e8ay In a League by Itse|f

Case Ana|ys|s

by

Ieff A|exander
Nancy N|emerg

Dr Ce|uch
Market|ng 601
S]2]2011




SI1UA1ICN ANALSIS
Interna|
cote competeocles 1he core compeLencles of a company ls Lhe collecLlve learnlng ln Lhe organlzaLlon especlally how
Lo coordlnaLe dlverse producLlon skllls and lnLegraLe mulLlple sLeams of Lechnology (1he Core CompeLence of Lhe CorporaLlon)
ln Lhe case of e8ay Lhelr maln focus ls on Lhelr cusLomers 1herefore Lhe company works Lo undersLand Lhelr cusLomers by
llsLenlng Lo Lhelr needs and wanLs and worklng Lo meeL Lhese requesLs qulckly and effecLlvely lrom lncepLlon e8ay seL ouL Lo
creaLe a Lradlng communlLy based on flve baslc values (1) people are baslcally good (2) everyone has someLhlng Lo conLrlbuLe
(3) an honesL open envlronmenL can brlng ouL Lhe besL ln people (4) everyone ls a unlque lndlvldual (3) encourage members Lo
LreaL oLhers Lhe way LhaL Lhey wanL Lo be LreaLed" (e8ay 4336) 1hese baslc values are Lhe core compeLencles of Lhe company
and are meanL Lo be adopLed by all users wlLhln Lhe Lradlng communlLy
8olooceJ scotecotJ
*lloooclol letspectlve 1o galn a flnanclal perspecLlve a company musL deLermlne how Lhey look Lo shareholders
e8ay malnLalned lLs poslLlon as Lhe leader ln lLs markeL and has conLlnued Lo grow AlLhough e8ay has conslsLenLly meL Lhelr
flnanclal goals Lhelr conLlnued growLh has lncreased Lhe expecLaLlons of Lhe company's lnvesLors 1herefore e8ay may be
appeallng Lo new lnvesLors buL Lhese lnvesLors wlll be expecLlng a larger lncrease ln growLh Lhan Lhe company has experlenced
ln Lhe paLh
*costomet petspectlve 1he key quesLlon Lo conslder when deLermlnlng cusLomer perspecLlve ls LhaL of how do
cusLomers see us?"(8alanced Score Card) e8ay alms Lo keep lLs cusLomers saLlsfled wlLh Lhe servlce lL provldes 1hls goal ls meL
Lhrough provldlng users wlLh an easy way Lo purchase and sell goods Lhrough an onllne markeL place 1he lncrease ln Lhe
number of reglsLered users proves LhaL Lhe company ls meeLlng lLs goal
*looovotloo ooJ leotoloq petspectlve Companles musL conslder whaL Lhey can Lo lmprove and creaLe value for Lhelr
cusLomers e8ay conLlnually works Lo meeL and/or exceed Lhe needs of Lhelr users 1he company complles lnformaLlon Lhrough
Lhe use of onllne Lown hall meeLlngs clLy vlslLs and holdlng volce of Lhe CusLomer meeLlngs ln whlch 10 new sellers are
complled ln a meeLlng Lo provlde feedback on Lhelr e8ay experlence 1he company uses Lhls lnformaLlon Lo lmplemenL poslLlve
changes meanL Lo please currenL and fuLure cusLomers
*lotetool bosloess petspectlve Companles musL ldenLlfy whaL areas Lhey need Lo excel ln and whaL Lhey musL do
lnLernally Lo meeL Lhelr cusLomer's expecLaLlons 1o meeL cusLomer expecLaLlons e8ay musL provlde convenlenL servlces Lo
cusLomers whlle malnLalnlng ease of use Areas ln whlch Lhe company can excel are Lhrough shlpplng and paymenL e8ay
parLnered wlLh Lwo of Lhe ma[or shlpplng companles uSS and uS Lo lncrease Lhe ease of selllng producLs Lhrough Lhe
webslLe Also Lo faclllLaLe Lhe paymenL process e8ay has purchased ayal Lhe leadlng LhlrdparLy onllne paymenL faclllLaLor ln
2003"(e8ay 429)
Customer
letceptloos e8ay has excelled ln deLermlnlng Lhe percelved preference for Lhelr servlce AlLhough Lhere are slx
dlfferenL caLegorles of cusLomers all cusLomers have Lhe same capablllLles and Lherefore no one cusLomer caLegory has
domlnance over anoLher WlLh Lhe expanslon of e8ay Lhe cosL of upgradlng servlce was passed on Lo Lhe cusLomer 1hls prlce
addlLlon had llLLle Lo no lmpacL on Lhe cusLomers selllng pracLlces or Lhe amounL of lLems belng sold Lhrough Lhe webslLe 1he
buyers' percepLlons of value represenL a Lradeoff beLween Lhe quallLy or beneflLs Lhey percelve ln Lhe producL relaLlve Lo Lhe
sacrlflce Lhey percelve by paylng Lhe prlce" (CusLomer value) AlLhough Lhe prlce was lncreased Lhe buyers percelved sacrlflce
dld noL ouLwelgh Lhe percelved beneflL of uslng Lhe servlce 1herefore lL can be deLermlned LhaL e8ay provldes lLs cusLomers
wlLh a preferred servlce
5etvpoolqops/Jetetmlooots
*CAl 1 1hls gap ls deLermlned by Lhe dlscrepancy beLween Lhe expecLaLlons of Lhe consumer and expecLaLlons
managemenL percelves Lhe consumer Lo have e8ay has soughL feedback from Lhelr cusLomers regardlng Lhelr percepLlon of Lhe
servlce Lhey recelve venues such as volce of Lhe CusLomer meeLlngs e8ay unlverslLy and chaL rooms were used Lo galn
cusLomer feedback on Lhelr lndlvldual experlence uslng e8ay 1hese communlcaLlons allowed e8ay Lo ldenLlfy a gap beLween
cusLomer and managemenL percepLlons of Lhe lncreaslng number of large reLallers enLerlng Lhe markeL WlLh Lhls lnformaLlon
e8ay managemenL was able Lo address Lhelr cusLomer's concerns by explalnlng LhaL all cusLomers would be glven Lhe same
