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12/16/2009
TABLE OF CONTENTS
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EBAY.COM INTRODUCTION
Once upon a time during the dawn of the internet, a man named Pierre Omidyar decided
to sell a broken laser pointer online on his website called EBay, named after his consulting
company Echo Bay. The site at that time during the year 1995 was not primarily an auction site,
the auction part was an afterthought and was named auction web. Auction web grew quickly
among internet fanatics, and soon Pierre had to hire several employees to take care of the many
tasks that involved his day to day operation. After two years, the site name was changed to EBay,
a site that was devoted to online auctions, soon after, the worldwide obsession with EBay and
consumers. Currently, Pierre is ranked #40 among the 400 richest Americans in the country by
Forbes, released September 30, 2009.
EBays mission statement says, eBay's mission is to provide a global trading platform
where practically anyone can trade anything." EBays vision, pioneers communities built on
commerce, sustained by trust, and inspired by opportunity. EBay brings together millions of
people every day on a local, national and international basis through an array of websites that
focus on commerce, payments and communications. Comparing the mission statement to the
vision of the company gives off the impression that EBay doesnt have focused priorities .This
means the mission statement seems clearly focus on the website, eBay.com, but their vision
statement is focused on the array of subsidiary websites.
During the year of 1998, Pierre hired an experienced CEO named Meg Whitman to
become head of the public exploding company who now had 130 employees and a spot on the
New York Stock Exchange with a symbol as EBAY. Over the course of the next 10 years with
Meg Whitmans leadership, EBay mania grew into an enormous multinational company who two
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years ago employed over 15,000 employees in 39 countries. In January 2008, John Donahoe took
over Meg Whitmans place as CEO, and currently EBay has 16,200 employees (an 8% employee
increase in one year) in over 30 countries. EBay is an online provider of marketplaces for the
sale of goods and services. It also provides commerce, platforms, online payments services and
online communications offerings to individuals and businesses. EBays foreign entry strategies
into other countries have played a key role in their success for worldwide domination in the
online auction market. The products and services that EBay offers vary from online
communication services to the sales of goods and services.
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The products and services that EBay provides is an online marketplace for the sale of
goods and services. The companys key products and services include the following:
Online classifieds
Advertising
The key brands that the company has and operates are a number of subsidiary websites
that are under the EBay umbrella. These companies include:
EBay's marketplace to buy and sell tickets for events Stubhub.com: Bought by
EBay in February 2007 for $292M
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The company generates about 75% of its revenues from the US, Germany and the UK.
The company recorded revenues of $8,541.3 million during the financial year ended December
2008, an increase of 11.3% over 2007. The operating profit of the company was $2075.7 million
in financial year ending 2008, an increase from $613.18 million in 2007. Net Profit in financial
year ending was $1,779.5 million as compared to $348.3 million in 2007. The increase in profits
is attributed to acquisitions and increased revenues from advertising and the payments business.
The current stock price as of November 5, 2009 is $23.13, can be seen in the chart on the next
page in the below bottom right table.
The increases in EBays financials for the past three years have been impressive.
According to Annualreports.com 2008 annual report for EBay, the company has seen
tremendous increases and growth for the online giant. Some examples of the increases over the
past year for EBay and some of its platforms include its payment option paypal.com. In 2007
delivered a total of $1.9 billion in revenue, as of EBays 2008 annual report, paypal.com not
hosts nineteen currencies with more than $60 billion dollars in revenue. A tremendous increase
in EBays payment platform suggests that more people are becoming comfortable sending and
receiving money over the internet, as well as the number of internet users are growing as well. In
EBays communication segment platform of skype.com, in 2007 skype.com hosted more than
276 million users, as of EBays 2008 annual report, skype.com now registers more than 405
million users. The increase of more than 47% shows that consumers are very comfortable with
EBay and the platforms that the company provides. As of EBays 2008 annual report, there are
more than $100 billion worth of pre-owned items on EBay, making it the worlds largest engine
for reuse.
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$8,541.30
$6,313.20
$1,779.50
Fiscal Year
Ending
2008
Revenue
(Millions U.S.
Dollars)
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions U.S.
Dollars)
$5,969.70
$4,713.00
$1,125.60
Fiscal
Year
Ending
2006
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$8,000.00
$7,000.00
$6,000.00
$5,000.00
$4,000.00
$3,000.00
$2,000.00
$1,000.00
$-
$7,672.30
$5,909.40
$348.30
Fiscal
Year
Ending
2007
Revenue
(Millions
U.S. Dollars)
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions
U.S. Dollars)
Revenue
(Millions
U.S. Dollars)
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions
U.S. Dollars)
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EBay faces high risk of internet fraud due to which it is involved in various litigations.
