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1.

Overview
eBay was founded by Pierre Omidyar's in his San Jose home in September of 1995, under the name AuctionWeb. From its early beginnings it was meant to be a marketplace for the sale of goods and services for a variety of interested individuals. It was incorporated in 1996, and has since grown to become the worlds largest most financially successful online auction company.

This report analyses the case eBay: King of the online auction industry written in the year 2000 and attempts to look at the future of the eBay, especially its marketing strategies.

2. Introduction to the case


In year 1995 Pierre Omidyar formed eBay as a way to create a person to person trading community based on a democratized, efficient market where everyone could have equal access through same medium, the internet. As the company grew, Pierre got his friend Jeffrey Skoll to help him with development of strategy and business background.

After realizing the overall potential of his idea, Pierre and Jeff Skoll brought on Meg Whitman, as CEO, to efficiently handle the growing popularity, and sustain eBays success

With the addition of Meg Whitmans expert experience eBay soon expanded rapidly to service a wide variety of buyers and sellers, and in September of 1998 the company went public. The shares were initially offered at $18 and immediately rose to $47 by the end of the day. The company has not faltered since, rising to revenues exceeding $220 million by 1999, while the online auctioning was forecasted to grow to trillions of dollars in coming years.

3. Environment Analysis
3.1. Porters five forces
After analysing the forces of this industry I believe that the competition is very intense. In order to succeed in this industry eBay must continuously improve all aspects of its business, or it will be quickly surpassed or replaced by another competitor. This industry is extremely volatile and it is imperative to invest in improving eBay in order to remain competitive. Please refer the Appendix 1 for details.

3.2. Strategic Map


eBay is currently the dominant player in the market with strong reputation and brand awareness and the broadest range of product categories and number of auctions verses the rest

of the market. The reason of this strategic position of eBay is that auctioning is core business for eBay. Please refer the Appendix 3 for details.

3.3. Product Life Cycle


eBay is obviously in an industry in the growth stage of the product life cycle. The online retail industry is exploding right now due to the low prices and convenience of an at home search and buy environment. The high degree of demand in this growing industry has attracted many new online retail companies and caused many offline retailers to develop online sites as well. The industry is relatively new and expected to continue to grow not entering the shakeout stage any time soon.

4. Problem
With entry of competitors like Yahoo! and Amazon in 1999 along with number of smaller niche players, have seen eBays market share decline drastically. Moreover, the prospect of attractive profitability and low barriers to entry is encouraging more new entrants. Industry analysts forecasting a huge industry growth in the next 3 years

With a huge forecasted industry growth in next three years, eBay is facing several challenges. At industry level competition is intensifying from existing and new players and at discipline level, ensuring right marketing strategy for a high growth environment. Hence the big question is how eBay will maintain market leadership in a growth market as competition intensifies.

5. Critical Factors
Entry of competitors with strong resources and differentiated products. As highlighted on the Strategic Map in Appendix 3, there are now many competitors competing in the same space, some with significant financial backing from the likes of Microsoft and Dell and others focusing on niche high growth segments. Nearest competitor Amazon currently also sells goods at a fixed price and is rapidly gaining market share at eBays expense. Marketing mix is focused on redundant introductory stage PLC strategies. eBays marketing mix is focused on the mass market for a pioneer in the introductory stage and now needs to adapt their marketing strategy for a growth stage Mass marketing focus on B2B and B2C when competitors are targeting growth segments Low customer confidence vs competitors in site reliability & security. eBay is currently ranked 4th in Customer Confidence which includes reliability and security of the online auction site, and quality guarantees, with Amazon at no 1. Improving these aspects are critical to ensuring customer stickiness in an online retailing environment particularly as

competitors are learning from eBays pioneering efforts and leapfrogging with better technology and services.

6. Potential solutions
To meet the future challenges, eBay has few potential solutions.

6.1. Market Expansion.


As we know eBay is in Growth market, one of the solutions is market expansion strategy. Currently eBays operation is limited to some parts of US and this strategy is to expand the business in rest of US, Europe, Asia and Africa as soon as possible. This way eBay will be able to expand into new geographies to build brand presence along with increase in market share and economies of scale, which will ultimately improve the bottom line of the organisation. However, there will be few challenges in terms of managing the cultural differences and managing the bigger organisation and its complexities.

6.2. Product Development.


To strengthen the market expansion and facilitate effective execution of that strategy, a product development strategy is required. This will be in line with Ansoffs growth matrix by developing some new products for the existing markets and by introducing existing products into the new geographies. Products like eBay Motoring will form part of this.

