You are on page 1of 14

Strategic Audit of EBay

I Current Situation

A. Current Performance

Based on eBay's current outlook for next year, the company believes net revenues
for 2002 could approximate $1.05 to $1.1 billion and its 2002 pro forma earnings
per share could range between $0.70 and $0.73 per diluted share. The company
also reaffirmed its financial projections for the fourth quarter of 2001.

"The depth, breadth and potential of our business gives us great confidence in the
future," said Meg Whitman, president and CEO of eBay. "The eBay marketplace is
thriving across geographies, trading categories, pricing formats, listed items, user
growth, and the services we offer our community."

Sources of Revenue Growth -- The U.S. Business

Company executives outlined plans for growing the U.S. business across all of its
categories and trading formats. Rapidly expanding areas such as computers and
eBay Motors were highlighted. eBay also described its next generation of fixed price
trading, called eBay Express Buys, which will result from the upcoming integration
of Half.com into the eBay platform along with the Buy It Now feature and eBay
Stores.

Sources of Revenue Growth -- The International Business

eBay also reviewed its recent international expansion and its current position in 17
markets around the world. eBay Germany's growth and profitability were
highlighted, including Q3-01 revenues of $16 million and operating margins of more
than 40%. The company expects its international portfolio of businesses to reach
profitability on a fully allocated aggregate basis in 2002.

Forward Looking Statement


This announcement contains forward-looking statements that involve risks and
uncertainties, including those relating to the company's ability to grow its business
and user base. Actual results could differ materially from those discussed. Factors
that could cause or contribute to such differences include, but are not limited to, the
company's current need to manage both an increasingly broad range of businesses
and significant growth, to deal with the increasingly competitive environment for
online trading, to manage regulatory and litigation risks, to maintain site stability
and to continue to expand its model outside of the U.S., as well as the timing and
commercial success of new features and functions added to the company's sites,
the price and demand for advertising offered by the company, the success of the
company's commercial partners and the costs of announced and prospective joint
ventures, acquisitions and other commercial transactions. This forward looking
guidance assumes no substantial worsening of the economy from current levels and
no terrorist actions making consumers less willing to purchase or receive goods.
More information about potential factors which could affect the company's business
and financial results is included in the company's Annual Report on Form 10-K for
the year ended December 31, 2000, the company's Quarterly Reports on Form 10-Q
for the periods ended March 31, 2001 and June 30, 2001, and in the company's
report on Form 8-K being filed October 29, 2001. All forward-looking statements are
based on information available to the company on the date hereof, and the
company assumes no obligation to update such statements.

B. Strategic Posture

With more than 90 million active users globally, eBay is the world's largest online
marketplace, where practically anyone can buy and sell practically anything.
Founded in 1995, eBay connects a diverse and passionate community of individual
buyers and sellers, as well as small businesses. Their collective impact on e-
commerce is staggering: In 2009, the total worth of goods sold on eBay was $60
billion -- $2,000 every second

Mission Statement: provide a global trading platform where practically anyone can
trade practically anything.
Corporate Business: constantly looking for ways to improve, whether it's connecting
executive compensation to diversity goals or improving the supplier application
process.
Function objectives: to support all businesses and individuals in building and
developing more efficient transactions on the web.

Consistency:

With each-other- always trying to improve their vertical and horizontal


communication channels so every employee can be heard and have similar rights

Mission- Very consistent with their mission because their key to success is their
people and how they treat them.

Internal environments-They simply treat their associates and suppliers with the
utmost respect and try every way to constantly improve.

External environments- when entering a neighborhood, they pledge to participate,


contribute, and engage the community, with making a commitment to becoming a
store of the community.

3. Strategies:

Internal Analysis Strategic Statement The strategic statement that describes eBay’s
activities could be formulated as follows “eBay allows customers to create individual
auctions and online stores in order to sell used and new products. This process is
facilitated by the ability to create communities of interest, providing secure
transaction services, and a peer review process in a global environment.” eBay sees
itself as facilitator for product-related transactions over the Internet In a league by
itself

4. Policies:

Auction industry and e-tailing

Gaining a large subscriber base general

Retaining existing customers

EBay strives to maintain the highest possible ethical standards. No bad appearance
or sense of dishonesty is what EBay wants to perceive

Consistency

With each-other - Throughout its worldwide operations, EBay seeks to avoid even
the appearance of impropriety in the actions of its directors, officers, associates,
and agents.
Mission- Striving to maintain all possible positive outlooks, EBay puts their policies
and missions both forward.