Below we will go over EBays strengths, weaknesses, opportunities, threats, and strategies to get
a better understanding of the strategic choices that EBay faces.
The strengths that the company has can be argued that they were the first to enter the
online auction business, as well as having a majority of the marketplace. The external strength
opportunities of EBay can be consisted of a strong market position due to wide usage. This
strength can maximize EBays opportunities, over the years, the company has built a strong
brand, currently the brand value stood at $12.9 billion and was ranked 54th in brand value
rankings. EBays internal strengths have focused on a swift increase in the number of users and
number of product listings. As of 2009, EBay has 88 million active users and about 150 million
listings worldwide and in any given day, has about 14 million listings. An increased number of
customers contributed to the growth of the company, and it emerged as one of the largest global
online auction website with presence in 39 countries. EBays strong customer base and market
position provides competitive advantage and gives EBay considerable bargaining power which
will have a positive impact on the top line of the company. EBays strength threats strategies can
be consisted of reinforcement of marketing, management, and systems as a concentrated effort.
EBays weaknesses can be favorably argued that the company has an insufficient
screening process to control counterfeit products. EBay does not have an effective screening
process in place to control sale of counterfeit products on its market places. While some sellers
commit fraud intentionally, some of them are unaware of any infringement. For instance, some
sellers might not be aware that certain products are not allowed for resale. The company does not
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have effective tools to monitor and weed out such instances. In most cases, the company is able
to identify counterfeit products only after the items have been listed.
The weakness threat strategies can be categorized as having an exposure to large
contingent liabilities due to litigations. EBay has consistently been involved in various lengthy
litigations, stretched over a period of two to three years because of which it is exposed to large
contingent liabilities. Many complaints were filed against EBay for offering counterfeit items.
This being the main area of contention, there were lawsuits filed by companies like Net2Phone,
Netcraft Corporation, and PartsRiver which claim that EBay, Skype and PayPal have infringed
their patent rights. In 2007, a lawsuit was filed alleging that EBay and PayPal, through various
anti competitive acts, were monopolizing markets. Most of these lawsuits filed in 2006 and 2007
are still pending. Lengthy litigations are expensive, and they expose the company to uncertainty
and large contingent liabilities. The damages awarded were as large as $56.8 million in a lawsuit
which claimed that EBay failed to curb sale of counterfeit products. Other than having to pay
damages, EBay might be prohibited from selling certain items or continuing certain business
practices. This affects the operations adversely. Litigations are expensive, time consuming and
they result in diversion of significant operational resources. EBay has to actively take measures
to ensure it is not involved in any further litigation as they are counterproductive.
The companys weakness opportunities strategies can consist of diversifying into new
product markets, as they have been over the years. The company can also try to implement an
online verification of goods being auctioned to avoid very expensive lawsuits and time
consuming litigations that hurt the company. The weakness threats of the company can consist of
the alliance with postal carriers implemented on the companys website for sellers to choose
from when shipping their items.
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Some opportunities that EBay faces are rapid growth of internet display advertising and
classifieds. Online advertising, both display ads and through classifieds, has been growing at a
fast pace. Revenues from interactive advertising which comprises search, display advertising and
classifieds is expected to grow as at rate of 23.4% during 2007- 2012 and generate $147 billion
by 2012. Increasing popularity of used goods is another opportunity for the company. In the
current uncertain economic situation where consumer spending has been decreasing, pre-owned
items have been increasingly popular. Since 1998, EBay marketplace has facilitated the reuse of
an estimated $100 billion in goods. Industry trends indicate the US consumers are buying used
goods as a way to save money. In 2008, according to EBay sources, 75% of adults purchased
used goods to save money. More than a quarter of adults who had purchased used goods in the
past six months (since August 2008) saved 76% or more off the retail price of the last item they
purchased. Apart from this, 88% of Americans believe that buying pre-owned goods amounts to
recycling and is therefore environment friendly.
The threats that EBay faces are exposure to internet fraud that will increase costs and
affect customer confidence adversely. Online marketplaces have a high exposure to different
types of fraud. There are various types of internet frauds including the sale of fake or counterfeit
products, credit card fraud or non delivery of goods, etc. According to the Internet Crime
Complaint Centers (IC3) statistics, internet fraud has been on a rise. During 2008, IC3
registered 275,284 complaints which indicate an increase in complaints by 33.1% from 2007.
