the most inexpensive online auction site, they have the largest variety of products offered. They also appeal to a larger group of consumers that include individual sellers, small entrepreneurs, and corporations all over the world. eBay achieves broad differentiation through their strong eBay community, a global reach not matched by any competitor, and a category span of 27,000. These aspects of the eBay service among others set their company apart from the rest. Customers see the value in using the eBay service. This is why eBay has become so successful.

eBay’s Business Model

eBay’s business model was based on creating and maintaining a person-to-person trading community. After implementing their model, eBay has been able to build strategic partnerships, continue to make innovative changes and improvements, and monitor its internal and external environments for possible future opportunities. This has given them the prestige of being the world’s largest online auction company.

Financial Analysis

Financially, eBay has shown improvement. Based on several critical financial ratios it can be determined that eBay has improved itself in this area nearly every year of its existence (Appendix B). Further, as of 2004, eBay was just shy of matching the industry averages of these ratios. The differences were small, and based on eBay’s record of improvement, it can be predicted that the company will continue to remain close to par with the industry average, if not begin to exceed it.

SWOT Analysis

A SWOT analysis of eBay was prepared to examine what the company does well and what aspects may need some attention (Appendix C). Also, eBay has many opportunities that are available to them in the future. Just like any company though they do have threats that may pose a problem for them. Some of the main strengths of their company include the variety of products offered, their customer service, and a tremendous global reach. Although they do not have very many weaknesses eBay should still work on keeping illegal activity to a minimum on their site. Also, they should look at Amazon.com to help provide better product descriptions for their customers.

eBay must continue to look for opportunities to expand their company in the future. The changing lifestyles of people can be an opportunity for eBay to penetrate the market even further and broaden their customer base. Also, eBay should look at other online auction sites for possible acquisitions or partnerships. eBay must continue to expand internationally to keep the number one spot in this market. Threats to eBay’s reign include the continual growth of Amazon.com and also thievery within their own site. eBay should keep a close eye on threats to their company and do what they can to make them opportunities for change.

Weighted Competitive Strength Assessment

A weighted average competitive assessment of eBay and its competitors has been developed to determine how strong each is in the online auction industry (Appendix D). The assessment was divided into eight categories each carrying a separate weight determined by importance. The scale ranged from 1-10, with 1 being the worst, 5 being average, and 10 being the best. After multiplying each score by its given weight, we were able to add all the scores to determine the strongest company. eBay ended up on top. Even though eBay was not the strongest in each category, they had the highest score on the top three weighted averages. This led to the conclusion that a company does not necessarily have to be better than its competitors in all areas, just as long as they are ahead in the most important ones.

Porter’s Five Forces of Competition Analysis on eBay

In the exhibit above, it is clear the threats of new entrants, particularly Internet directories such as Yahoo!, MSN, and Online retailers such as Amazon, to broaden their product/service categories in the market posts a significant threat to eBay . In addition, buyers have a significant bargaining power with online auctions operators because they can easily switch to competing sellers . The key bargaining power of eBay is its large community that attracts new buyers and creates repeat business from bargain hunters. More importantly, the community provides the critical mass of customers needed for an online auction to operate profitability and sustain growth.

PESTLE Analysis
Political

Last March of 2006, eBay was found to infringe on patents held by MercExchange LLC. This issue has gotten to the attention of the Internet companies because patents are competitive tools.
Proving such, eBay is to face shutting down however; the issue is how one company used by many can be shut down.

Economics

Demand in China is increasing thereby eBay ventured in agreement with TOM Online. eBay is widely used but this move was done because TOM Online has a proven track record with its users- the Chinese.

Social

eBay believes in developing its services to its clients. They have announced eBay Member Blogs and an eBay Wiki as new ways for the facilitate commerce and community activity enabling easier trade for users.

Technological

The eBay intends to dominate television as there is rising demand on selling television ads. With Wal-Mart supporting eBay’s hope of finding luck on television. This service will be launched by March. Still, it’s just one more step in media domination by Internet moguls.

With Google and Yahoo expanding for new tricks, Google has to also keep up.  Developments, computer hardware, software, applications, other equipment, materials, products and proceses etc.
With its expansion in China, it has ventured partnership with TOM’s Online. TOM’s has the experienced in dealing with this crowd therefore it would not be much costly for the company to develop.
Legal world/ eu/ national legislation changes, prospects etc.
With its issue on infringement of patents, eBay is doing a lot of research to avoid this from happening again. Intellectual Property Rights must be valued by companies especially among Internet based companies like eBay.
Environmental global/ eu/ national/ local issues, pressures, movements etc.

eBay being a internet based company need not worry much on this aspect. Their services does not involve much problem in this area. One good thing about Internet based companies is that they are able to save on materials to enhance their transactions since everything is online. But then, eBay must continue to promote environment advocacy through charity events.