Internal environments- With its anti-corruption policy, privacy policy, and equality of
opportunity policy, EBays associates have free right to express themselves.

External environments- With the Global Statement of Ethics, outsiders can see that
EBays stay’s consistent with all their policies and procedures which gives suppliers
a sense of growth and satisfaction.

Global or Multi-domestic mission- In EBay’s Global Statement of Ethics, the


company can commit to maintain an environment in which all their associates
globally can be proud to work, and were both suppliers and other partners know
what they are being dealt with. Giving global prosperity gives shareholders a sense
of confidence and furtherance to these goals, EBay can provide their values and can
give extra steps to provide growth to all who share it.

II. Corporate Governance

A. Board of Directors

Pierre M. Omidyar, Chairman of the Board since 1996, founded eBay in 1995. Mr.
Omidyar served as eBay's Chief Executive Officer, Chief Financial Officer, and
President from inception to February 1998, November 1997 and August 1996,
respectively. Prior to founding eBay, Mr. Omidyar was a developer services engineer
at General Magic, and in 1991, he co-founded Ink Development Corp. Mr. Omidyar is
currently co-founder and chairman of Omidyar Network, a philanthropic investment
firm. He serves on the Board of Trustees of Tufts University, Omidyar-Tufts
Microfinance Fund, the Santa Fe Institute and the Punahou School, and is a director
of Meetup, Inc. Mr. Omidyar holds a B.S. in Computer Science from Tufts University.

John J. Donahoe, has served as President and CEO since March 2008. From 2005-
2008, Mr. Donahoe served as President, eBay Marketplaces, where he was
responsible for all elements of eBay's global e-commerce businesses. Prior to eBay,
Mr. Donahoe served as Worldwide Managing Director for Bain & Company, where he
oversaw Bain's 30 offices and 3,000 employees. Mr. Donahoe serves on the board of
Intel Corporation and on the Board of Trustees for Dartmouth College. Mr. Donahoe
holds a B.A. in Economics from Dartmouth College and an M.B.A. from the Stanford
Graduate School of Business.

Marc L. Andreessen, a director since 2008, is a co-founder of Netscape


Communications and Opsware (formerly Loudcloud), which was acquired by Hewlett
Packard. He is also a co-founder of Ning Inc., which provides a platform for social
networking sites. Mr. Andreessen also serves on the board of directors of Facebook
Inc., Stanford Hospital and Room to Read. Mr. Andreessen holds a B.S. in Computer
Science from the University of Illinois at Urbana-Champaign

William C. Ford, Jr., a director since 2005, has served as Executive Chairman of
the Board of Directors of Ford Motor Company since 2006, and has held a number of
management and board positions at Ford since 1979. Mr. Ford serves as Vice
Chairman of The Detroit Lions, Inc., Chairman of the Board of Trustees of The Henry
Ford and Vice Chairman of Detroit Renaissance. Mr. Ford holds a B.A. from Princeton
University and a M.S. in management from the Massachusetts Institute of
Technology.

Dawn G. Lepore, a director since 1999, is the Chief Executive Officer and
Chairman of the Board of drugstore.com, inc. From 1999- 2004, Ms. Lepore held
various executive management positions at the Charles Schwab Corporation
including Vice Chairman of Technology, Operations, Business Strategy, and
Administration. Ms. Lepore also serves on the board of directors of The New York
Times Company. Ms. Lepore holds a B.A. from Smith College.

Richard T. Schlosberg, III, a director since 2004, is Chairman of the Board of the
Kaiser Family Foundation and served as President and Chief Executive Officer of the
David and Lucile Packard Foundation from 1999 - 2004. Prior to joining the
foundation, Mr. Schlosberg was publisher and Chief Executive Officer of the Los
Angeles Times and the Denver Post. He is a graduate of the United States Air Force
Academy and holds an M.B.A. from Harvard Business School.