The total dollar loss due to these frauds has been $264.6 million which works out to be an
average loss of $934 per complaint. Effectively eliminating frauds is costly as the company as to
incur large recurring expenses to monitor and prevent such frauds. In case of litigations, EBay
would have to incur legal expenses, and there is a possibility that heavy penalty or compensation
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would have to be paid. Another example of a threat for EBay would be the unavailability of
services that leads to loss of income. System failures for long duration operational risk for EBay
in 2008 had periods of interruptions for periods for as long as 22 hours, and PayPal was
unavailable for five continuous days. In early 2007 Skype was unavailable for two continuous
days. Repeated failures might lead customers to believe that the systems are unreliable and
reliability is especially crucial for the payments division which is seeking to expand its merchant
services business. Due to frequent unscheduled interruptions for long periods, the companys
reputation and reliability will be affected negatively.
EBays competitive analysis in the marketplace gives the company a higher advantage
over their competitors such as ioffer.com, sell.com, and alibaba.com. Although the company has
similar commonalities with their rivals, eBay has several different platforms and segmentations
under the companys umbrella to help keep them afloat. This is the difference between eBay and
their competitors. Since they were the first to the market for online auctions, this gives the
company an advantage of trust and well being to consumers who may be new to the internet as
well as online auctions. Consumers and competitors alike recognize eBay as a dominant force on
the internet, and they are aware of its capability of providing far better than competition.
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Strengths S
Weaknesses W
Own majority of
marketplace by
being first
Poor screening
process to control
counterfeit goods
Opportunities O
SO Strategies
WO Strategies
Diversification with
the growth of
consumers
Global expansion in
products and
services
Online product
verification to
control fraud
Threats T
ST Strategies
WT Strategies
Competition among
rival internet sites
Reinforcement of
marketing and
management
Alliance to postal
services
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Porters Five Force model of competition is a key tool for diagnosing the competitive
environment:
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Supplier power is higher when buyers have fewer choices from whom to buy. The
internet has increased the amount of supplier power to consumers. Buyers have an option now to
become a supplier themselves by becoming a drop shipper for suppliers. The drop shipper does
not have to store any items in a warehouse or factory with this option, thanks to the power of ECommerce. Drop shippers can earn money by listing items for suppliers and forwarding the
orders to the main supplier. The logistics part is also at the main suppliers expense, really not
having to do too much work on the drop shippers part except collect their share from the sale.
This type of supplier power gives an increase in products and services to the marketplace, and in
turn continues the growth of eBays online website. Especially for eBay, there are numerous
drop shippers that have set up their own stores on eBays site. EBay gives sellers an option to set
up an online store for a monthly fee where shoppers can browse through products as they please.
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The strong competitive pressures coming from the attempts of companies outside of the
industry to win buyers over have become more widespread in todays E-Commerce market.
There have been an increasing number of fixed price sales over auction style listings over online
auction sites such as eBay. Search engine and price comparison websites are moving in the
direction of online retailing and auctions. Yahoo shopping and price comparison search engines
such as Microsofts Bing.com have recently been becoming a more popular way to price
comparison shop online. The internet offers avenues of competition to existing companies and
opportunities for start ups. Now businesses can enter the market on-line with few barriers to
entry. Porter's Five Forces Model can help demonstrate the attractiveness of starting your on-line
business or evaluating a current one such as eBay. The model below will help to better illustrate
eBays five forces:
Threats
Competition
with rival
sites
Supply Power
Drop
shipping for
suppliers
Rivalry
Ioffer.com
Amazon.com
Buyer Power
Bargain
shopper
paradise
Substitute
Price
comparison
sites
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A cost leadership strategy that eBay has is the ability to form alliances with numerous
companies. An example of this strategy could be the alliance by eBay and Tom.com. In 2006,
Tom.com and EBay Eachnet (eBays China Auction Site) decided to announce a joint venture
agreement in China. The two companies would need to build a new China marketplace in 2007
to compete with Chinas top auction site rival Taobao.com. EBay would have a 49% stake in the
company and tom.com will have a 51% stake in the joint venture. In addition, EBay will
contribute its Eachnet subsidiary, while Tom Online will contribute local management expertise,
technology, and brand.
Active users increased 4% y/y (a small acceleration, well big percentage-wise, but small
in absolute terms) from the Q3 3% y/y gain.
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Here are some graphs from Jeetil Patel that show the trends in the item sold and active user
metrics:
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The transaction growth chart shows that while eBay held onto a y/y growth on this
metric, the trend is definitely decelerating. It will be interesting to see if this goes negative in Q1
or if eBay can hold the line here.
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local Meetup Groups around shared interests and purposes. These groups and clubs have held
over 1 million local meetups. In April of 2006 eBay acquired Tradera.com for $48.3 Million
USD. Tradera.com is an auction site based in Sweden.