servlce regardless of slze
*CAl 2 1hls gap ls characLerlzed by Lhe dlfference beLween whaL managemenL belleves Lhe consumer expecLs from
Lhe servlce and Lhe quallLy of Lhe servlce Lhe company provldes AlLhough e8ay managemenL has ldenLlfled Lhe problems wlLh
fraud on Lhelr webslLe a gap could exlsL beLween managemenL's ldea of Lhe cusLomer's expecLaLlons and Lhe servlce quallLy
speclflcaLlon e8ay managemenL has lmposed new regulaLlons Lo ald ln fraud prevenLlon ln order Lo meeL Lhelr percelved
cusLomer expecLaLlons
*CAl J 1he gap LhaL exlsLs beLween company guldellnes for quallLy servlce and Lhe acLual servlce recelved by Lhe
cusLomer lraud can also become an lssue beLween servlce quallLy speclflcaLlons and servlce dellvery 1he programs
lmplemenLed Lo allevlaLe Lhe fraud concerns may work for Lhe currenL problem new lssue musL be dealL wlLh as Lhey arlse
Clven Lhe varlance of LransacLlons lL wlll be dlfflculL Lo remove all posslble concerns
*CAl 4 1hls gap ls deflned by Lhe dlsparlLy beLween Lhe servlce recelved by Lhe cusLomer and Lhe servlce Lhe
cusLomer was Lold he would recelve 1here ls no real gap beLween acLual servlce dellvery and whaL ls communlcaLed Lo Lhe
cusLomer
*CAl 5 1he gap beLween whaL Lhe cusLomer ls expecLlng Lo recelve from Lhe producL and whaL ls acLually dellvered
An lssue for e8ay ls LhaL of whaL Lhe cusLomer expecLs and whaL he recelves e8ay has llLLle Lo no conLrol over Lhe servlce
recelved or glven slnce Lhey merely provlde Lhe plaLform for selllng and purchaslng lnsLead of performlng Lhe servlce of selllng
and purchaslng 1he servlce recelved by Lhe buyer ls dependenL upon Lhe seller AlLhough e8ay has ldenLlfled Lhelr 3 baslc values
whlch are meanL Lo be followed by all cusLomers Lhe values musL be enforced Lo dlmlnlsh Lhe concern of a dlsgrunLled
cusLomer e8ay has esLabllshed a leedback lorum ln whlch buyers can offer feedback on sellers Lhey have had LransacLlons wlLh
and vlce versa 1hls feedback ls negaLlve neuLral or poslLlve 1he users wlLh subsLanLlal negaLlve commenLs are reprlmanded
Lhrough suspenslon of purchaslng and selllng ablllLles
Industry
,octoeovltoomeotol foctots When performlng an lndusLry analysls one musL look aL slx dlfferenL Lypes of
envlronmenLal facLors uemographlcs socloculLural economlc regulaLory Lechnologlcal and naLural lL ls lmporLanL for e8ay
Lo be aware of whaL Lrends are lnfluenclng demand for or agalnsL e8ay's servlces
*1be uemoqtopblc ovltoomeot e8ay has recognlzed LhaL Lhe fasLesL growlng segmenL of Lhe uS populaLlon ls now
older Lhan ever Lhose aL 30 and over (e8ay PandouL 436) 1he company has aLLempLed Lo LargeL Lhls markeL by launchlng Lhe
ulglLal CpporLunlLy rogram for Senlors wlLh Lhe goal of brlnglng ln 1 mllllon new senlors by 2003 We assume LhaL senlors ln
general are Lechnologyaverse and llkely vlew onllne LransacLlons as unLrusLworLhy and lnLlmldaLlng 1o combaL Lhls Lhe ulglLal
CpporLunlLy rogram for Senlors lnvolves Lralnlng senlors on how Lo use e8ay Lo flnd and purchase lLems Lhey may need and
whaL e8ay has done Lo ensure LransacLlons are safe easy and secure e8ay has hlred SenlorneL a nonproflL organlzaLlon
speclallzlng ln Lralnlng senlors Lo use Lechnology and lnLends Lo seL up 10 Lralnlng faclllLles by 2003 a volunLeer program for
Lralnlng and a senlorspeclflc area on e8ay's slLe
*1be 5oclocoltotol ovltoomeot e8ay ls lnvolved ln a ma[or ongolng socloculLural Lrend lncreased use of Lhe lnLerneL
Lo accompllsh day Lo day acLlvlLles such as buylng and selllng of goods and oLher ecommerce $373 bllllon ln revenues are
expecLed Lo come from onllne aucLlon sales by 2008 whlch ls a 19 percenL annual lncrease (e8ay PandouL 422) e8ay ls
challenged wlLh how Lo lncrease Lrafflc Lo lLs slLe for boLh new and reLurnlng cusLomers Lo lncrease lLs share of Lhe expecLed
lndusLry revenues
*1be cooomlc ovltoomeot As economles rlse and fall cusLomers' lncome levels are ofLen dlrecLly affecLed creaLlng
a slgnlflcanL problem for e8ay's buslness when economles are sLruggllng As everyone ls aware Lhe world economy over Lhe
pasL decade has been on a rollercoasLer rlde and more ofLen Lhan noL on a downhlll sllde When economles are sLruggllng
more people are llkely Lo Lry Lo sell Lhelr producLs onllne ln an aLLempL Lo galn some qulck cash buL buyers are less llkely Lo
purchase due Lo decreased dlsposable money 1hls lncrease ln supply and decrease ln demand may slgnlflcanLly hurL e8ay's
revenues slnce much of lL ls generaLed based on flnal value fees of Lhe end selllng prlce
*1be keqolototy ovltoomeot Slnce e8ay operaLes ln many counLrles LhroughouL Lhe world dlfferenL governmenL
regulaLlons ln dlfferenL counLrles can have a dlrecL lmpacL on e8ay's operaLlons As regulaLory pracLlces wax and wane Lhe