Philippe E. M. Bourguignon, a director since 1999, is Vice Chairman of


Revolution Resorts, and previously served as Chairman of Aegis Media France, a
media communications and market research company. Mr. Bourguignon has also
served in executive and board positions at The World Economic Forum, Club
Méditerranée and the Walt Disney Company. He holds a Masters in Economics from
the University of Aix-en-Provence and holds a post-graduate diploma from the
Institut d'Administration des Enterprises in Paris.

Thomas J. Tierney, a director since 2003, is the co-founder of The Bridgespan


Group, a non-profit consulting firm serving charitable organizations and
foundations. Prior to founding Bridgespan, Mr. Tierney served as Chief Executive
Officer of Bain & Company, from June 1992 to January 2000. Mr. Tierney holds a B.A.
in Economics from the University of California at Davis and an M.B.A. from Harvard
Business School.

David M. Moffett, a director since 2007, has more than 30 years of strategic
finance and operational experience in banking and payment processing. He served
as Chief Executive Officer of Federal Home Loan Mortgage Corp. (Freddie Mac). He
has held executive positions at some of the nation's leading financial service
companies, including Star Banc Corporation, Bank of America and Security Pacific
Corp. Mr. Moffett holds a B.S. in Economics from the University of Oklahoma and a
M.B.A. from Southern Methodist University.

>
Fred D. Anderson, a director since 2003, is a Managing Director and co-founder of
Elevation Partners, a private equity firm focused on the media and entertainment
industry. From 1996-2004, Mr. Anderson served as Executive Vice President and
Chief Financial Officer of Apple Inc. Mr. Anderson also serves on the board of
directors of Move, Inc. and Palm, Inc. and holds a B.A. from Whittier College and a
M.B.A. from UCLA.

Edward W. Barnholt, a director of eBay since 2005, served as President and Chief
Executive Officer of Agilent Technologies, Inc. From 1990-1999, Mr. Barnholt held
various executive positions at Hewlett-Packard Company. Mr. Barnholt also serves
as the Non-Executive Chairman of the Board of KLA-Tencor Corporation, a member
of the Board of Directors of Adobe Systems Incorporated, and a member of the
Board of Trustees of the David and Lucile Packard Foundation. Mr. Barnholt holds a
B.S. and a M.S. in electrical engineering from Stanford University.

Scott D. Cook, a director since 1998, is the founder of Intuit Inc. and served as
Intuit's President and CEO From March 1993 to July 1998, Mr. Cook served as
Chairman of the Board of Intuit. From 1984 to 1994, Mr. Cook served as President
and Chief Executive Officer of Intuit. Mr. Cook also serves on the board of directors
of The Procter & Gamble Company, The Asia Foundation and The Intuit Scholarship
Foundation. Mr. Cook holds a B.A. in Economics and Mathematics from the
University of Southern California and an M.B.A. from Harvard Business School.

Online auctions Characteristics of the industry

The current characteristics of the online auction industry include market data and
descriptive factors of the industry Market data General factors
Market size: 665m internet users in
Economies of scale: traffic and 2002, expected to be 1bn in 2005 subscriber base
are important e-
Commerce: $170bn in 1999 to Product innovation: short product life $6,79tn in
2004 cycle demands expenditures for R+D
Online retail: annual growth at 19% to Vertical
integration: changing customer reach a volume of $230bn in 2008, structure (from
B2C to B2B), use of 57,5 of that will be online auctions physical stores, development
and sale of underlying systems Low
CAPEX requirements The online auctions industry has been growing enormous over
the last years – companies have to be able to keep up In a league by itself

What are the implications from industry characteristics for companies competing in
this industry? Market size Vertical integration
Global market To keep a competitive
advantage companies have to consider vertical Opportunities for a large
number of integration up- as well as down-stream competitors Product Innovation
Market growth Product life cycles are very short - Fast growing market companies
have to keep track with Companies have to keep up with the competitors and meet
the needs of the speed of the growing market customers Capacity & Economies of
scale CAPEX Subscriber base is important - Very low, so entry barriers for new
companies have to generate traffic in players in the market are low order to get
customers In a league by itself