In June of 2006 eBay Inc. and PCHome Online announced that they have agreed to form
a joint venture in Taiwan. Under the agreement, the companies will leverage eBay's global
experience and PCHome Online's local ecommerce expertise to launch a new co-branded website
that will bring new online trading opportunities to buyers and sellers in Taiwan under the name
of Ruten.com.tw. Focused on the needs of Taiwan consumers, the website specializes in online
auction-style trading and also offers the ability to buy and sell at a fixed price.
In January of 2007 eBay acquired Stubhub.com for $310 Million USD. Stubhub.com is
an online marketplace for concert, sport, and Broadway event tickets. In April of 2007 eBay
acquired Microplace.com. MicroPlace is a social business owned by eBay. It focuses on
microfinance loans sent via the internet, utilizing PayPal, allowing users to choose specific
lending clients and businesses and loan them money over a designated period of time. Unlike
competitor Kiva, investments are returned to the lendee with interest. Microplaces stated
mission is to alleviate global poverty by offering investments that enable loans to hardworking
poor people.
May 2007 was a busy month for eBay; they acquired three companies and invested in
another. The first company which was Stumbleupon.com that eBay acquired for $75 Million
USD on May 1st. StumbleUpon is a website and content discovery service enabled by a browser
toolbar. StumbleUpon uses positive and negative user ratings to form collaborative opinions on
website quality. When users stumble, they will only see pages which friends and like-minded
stumblers have recommended. More often than not, its something almost serendipitously
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interesting to the reader. The StumbleUpon site says they have nearly 7.5 million users as of
April, 2009, up from 1.7 million in December 2006. Over 15 million personalized
recommendations (stumbles) are delivered daily. The same day on May 1st eBay invested in
Channeladvisor.com. ChannelAdvisor Corporation provides technology and services that enable
online retailers to maximize their profits across multiple e-commerce marketplaces such as eBay,
Amazon.com and Overstock.com, comparison shopping engines such as Shopping.com,
Shopzilla, Nextag and Google Product Search and search engines such as Google, Yahoo and
MSN. In 2007, ChannelAdvisor managed over $2.1 billion in gross merchandise value (GMV)
on behalf of its customers.
Two days later, on May 3rd, eBay acquired Gittigidiyor.com, which in Turkish means
going, going, gone. Gittigidiyor is a Turkish online marketplace similar to eBay that offers
auctions, stores and fixed price listings. Gittigidiyor is Turkeys leading online marketplace
company. It was founded in 2000 by local entrepreneurs in Turkey and is headquartered in
Istanbul. Auctions began at 5 February 2001. Gittigidiyor has over 1.5 million registered users
and more than 500,000 daily visitors. Since 2001, 3.5 million sales have been successfully
completed. Finally, for the month of May, eBay acquired Gumtree.com on May 19th.
Gumtree.com was started in March 2000 as a local London classified ads and community site,
designed to connect people who were either planning to move, or had just arrived in the city, and
needed help getting started with accommodation, employment and meeting new people.
Gumtree.com now covers 60 cities across 6 countries - the UK, Ireland, Poland, Australia, New
Zealand and South Africa - and are the UKs biggest website for local community classifieds
including flat share, flat rentals and jobs. More than 25,000 new rooms are advertised a month,
which means at least 10,000 rooms are rented a month through Gumtree.
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On October 4th 2007, eBay acquired Via Online. Via-Online GmbH is an auction
management software company. The company operates web-portal, Afterbuy.com, which helps
users manage various aspects of the selling process, with features like inventory management
and item listing. The company is based in Krefeld, Germany. On January 1st 2008, eBay acquired
Fraud Sciences for $169 Million USD. Israel and Palo Alto based Fraud Sciences offers
automated anti-fraud systems including SpotLight VFX and SpotLight T2T, merchant solutions
they provide are transaction verification with fraud prevention. Fraud Sciences has been
integrated into eBays PayPal product to help fight against fraud prevention. On May 2nd 2008,
eBay acquired Vuvox. Vuvox makes technology for presenting rich media in slideshows.
On September 25th 2008, eBay acquired Gmarket.com. Gmarket.com is a financial
information company specializing in the delivery of global fixed income and capital markets
data. The flagship product PILOT is a real-time desktop workstation for financial professionals
delivered via the Internet. Pilots customizable desktop aggregates the worlds leading sources of
capital markets content onto one singular platform for ease of access. It also includes a real-time
direct interface to MS-Excel. They pride themselves on delivering quality content in one easy to
use, flexible, and affordable package.]
In October 2008, eBay acquired Den Bla Avis for $380 Million USD. Den Bla Avis and
BilBasen are leading classifieds businesses in Denmark and operate dba.dk, an online classifieds
site that generates more than 120 million page views per month, and bilbasen.dk, an online
vehicle classifieds site that generates 66 million page views per month. Founded as printed
classified advertising circulars, Den Bla Avis and BilBasen have successfully made the transition
to fast-growing, profitable online businesses while maintaining the publication of its circulars.