aLLracLlveness of markeLs ofLen follows sulL" (undersLandlng MarkeL CpporLunlLles PandouL 93) noL all markeLs are as free as
Lhose found ln Lhe WesL Some may resLrlcL cerLaln Lypes of goods from belng sold or oLhers may resLrlcL lmporLs and exporLs
wlLh oLher counLrles e8ay musL be fully aware of Lhe regulaLory envlronmenL before enLerlng a new counLry and Lo navlgaLe
Lhrough any changes
*1be 1ecbooloqlcol ovltoomeot Changes ln Lhe Lechnologlcal envlronmenL are dlrecLly affecLlng e8ay's buslness
performance as lL aLLempLs Lo compeLe wlLh new compeLlLlon e8ay has been overwhelmed by Lhe number of users lL has had
aL Llmes causlng server fallures and resLrlcLed servlce Amazoncom and 8ldvllle have apparenLly surpassed e8ay
Lechnologlcally aL one polnL slnce a recenL benchmark sLudy by Lqulnox showed boLh had beLLer fasLer performance whlle
e8ay was near or aL Lhe boLLom ln boLh caLegorles 8egardless of how many users e8ay can aLLracL lLs servlce musL be rellable
and conslsLenL Lo reLaln Lhose users and promoLe growLh
*1be Nototol ovltoomeot We do noL feel LhaL Lhe naLural envlronmenL plays any slgnlflcanL role ln e8ay's operaLlons
lottets llve lotces orLer's llve lorces ls a meLhod for analyzlng an lndusLry's aLLracLlveness based on compeLlLlve
forces ln lLs envlronmenL 1hls mlx can explaln why some lndusLrles are conslsLenLly more proflLable Lhan oLhers" and gulde an
organlzaLlon ln lLs declslonmaklng processes for fuLure sLraLegles (undersLandlng MarkeL CpporLunlLles 93)
*klvolty omooq lteseot competltots 1he rlvalry among presenL compeLlLors ls hlgh and unfavorable Lo currenL
companles because lL ls exLremely easy for cusLomers Lo swlLch Lo a compeLlLor's onllne slLe and Lhere ls llLLle dlfferenLlaLlon
beLween slLes Whlle some may offer dlfferenL servlces Lhe essenLlals lnvolve a seller selllng Lo a buyer Ma[or compeLlLors
lnclude ?ahoo Amazon 8ldvllle and u8ld
*1bteot of New ottoots 1he LhreaL of new enLranLs ls hlgh and unfavorable Lo currenL compeLlLors because caplLal
requlremenLs aren'L hlgh for enLry (le seLLlng up a webslLe ln comparlson wlLh brlckandmorLar or oLher operaLlons ls
relaLlvely lnexpenslve) and sLrong producL dlfferenLlaLlon doesn'L exlsL
*8otqololoq lowet of 5oppllets ooJ 8oyets 1he bargalnlng power of boLh suppllers and buyers (ln reference Lo users
slnce e8ay lLself doesn'L buy or sell) ls average because boLh can easlly swlLch Lo oLher medlums as nelLher have anyLhlng
slgnlflcanL lnvesLed ln e8ay's operaLlons buL do en[oy relaLlvely low user fees greaLer exposure and llsL of goods compared wlLh
oLher aucLlon slLes
*1bteot of 5obstltote ltoJocts 1he LhreaL of subsLlLuLe producLs ls average because many cusLomers especlally Lhe
elderly may dlsLrusL onllne LransacLlons wlsh Lo see Lhe producL ln person before purchaslng or need Lhe producL lmmedlaLely
and cannoL walL for shlpplng delays buL a greaLer varleLy of producLs can be found on e8ay and ofLen aL a lower prlce Lhan whaL
subsLlLuLes can offer whlle provldlng greaLer exposure due Lo a large user base Some subsLlLuLes can lnclude flea markeLs
garage sales aucLlon houses classlfled ads or reLall sLores
Compet|tor
5tteoqtbs/weokoesses telotlve to competltloo Cne of Lhe mosL popular lndlcaLors of markeLlng effecLlveness and
compeLlLlve advanLage ls markeL share" (Assesslng AdvanLage) Slnce Lhe creaLlon of Lhe company e8ay had been Lhe leader
ln Lhe onllne aucLlon markeL AlLhough rlvals such as Amazon u8ldcom and ?ahoo AucLlons have lncreased Lhelr poslLlon ln Lhe
markeL lL ls esLlmaLed LhaL e8ay conLrolled approxlmaLely 83 percenL of Lhe consumerLoconsumer onllne aucLlon markeL and
64 percenL of LoLal onllne aucLlon revenue share"(e8ay 442) lL can be seen LhaL e8ay clearly has cllnched Lhe vasL ma[orlLy of
Lhe markeL and lL conLlnually worklng Lo lncrease lLs markeL share
AlLhough Lhere are many companles ln Lhe markeL compeLlLors wlll look Lo compeLe dlrecLly wlLh e8ay slnce lL ls Lhe
markeL leader ln order Lo malnLaln lLs poslLlon as markeL leader e8ay musL conLlnually work Lo please Lhelr cusLomers e8ay's
conslsLenLly hlgh ranklng ln cusLomer servlce when compared Lo lLs compeLlLors shows LhaL Lhe company ls malnLalnlng lLs
poslLlon by meeLlng Lhe needs of consumers 1haL belng sald e8ay musL be aware of compeLlLors ln Lhelr markeL such as
Amazoncom whose cusLomer servlce ranklng has exceeded e8ay's from 2000 Lo 2002 Slnce Lhls lndusLry relles heavlly on
cusLomer servlce e8ay musL work Lo lncrease Lhelr cusLomer servlce when compared Lo lLs compeLlLors ln Lhe lndusLry or rlsk
Lhe loss of cusLomers Lo rlval companles
D|str|but|on]supp||er
5ttoteqlc telotloosblps/pottoetloq lssoes e8ay has aggresslvely pursued a buslness model of parLnerlng wlLh sLrong