Human Resource Analysis

Industrial Relations
There is also a strong emphasis on the effective management of people, but with a distinct, non-union approach. From a normative perspective, eBay seems to have taken a non-traditional stance to the personnel function (Thomason, 1991).
Based on this assessment, we say that management orientation and workforce orientation of eBay are both geared towards non-unionism, which suggest an individualistic slant for industrial relations.
Nature and role of collective bargaining and joint consultation.

Personnel is perceived as a conscience and a channel through which valid grievances may be aired. In such cases, management is “ready to step down” to admit the fault or shortcoming. This is not the case in unionised environments. In the latter, the transactions are impersonal since the union is used to represent the person – and that person-to-person interaction, which is very important, gets lost. eBay’s set-up requires a high degree of management maturity.

It is good for the organisation to promote this notion of HR merely as an arbiter, and not as “police”. The company operates with the thinking that “people will deliver given the opportunity and the correct guidance and discipline”. The company perceives that there is still a need for control if they were to expect optimal performance from employees. There are clear indicators that suggest the bargaining unit is the individual, there is narrow scope in the bargaining process, that such is done sporadically. No joint consultations are exercised.

Work Organisation

Technical and social organisation of work. There is high division of labour and compartmentalisation of tasks since their jobs are highly specialised. The motivation to perform represents a much more complex psychological contract between the individual and the organisation involving perceived alternatives, perceived consequences of these alternatives, and individual goals (Mcdonald & Makin, 2000). There is an emphasis on breadth of knowledge and expertise. This is an effective way of motivating workers. Such motivation in these times of change demands a balanced combination of emotional and intellectual levers (Goss, 2000).

Control over job methods / rules. Looking at their style of eliciting commitment and ensuring control, one can see that employees are not stringently monitored on the use of their time, and they are autonomous in this respect. They are encouraged to learn. Those who are more experienced willingly coach neophytes; as training skill is one of the appraisal criteria. A handful of employees are personally engaged in driving their learning. Employees who have a high need for achievement ate not risk takers and tend to set goals that are challenging enough to be interesting but low enough to be attainable. Employees with a high need for achievement need recognition and want their achievements to be noticed (Arnold, Cooper, & Robertson, 2002) .

The supervisor determines job methods and rules. Targets are set systematically, emanating from the overall plan. These are then cascaded per section, and performance comparisons against target are done on a monthly basis. From a normative viewpoint, getting employees warmed up through performance management is good, but it is not enough. Performance management is critical for the successful achievement of organisational strategies and goals (Managing People, 1999). This suggests an individualist orientation towards control over job methods/rules.

Personnel/ HR Aspects

Recruitment System. The company also has clear job descriptions in place across all posts to ensure that the skills, knowledge, and attitudes necessary for each job is defined. This recruitment practice of internal hiring may be sustained, since as Johnson (1997) recommends, it is one way of increasing the morale of the workforce. However, they do have to strike a healthy balance in considering external candidates to maintain the vitality of the organisation.

In determining which recruitment method to use, that is, whether formal or informal, ebay may consider the effect of race. According to the research carried out by Caldwell & Spivey (1983), race seems to have a moderating role in the relationship between tenure and type of recruitment method – that is, for Whites, informal recruitment methods seem to result in longer tenure, while the same trend is observed among Blacks with the use of formal means. Since the company considers multicultural diversity as a strategy, they may consider this recommendation.

There is also no evidence presented as to the effectiveness of internal hiring as a strategy, and they may wish to run correlational studies relating this strategy to outcomes such as tenure and individual performance. This will lend further support to the empirical studies of Aamodt & Carr (1998) and Rupert (1989) in which both found that those employees who were hired through internal sources had significantly longer tenure than those who were hired through external sources. However, no such differences were found when performance was investigated.

Rewards system. The appraisal is conducted once a year and is their basis for a performance-based pay system. They also advocate continuous feedback giving, and the formal appraisal process is simply a documentation of the feedback that has been constantly given to the employee. There are pre-determined performance criteria, including quality of work, innovation, problem solving, and continuous improvement.

