In 1995, Pierre Omidyar was experimenting with how equal access to information and opportunities affects the efficiency of marketplaces. After spending Labor Day weekend writing the code for an online auction site, he tested his idea by posting a listing for a broken laser pointer which to his astonishment sold for $14.83. Omidyar contacted the winning bidder to ensure he realized the item was broken. The buyer answered, “I’m a collector of broken laser pointers.” At that moment, Omidyar knew he was on to something very big and eBay was born.
From day one, Omidyar built eBay around what remain the company’s core values; a belief that:
• People are basically good
• Everyone has something to contribute
• An open environment brings out the best in people
In June, 1996, eBay hired its first employee after revenues topped $10,000 for the month. Jeff Skoll was soon hired as the first president of the company and Pierre Omidyar quit his day job to work on eBay full time. That same year, eBay launched the feedback forum. In 1997, registered eBay users topped 341,000 and they are hosting more than 200,000 individual auctions per month, compared with 250,000 auctions in all of 1996. In 1998, Meg Whitman joined the company as President and CEO and eBay went public in September. Gross profits exploded from $95 million in 1997 to $740 million. eBay expanded internationally in 1999, with sites in the United Kingdom, Germany, and Australia. The “Buy it Now” option was introduced to meet the demand for fixed price trading.
Between 2000 and 2007, eBay continued its international expansion with marketplaces in Austria, Canada, France and Taiwan, as well as Ireland, Italy Korea, New Zealand, Singapore and Switzerland, among others. In 2003, eBay introduced PayPal Buyer Protection services for eBay transactions. By the end of 2007, revenues have topped $52.5 billion, registered eBay users have exceeded 222 million and the number of employees has reached 13,200.
The success of eBay underscores the truth of the corporate values outlined earlier, which are at the heart of eBay’s continuing success. In spite of eBay’s success in international markets, the question remains of why eBay can’t get a strong foothold in the Asian market, primarily China and Japan.
S.W.O.T. Analysis
The following analysis was derived from the case outlined in the text as well as internet research performed in order to analyze eBay and their strategy to be the dominant player in the Asian online auction market. Although eBay has several important strengths and weaknesses, our team chose to identify those we felt were most crucial. Those weaknesses are listed in order of importance.
Strengths
• eBay currently enjoys a large global presence and various globally recognized brands.
• They have access to an extremely large amount of capital.
• The parent company has ensured a strong foundation of survivability and diversification by acquiring numerous highly successful companies ( PayPal, Skype, Shopping.com)
• Currently, eBay possesses the largest market share in online auctions.
Weaknesses
• eBay maintains centralized management home based in the United States through which all decision making goes.
• Their website’s layout, design and development are weak.
• They lack an online payment system like PayPal in the Asian market.
• eBay’s previous strategy of acquiring other e-commerce sites through complete buyout appears too aggressive to the Asian market.
• eBay has a history of poor customer support.
Opportunities
• People have access to the internet at any time and any place.
• There is currently endless potential for growth of e-commerce in the Asian market
• eBay has a feedback forum that other sites do not have.
• Through the implementation of a global PayPal platform, eBay can allow and provide a means for currency exchange between markets.
• Currently there is a low percentage of the large Asian market which is online.
Threats
• There are very few barriers to entering the online market
• Competition in the Asian market is “homegrown” so they understand the culture and business practices.
• There are other successful retail websites such as Wal-Mart and Amazon which are already well established which eBay must compete with.
• Yahoo, eBay’s largest competitor, is currently very successful in the Asian market and they are affiliated with the largest Asian competitor.
• eBay does not allow direct communication between buyer and seller as do other sites.
Alternatives
Alternative 1 – Research project, website improvement, and advertisement
The Simple Plan
With this plan EBay could improve some of the small things to their company. A research project of how eBay could get a foothold in the Asian market could give them valuable information. Some improvements to their website to suit the Asian market could make it more accessible and easier to navigate. Lastly, simple advertisement of the new and improved website through several medias, including magazines, newspapers, and TV commercials, could help narrow the gap between their Asian competitors.
Alternative 2 – Research project, website improvement, advertisement, and hire a competitor’s executive
The Better Plan
The inability to expand into the Asian market has put eBay on the outside looking in. If eBay could hire an executive from a competitor in the Asian market, it could give them the edge they need for a complete breakthrough. This executive could show eBay how to gain the advantage they need to penetrate the Asian market. Another benefit of this option would be the “Piped Piper Effect” which is when one employee leaves, and other employees follow. This is due to social capital which is the relationship between coworkers both in and out of their work environments.
Alternative 3 – Start from scratch
The Complete Plan
Both previous plans would give eBay a chance to expand into the Asian market, but without the complete plan, the future could be short.
eBay’s several attempts at acquiring already in place e-businesses have failed. One factor for failure has been that eBay tried to expand into Asia without physically being there. Analysts also believe that eBay’s aggressive method of acquiring other online businesses as being defensive. Implementing the complete plan would be to decentralize and create a headquarters physically in the Asian market. With this plan there are several benefits that could help eBay be more successful. Developing a headquarters in Asia would create job opportunities. A local headquarters could also improve customer service which in turn creates customer loyalty.
Conclusions and Recommendations
In conclusion, all the alternatives presented will have an impact on eBay’s future. The Simple Plan requires the least amount of change and resources. This alternative will have a small impact on eBay’s bigger picture of gaining a larger share of the Asian market. The Better Plan will help increase eBay’s share in the Asian market, but does not meet the ultimate goal. The Complete Plan meets the goal of a larger expansion into the Asian market.
The Complete Plan provides the largest opportunity for eBay to break into the Asian market. The Complete Plan provides for a brand new headquarters located in Asia to gain a better understanding of the local customs and the target market. This plan also provides for an insider look at the success of competitor’s in eBay’s desired market. This new perspective will help eBay to realize its goal. Once the new headquarters for the Asian branch of eBay becomes established, advertising, research and web design will complete the changes needed to succeed. This complex plan should be executed in stages in order to be implemented correctly.
First, eBay should start from scratch. By building a local headquarters in Asia, eBay will gain a physical presence in the Asian market. This will also help eBay gain respect in the Asian market. Second, eBay should aggressively recruit experienced personnel to handle the operations in the Asian headquarters. By hiring locals to run the headquarters and decentralizing, eBay will have the knowledge needed to connect with the local market. Ideally, a recruit from eBay’s competitors would have a greater knowledge of the market in Asia and therefore give eBay a greater advantage. Lastly, eBay should implement the advertising, research project, and website improvements discussed in the Simple Plan. The information gained from the research project will help the local executives at the Asian headquarters compete against already established firms. The improvements to the website will allow for a platform that is suitable to the Asian market. An example of this would be to allow the open forum eBay already has established to facilitate communications between the buyer and seller, like the competition has found successful. Advertising of these new features will entice auction seekers to visit eBay’s new Asian website.
This case analysis has discussed eBay’s strengths and weaknesses as well as the opportunities and threats to the company. The Complete Plan has been chosen as the best alternative for eBay’s successful expansion into the Asian market.