allles ln almosL every aspecL of lLs buslness wlLh over 230 sLraLeglc alllances wlLh companles such as Amerlca Cnllne (ACL)
?ahoo l8M Compaq and WalL ulsney LhroughouL all sLages of lLs value chaln Accordlng Lo lottoet ot letlsb by lorbescom ln
a global markeL Lled LogeLher by Lhe lnLerneL corporaLe parLnershlps and alllances are provlng a more producLlve way Lo keep
companles growlng" Some examples of e8ay's ma[or parLnershlps lnclude
&uSS and uS whlch allows members Lo accuraLely calculaLe shlpplng cosLs and seL up shlpplng and pay for posLage labels
onllne
&AccenLure Lo faclllLaLe efflclenL LransacLlons for large sellers
& Lvoke CommunlcaLlons so e8ay unlverslLy can offer onllne classes Lo educaLe users abouL lLs servlces
&SenlorneL Lo focus on Lralnlng senlors Lo use e8ay
&Square1rade Lo handle dlspuLes among buyers and sellers
&CollecLor's unlverse Lo auLhenLlcaLe and grade collecLlble memorabllla
&varlous aucLlon slLes ln forelgn counLrles such as Alandode AC ln Cermany or nLC ln !apan Lo esLabllsh Lhemselves ln Lhese
markeLs
arLnershlps can be ln varlous forms such as ouLsourclng lnformaLlon sharlng web consorLla [olnL markeLlng and
[olnL venLures Cne execuLlve lnLervlewed ln Lhe lorbescom arLlcle sLaLed LhaL 1he quesLlon we wlll be asklng from here on
ouL ls can we do lL fasLer smarLer or cheaper? lf noL we parLner" (arLner or erlsh PandouL 1) CrowLh access Lo
compeLlLors' compeLencles and expanslon lnLo new markeLs are Lhe ma[or reasons companles choose Lo parLner arLnerlng ls
Lhe alLernaLlve Lo mergers and acqulslLlons whlch ofLen fall due Lo poor change managemenL durlng Lhe process e8ay has had
some very successful acqulslLlons however such as aypal Lhe leadlng onllne paymenL faclllLaLor whlch now accounLs for 338
percenL of revenue growLh ln 2003 (e8ay PandouL 433) e8ay has uLlllzed a successful mlx of boLh parLnershlps and acqulslLlons
Lo acceleraLe lLs growLh Lo where lL ls Loday
SWC1 ANALSIS
Strengths
1) SLraLeglc parLnershlps producL leadershlp e8ay's exLenslve use of alllances as dlscussed ln Lhe prevlous secLlon has
been a ma[or facLor ln caLapulLlng lLs growLh e8ay has beneflLLed from Lhe core compeLencles of ma[or companles ln
every aspecL of lLs buslness and has been able Lo successfully expand lnLo new markeLs whlle furLher peneLraLlng lLs
currenL markeL due Lo lLs selecLlon of allles
2) 8rand lmage producL leadershlp e8ay ls deflnlLely Lhe [uggernauL Lo compeLe wlLh Lhe WalmarL" of onllne
aucLlons (and lncreaslngly oLher servlces) lL ls known as a secure organlzaLlon wlLh goods from every walk of llfe
e8ay llke oLher brand names such as ChapSLlck or kleenex has become a generlc Lerm when referrlng Lo onllne
aucLlons 1he company name ls commonly used ln verb form such as referrlng Lo e8aylng" or Lo users of e8ay as an
e8ayer"
3) WebslLe Lrafflc generaLlon operaLlonal excellence 1he above Lwo sLrengLhs have led Lo anoLher ma[or facLor of
e8ay's buslness success and LhaL ls slmply of lLs ablllLy Lo aLLracL users Lo lLs webslLe uslng lLs sLrong brand lmage and
parLnershlps wlLh oLher wellknown companles e8ay has Lhe largesL user reglsLraLlon ln Lhe world among aucLlon
slLes
4) MonlLorlng of lnLernal/exLernal envlronmenL cusLomer lnLlmacy producL leadershlp e8ay aggresslvely monlLors lLs
envlronmenL whlch allows lL Lo adapL Lo change as necessary and consLanLly sLay on Lop of lLs compeLlLors lL flles ln 10
sellers every monLh Lo hold group meeLlngs and hosLs onllne Lown hall meeLlngs Lo sollclL feedback from cusLomers
7380 percenL of new feaLures were orlglnally suggesLed by communlLy members" (e8ay PandouL 436) An example
of lLs monlLorlng of and reacLlon Lo Lhe exLernal envlronmenL was glven above ln how e8ay has reacLed Lo Lhe growlng
populaLlon of clLlzens age 30 and over
3) Lack of lnvenLory Lo manage operaLlonal excellence WlLhouL an lnvenLory Lo manage llke some of lLs compeLlLors ln
Amazoncom or reLall sLores e8ay has fewer cosLs assoclaLed wlLh handllng such lnvenLory 1hese savlngs can be
passed on Lo oLher areas allowlng e8ay Lo spend addlLlonal caplLal elsewhere
&We recognlze LhaL e8ay has a large number of sLrengLhs glven lLs ablllLy Lo grow as large and as fasL as lL has buL due
Lo space consLralnLs oLher lssues wlll noL be dlscussed ln deLall aL Lhls Llme Some oLhers lnclude lLs use of cusLomer
feedback Lo generaLe LrusL lLs reglonal offlces Lo caLer Lo local markeLs and lLs servlces relaLed Lo educaLlng users and
senlors
Weakness
1) LxLremely fasL growLh could sLreLch e8ay Loo Lhln operaLlonal excellence e8ay's vasL expanslon lnLo dlfferenL areas
has led Lo exLremely fasL growLh buL ln Lurn lL has creaLed problems for lLself lnvesLors are conLlnulng Lo demand
more and more growLh whlch e8ay ls beglnnlng Lo flnd dlfflculL Lo susLaln Whlle Meg WhlLman e8ay's CLC clalms