Online auctions Changing forces of the macro-environment Driving forces with the
biggest influence within an industry and their implications for competing companies
Emerging internet technology Long-term industry growth applications Industry is still
in the growing phase, companies have to adjust to Market is based on internet
technological development technology, hence it must be a core competency of
competing companies Marketing innovation Globalization Large market, fast growth
and a huge subscriber base ask for differentiating Large base of suppliers and
customers the company from its competitors throughout the world

Online auctions Changing forces of the macro-environment Driving forces with the
biggest influence within an industry and their implications for competing companies
Diffusion of technology among Changing societal concerns, competitive companies
attitudes, and lifestyles Low CAPEX and low barriers of entry Customers get used to
use the make it difficult to differentiate from Internet, more and more competitors the
competitors, only technology will try to get into this market (R+D) can be used as a
differentiating factor Regulatory influences Young environment, still in its growing
phase, so future regulations are uncertain, only few regulations in place yet

Online auctions Competitive Forces The Five Forces Model of Competition is a key tool
for diagnosing the competitive environment Substitute products Industry Suppliers
Buyers rivalry Potential new entrants Source: Thompson, Strickland, Gamble (2005)

Online auctions / Competitive forces 1/4 Industry rivalry How strong are competitive
pressures stemming from the efforts of rivals to gain market positions?* The online
auction market changed B2B / B2C / P2P a lot since its beginnings New entrants over
the past years More and more competitors from (search engines, etc.) different
backgrounds entered the market Pure markets of auctions vs. e-tailing *Source:
Thompson, Strickland, Gamble (2005) Competition increased as more players entered
to take the opportunities of the fast growing market

Online auctions / Competitive forces 2/4 Potential new entrants How strong are the
competitive pressures associated with the entry threat of new rivals?* Technological
barriers of entry do Traditional retailers and e-tailors not exist are in a similar market
to online auctions Traffic generation is important Customers have to be gained from
traffic Customer base retention is important *Source: Thompson, Strickland, Gamble
(2005) With new entrants from traditional industries the market for online auctions
changes

Online auctions / Competitive forces 3/4 Substitute products How strong are
competitive pressures coming from the attempts of companies outside the industry to
win buyers over?* Increasing number of fixed price Traditional retailing sales over
online auction sites e-tailing Search engines and price- comparison websites moving
into online retailing and auctions Traditional auctions *Source: Thompson, Strickland,
Gamble (2005) The fast growing nature of the market lead to companies differing their
products slightly to take part in the market

Online auctions / Competitive forces 4/4 Suppliers / Buyers How strong are the
competitive pressures stemming from supplier/ buyer bargaining power and seller-
supplier collaboration?* Suppliers Similar pressures Casual sellers Diverse customer
base Hobbyists and Collectors Shift from North America to Asia- Pacific and Eastern
Europe Power and corporate sellers Fraud Buyers Quality checks are difficult
Bargain hunters Hobbyists and Collectors Professional buyers *Source: Thompson,
Strickland, Gamble (2005) Especially in the case of online auctions suppliers and
buyers and their pressure on the companies are very similar

A Key success factors Online auction industry B C Online auctions vs. e-tailing eBay

Key success factors Online auction industry The key success factors include product
attributes, competencies, competitive capabilities that have impact on future
competitiveness Technology Marketing Expertise in technology Brand name Skills
and capability Technical assistance Customer service Talented workforce Accuracy
of billing Product innovation Guarantees and warranties e-commerce Advertising
After-sales service For the online auctions industry, the main key success factors are
related to marketing activities

Key success factors Online auctions vs. e-tailing Key success factors for online auctions
include the amount of traffic or security and are quite similar Key success factors of
the online Further KSF are: auction industry and e-tailing in Gaining a large subscriber
base general are comparable Retaining existing customers Auction sites, such as
eBay have either moved into or come from an Security issues (payment and e-tailing
background perception of security) Variety of products