Looking Forward to the Future and Lesson Learned

While many dot com start-ups have failed during the 1990s, eBay has continued to grow and enamored a number of investors to help them further grow the business. This only illustrates eBay’s reliance not on technological superiority, but its focus on serving the needs of its customers. eBay’s close relationship with the eBay community has proven to be its competitive advantage in the midst of growing threats in the market – entry of new competitors into the industry. Moreover, this affinity has garnered a strong brand recognition and brand name for new buyers and sellers. It is their customer-focus that will provide them the continued success and further cement their leadership in the auction industry.

Looking forward, eBay’s market leadership and success story continue to attract attention from competitors and investors alike. While the industry does not show any slowdown in user activity, eBay should continue to expand its services and products into specialty sites, further develop and enhance value-added services in its portfolio to continuously attract new buyers and sellers into the community, and continue to focus on its efforts on maintaining the character of the eBay community.

To protect its current market position, it is important for eBay to continue to expand to other specialty sites and further develop and enhance its value-added services to differentiate its product offerings from competitors. This strategy will continue exploit the eBay competitive advantage being the pioneer and introducing innovative product offering to for eBay’s community. This would keep the company’s products and services fresh and exciting enough to stand out in the midst of all the changes that are taking place.

Lastly, it is also important for eBay to continue to focus its efforts on maintaining the character of eBay community and to continue to nurture that trust and camaraderie, so as not to lose sight of the eBay’s foundation and shared values that it had established with its community. eBay is the community that encourages open and honest communication among all its members valuing trust, honesty, openness, and respect for every person. It is always important to hold on to their corporate identity in the turbulent and fast-changing market.

Appendix A: Corporate-Level Strategy, Business-Level Strategy, and Business Model

Corporate Level Strategy

eBay is a very diverse company. The service they provide is appealing to both individual customers as well as large corporate customers. Hobbyist and collectors, casual sellers, professional buyers, and corporate sellers all belong to the eBay customer base. The products that are offered on the eBay website range from shoes to automobiles. This makes their product line very diverse as well. The creation of eBay motors, eBay Real Estate, and the LiveAuctions specialty site, as well as the acquisition of Half.com have all contributed to the growth and diversification of this company. In addition to diversifying their customers and their products, eBay has expanded their business by branching out into domestic markets as well.

Business Level Strategy

eBay competes in the online auction industry using a broad differentiation strategy. By choosing this strategy eBay determined that the best way to achieve a sustainable competitive advantage over its rivals was to differentiate their service. The way in which eBay has set their online auction site apart from its competitors has lead customers to prefer their site over other online auctioneers and retailers

eBay’s Broad Differentiation Strategy

eBay has created a one-stop-shopping experience that is appealing to large corporations, independent entrepreneurs, and individual buyers and sellers. They have created value through many facets of their business that appeal to their customers and differentiate them from the competition. The main ways that eBay differentiates themselves is through:

1. Variety of products offered
• When customers visit eBay they can search for virtually any product. eBay boasts a category variety not matched by any competitor with over 27,000.
2. The eBay Community
• eBay wants their customers to feel like they are a part of a community. This community feel gives customers the sense that they are branch of something and cared about. By showing the customers that their feedback, opinions, and feelings are important eBay has gained tremendous ground with their customers.
3. The eBay Website
• eBay has created an auction and retail website that is unique and interesting. This creative site sets them apart from their competitors. The site is set up with many facets that reach a broad span of visiting buyers and sellers. The site is also entertaining and easy to use making it very appealing for online shopping and trading.

4. The eBay Brand Name
• eBay was the creator of the online auction industry. When customers think of online buying the immediately think of eBay. This has given them a competitive advantage that sets them apart from other online auctions.
5. eBay’s Global Reach
• The global reach of eBay is not achieved by any other online auction site. For large corporations international selling and buying is done everyday. Even for an individual buyer or seller, having the option of searching throughout 150 countries with a span of 94.9 million users is very appealing.

Why the Differentiation Strategy Works Best for eBay

The users of eBay have many different preferences and needs depending on why and how they use the service. eBay has determined a way to satisfy their customers whether they are large businesses or individuals. By offering a wide variety of products, globally expanding, and creating a community for all customers to join eBay has created a distinctive value unmatched by its rivals.