Den Bla Avis and BilBasen have offices in Aarhus and Copenhagen, Denmark.
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During the same month and year of 2008, eBay acquired Billmelater.com for $945
Million USD. Bill Me Later, Inc. provides payment and marketing technology solutions to
multichannel retailers. It offers PayCapture, a set of credit tools; and Bill Me Later that enables
customers to pay for purchases without providing credit card information. The company supports
and delivers a suite of web-engineered payment solutions; and offers consulting services in the
areas of payments, risk management, marketing, and technology. Bill Me Later, Inc. was
formerly known as I4 Commerce, Inc. and changed its name to Bill Me Later, Inc. in August,
2007. The company was founded in 2000 and is based in Timonium, Maryland. As of November
7, 2008, Bill Me Later, Inc. operates as a subsidiary of eBay Inc.
EBay has certainly taken their growth strategy process to new levels, buying every
company that will give eBay a threat in the future. It is a very good strategic move on the internet
giant to invest and acquire numerous companies around the globe. This strategy will only
strengthen eBay as a company and brand name for years to come. EBay is in a league of their
own and at that moment it seems like no competition can stop them or even compare to the
market share that eBay possess.
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ALIBABA.COM INTRODUCTION
Alibaba is a B2B e-commerce company founded in 1999 by Ma Yun. Alibaba is also the
flagship company of the Alibaba Group. With more than 40 million users and 5 million virtual
storefronts, Alibaba has been able to climb to the top as one of the most useful online ecommerce businesses.
manufacturers connecting them to other companies around the world looking for suppliers. It
connects companies with suppliers and manufacturers throughout the world. By creating the
connection for business, Alibaba specializes in trade between buyers and sellers. Its primary
business is to serve the Chinese market with a directory of the Chinese manufacturers. Alibaba
also offers business management software solutions to small businesses across China using the
"Alisoft" brand. Alibaba was founded in Hangzhou, China. Alibaba.com has offices in more
than 50 cities across Greater China, Japan, Korea, Europe and the United States.
The mission/vision statement of the company can be defined as; Alibaba Group (Alibaba
for short) is a global e-commerce leader basing in China. Alibaba has 7 subsidiary companies,
which are involved in the business of B2B, C2C, online payments, software service, search
engine, online advertising, local living, and consumption community, etc. Alibaba is committed
to building the world's leading e-commerce infrastructure and high quality online living
platform. CSR should be born from business model. Only by this, corporations can realize
sustainable development. CSR isnt a burden. Every corporation can find a point to combine
itself with CSR. Everyone should assume social responsibility and can assume social
responsibility in the convenient network environment.
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While holding the Chinese market as its first customer base, Alibaba also works
internationally throughout the world. Alibaba operates in two different marketplaces; the first is
an international marketplace in English personalized to global importers and exporters in China;
the second is a Chinese marketplace that focuses on suppliers and buyers trading domestically in
China. It also reaches buyers and sellers in more than 240 countries around the world. Since
September 2009, Alibaba.com had gained 45.276 million registered users, which add up to be an
increase of 27% since the previous year.
international trade market and 35.8 million were from the Chinese trade market. Although
Alibaba started out as an independent company, Yahoo currently holds a 40% share holder in the
parent Alibaba Group. Alibaba plans to raise $1.5 billion in the next year, making it the secondbiggest Internet IPO ever, after Googles $1.9 billion offering in 2004. The IPO will value
Alibaba.com at up to $7.8 billion. The company recorded revenues of CNY 3,001.2 million
(approximately $432.6 million) in the fiscal year ended December 2008, an increase of 38.8%
over 2007. The company's operating profit was CNY 1,192.4 million (approximately $171.9
million) in fiscal 2008, an increase of 48.2% over 2007. Its net profit was CNY 1,205.2 million
(approximately $173.7 million) in fiscal 2008, an increase of 24.5% over 2007.
By the end of 2008, Alibaba launched business to business sites in six foreign language
versions, in order to make trading easier for foreigners. The International sites for Alibaba
consist of: Spanish.alibaba.com, german.alibaba.com, Italian.alibaba.com, Russian.alibaba.com,
Portugese.alibaba.com, and german.alibaba.com.
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1999
2000
HISTORY OF ALIBABA.COM
Alibaba Group was established
2001
2002
Launched the TrustPass membership to serve SMEs engaging in domestic China trade.
Launched keyword ranking services in the international marketplace.
2003
2004
2005
2007
2007
2008
Became a constituent stock of Hang Seng Composite Index Series and Hang Seng
Freefloat Index Series.