Key success factors eBay The future success of eBay is dependent on the company’s
ability to identify and optimally adjust to drivers of success Fixed prices Expansion of
categories vs. focusing on using full capabilities of Use of large subscriber base to
move current categories from auctions to general (online) Other issues retailing
Larger, more established competition International expansion has to be faced
Prioritization of efforts Emphasis on fixed prices? Satisfying small and large customers

eBay Position of eBay and its competitors Strategic group map

eBay Positioning of eBay and its competitors Under consideration of the identified key
success factors eBay’s position in the industry can be identified as follows eBay
Competition extensive offering of products in trying to copy the business model of
different categories: Collectables, eBay Vehicles, Real Estate, Office equipment
difficult to differentiate their product etc. no competitive advantage with regard brand
name eBay is synonymous with to reputation, and brand awareness online auctioning
reputation as a safe and reliable and fiercely protected by the company

eBay Strategic group map Putting together the key success factors of eBay and its
competition, the online auction industry shows different company types Strong Class.
ads Reputation/ Brand Awareness Amazon.com Live Amazon auctions Flea markets
Yahoo uBid Weak Broad Narrow Number/ Variety of Auctions/ Product Categories

Internal Analysis Strategic statement Implications of the strategic statement Evaluation


of the strategy

Internal Analysis Strategic Statement The strategic statement that describes eBay’s
activities could be formulated as follows “eBay allows customers to create individual
auctions and online stores in order to sell used and new products. This process is
facilitated by the ability to create communities of interest, providing secure transaction
services, and a peer review process in a global environment.” eBay sees itself as
facilitator for product-related transactions over the Internet In a league by itself

Internal Analysis Implications of the strategic statement What are the implications of
this particular formulation of a strategic statement for eBay? What? So what?
“individual auctions and online removes physical barriers between stores” buyers and
sellers creates added value through base “communities of interest” of additional
information “peer review” creates confidence “global environment” opens new markets
This particular statement describes the company’s main processes and shows the
opportunities eBay wants to pursue

Internal Analysis Evaluation of the strategy Does the strategy create a competitive
advantage for eBay? – Is it a winning strategy The strategy describes the core A
competitive advantage will be competencies of eBay created, if: Several “soft” factors
are addressed eBay handles the necessary processes more efficient and effective Not
sure if these factors e.g. peer eBay keeps its first-mover advantage review
differentiate eBay in a way that and stays always one step ahead of the creates a
competitive advantage competition The strategy as described seems to be easy to
replicate The strategy can be a winning strategy if eBay moves fast enough and
optimizes the processes to gain a competitive advantage

Value chain analysis Value chain model Competencies Differences between eBay and
amazon.com Implications Issues to address

Value chain analysis Value chain model 1/3 In order to assess the value chain of eBay,
Porter’s model will be applied to eBay and its closest competitor Strong Class. ads
Amazon.com Reputation/ Brand Amazon Live auctions Awareness auctions Flea
markets Yahoo uBid Weak Broad Narrow Number/ Variety of Auctions/ Product
Categories Further evaluation will include a closer look at amazon.com’s value chain
and the main differences compared to eBay

Value chain analysis Value chain model 2/3 – eBay The application of the Value Chain
model onto eBay delivers results that differ from the generic model Legal Finance
Human Resources Margins Technical Development (R+D) Conversion Auction Peer from
traffic Marketing Payment to buyers Process Review and sellers Differentiation from
other service providers leads to unique value creating activities for eBay In a league by
itself
Value chain analysis Value chain model 3/3 – amazon.com Although they compete in
the same industry, amazon.com’s value chain differs in many instances from eBay’s
Legal Finance Human Resources Margins Technical Development (R+D) Con- version
Market- Retail Cross- Product from process selling shipping review traffic to buyers
Differentiation from other service providers leads to unique value creating activities for
amazon.com

Value chain analysis Competencies eBay amazon.com Competencies -Technical


proficiency -Technical proficiency -Usability -Usability -Shipping Core competencies
-Bidding site -Catalogue site -Conversion rate -Product review (traffic to subscribers)
-Conversion rate Distinctive -Peer review -Cross-selling competencies Both, eBay and
amazon.com, have distinctive competencies that differentiate them from competition
and from another

Value chain analysis Differences between eBay and amazon.com eBay amazon.com
eBay started with used products amazon.com started with new and is now expanding
into new products and is now distributing products used products as well Community
focus – connects Product focus people “Virtual” product – no ownership Handles
physical products and or handling of physical products takes ownership Facilitates
transactions Warehousing, packaging and delivery The main difference between the
two companies is the handling of physical and “virtual” products