Analysis of eBay’s Business Model

eBay’s business model was based on creating and maintaining a person-to-person trading community. This allows buyers to easily search for what they want to purchase. It also allows sellers to post their items minutes after they have registered. There are a few specific elements of eBay’s business model that they recognized as key to its success they are (as given in the case study):

• Being the largest online trading forum with a critical mass of buyers, sellers, and items listed for sale
• Its compelling and entertaining environment, which had strong values, established rules and procedures that facilitated communication between buyers and sellers
• Establishing programs such as Safeharbor to aid in disputes and to punish users who violate eBay
• Cost effective and convenient trading
• Strong community affinity
• An intuitive user interface that was easy to understand, arranged by topics, and fully automated

By implementing their business model, eBay employed three main tactics. First, they looked to build strategic partnerships. Second, they looked for customer feedback to constantly make changes and improvements. Finally, they monitored its internal and external environments for possible opportunities. By doing all of these things, eBay was able to adapt to the changing ways and keep their customers satisfied. To be successful eBay must continue to mold and change their business model to satisfy its customers and keep the level of quality they employ to the highest degree possible. If eBay is able to do this they will continue to be successful.

Sustaining Growth in the midst of growing competitive pressures

Competitive Environmental Analysis

In his book Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael Porter discusses the five forces of competition in an industry. He illustrated the five competitive forces as: (1) Rivalry between competing sellers in an industry, (2) potential entry of new competitors, (3) the market attempts of companies in other industries to win customers over to their own substitute products, (4) the competitive pressures stemming from supplier-seller collaboration and bargaining, and (5) the competitive pressure stemming from seller-buyer collaboration and bargaining.

Porter’s five forces of competition is a widely used tool to determine the company’s current strengths and competitive position. Having a clear picture of the balance of power in a competitive industry will help in planning for a sustained growth in the industry. In the Exhibit 2, we analyzed and plot the competitive forces in the online auction industry in which eBay is competing.

Appendix B: Financial Overview of eBay and the Internet Retail Industry

Ratio eBay 2003 eBay 2004 Industry Average 2004 Status Relation to Industry

Gross Profit Margin 80.7 86.8 N/A Improving N/A
Operating Profit Margin 30.6 32.5 32.8 Improving Nearly equal as of 2004
Net Profit Margin 21.7 24.2 24.3 Improving Nearly equal as of 2004
ROA 7.7 10.4 9.2 Improving Above Industry Average
Current Ratio 2.683 3.315 N/A Improving N/A
Debt To Assets 1.6 1.6 N/A Unchanging N/A
Net Profit Margin 20.65 24.23 N/A Improving N/A

It is clear that eBay as a company is remaining the same or improving in each of aspect of the financial ratios reported above. These six ratios are critical to evaluation a company on several different levels.

Also, it should be noted that eBay is relatively similar to the industry average. However, there is still not one category where eBay outperforms the industry average. Yet, the improvement eBay is facing, is a positive sign for the company that it will remain competitive on a financial level, if not pull ahead of the industry average.

Appendix C: eBay S.W.O.T Analysis

Strengths Weaknesses
 Largest online trading forum
 Sense of community
 Recognizable Brand Name
 Over 250 Alliances
 Partnerships with international companies
 Global reach
 eBay University
 Entertaining site
 Over 27,000 different categories
 Publicly Traded
 Zero inventory held by company
 No need for the traditional sales force  Inability to measure illegal activity on site
 Inability to penetrate some foreign markets
 Lack of in depth descriptions of products
 Technology malfunctions
Opportunities Threats
 Changing lifestyles of people
 Acquisition of Yahoo.com
 Continued international expansion
 Increasing use of the internet
 Expand community services  Thieves
 Increasing number of online auction sites
 Rapid growth of Amazon.com
 Increasing number of online stores
 1/3 of internet users already registered on eBay

eBay’s Strengths

EBay is the leading provider of online auction and customer-to-customer trading in the world. They have many competencies, core competencies, and distinctive competencies that set them apart from their competitors. Their alliances, international dominance, and recognizable brand, name just to name a few, are some of the main reasons why eBay is a company that is hard to top.

Largest Online Auction Forum(core competence)

From its beginning in the mid-1990s, eBay has been growing in leaps and bounds. They now have over 94.9 million registered users in more then 150 different countries. eBay’s founder Pierre Omidyar did not even see the tremendous possibilities that eBay had when it was first developed over ten years ago. eBay now holds the top spot in the online auction industry. In the United States alone one-third of the population is already registered with the site and with increasing use of the internet that number is sure to grow.