Launched Winport to help SMEs build their own presence in the China marketplace.
Formed an associated company, Alibaba Japan, with Softbank to take over the
operation of the Japanese marketplace.
Launched the China TrustPass for Individuals membership to serve entrepreneurs
engaging in domestic China trade.
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2009
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Alibaba like eBay does not carry specific products, but a very different mix of items and brands.
Some of the products the offer include everything from Agriculture to Transportation items.
Agriculture
Apparel
Automotive
Chemicals
Energy
Environment
Luggage
Service Equipment
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3,001.20
2,613.80
2,000.00
1,205.20
1,000.00
Rev. USD: $432.6M
Gross: USD: $171.9M
Net: USD: $173.7M
Fiscal Year
Ending
2008
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
1,363.90
1,126.20
219.90
Fiscal Year
Ending
2008
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2,162.80
1,882.60
967.80
1,000.00
500.00
-
Fiscal Year
Ending
2008
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
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One of its recent strategic moves was the acquisition of Yahoo China. This was expected
to have a large impact and allow the companies to integrate and join forces with their combined
resources that will with time lead to growth. A restructuring strategy of Yahoo China began after
Yahoo failed to generate profits. In December 2007, Yahoo China removed the three original
departments: new media, network search and communications departments. In turn two new
departments: website operating and mailbox departments. Merging of network search and ebusiness and digging into the potential of network search will be the future direction for
development within Yahoo! China. E-business search technology will also be a main focus
because the company believes that developing this technology will lead to greater profits. This
strategy is extremely focused because Alibaba realizes that the acquisition of Yahoo represents
an overwhelming opportunity to grow and gain a larger market share because Yahoo is such a
recognized company. The company realizes that for optimal results changes within the company
has to take place. Restructuring of Yahoo is a step in the right direction.
Alibaba is very focused on expanding overseas Mr. Wei, chief executive at the company,
continued to explain that his strategic move is to attract more clients in markets including India
and Japan, because according to Wei more suppliers outside China will look for new markets
like China. At present, about 4% of its 400,000 users Alibaba have chosen to look more
outwardly to Chinese markets. To show how committed the company was to broaden its
boarders, it announced a joint venture with Japans Softbank Corp. This together with other
international alliances has helped to elevate this company into the Global marketplace.
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customer/supplier base is whats most important because loyal suppliers will eventually raise
profits from the raised sales revenue. When this first strategy was introduced, signs pointed to a
positive result in the first period under the new pricing model, total sales were higher than what
the company usually receives in a month. Analysts seem to like the new pricing model. Citigroup
says it expects the company to decline in 2009, but 2010 should be a rebounding year because it
should benefit from a more sustainable model, delivering a faster growth and higher margins.
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Membership fees are charged ranging from $300-$8000 and various membership programs is
offered which provide different membership opportunities.
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to the effectiveness of this pricing strategy. Customers believe that the price for the membership,
which varies, is a small cost to pay for the services that are available as a registered member. The
realm of possibility is great which makes global trade a possibility for small companies who
wouldnt have this opportunity otherwise. Customers are jumping at the opportunity to sign up to
be a Gold supplier which gives Alibaba the upper hand and the opportunity to create revenue.
Many spin offs of the gold supplier membership have provided other services and benefits at
lower cost to the customer but with fewer benefits. The gold supplier tag is more prominent still.
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Porters Five Force model of competition is a key tool for diagnosing the competitive
environment:
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Alibaba.com Rivalry
The auction ecommerce industry is quite the growing one. In recent years, it has become
very concentrated with equally large global companies which have been able to develop core
competencies in the industry. One of Alibabas rivals is eBay Eachnet. Both Alibaba and eBay
Eachnet operate in the Chinese e-commerce industry, so it is understandable that these are close
competitors. Alibaba acquired Yahoo! China as well as other subsidiaries to help grow its
company and develop it into the company it is today. EBay is a global giant in ecommerce and it
has the advantage of owning a recognizable brand that had global attention and had a loyal
customer base in the US.
AliPay is the payment tool that Taobao, Alibabas subsidiary uses for business tobusiness e-commerce website. With this AliPay, buyers can deposit money into a bank account
designated by Alibaba Taobao. The sellers receive payment when the deal is verified by buyers.
EBay Eachnet the fierce competitor it is also announced that it would spend more than 100
million Yuan (Us$12 million) to launch a new online payment system as well. EBay plans to
invest heavily to make sure that it has available a secure system for payment on their site. EBay
Eachnet launched a payment system called Escrow in October very similar to AliPay which was
set up to create a more secure online payment environment for members. EBay, just like Alibaba,
gained success in the Chinese market quite rapidly but, Alibaba has a larger hold on the Chinese
market because of its global reach and innovative systems.