Value chain analysis Implications When they started business, the strategic intent of
eBay and amazon.com differed considerably Through diversification in new eBay’s
way of handling products is market segments the targeted less capital intensive, hence
easier users of eBay and amazon.com have to copy become more similar eBay adds
value through bringing Both business models have become buyers and sellers
together, who more professional over time, would not have made business providing a
platform not only for otherwise consumers, but also for businesses The business
models of eBay and amazon.com have become closer over the last years

Value chain analysis Issues to address Through the value chain analysis several issues
within eBay can be identified, both present and near future issues Present Near future
Too many sellers in comparison to the Positioning number of buyers Prioritization of
efforts Security (of the auction process and Changes in the number of categories
payment) Specialization Fraud (through users in the auction process and in the
review process) Expansion in terms of different types of sellers Necessity to
accommodate power sellers (businesses) Fixed price auctions Apart from system
related issues the integration of professional sellers is one of the most urgent issues for
eBay

Strategic actions Now what? SWOT TOWS-Matrix Competitive strength assessment


Action groups Activity system

Strategic actions Now what? 1/3 – Industry characteristics What? So what? Now what?
Market size Global market/ Opportunities for Protect market-share/ Scan many
competitors market for new players Market growth Fast growing market Maintain
growth initiative Keep up with speed of market (beware sustainable growth rate)
Capacity & Economies Subscriber base is important/ Maintain brand image and of scale
generate traffic to get subscribers advertising efforts Vertical integration Up- and
downstream integration Identify take-over candidates/ to keep competitive advantage
software for vertical integration Product innovation Product life cycles are short, keep
Rapid application development track with competitors and meet customers’ needs
CAPEX Low requirements, hence low Monitor market for possible market entry barriers
entrants

Strategic actions Now what? 2/3 – Changing forces What? So what? Now what?
Emerging internet technology must be ahead of and develop technology applications
among core competencies software, standards & protocols Globalization Large base of
suppliers and Form strategic alliances customers worldwide Long-term industry is in
growing phase, Be a main driver of technological growth adjust to technological
advances Marketing innovation Differentiation necessary to Maintain current and
develop accommodate huge potential new distinctive competencies Diffusion of
technology (R+D) as main Hire, train and reward best staff differentiating factor in
industry Regulatory influences Future regulations are uncertain, Internal code of best
practice only few regulations in place yet with high ethical standard Changing societal
Growing acceptance and use of Actively participate in user attitudes and lifestyles
Internet/ more competitors education (communities)

Strategic actions Now what? 3/3 – Strategic statement What? So what? Now what?
Individual auctions and Removes physical barriers Keep processes easy, best in online
store between buyers and sellers industry for auctions and stores Communities of
Creates added value through Nurture communities, support interest base of additional
information via newsletters etc. Peer review Creates confidence Protect integrity
process, actively monitor for fraud Global environment Opens new markets Support
multi language platforms/ communicate advantages of global market to customers

Strategic actions SWOT 1/2 The internal analysis leads to the following findings
Strengths Weaknesses eBay is the leading global brand for The model of eBay is
open to a online auctions number of fraudulent activities The company exploits the
benefits of System breakdowns could affect the CRM trading activities of eBay eBay
has become a generic term for online auctions eBay has a very strong position in the
online auction industry – it is more or less a synonym for online auctions

Strategic actions SWOT 2/2 The external analysis shows following opportunities and
threats Opportunities Threats Acquisitions provide new business Success attracts
competition strategy opportunities Attacks by illegal practices could Market
development in new and happen emerging markets like China and India Some costs
like credit card charges is a huge opportunity cannot be controlled by eBay Market
penetration in current markets can change a large number of potential customers to
subscribers Opportunities and threats can mainly be connected to the growing
character of the industry