LhaL lL ls beLLer Lo do 3 Lhlngs aL 100 percenL Lhan 10 Lhlngs aL 80 percenL" lL would appear e8ay ls Lrylng Lo do 100
Lhlngs aL 100 percenL (e8ay PandouL 448) Cur CusLomer lnLlmacy and CLher value ulsclpllnes handouL sLaLes LhaL
companles LhaL have Laken leadershlp poslLlons ln Lhelr lndusLrles ln Lhe lasL decade Lyplcally have done so by
narrowlng Lhelr buslness focus noL broadenlng lL"
2) Web appllcaLlons are slower Lhan compeLlLors operaLlonal excellence producL leadershlp Accordlng Lo Lhe sLudy
performed by Lqulnox as dlscussed ln a prevlous secLlon e8ay's error raLe was up Lo 8 Llmes LhaL of lLs compeLlLors
whlle lLs average LransacLlon lengLh was up Lo 3 Z Llmes longer (e8ay PandouL 441) 1hese lssues could very llkely
drlve cusLomers Lo oLher slLes especlally when comblned wlLh oLher lssues
3) ulfflculLy saLlsfylng large buys due Lo level playlng fleld pollcy cusLomer lnLlmacy Whlle e8ay sLlcks Lo lLs pollcy of
LreaLlng everyone equally lL rlsks allenaLlng lLs power and corporaLe sellers whlch accounL for 80 percenL of lLs LoLal
buslness (e8ay PandouL 423) e8ay's focus on malnLalnlng lLs culLure may come aL Lhe cosL of loslng one of lLs largesL
sources of revenue
Cpportun|t|es
1) lnLernaLlonal MarkeLs cusLomer lnLlmacy AlLhough e8ay ls currenLly operaLlng ln 28 counLrles Lhe lnLernaLlonal
markeL place ls lncreaslng 1herefore e8ay has Lhe opporLunlLy Lo expand lnLernaLlonally by ldenLlfylng Lhe demands of
Lhe new cusLomers and offerlng a servlce Lo meeL Lhese demands WlLh Lhls expanslon e8ay has Lhe opporLunlLy Lo
become a global leader ln Lhelr markeL
2) 8roadenlng Lhe LxlsLlng 1radlng laLform cusLomer lnLlmacy producL leadershlp e8ay conLlnues Lo expand Lhelr
operaLlons by dlverslfylng and lncreaslng Lhelr Lradlng plaLforms Lo meeL Lhe demands of Lhelr cusLomers 8y
developlng Lhese new meLhods of Lradlng e8ay ls conslsLenLly enhanclng Lhelr cusLomer's use of Lradlng
appllcaLlon(CusLomer lnLlmacy and CLher value ulsclpllnes)
3) Lxpand value Added Servlces operaLlonal excellence producL leadershlp Servlces are conLlnually added Lo decrease
any lnconvenlence Lhe cusLomer may experlence wlLh uslng e8ay 1he company alms Lo provlde pre and posLLrade
servlces Lo enhance Lhe user experlence and provlde and endLoend Lradlng experlence" (e8ay 438) AlLhough many
servlces have already been added lncludlng shlpplng and paymenL faclllLaLors e8ay has Lhe opporLunlLy Lo ldenLlfy
furLher servlces LhaL wlll add value Lo Lhe cusLomer experlence
1hreats
1) new lncreased compeLlLlon producL leadershlp lasL growLh and expanslon opens up e8ay Lo lncreased compeLlLlon
ln new areas such as dlrecL compeLlLlon wlLh Amazon and oLher reLallers auLo Lraders real esLaLe agencles brlckand
morLar slLes and more
2) lraud and securlLy cusLomer lnLlmacy Anywhere Lhere ls success Lhere are Lhose who Lry Lo sLeal from lL An
esLlmaLed less Lhan one percenL of users on e8ay aLLempL Lo fraudulenLly use Lhe servlce Lo rob oLhers of Lhelr money
ln whlch e8ay ofLen has Lo pay Lhe prlce for slnce Lhey offer free lnsurance (e8ay PandouL 437) e8ay has Laken some
measures Lo deLer fraud such as lmplemenLlng Lhe leedback sysLem Lo help ldenLlfy good and bad users
lmplemenLaLlon of a dlspuLe resoluLlon sysLem and reporLlng Lhe fraudulenL acLlvlLles Lo legal agencles 8egardless of
Lhese meLhods fraud wlll sLlll conLlnue Lo exlsL deLer cauLlous users from uslng e8ay and rob e8ay of poLenLlal
revenues
3) PlsLory of Lrouble wlLh servers operaLlonal excellence producL leadershlp e8ay's frequenL servlce ouLages are a
ma[or draln on e8ay's resources whlle aL Lhe same Llme capable of frusLraLlng users Lo a polnL Lhey choose Lo use
anoLher servlce Whlle e8ay Look swlfL acLlon by handlng Lhelr server and neLwork managemenL off Lo Lhlrd parLles
Lhelr conLlnued growLh wlll requlre e8ay Lo always be mlndful of Lhelr Lechnologlcal lnfrasLrucLure's capablllLles Lo
supporL lL servlces
IALUL S1kA1LGILS
value sLraLegles are a seL of Lhree operaLlng plaLforms LhaL companles can focus on Lo add value Lo Lhelr servlces and
meeL Lhe needs of Lhelr producLs 1hese Lhree plaLforms are operaLlonal excellence cusLomer lnLlmacy and producL
leadershlp 1he general rule of Lhumb ls LhaL a company musL excel ln one area whlle meeLlng lndusLry average ln Lhe oLher Lwo
ln order Lo be successful A selecL few companles aLLempL Lo become MasLers of 1wo" whlch means leadlng Lhe lndusLry ln
Lwo of Lhe caLegorles (CusLomer lnLlmacy and CLher value ulsclpllnes)
Cperat|ona| Lxce||ence
CperaLlonal excellence refers Lo provldlng cusLomers wlLh rellable producLs or servlces aL compeLlLlve prlces and
dellvered wlLh mlnlmal dlfflculLy or lnconvenlence" (CusLomer lnLlmacy and oLher value ulsclpllnes) Companles whlch pursue
