Premier online auction firm eBay is one company which has faced threats throughout its existence. Yet a large part of the company’s core competencies — which have contributed immensely to its competitive edge and successful penetration of niche markets — have enabled it to weather the challenges that have come its way and soar to phenomenal success. Today, with the rise of new online auction and shopping sites, eBay finds itself seeking new ways to bolster its capacity to retain and attract new customers and maintain market stronghold.
The question that arises is whether eBay in the present age can rely on its brand strength, quality product array, large user base, and enhanced technology to regain its market leadership. e-Bay’s Globalization Strategy The largest online auction firm, eBay, maintains viability in the highly competitive and volatile online retail business while focusing on its global international expansion thrusts through numerous strategies.
Among the most notable of its strategies is its expansion into key markets across the world. It penetrated Australia, Germany, and the U. K. in 1999 and then expanded to Japan a year later. However, eBay’s inability to gain market stronghold in Japan prompted the US online auctioneer to make a graceful exit in 2002. The online aucton company had earlier also expanded to Canada, France, and Austria, to name some of the first few countries it set up business operations in.
The firm’s overall thrust of enhancing services for customers, which it has always believed can translate to long-term profitability, has also guided eBay throughout the years. The company has grown by leaps and bounds since it was founded by computer programmer Pierre Omidyar on September 3, 1995. The core competencies of eBay include, first and foremost, its brand strength. Global recognition for the brand did not come about by accident.
The company’s key officers relentlessly worked to ensure that the brand turned into a household name within a short span of time since its inception. Word-of-mouth and hands-on-approach, led by eBay founder and the key executives he eventually hired, were instrumental in bolstering eBay’s brand recognition. A year after she joined eBay, former CEO Meg Whitman was the powerful force behind numerous strategic acquisitions, partnerships and investments which helped the company lure more customers while strengthening the services aspect of the business.
Under Whitman, eBay “earned accolades for its management style and customer-centric philosophy” (“eBay,” 2002, para. 17). Key executives like Whitman ensured that the company would be able “respond quickly when competitive threats come (sic) along… Far more than lip service, Whitman and her people have managed to get feedback from customers and bring innovations to eBay, which is what buyers and sellers love about the site” (“eBay,” 2002, para. 18). Alongside brand recognition is eBay’s ability to attract buyers.
Market access for eBay customers has been facilitated by several decisive moves. One strategy that was implemented involved inviting software developers “to shake and bake the company’s 33 million weekly auction transactions… With eBay’s listings uploaded to the innovative sites they’ve built, other Web businesses are allowed to tap into eBay’s transaction databases and to list eBay auctions” (Kao, 2007, p. 68). One also cannot discount the huge volume of transactions and the diverse array of goods that eBay eventually facilitated.
Analysts have noted that “eBay has been able to move into markets selling more practical everyday items and has `extended the online auction mechanism to go beyond products it was ideally suited for” (“eBay,” 2002, para. 18). Venturing into new product categories is believed to have spurred eBay’s growth. A clear-cut example is the creation of eBay Motors. While the company’s initial thrust had been to offer hard-to-find collectible or items, in later years eBay veered towards more practical goods and in so doing, somehow turned into a conventional retailer.
Large-scale sellers that have become part of the eBay platform have had “an altering effect” on the company, but that’s not necessarily bad… if you look at the nature of what is traded on eBay it’s more than a collectible bazaar today, but a true bazaar of goods, including boats, autos, real estate, airplanes and more… unique products will stand out even more than they would otherwise” (“eBay,” 2002, para. 18) The question that crops up is how eBay internally manages and balances its growing buyers and sellers base. “A small number of salaried employees and outsource numbers can handle a huge and growing volume of business (Luecke, 2005, p. 2). The business model of eBay started out quite simple – the company takes no part in the online transactions between buyers and sellers, enabling it to avoid costs, but eBay gets a cut of every transaction. Also part of eBay’s core competencies, particularly during the decade since its founding, are customer service, as well as solidity with or interaction with the community. This is closely intertwined with another of its key strengths or strategies – the building of a sound IT infrastructure or system reliability.
The latter, in turn led to website convenience and accessibility for a greater number of potential customers. Add to that the powerful marketing strategies sustained by its top-level executives and you find a seemingly unbeatable market leader. Consumer marketing pundits have noted that “eBay’s “attitude toward the community borders on reverence and this is what has propelled eBay to build an IT infrastructure that was stable, always available and flexible; the company has a rigorous development and design process to support the community” (Mascarenhas, Kesavan, ; Bernacchi, 2005, p. 91). In terms of reliability of delivery and payment, customers who easily gravitate to online transactions generally find relative ease in eBay’s delivery and payment. Recent years have seen the firm increasing shipment fees and service fees, however. Overall, eBay’s core competencies support its chosen key strategies of acquiring more users who eventually become active bidders, buyers or sellers. As far as venturing into the international marketplace is concerned, high delinquency cases encountered by certain foreign subsidiaries in online transactions posed setbacks.