Recognizable Brand Name(core competence)

A recognizable brand name is important to the success of a company. eBay has made sure to use color and unique writing to show their brand name off. They also use television and Internet advertising to get continued publicity on different media avenues. Amazon.com does not have as much face value as eBay. Their name is not distinctive to the customers like eBay’s.

Over 250 Alliances (competence)

eBay holds alliances with some of the largest companies in the world. They include UPS, America Online, IBM, PayPal, and Walt Disney. These alliances create more opportunities for eBay to advertise and reach potential customers. eBay has also created alliances with companies that help to maintain customer satisfaction. Tradesafe and I-Escrow have both partnered with eBay to make sure that all customers get what the pay for.

Partnerships with International Companies (competence)

Partnerships abroad can be crucial to a company succeeding in foreign markets. By partnering with established foreign companies eBay is able to easily transition into that countries culture with the help of citizens who work with the partnering company. eBay also immediately acquires ties with companies in the foreign market, which makes it simple for them to make more partnerships and alliances.

Global Reach (core competence)
The global reach that eBay has obtained is not matched by any other online auction site. Although Amazon.com is in a close second to eBay, customers obviously prefer eBay’s global ability. They have the capability to reach people in virtually any part of the world and get them the product they are looking for.

Sense of Community (distinctive competence)

Caring about your customers and making sure they know the lengths you go for to keep them happy is crucial to the success of a business. eBay makes their community a main priority at all times. eBay is continually coming up with new ways to reach out to their customers. They have come up with the Feedback Forum that is used for customers to provide comments about their trading partners. Two new personalization features have also been added for their members, My eBay and About me. eBay takes great pride in their community and will go to great lengths to make sure that it stays intact.

eBay University(competence)

eBay University is a distinctive feature of the eBay community. It was created in hopes of gaining more entrepreneurs and also educating new users. It has been a great success for eBay. It has helped new users gain knowledge as well as eBay. eBay used the many questions asked by participants in eBay University to their benefit.

Entertaining Site (competence)

eBay has created a site that makes people want to come back again and again. They are constantly revamping their site to make sure that it is the easiest, fastest, and most fun auction site on the web.

Over 27,000 Different Categories (distinctive competence)
The wide variety of products offered on eBay gives them a competitive advantage above all other online auction sites. They are like the Wal-Mart of the Internet! They say that anything you want you can find on eBay.

Publicly Traded (core competence)

EBay is a publicly traded company. The initial public offering generated $66 million in new capital for the company. Their second IPO generated another $600 million for the company. Being a publicly traded company has been a success for the company and brought in new capital.

Zero Inventory Held by the Company (competence)

eBay does not have stores or warehouses. They do not hold any of their own inventories. This is strength for the company because it keeps costs down and does not put any threat of having to liquidate the company. eBay has kept it simple by simply being a place for people to trade items.

No Traditional Sales Force(competence)

EBay has no need for the traditional sales force. This is another way that they keep their costs down. The do not have to train or keep a sales force on payroll.

eBay’s Weaknesses

Like any company, eBay has weaknesses. They are not able to do everything to the best of their abilities. A lack in ability to monitor all illegal activity as well as failure in some foreign markets is two weaknesses of eBay.

Inability to Measure Illegal Activity on Site

eBay has taken many precautions to prevent illegal activity on their site. They estimate that only 1 percent of transactions on their site involve fraud. The customers however disagree to some extent. Some say that there are as much as 10 percent fraudulent transactions. EBay has no real way to measure the extent of illegality on their site.

Inability to Penetrate Some Foreign Markets

Penetration in foreign markets is crucial to the success of online auctions. EBay has done an outstanding job of penetration in foreign markets. However, they have been unable to take over one of the most crucial foreign markets, Japan. Japan is one foreign market that is on the rise. They are becoming more prosperous and use of the internet is growing. If eBay is not able to gain ground in this market it could hurt its foreign market standing.

Lack of In-Depth Descriptions for Products

Amazon.com boasts in-depth product descriptions for all merchandise sold on their site. This is not one of eBay’s outstanding features. The lack of description in products could be a factor in the amount of counterfeit and wrongly identified products that are sold to customers.