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Alibaba has many alliances with companies that keeps the auction site running and on the
cutting edge of technology in the external environment. VeriSign Inc is a well known provider of
Internet infrastructure for Networked worlds. This helps companies and consumers all over the
world communicate and deal commerce. The A&V is a product designed and launched by Asian
Company Profiles Ltd. It is an application conduct B2B partner screening, pre-L/C beneficiary
screening, and Para-legal support for contractual purposes. The American International
Underwriters China (Chinas AIU) provides quality commercial and consumer insurance to the
company.
These suppliers are a key to Alibabas credibility and quality management efforts.
Ecommerce organizations have to have safeguards available for its consumers and companies
especially when large transactions are taking place. Each of these supplier companies help to
make sure that the consumer is protected. These organizations have a certain level of power
because if A&V decides to not partner with the company another company would have to be
sought out to fill the need but it can be done. Just like if the insurance company doesnt want to
be affiliated with Alibaba anymore, it is at thats companys own detriment because Alibaba is a
growing company that has a reputation of having a large member based which means large
insurance dollars for the insurance company.
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These are the core of the organization as an auction site. The success of the company is
dependent on the customers who are willing to buy online products. Alibaba is a global company
and so businesses from different areas of the world are a key to its success. Alibaba offers small
businesses the opportunity to grow through its site, and they give these owners power to expand
and really make their products available to a global customer base quite easily. This Alibaba
Company is a growing one and already has a large global marketplace the largest B2B one in the
world, so buyer with the power that they have would be wiser to choose Alibaba as it is the
world leader and the opportunity for growth is great. Yes, there are other competitors, but
Alibaba has established a loyal customer base and as a global leader in ecommerce it seems like
its a secure professional site.
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Strengths S
Alibaba.com, the
worlds largest
ecommerce
organization, is one
that generates income
from influencing
business to buy and sell
through their site.
Labor intensive.
growth strategies
e-commerce search
partnerships with
technology.
Brand recognition is
low.
A international
organizational structure
Profitably is slowing.
WO Strategies
Global Marketplace.
Opportunities O
It has a reputation of
Weaknesses - W
Acquisition of an
American company in
the internet industry
could develop
recognition in the US.
Acquisition of a
technology company
experienced in
developing ecommerce
sites.
in the US
Threats T
Chinas Google and the
strength of the vertical
sites.
Growth of Chinas
ecommerce industry.
EBays new subsidiary
eBay Eachnet poses a
competitive influence.
Global Economic crisis.
Development of a more
competitive technology
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ST Strategies
WT Strategies
Enforce differentiation
strategies using the
companys influence in
the marketplace to
draw new members
from innovation and
quality controls.
Advertising more in
international arenas to
strengthen market
share in areas of little
brand recognition. The
sponsoring of
international events like
the Olympics can help
to establish the brand
among the other global
competitors.
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Alibaba.com Strengths
Alibaba.com has much strength. It has grown quite rapidly and many great strategies
were implemented to facilitate development. From my research, it was mentioned repeatedly that
this company is a global one that has reach in several large countries in the world. This is always
a great thing because the larger the market the larger the profit opportunity. A global reach will
only profit an organization especially with a growth strategy. Alibaba also used a great strategy
of developing great acquisitions with other leaders in the industry such as Yahoo China.
Acquisitions put companies in the position to grow quite rapidly and are generally a great mode
for entry in a new untapped market. The ecommerce market in China is growing and Yahoo
being a global company with influence puts Alibaba is the position to control a large percentage
of a Chinese market. The leaders of the company have shown how committed it is to being a
global organization and has a staff and management team just as diverse as its customers.
Alibaba.com Weaknesses
The main weakness that this organization has is its low level of technology. Other
businesses in the market have more complex and attractive ecommerce sites, and this is really a
detriment to the company. The company is also very labor intensive. It has 4000 employees all of
whom are well paid which means a large amount of expenses paid in salaries. This company that
operates most of its activities online should be able to limit labor expenses a bit more. Although
the organization is known as a Global one it is still not well known in the US, which is one of the
largest economies in the world. Efforts could be made to develop the brand more by increased
advertising efforts and tapping into untapped markets. Profitability is a definitely a problem for
the company. More cost strategies need to be implemented to decrease the expenses within the
company.
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Alibaba.com Opportunities
There is a great possibility for growth within the organization. Yes it is the largest
ecommerce organization in the world, but this industry will get more competitive and just like
Alibaba grew rapidly another company can enter the market and decrease Alibabas market
share. The company isnt as well known in America, so there is an opportunity for growth in this
economy where so many other large ecommerce organizations exist.