Strategic actions TOWS-Matrix Strengths – S Weaknesses – W Majority of Market Fraud


issues - esp. at C2C level Strong Leadership Dependencies on system running at
Communities of interest all times Global brand/ Megabrand B2C and C2C operations
Financial strength First to market Opportunities – O SO Strategies WO Strategies
Acquisitions Global expansion Online banking Maintain simplicity of interaction
Diversify into “new” product Growth of aspiring consumers in with buyers and seller -
usability markets developing markets Online verification of products Strategic alliance
with couriers Diversification Systems for product verification eBay stores - brick and
mortar Threats – T ST Strategies WT Strategies Domestic players have advantage
Acquisition strategy - global Alliance to postal services due to local experience
expansion Use online security protocols Unscrupulous practices - spam and similar to
banking for verification of viruses to eBayers authenticity Attracts competition because
of Re-enforce marketing, management supernormal profits and systems as
concentrated effort

Strategic actions Competitive strength assessment


eBay Yahoo uBid
amazon.com Key success factors Weight Rating Score
Rating Score Rating Score Rating Score Technology Expertise in technology
0.15 8 1,20 8 1,2 7 1,05 5 0,75 Skills and capabilities Talented workforce 0.05
7 0,35 5 0,25 6 0,30 5 0,25 Product innovation 0.20 9 1,80 7 1,40 8 1,60 6
1,20 After sales service 0.05 3 0,15 8 0,40 3 0,15 3 0,15 Marketing Brand
name 0.15 10 1,50 10 1,50 9 1,35 4 0,60 Customer service 0.10 6 0,60 8
0,80 6 0,60 5 0,50 Accuracy of billing 0.10 9 0,90 7 0,70 7 0,70 7 0,70
Guarantees and warranties 0.10 6 0,60 8 0,80 6 0,60 5 0,50 Advertising 0.10
8 0,80 6 0,60 7 0,70 3 0,30 Total 1,00 66 7,90 67 7,65 59 7,05 43 4,95

Strategic actions Competitive strength assessment 2/2 What strengths and weaknesses
of eBay in relation to the competition can be identified through the competitive
strength assessment? Strengths Weaknesses Expertise in technology After sales
service Talented workforce Customer service Product innovation Guarantees and
warranties Brand name Accuracy of billing Advertising The identified weaknesses are
due to activities eBay performs and have no immediate effect, as they don’t affect
operations

Strategic actions Action groups 1/2 Maintain global growth initiative selling new
applications creating standards for the industry acquisitions (develop new markets)
(e.g. protocols) alliances (postal services, brick and application program interface and
mortar stores) developers program new markets (develop India and China) new
products (m-commerce, e-tailing, Security brick & mortar shops, online-banking)
back-up systems keep different cultures in mind online verification of electronic goods
Technological development enhance trustee service online banking protocols rapid
application development (software for new and existing market enhance back-end
areas, e-tailing)

Strategic actions Action groups 2/2 Reinforcing marketing People matter improve
and maintain image through employ best in industry advertising (above and below the
line) continuous training user education participation retain performers through
rewards global branding to make eBay generic code of conduct and ethics policy
brand with online auctions and e-tailing Protect market share Step ahead (of market
dynamics) aggressive marketing and advertising increase competitive intelligence
innovative products and interfaces identify and analyze global trends aggressive
quality control through peer participate in user education review innovation
concentric environment parallel systems
Strategic actions Activity system Maintain global growth Tech. Develop- Reinforce met
marketing Prioritization Security 1 Step 2 ahead of market Protect 3 dynamics market
share 4 People 5 matter 6

Competitive approach Porter’s generic strategies SPACE Miles/ Snow Warfare


Justification Ansoff-Matrix

Competitive approach Porter’s generic strategies 1/2 According to Porter a company


can pursue a cost-leadership or a differentiation strategy Quality Service Features
Security Trustee service Innovative products Quality control User education M-
commerce through peer review Interface/ Usability Interfaces Alliances Online
banking API Innovative products Industry standards Security Online verification eBay
can be identified as differentiator that builds a unique position through quality, service
and features

Competitive approach SPACE 1/5 - Environment and stability Factors determining


environment and stability (ES) Technological Change Many 0 1 2 3 4 5 6 Few Rate of
inflation High 0 1 2 3 4 5 6 Low Demand variability Large 0 1 2 3 4 5 6 Small Price
range of competing products Wide 0 1 2 3 4 5 6 Narrow Barriers to entry into market
Few 0 1 2 3 4 5 6 Many Competitive pressure High 0 1 2 3 4 5 6 Low Price elasticity of
demand Elastic 0 1 2 3 4 5 6 Inelastic Average: 3.00 – Score on the graph: -3.0