Any company that wants to overtake eBay will have to address the fraud issue because fraud is the “biggest concern people have” about online auctions” (Enos, 2001, para. 14). In some highly industrialized countries like Japan, eBay had experienced a stumbling block in terms of gaining market foothold. However, this did not stop eBay from trying again. In terms of its alliances and tie-ups with various firms, eBay “ realizes that small strategic acquisitions (like StubHub and Dutch classified ad site Marktplaats) can be just as important as the big ones like PayPal and Internet telephony Skype Technologies SA” (Hiralal, 2008, para. ). These are moves that aim to finetune services for eBay’s growing customer base. The company’s ability to attract buyers, however, has dropped off in recent years, with some consumers decrying how the traditional auction format has metamorphosed into something like a direct selling site. Nonetheless, eBay executives aver they continually explore ways and means to address customer needs and requirements. The online auction firm configured its value chain in such a way that it is able to offer all types and manner of goods that buyers and sellers may opt for through a customer-friendly site, without taking part in the transactions.
If there had been key executives who did take part in eBay’s online transactions, they did so on a personal level, or it was to be able to glean exactly which areas needed improvement or finetuning. The company likewise seeks to further expand its reach to small-to-medium-scale businesses and large merchant through major companies it had purchased, like PayPal, which it acquired on October 14, 2002. The value chain of eBay may be characterized to an extent as real when it comes to supplier relationships, and virtual in relation to end-consumers.
It has developed a Web-based infrastructure of software, servers and rules behavior that allows a community of buyers and sellers to interact. To its credit, eBay has emerged as “the world’s online marketplace; (it) enables customer involvement with other customers, with suppliers, with distributors, with managers and marketers on a 24/7 basis, (and) has implemented an online sales and support capability that enables live 24/7 interaction to provide fast response to business customers’ inquiries and technical problems. (Mascarenhas, Kesavan, & Bernacchi, 2005, p. 492).
It has been noted that eBay serves as “an excellent example of involving the customer in the customer-service value chain” (Mascarenhas, Kesavan, & Bernacchi, 2005, p. 491). It can be deduced that most of eBay’s strategies today have not departed much from what the company concentrated on a decade ago. Back in 2001, eBay partnered with other sites that included Microsoft (Nasdaq: MSFT) and Terra Lycos. The year 2001 was also the time when eBay branched out to the international marketplace, purchased iBazar in France and launched websites in Ireland, New Zealand and Switzerland (Enos, 2001).
A year ago, eBay announced plans to stay ahead of the competition and enhance user experience by sourcing new deals which show promise of long-term growth. “The company is looking to inject more money into product development and integration” (Hiralal, 2008, para. 2). Investing on product development and tie-ups is no different from eBay’s thrusts 10 years ago. This is because the company had always adopted a two-pronged approach – on one hand, eBay knew it needed to fortify its core auction business. On the other hand, it always sought to diversify by investing on other firms and forming strategic alliances..
Today, however, eBay seems to find itself in the doldroms. In 2001, companies like Amazon and Yahoo! had settled for a solid number two industry position next to then acknowledged leader eBay. Things seem to have changed in recent years. Reports indicate that as of the fourth quarter of 2008, Amazon’s business has grown by 48 percent over eBay with active user growth rate of eBay lagging behind by six percent from that of Amazon, a clear indication that ” eBay’s auction business is ailing” (Wingo, 2009).
The firm clearly faces the main challenge of addressing declining revenues, something which may have an impact on its strategies of global expansion and multiple corporate acquisitions. While eBay’s acquisitions are generating online traffic, on the whole eBay appears to be facing the threat of eventually being upstaged by competition. Nonetheless, eBay remains a vibrant force in the online retailing arena which it redefined, and its future, though hazy, still holds much promise.
eBay: last man standing. (2002, April 10). Retrieved February 20, 2009, from http://www.upenn.edu/pennnews/researchatpenn/article.php?89;bus
Enos, L. (2001). Can anyone catch eBay? ecommercetimes.com. Retrieved 21 February, 2009, from http://www.ecommercetimes.com/story/11349.html
Hiralal, B. (2008). eBay’s top dealmaker talks strategy. thedeal.com. Retrieved February 22, 2009, from http://www.thedeal.com/corporatedealmaker/2008/02/ebays_top_dealmaker_talks_str a.php
Kao, J. (2007). Innovation nation: How America is losing its innovation edge, why it matters, and what we can do to get it back. New York: Simon & Schuster, Inc.
Luecke, R. (2005). Entrepreneur’s toolkit: tools and techniques to launch and grow your new business (Harvard Business Essentials). Boston, MA: Harvard Business School Press. Mascarenhas, O., Kesavan, R. ; Bernacchi, M. (1995). Customer value-chain involvement for co-creating customer delight. Journal of Consumer Marketing, 21(7), 491-492.
Wingo, S. (2009). Q408 in-depth analysis – eBay vs. Amazon – The giants of ecommerce duke it out. Retrieved February 22, 2009, from http://ebaystrategies.blogs.com/ebay_strategies/2009/02/q408-indepth-analysis-ebay- vs-amazon-the-giants-of-ecommerce-duke-it-out.html