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Overview
eBay was founded by Pierre Omidyar's in his San Jose home in September of 1995, under the name AuctionWeb. From its early beginnings it was meant to be a marketplace for the sale of goods and services for a variety of interested individuals. It was incorporated in 1996, and has since grown to become the worlds largest most financially successful online auction company.
This report analyses the case eBay: King of the online auction industry written in the year 2000 and attempts to look at the future of the eBay, especially its marketing strategies.
After realizing the overall potential of his idea, Pierre and Jeff Skoll brought on Meg Whitman, as CEO, to efficiently handle the growing popularity, and sustain eBays success
With the addition of Meg Whitmans expert experience eBay soon expanded rapidly to service a wide variety of buyers and sellers, and in September of 1998 the company went public. The shares were initially offered at $18 and immediately rose to $47 by the end of the day. The company has not faltered since, rising to revenues exceeding $220 million by 1999, while the online auctioning was forecasted to grow to trillions of dollars in coming years.
3. Environment Analysis
3.1. Porters five forces
After analysing the forces of this industry I believe that the competition is very intense. In order to succeed in this industry eBay must continuously improve all aspects of its business, or it will be quickly surpassed or replaced by another competitor. This industry is extremely volatile and it is imperative to invest in improving eBay in order to remain competitive. Please refer the Appendix 1 for details.
of the market. The reason of this strategic position of eBay is that auctioning is core business for eBay. Please refer the Appendix 3 for details.
4. Problem
With entry of competitors like Yahoo! and Amazon in 1999 along with number of smaller niche players, have seen eBays market share decline drastically. Moreover, the prospect of attractive profitability and low barriers to entry is encouraging more new entrants. Industry analysts forecasting a huge industry growth in the next 3 years
With a huge forecasted industry growth in next three years, eBay is facing several challenges. At industry level competition is intensifying from existing and new players and at discipline level, ensuring right marketing strategy for a high growth environment. Hence the big question is how eBay will maintain market leadership in a growth market as competition intensifies.
5. Critical Factors
Entry of competitors with strong resources and differentiated products. As highlighted on the Strategic Map in Appendix 3, there are now many competitors competing in the same space, some with significant financial backing from the likes of Microsoft and Dell and others focusing on niche high growth segments. Nearest competitor Amazon currently also sells goods at a fixed price and is rapidly gaining market share at eBays expense. Marketing mix is focused on redundant introductory stage PLC strategies. eBays marketing mix is focused on the mass market for a pioneer in the introductory stage and now needs to adapt their marketing strategy for a growth stage Mass marketing focus on B2B and B2C when competitors are targeting growth segments Low customer confidence vs competitors in site reliability & security. eBay is currently ranked 4th in Customer Confidence which includes reliability and security of the online auction site, and quality guarantees, with Amazon at no 1. Improving these aspects are critical to ensuring customer stickiness in an online retailing environment particularly as
competitors are learning from eBays pioneering efforts and leapfrogging with better technology and services.
6. Potential solutions
To meet the future challenges, eBay has few potential solutions.
Actual product offered by eBay is the online auctioning and once they expand by entering into new geographies or by introducing new products, the existing technological capability will come under pressure which will further reduce customer confidence and experience. Hence the technological up gradation and enhanced CRM system is a necessary to increase the security features and enhanced search capability. A combination of fortress and market expansion strategy will be used to build an impregnable fortress capable of repelling attacks by current or future competitors to maintain market share.
This I believe will further help increase the brand presence, revenue, customer base and customer experience .However, the cost of enhanced technology and the implementation are potential risks.
sell automobile related products. This will avoid selling a second hand rug next to a Lexus or costly jewellery. An integrated marketing mix will be developed along with targeting few segments to focus on premium, non premium, B2B and B2C customers. eBay offers that unique experience or sheer joy of winning a product through auctioning, however, there are other set of customer who would like to just purchase products with fixed pricing. Hence this will form a part of product segmentation / product development. This will bring greater customer experience, increased sales and market share, efficiency to target segments and synergies in marketing mixes. However, increased organisational complexities and operating cost will continue to be a concern.
7. Recommendation
All Three Aggressive Corporate Growth Multiple corporate growth strategies to further penetrate mass market
MODERATE
MODERATE
Strategic Map
Strong
Classifieds
Reputation/Brand Awareness
Live Auctions
GO.com
Auctions.com Flea
Mkt
AuctionWatch
FairMarket