Alibaba.com Threats
The main threats that exist in Alibabas external environment is competition from highly
competitive companys CEO, Wei has been quoted as saying that he welcomes competition on
any scale because competition makes other competitors work harder to improve business and its
through competitive market that that industry will see growth. The Asian web search/
ecommerce is growing quite rapidly through the penetration by other new companies into the
market. Google China is a becoming quite a competitive force in the industry. Google is a very
diverse company and so it has many vertical affiliations that are competitive forces for the
business that Alibaba runs. Also EBay Eachnet is a competitive rival and recently has been
developing Alibabas similar operations as to steal market share from the company. So far,
Alibaba has risen above the Global economic crisis but this remains a threat.
Alibaba.com SO Strategy
One strategy to get market share in the US by using it global power is to acquire a US
recognized company. This could be very effective entry mode into this economy. It really isnt
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important if its another ecommerce company; the company would just have to be US based and
have high brand loyalty. The growth possibilities are great as well. Gaining resources and
information from another successful company can grow a company dramatically.
Alibaba.com WO Strategy
In order to improve on the weakness of low technology level and take advantage of the
opportunity for growth, they could acquire a small technology company. There is a lot of
advantages to doing this. A company with experienced staff who are capable of upgrading
technology can help to move the company into a more competitive place, technically. Also, this
is a growth opportunity for the company as well.
Alibaba.com ST Strategy
In order to combat competition and to take advantage of the companys influence in the
Global marketplace, Alibaba could implement differentiation strategies that set them apart from
the other global companies in the industry. Differentiation strategies are extremely effective in
developing customer loyalty and grabbing a large market share for growing companies.
Alibaba.com WT Strategy
In order to improve brand recognition in the US and strengthen market share the
company should develop a real commitment to marketing on a Global scale quite like Coca Cola.
A good marketing strategy can be a real turning point for a company and increase profits
dramatically. Its something worth developing especially if being a global company is an
important outlook as is the case with Alibaba.com
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COMPARITIVE ANALYSIS
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business segment of the market and took it to another level. This is now Alibabas niche market
of suppliers. EBay however has no real supplier preference, and so markets to the average
consumer and businesses. Thus, they have competitors like Amazon which features a rather
complex e-commerce environment.
The business model of Alibaba compared to EBay is far more simplified yet focused on
achieving particular goals. Both companies seek growth, but Alibaba has the way in which they
will go by doing this clearly outlined with effective ways of entry. Alibaba is a world leader in
business to business e-commerce and this was its route to the world and globalization. The
move, whereby it purchased its own fierce competition, EBay Eachnet, was the smartest move
they could have made towards growth. EBays goals are far reaching and not as concentrated.
Both companies made smart moves in the acquisition of well noted international companies like
eBay did with Swedish company, Tradera.com. Evidently, both of these companies are smart in
their moves to acquire companies that will give them; 1) an entry into new global markets, and 2)
give them the upper hand against threats of competition.
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around the world and make business easier for people that otherwise wouldnt have the
opportunity. EBay just seems, to our group, to have the best tools for growth in their possession
and we think its almost impossible to compare two equally very powerful global giants in this
rather small industry.
Group Challenges
As a group, we never underestimated the enormity of the task set before us. It was a tall
order to organize a project of this magnitude with our many different schedules and personalities.
We knew it would have to be communication that led to success of this project, and so many
emails were transferred between the original four group members. Originally, we couldnt even
agree on the two companies to research we went back and forth between entertainment
companies, airline manufacturers and the online auction companies. Choosing these particular
companies was definitely a learning experience for most of us. We learned what drives these
companies technically. At the beginning, of the quarter we had originally four members: Anca,
Thomas, Angelica and Danauda. Due to illness, (our presumption) communication with angelica
was cut off. We had to make a fast decision fast and split the responsibilities between the
remaining members. We gritted our teeth because of the added work, but thankfully, we
completed it. Mostly we were working with three different leadership styles, so figuring out how
to work as a group was definitely a challenge. Compromise and allowing everyone to vote was
important when deciding things. Early on, we set goals and deadlines for when the work was
suppose to be ready etc. Deadlines were mostly met (at least by the remaining members), and
afterward, further goals were made until the completion of the project. In all, we learned a lot
about working in groups and how to compromise to see that all our expectations were met within
the timeframe allotted.
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WORKS CITED
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"Alibaba.com Limited." Business Source Premier. Berkeley College. Web.
<https://my.berkeleycollege.edu/webapps/portal/frameset.jsp?tab_id=_18_1>.
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"EBay Inc." Datamonitor Company Profiles Authority. Berkeley College. Web. 1 Dec. 2009.
<http://http://web.ebscohost.com.ezproxy.library.berkeley.org/ehost/detail?vid=5&hid=5
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