Ebay in 2002: The Challenges of Sustained Growth

Case Analysis

eBay in 2002: The Challenges of Sustained Growth

Tables of Content

IDENTIFICATION 3

OVERVIEW OF THE SITUATION 3

EBAY'S CURRENT STRATEGY 5

ANALYSIS AND EVALUATION 7

COMPETITION ANALYSIS 7

FINANCES 9

MARKETING 12

OPERATIONS 13

MANAGEMENT 13

COMPANY'S VALUE CHAIN 14

SWOT ANALYSIS 14

KEY ISSUES 15

ALTERNATIVE SOLUTIONS ....................................................................... 16

RECOMENDATION AND ACTION PLAN................................................... 17

Identification

Overview of The Situation

eBay, an early pioneer of a particular kind of e-commerce that is online auctions. Established in mid-1990's and transformed to public company in 1998, eBay provided trading platform in online marketplace and acted as facilitator providing pre- and post- value added services for three basic categories of online auctions:

* Business-to-business auctions: businesses, which trade with other businesses in order to sell merchandise surplus, used equipment or high-tech production.

* Business-to-consumer auctions: businesses selling goods and services directly to their consumers via Internet.

* Person-to-person auctions that gather small sellers and buyers in a virtual face-to-face trading place.

Since 1995 eBay experienced phenomenal popularity and substantial growth and met the new millennium being the largest Internet auction platform, which in 2001 served 42,4 million registered users and facilitated 423 million listed auctions globally:

* U.S. e-commerce

* Europe (U.K., Belgium, Brazil, Italy, France, Netherlands, Portugal, Spain, Sweden)

* Asia/Pacific region (China, South Korea)

* Latin America (Argentina, Chile, Colombia, Ecuador, Mexico, Uruguay, Venezuela)

Such growth (illustrated in Table 1. and Graph 1.), was caused by several factors:

* High-Tech availability to ordinary user resulted in growing Internet usage

* Advanced technologies enabled eBay to offer new attractive services as for loyal users as for new ones (industries)

* High-Tech decreased amount of server breakdowns

* Improved security built trust

* Expansion to the global market and purchasing locally popular e-commerce providers (Internet Auction Co., iBazar, Half.com, and other local trade platforms)

Table 1. Six Year Summary of eBay Usage Growth.

1996 1997 1998 1999 2000 2001

Nr. of Registered Users 0,041 0,341 2,181 10,006 22,500 42,400

Gross Merchandise Sales 7,000 95,000 745,000 2800,000 5400,000 9300,000

Nr. of Auctions Listed 0,289 4,394 33,668 129,560 264,700 432,000

Graph 1. Six Year Summary of eBay Usage Growth.

So as the trends of profitability and revenues (as shown in a Table 2. and Chart 2.) due to such increase in customers resulted in substantial growing as well.

Table 2. Six Year Summary of eBay's Financial Performance.

1996 1997 1998 1999 2000 2001

Revenues 6.803 8.404 16.094 57.588 95.453 134.816

Net Income 3.338 7.061 7.273 10.828 48.294 90.448

Chart 2. Six Year Summary of eBay's Financial Performance

Even though eBay's business showed very good results, competition was growing fast and eBay decided to improve their strategy for keeping leader's position in online auctioning and for the future growth in global market.

eBay's Current Strategy

Strategy: eBay's strategy was to create efficient online marketplace that would bring together fragmented market.

Vision: The author of eBay, Pierre Omidyar, had a vision of creating not just trading platform for potential users, but to create virtual, democratized marketplace that would function as real one and to facilitate person-to-person trading community where everyone would have equal access to the same medium, via Internet.

Mission: to help people to trade on anything that might bring benefits to both parties in a virtual market place, which would function as the real market where people are able to meet face-to-face while making business together, and what is more important, to be able to get to know each other better and built trustful relationships.

Objectives Stated in 2002:

1. Deepen the existing trading platform:

* Broaden existing product categories

* Find new product categories

* Local and international expansion

* Introducing new pricing format - fixed price sales

2. Strengthening