Technology Malfunctions

Technology malfunctions are always going to be a factor when dealing with websites and online shopping. eBay must take measures to keep malfunctions as low as possible to retain happy customers and to keep hackers out of personal PayPay and eBay accounts.

eBay’s Opportunities

EBay must continue to search out new opportunities for its company. Continuing its growth and innovation is crucial to continuing its success. eBay can continue to seek alliances, partnerships, and new customers to continue its reign as number one.

Changing Lifestyles of People

People are using the internet more and more to pay bills, talk to family, and shop. eBay can use this opportunity for continued market penetration and expansion.

Acquisition of Shop Yahoo.com

Yahoo.com’s shopping site is very weak in the online auction industry. eBay should explore the possibility of acquiring their shopping site, along with its members and alliances already formed to broaden their customer base. EBay already has partnerships with Yahoo.com in other areas so this acquisition would benefit both parties.

Continued International Expansion

As internet use continues to grow throughout the world eBay must take every opportunity to enter desirable international markets. With the amount of internet users already registered on eBay in the United States continued international expansion is critical.

Increasing Use of the Internet

The internet is being used more and more each day. eBay can take this opportunity to expand and penetrate new markets.

Expand the eBay Community

For continued customer satisfaction eBay can increase its community feel. With new resources and sites tailored specifically to their community members eBay will continue to be the most highly respected internet auction site by its members.

eBay’s Threats

eBay must take its threats head on. eBay should acknowledge their threats and take steps to protect their company. There might also be the potential of turning some threats into opportunities.

Thieves

There will always be the threat of fraud and illegal actions in online shopping. No matter how many precautions eBay takes computer hackers and thieves will find new ways to trick honest shoppers. eBay has taken precautions to prevent these illegal actions and they must stay on their toes to make sure they do all they can to prevent illegal activity on their site.

Increasing Number of Online Trading Sites

When an industry is attractive new competitors will always try to enter and steal some of the market share. eBay already has many competitors surrounding them including Amazon.com, uBid, and ePier. Some boast that they are an alternative to eBay while others just try to be better than eBay. To sustain a competitive advantage above their competitors eBay must continue to grow and advance in the online auction industry. Strategies must be determined and defenses formed.

Rapid Growth of Amazon.com

Amazon.com has continued to grow since it was formed in the mid-90s. They the largest competitor of eBay and may have the potential to take over the largest market share in the online auction industry.

Increasing Number of Online Stores

Online shopping is becoming more and more common. Stores such as Target and JC Penny have developed sites where people can shop from the comfort of their own home. This poses a large threat to eBay. They are now not only competing with other online auction sites but also online retailers.

eBay already allows people to purchase products on their site with a set price system. This system accounted for 28 percent of eBay’s gross merchandise sales. They must make sure that they continue to offer a fixed price program for customers who are not looking to auction products and instead only want to purchase or sell with a set price.

1/3 of Americans Already Registered on eBay

The United States is eBay’s largest customer. This poses a threat to their continued rapid growth because they will start to run out of customers to join their site. This is why international markets are so crucial

Appendix D: Weighted Competitive Strength Assessment

Key Success Factors/Company Strengths Importance Weight eBay Amazon Yahoo Auctions uBid
BRAND NAME 0.15 10/1.5 8/1.2 8/1.2 5/.75
QUANTITY OF BUYERS AND SELLERS 0.3 10/3 8/2.4 7/2.1 4/1.2
CONVENIENCE 0.1 8/.8 10/1 5/.5 4/.4
CUSTOMER SERVICE 0.1 8/.8 9/.9 7/.7 6/.6
SPEED OF TRANSACTION 0.05 5/.25 10/.5 6/.3 8/.4
ERROR RATE 0.05 7/.35 9/.45 8/.4 6/.3
LOW INVENTORY/COST 0.1 10/1 7/.7 7/.7 8/.8
GLOBAL DISTRIBUTION 0.15 10/1.5 8/1.2 6/.9 1/.15
WEIGHTED TOTAL 9.2 8.35 6.8 4.6

By using a weighed average to assess eBay’s competition, we were able to conclude that eBay ranked ahead of all the others. We ranked each category based on the information provided to us in the case study. The scale ranged from 1-10, with 1 being the worst, 5 being average, and 10 being the best. Even though eBay was last on Speed of Transaction and second to last in error rate, it did not affect them as much due to the low weight the categories carried. However, the three categories they were on top of; Quantity of Buyers and Sellers, Brand Name, and Global Distribution, were the three most heavily weighted factors. This analysis shows that a company does not have to be better than its rivals in every category, just as long as they are ahead in the most important ones.

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