Competitive approach SPACE 2/5 - Industry strength Factors determining industry


strength (IS) Growth potential Low 0 1 2 3 4 5 6 High Profit potential Low 0 1 2 3 4 5 6
High Financial stability Low 0 1 2 3 4 5 6 High Technological know-how Simple 0 1 2 3 4
5 6 Complex Resource utilization Inefficient 0 1 2 3 4 5 6 Efficient Capital intensity High
0 1 2 3 4 5 6 Low Ease of entry into market Easy 0 1 2 3 4 5 6 Difficult Productivity,
capacity utilization Low 0 1 2 3 4 5 6 High Average: 4.25 – Score on graph: 4.3

Competitive approach SPACE 3/5 - Competitive advantage Factors determining


competitive advantage (CA) Market share Small 0 1 2 3 4 5 6 Large Product Quality
Inferior 0 1 2 3 4 5 6 Superior Product life cycle Late 0 1 2 3 4 5 6 Early Product
replacement cycle Variable 0 1 2 3 4 5 6 Fixed Customer loyalty Low 0 1 2 3 4 5 6 High
Competitor’s capacity utilization Low 0 1 2 3 4 5 6 High Technological know-how Low 0
1 2 3 4 5 6 High Vertical integration Low 0 1 2 3 4 5 6 High Average: 4.13 – Score on
graph: -1.9

Competitive approach SPACE 4/5 - Financial strength Factors determining financial


strength (FS) Return on investment Low 0 1 2 3 4 5 6 High Leverage Imbalanced 0 1 2
3 4 5 6 Balanced Liquidity Imbalanced 0 1 2 3 4 5 6 Balanced Capital required/ capital
available High 0 1 2 3 4 5 6 Low Cash flow Low 0 1 2 3 4 5 6 High Ease of exit from
market Difficult 0 1 2 3 4 5 6 Easy Risk involvement in business Much 0 1 2 3 4 5 6
Little Average 3.86 – Score on graph: 3.9

Competitive approach SPACE 5/5 FS 3.9 Aggressive posture eBay has a competitive
advantage and is in the financial position to protect it CA IS -1.9 4.3 Competitive
posture The competitive advantage exists, but -3.0 eBay still has to improve its
situation in emerging markets like e-tailing ES The main markets of eBay are online
auctions and e-tailing, the company has a strong position to enhance it situation there
Competitive approach Miles/ Snow Factors Strategic typologies Market characteristics
Analyzer Technology Analyzer Competition Prospector/ Analyzer Business’s relative
strength Prospector According to the typologies of Miles and Snow and the findings for
eBay, the proposed strategies should be of offensive nature

Competitive approach Warfare The model from Miles/ Snow and the SPACE-model both
identify aggressive, offensive strategies for eBay From the set of offensive strategies
that eBay can choose, we identified and propose two: Frontal Assault eBay has the
power (resources like capital) to take on any upcoming competitor and push him out of
the market before he can establish his position Encirclement The strategy of
encirclement includes a number of various actions that attack competition in several
ways. Again, caused by its market position, eBay has the possibility to deal with
competitors, before they become a threat eBay is in the position to take on competitors
as they enter the market, either by pushing them out, or taking them over

Competitive approach Justification Are the identified strategic moves in alignment with/
supporting the strategic intent? Vision “To be the world’s personal trading
community” (eBay) Mission “eBay allows customers to create individual auctions and
online stores in order to sell used and new products. This process is facilitated by the
ability to create communities of interest, providing secure transaction services, and a
peer review process in a global environment.” Objectives Identified action groups
Looking at the vision, mission and objectives that have been identified for eBay, the
offensive approach is justified

Competitive approach Ansoff-Matrix Product/ Market offer present new Market


penetration Product development present Protect market share Technological
development Maintain global growth initiative Market development Diversification
Maintain global growth initiative Step ahead new Reinforce marketing Maintain global
growth initiative eBay’s current strategies and the identified strategic thrusts follow all
of the possibilities Ansoff described for this matrix In a league by itself