operaLlonal excellence ofLen aLLempL Lo flnd any way Lhey can Lo cuL cosLs and lncrease efflclencles ln order Lo qulckly geL
producLs Lo Lhelr cusLomers aL less expenslve prlces
e8ay has some sLrengLhs relaLed Lo operaLlonal excellence such as a lack of lnvenLory Lo manage lLs ablllLy Lo
generaLe large amounLs of Lrafflc Lo lLs webslLe and mosL lmporLanLly lLs lndusLryleadlng lowcosL fees for use of lLs servlces
We feel LhaL e8ay only meeLs Lhe lndusLry average overall however due Lo lLs Lechnologlcal problems relaLed Lo efflclencles as
well as lLs lssues relaLed Lo fraud and securlLy
As sLaLed prevlously e8ay has experlenced problems ln Lhe pasL wlLh server ouLages due Lo an overwhelmlng number
of users as well as long LransacLlon Llmes hlgh raLes of error and slowperformlng web appllcaLlons Whlle Lhls ln lLself may
noL be much of a deLerrenL Lo Lhose who use e8ay comblned wlLh oLher facLors lL could cause frusLraLlon Lo a polnL LhaL e8ay
may begln Lo see more and more cusLomers golng Lo lLs compeLlLors who are vlewed as more convenlenL and efflclenL
1he cosL of fraud can be qulLe hlgh ln Lhe case of u8ld Lhe cosLs assoclaLed wlLh pollclng fraud" was one of Lhe
prlmary reasons Lhe company ceased consumerLoconsumer aucLlons ln 2002 (e8ay PandouL 444) AlLhough e8ay has
lmplemenLed varlous sLraLegles Lo mlnlmlze fears of fraud such as Lhe leedback sysLem Lhe problems sLlll exlsL We assume Lhe
leedback lorum for example doesn'L accuraLely represenL many e8ayers due Lo Lhe fear of reLallaLlon for leavlng negaLlve
commenLs 8elng personal users of e8ay we boLh have had experlences where we felL users deserved negaLlve feedback buL
were afrald Lo leave lL because we dldn'L wanL Lhose users Lo reLallaLe and leave us negaLlve feedback ln reLurn 1hls problem
leads Lo more poslLlve feedback Lhan ls ofLen deserved whlch makes ldenLlfylng bad and someLlmes fraudulenL users more
dlfflculL
5ttoteqlc optloos e8ay needs Lo focus on lmprovlng lLs Lechnologlcal lnfrasLrucLure Lo mlnlmlze or ellmlnaLe server
ouLages and lncrease performance of lLs appllcaLlons whlle conLlnulng Lo llsLen Lo lLs cusLomers' advlce on lmprovlng varlous
parLs of lLs webslLe Lo lncrease convenlence and ease of use (1leln Lo cusLomer lnLlmacy below) e8ay could also conslder
ralslng lLs lnsurance pollcy Lo combaL fears of fraud AL Lhls Llme e8ay only covers up Lo $200 on normal producL mlnus a $23
deducLlble 1hls lnsurance personally makes boLh of Lhe auLhors much more comforLable ln uslng lLs servlce buL on larger
purchases lL has llLLle effecL Whlle lL may cosL e8ay more money on some deals lL would llkely conLrlbuLe Lo an lncreased user
base whlch would more Lhan make up for lL
Customer Int|macy
CrganlzaLlons pursulng a sLraLegy ln cusLomer lnLlmacy conLlnually Lallor and shape producLs and servlces Lo flL an
lncreaslngly flne deflnlLlon of Lhe cusLomer" (CusLomer lnLlmacy and CLher value ulsclpllnes) A maln goal behlnd Lhls ls Lo
creaLe longLerm cusLomers by spendlng exLra up fronL ln order Lo aLLracL and reLaln Lhem
AlLhough e8ay's servlces are avallable Lo anybody wlLh access Lo Lhe lnLerneL and lL doesn'L speclflcally Lallor Lo one
Lype of markeL segmenL we feel e8ay ls aL or above average compared wlLh Lhe lndusLry due Lo lLs responslveness Lo cusLomer
needs and wanLs and lLs consLanL focus on developlng speclflc servlces for speclflc nlches ln Lhe markeL e8ay's aggresslve
monlLorlng of lLs lnLernal and exLernal envlronmenL have allowed lL Lo adapL well Lo Lhe needs and wanLs of lLs users and Lo
combaL lLs compeLlLors
Slnce 7380 percenL of e8ay's feaLures come from cusLomer recommendaLlons as sLaLed earller lL ls clear e8ay's
sollclLaLlon and use of cusLomer feedback has greaLly beneflLLed Lhe company e8ay also llsLens Lo lLs crlLlcs who aren'L happy
when e8ay came under hoL waLer for referrlng loslng bldders Lo oLher aucLlons of a slmllar lLem sellers weren'L happy Cmldyar
and WhlLman founder and CLC of e8ay Look a personal lnLeresL ln one cusLomer who clalmed e8ay's new pollcy was screwlng
Lhe folks who bullL Lhem" (e8ay PandouL 436) AfLer meeLlng wlLh Lhls dlsgrunLled user e8ay removed Lhls upseLLlng pollcy
e8ay Lallors varlous parLs of lLs operaLlons Lo dlfferenL markeL segmenLs such as lLs focus on senlor clLlzens e8ay has
a secLlon of lLs webslLe devoLed speclflcally Lo senlors has launched Lhe ulglLal CpporLunlLy rogram for Senlors and spenL over
$1 mllllon on SenlorneL Lo Lraln senlors Lo use lLs sysLems e8ay also alLers lLs servlces dependlng on locaLlon such as addlng
popular caLegorles of producLs dependlng on whaL Lhe local culLure ls lnLeresLed ln Pello klLLy and okemon for example ln
!apan ln addlLlon e8ay has reglonal offlces locaLed ln Lhe 30 largesL clLles ln Lhe uS whlch focus prlmarlly on local demands