Actual product offered by eBay is the online auctioning and once they expand by entering into new geographies or by introducing new products, the existing technological capability will come under pressure which will further reduce customer confidence and experience. Hence the technological up gradation and enhanced CRM system is a necessary to increase the security features and enhanced search capability. A combination of fortress and market expansion strategy will be used to build an impregnable fortress capable of repelling attacks by current or future competitors to maintain market share.

This I believe will further help increase the brand presence, revenue, customer base and customer experience .However, the cost of enhanced technology and the implementation are potential risks.

6.3. Segmentation, Targeting and Positioning.


The above two solutions are in line with the corporate strategy of the organisation. However, the main issue eBay is currently facing is getting its marketing right. This is only possible by taking a STP approach to the business which refocuses on the discipline of the business. This approach will look at the various segments and product differentiation. Like creating new dedicated site to

sell automobile related products. This will avoid selling a second hand rug next to a Lexus or costly jewellery. An integrated marketing mix will be developed along with targeting few segments to focus on premium, non premium, B2B and B2C customers. eBay offers that unique experience or sheer joy of winning a product through auctioning, however, there are other set of customer who would like to just purchase products with fixed pricing. Hence this will form a part of product segmentation / product development. This will bring greater customer experience, increased sales and market share, efficiency to target segments and synergies in marketing mixes. However, increased organisational complexities and operating cost will continue to be a concern.

6.4. All three Aggressive Growth.


This will be a combination of all the above three strategies.

7. Recommendation
All Three Aggressive Corporate Growth Multiple corporate growth strategies to further penetrate mass market

8. Justification and Rationale


As we know that the brand name recognition and user base is critical to the internet business success especially in this high growth market. At the same time, competitors are still learning to eBays business model on Auction, their non core business. eBay has strong resources and competencies for future growth and want to be a leader in the new world economy. To achieve this they will have to pursue this aggressive strategy which will ultimately provide eBay sustainable competitive advantage. Outcome of the strategy should ultimately achieve wide spread brand building, largest and dominant online auction site which provide a secure, reliable and quick transaction.

Appendix 1: Porters Five Forces


Threat of new The risk of entry by potential competitors is high due to low barriers to entry. New competitors can launch new sites at a nominal cost using commercially available software. This low barrier to entry will cause competition to intensify in the future. Also due to the broad range of products sold at eBay there is many more opportunities for new competitors to enter in more specific market segments. Buyer Power The bargaining power of buyers is relatively low because the seller sets the prices of the products and because a majority of the sales are in an auction platform. This gives eBay and the buyer less control of the products prices, but in most cases the large amount of sellers per product keeps the prices low and competitive. The buyers benefit from the competition of the sellers, convenience of a trade environment, and not on the power of price bargaining. Supplier Power The bargaining power of suppliers is relatively high because eBay must keep its fees and commissions low in order to attract and keep loyal sellers. Sellers are the suppliers of the products and are able to pick from different auction companies and select one offering the lowest fees and commissions. The ability for the suppliers to select the company offering lower selling costs and higher profits per sale, forces eBay to remain competitive in selling costs. With the power more in the suppliers hands eBay is required to satisfy their needs with higher customer service, more convenient selling platform, and lower selling costs in order to keep a large supplier base and attract new sellers. Competitive Rivalry HIGH The degree of rivalry among established companies within eBays industry is high. This high degree of rivalry is very common in discount retail industry due to the high concentration on being the price leader. EBays competition is very broad and varies with each of its different products. eBay competes closely with many well know broad-based companies such as traditional department and general merchandise stores, as well as a large variety of online retailers. Due to this complex competitive industry, eBay must concentrate on many competitive factors such as: ability to attract buyers, volume of transactions and selection of goods, customer service, system reliability, brand recognition, and many others to keep their edge. Threat Substitution MODERATE of The threat of substitution is relatively high due to the growing number of online auction and shopping sites. Online retail is a highly volatile and rapidly growing industry where substitutes and rivalling competitors can emerge with relatively minimal costs and in a short amount of time. This high degree of threat forces eBay to continuously use its strong finances to maximize user satisfaction and to acquire high quality auction properties in order to remain dominant in its industry. Entrants HIGH

MODERATE

MODERATE

Appendix 2: SWOT Analysis

Appendix 3: Strategic Position Map


6

Strategic Map
Strong
Classifieds

Reputation/Brand Awareness

Live Auctions

GO.com
Auctions.com Flea

Mkt

AuctionWatch

FairMarket

Weak Broad Narrow Number/Variety of Auctions/Product Categories