LhaL may noL be popular elsewhere
5ttoteqlc optloos Slnce e8ay has made lL clear lL wanLs Lo respond Lo lLs cusLomers' needs and wanLs lL ls lmporLanL
for e8ay Lo address Lhe ma[or lssue beLween corporaLe and personal users As sLaLed ln Lhe SWC1 e8ay ls loslng corporaLe
sellers such as MoLorola and ClrculL ClLy because Lhey aren'L happy abouL Lhe dlfflculLles (and lack of speclal LreaLmenL) of
selllng ln bulk ersonal users may complaln abouL culLure and belng overrun by large sellers buL Lhe facL LhaL 80 of e8ay's
aucLlon revenues come from Lhese large sellers means e8ay musL address Lhe lssue 1hls could come ln Lhe form of small
dlscounLs for mass quanLlLles of lLems sold or oLher beneflLs such as ?ahoo's remlum Sellers rogram 8eneflLs shouldn'L be
Loo exLravaganL however for fear of allenaLlng lLs core users who essenLlally bullL Lhe company ln addlLlon e8ay needs Lo
conLlnue ldenLlfylng and focuslng on lncreaslngly narrow markeL segmenLs and Lallorlng Lhelr producLs Lo Lhose ln order Lo
aLLracL and reLaln new cusLomers 1he hlgh cosLs of cusLomlzaLlon wlll be ouLwelghed by lncreased brand loyalLy
9roduct Leadersh|p
1he Lhlrd value dlsclpllne LhaL organlzaLlon may pursue producL leadershlp requlres Lhem Lo sLrlve Lo produce a
conLlnuous sLream of sLaLeofLhearL producLs and servlces" (CusLomer lnLlmacy and CLher value ulsclpllnes) CrganlzaLlons
may reach Lhls goal by belng creaLlve commerclallzlng ldeas qulckly and relenLlessly pursulng new soluLlons and ldeas
e8ay ls deflnlLely Lhe blg dog ln Lhe onllne aucLlon world and lncreaslngly becomlng more so ln onllne reLalllng ln
everyLhlng from real esLaLe Lo consumer elecLronlcs and auLomoblles A sLrong brand lmage exLenslve llsL of sLraLeglc
parLnershlps and creaLlve and lnnovaLlve servlces clearly make e8ay sLand ouL ahead of lLs lndusLry ln Lhls caLegory
e8ay ploneered Lhe onllne aucLlon world wlLh lLs creaLlon ln Lhe mld90's Slnce Lhen by offerlng a Lhenunlque
servlce and sLraLeglcally poslLlonlng lLself by allylng wlLh ma[or players ln every faceL of lLs lndusLry e8ay has developed a brand
lmage and name LhaL ls synonymous wlLh onllne LransacLlons 1he lnnovaLlve ldeas of creaLlng programs such as e8ay
unlverslLy Lo educaLe new and advanced users lLs lmplemenLaLlon of Lhe leedback lorum and SafeParbor Lo promoLe securlLy
and use of LlveAucLlons speclalLy slLe Lo bld on currenL llve sucLlons has helped expand Lhelr valueadded servlces and shooL
Lhem Lo a class above Lhelr compeLlLors
An example of e8ay's domlnance ln lLs lndusLry was shown ln ?ahoo's concesslons ln varlous lnLernaLlonal markeLs ln
2002 ?ahoo succumbed Lo Lhe [uggernauL of onllne aucLlonlng and shuL down lLs slLes ln lrance Cermany lLaly Spaln Lhe
unlLed klngdom and lreland and Lhen began promoLlng e8ay's slLes ln Lhose counLrles lnsLead (e8ay PandouL 443) ln
addlLlon a survey ln 2003 by PlLwlse showed LhaL e8ay garnered 936 of all Web Lrafflc dlrecLed Lo aucLlon slLes (e8ay
PandouL 443)
5ttoteqlc optloos e8ay has creaLed an lmage of conLlnuously offerlng unlque and lnnovaLlve ldeas Lo lLs cusLomers
and musL conLlnue Lo do so Lo malnLaln lLs markeL share 1he nexL loglcal sLep may be Lo creaLe a new meLhod of searchlng ouL
and handllng fraudulenL users wlLh a greaLer degree of success Lhan has been done by lLs currenL programs e8ay needs Lo also
focus on lmprovlng Lhe quallLy of lLs producLs ln relaLlon Lo Lhe poor performance of some of lLs funcLlons
CCNCLUSICNS]IN1Lk9kL1A1ICN
A SlLuaLlon and SWC1 Analysls were performed Lo ldenLlfy e8ay's currenL slLuaLlon ln order Lo provlde
recommendaLlons for lmprovlng Lhe company's markeLlng sLraLegy and susLalnlng Lhe company's growLh and buslness
performance
1he core compeLency of Lhe company ls Lo please Lhelr cusLomers by provldlng a slmple and convenlenL onllne Lradlng
plaLform ln whlch cusLomers are able Lo sell and purchase goods lL ls recommended LhaL e8ay conLlnues Lo sLrengLhen Lhelr
core compeLency by acqulrlng cusLomer feedback and uLlllzlng Lhls feedback ln lmprovlng Lhelr servlces e8ay should conLlnue Lo
employ feedback forums such as Lhe volce of Lhe CusLomer program Lo meeL Lhelr core compeLency close gap 1 and lncrease
Lhe lnnovaLlon and learnlng perspecLlve of lLs balance scorecard
1he currenL markeL for onllne Lradlng offers companles many opporLunlLles Lo caplLallze upon 1hese opporLunlLles
lnclude expandlng Lo lnLernaLlonal markeLs broadenlng Lhe company's exlsLlng Lradlng plaLform and expandlng Lhelr servlce Lo
add value Lo Lhelr cusLomers 1he lnLernaLlonal markeL segmenL ls conLlnually growlng and Lherefore lL ls recommended LhaL
e8ay expand lLs servlce Lo lnclude Lhese markeLs Slnce each markeL ls dlfferenL ln Lerms of whaL ls soughL by cusLomers e8ay
has Lhe opporLunlLy Lo segmenL lnLernaLlonal markeLs and provlde servlced dlrecLly ln llne wlLh cusLomer needs 1hls wlll
esLabllsh e8ay as a global leader ln Lhe onllne Lradlng lndusLry 1hls dlverslflcaLlon musL noL remaln solely beLween lnLernaLlonal
markeLs buL raLher e8ay musL dlverslfy wlLhln lLs exlsLlng Lradlng plaLform e8ay has been very sLrong ln expandlng lnLo markeLs
prevlously unused by Lhe onllne Lradlng communlLy such as Lhe sale of vehlcle land eLc lL ls recommended Lhe company
conLlnue Lo address unexplored Lradlng plaLforms ln order Lo meeL and enhance Lhelr cusLomer's deslres ln addlLlon Lo
expandlng lnLo lnLernaLlonal markeLs and broadenlng Lhe exlsLlng Lradlng plaLform e8ay musL also expand lL value added
servlces e8ay has conLlnued Lo lncrease lLs value added servlces Lhrough creaLlng alllances wlLh shlpplng companles and
purchaslng ayal Lo alde ln Lhe Lransfer of paymenLs beLween Lhe buyer and seller AlLhough ayal has been effecLlve lL ls
recommended LhaL e8ay offer oLher means of paymenL such as check and/or money order Many companles offer cusLomers
Lhe ablllLy Lo pay wlLh echecks whlch use bank rouLlng and accounL numbers Lo Lransfer funds from Lhe buyers accounL lL ls
recommended LhaL e8ay lmplemenL Lechnlques such as eCheck Lo offer cusLomers addlLlonal paymenL opLlons ln addlLlon Lo
addlng purchase opLlons lL ls recommended LhaL e8ay conLlnue Lo parLner and form alllances LhaL wlll lncrease cusLomer value
AlLhough e8ay has ldenLlfled flve baslc values whlch lL expecLs lLs cusLomers Lo follow noL all members follow Lhese
values 1o allevlaLe Lhe concern of fraud and Lo close Lhe flfLh gap e8ay has lnlLlaLed feedback forum ln whlch buyers and sellers
are able Lo raLe each oLher based on Lhelr performance such as quallLy of producL speed of dellver ease of LransacLlon
paymenL Llme eLc 1hls has been useful ln LhaL lL allows buyers and sellers Lo revlew pasL performance raLlngs prlor Lo
compleLlng LransacLlons AlLhough Lhls program has been hlghly effecLlve fraud wlll always be presenL When cases of fraud
occur e8ay has lmplemenLed dlspuLe resoluLlon and reporLed fraudulenL acLlvlLles Lo auLhorlLles AlLhough e8ay does have an
lnsurance pollcy LhaL covers fraudulenL LransacLlons Lhe pollcy llmlL ls raLher low 1hls could deLer some users from purchaslng
lLems over Lhe lnsured raLe and Lherefore could cause a loss of posslble revenue for e8ay lL ls recommended LhaL e8ay lncrease
Lhe amounL covered by Lhelr lnsurance ln order Lo dlmlnlsh Lhe cusLomers fear of fraud when purchaslng hlgh LlckeL lLems 1he
lmplemenLaLlon of Lhls recommendaLlon could poLenLlally lncrease revenue for Lhe company slnce hlgher prlce sales could
occur
CurrenLly e8ay offers Lhe same capablllLles Lo all sellers regardless of whaL caLegory Lhey operaLe ln 1hls has been
done Lo creaLe falrness for all cusLomers buL by dolng Lhls e8ay has allenaLed some of lLs larger sellers such as MoLorola and
ClrculL ClLy 1hls has caused Lhese larger cusLomers Lo leave and look elsewhere for sales ouLleLs slnce Lhey flnd lL hard Lo make
a proflL e8ay cannoL afford Lo lose Lhelr larger cusLomers slnce Lhey make up a largesL percenLage of Lhe operaLlng proflL
1herefore lL ls recommended LhaL e8ay offer speclal lncenLlves/dlscounLs Lo sellers who provlde bulk" sales selllng mulLlples
of Lhe same producL under one headlng 1hese dlscounLs should be on an lncremenLal scale dependenL upon Lhe number of
lLems offered 1herefore lL ls noL necessarlly creaLlng lssues wlLh sellers of lndlvldual producLs buL raLher offerlng all sellers Lhe
opporLunlLy Lo recelve speclal lncenLlve/dlscounLs based on Lhe number of ldenLlcal lLems avallable for sale
lL has been ldenLlfled LhaL e8ay has had a hlsLory of problems wlLh Lhelr servers e8ay ls operaLlng ln an lndusLry whlch
Lechnology plays a ma[or role 1echnology ls requlred for e8ay Lo provlde servlce Lo Lhelr cusLomers and Lherefore lL cannoL be
neglecLed WlLh Lhe conLlnued expanslon of Lhe company Lhe lssue of server problems wlll lncrease lf noL dealL wlLh
accordlngly lL ls recommended LhaL e8ay focuses on allevlaLlng Lhe problems wlLh Lhelr servers by allocaLlng funds almed aL
lmprovlng Lhelr sysLem lnfrasLrucLure ln order Lo mlnlmlze or ellmlnaLe server lssues lf fundlng ls noL avallable for expanslon
and sysLem lnfrasLrucLure e8ay should remove LhreaLs prlor Lo caplLallzlng on opporLunlLles 1herefore once Lhe server lssues
are properly dealL wlLh expanslon can conLlnue
Slnce lncepLlon e8ay has been Lhe leader ln Lhe onllne Lradlng markeL and has pconLlnued Lo grow lf lmplemenLed
Lhe above menLloned recommendaLlons wlll lmprove Lhe company's markeLlng sLraLegy and susLaln Lhe company's growLh and
buslness performance