E-bay

Introduction

            eBay was founded in 1995 and it has continued to grow its revenues in the online auction industry. The net income of the firm stood at $1.8 billion with revenue levels of $9.15 billion in 2010. The Pay-Pal which is the core business of eBay has continued to become a strong global brand. The firm focuses on the ways through which it can be able to shape the future of payments and shopping. The vision of the firm is to build sustained trust and inspired opportunity in commerce. The mission of the firm is to enable individual self-improvement on a global scale and employ business a tool for the socials good of the society. The firm had a total of 221 million registered users in the globe; with the users signing up for Skype, Rent.com, Marketplaces, eBay and PayPal.

External environment analysis

E-bay operates in a market that is highly competitive and is characterized with competition that is very intense. The competitiveness of the industry is explored through the consideration of the Porters 5 forces model. Varied trends in the industry also impact the operations of the firm.

General Environment (PESTEL analysis)

            The PESTEL analysis is used to explore the general macro-economic environment of a given firm. The factors have a great impact on the various operations that the firms engage in.

Political

            Political factors have a very minimal effect on the operations of eBay. However, there are some countries that have put up policies that are affecting the various operations of the firm. The effect of globalization must also be acknowledged as having a great influence on the various operations of the firm. The effects of globalization will lead to the continued expansion of the firm. Globalization has led to the growth of international commerce between people who are located in different countries. The effect would be an increase in the markets that the firm serves.

            Apart from the effect of globalization, the operations of eBay are also affected by the different government policies especially those that govern e-commerce. The policies have come through varied regulatory instruments which are geared towards making the various activities that are carried out online to be safe and secure. This will have an effect of increasing the operating costs of the varied online businesses.

Economic factors

            First, the operations of the firm will be affected by the volatilities and instabilities in the exchange and interest rates. This is because of the global operations of the firm thus the exchange and interest rates will directly impact on the revenues and thus the overall profitability of the venture. The profitability of eBay will also be affected when the rates of taxation that the firm faces increase.

Socio-cultural

            The lifestyle trends pose an encouraging factor for eBay. Majority of the people have internet as part of their lifestyles and thus eBay’s operations will be impacted positively. Secondly, the buying patterns of the consumers have tended towards purchasing their products online and having the products delivered to the homes of the consumers. The firm can thus make use of the buying patterns to capture new markets and increase their market share. Thirdly, there is the consideration of the brand image of the firm which might suffer thus allowing the firm to be overtaken by its competitors. Finally, there are demographics as older generations in most parts of America and Europe will have little usage of the internet and thus by extension eBay. The more youthful societies will have a greater usage of the internet thus the market share of eBay will rise in those societies.

Technological

            The consumer buying mechanisms of the future will increasingly make use of various online platforms and would thus be able to take advantage of this development towards increasing the market share of the firm. There is a requirement for innovation which will shape whether eBay retains its dominant position in the market.

Environmental

            The firm is focused on the ways through which it can be able to create an environment where trust is the key. The strategy would be able to attract the firm a number of buyers and sellers who would not be worried about the truthfulness of the various activities that were undertaken in the firm.

Legal

            eBay is faced with various licensing and patenting laws that will guide how the firm operates. When the firm complies with the various laws, the effect would be an increase in the profitability of the firm. The ownership of the patents will ensure that significant amounts of the income that is received by the firm will be retained to help in the running of the various operations of the firm.

Porters 5 forces model of the segment

The five forces model is a tool that is used to assess the competitiveness of the industry in which a given firm operates.

Industry rivalry

            There has been a significant amount of pressure as more firms from different backgrounds have been able to enter. An example of a firm that piles pressure on eBay is Yahoo and Google. eBay appeals to its customers through low cost quality services. The firm also continues to expand horizontally into the market. Also, it has continued to expand its brands.

Potential for new entrants

            There is a high potential for new entry due to the low barriers to the access of technology. The firms must thus work on ways through which thy can generate traffic to their sites, attract different customers of the firm and also effectively leverage themselves against the various competitors of the firm. The threats arise from the e-tailers and the different traditional retailers. However, there are barriers that are imposed by the laws in some countries. New market entry is affected by the brand and the security that is associated with their sales

Threats from substitutes

            There is a medium threat of substitutes for instance sellers can offer their products directly without putting them up for the auction. The items are sold for the highest price at the auction; which may be higher than what the sellers though they could get from the products. The threats are not major as long as eBay can be able to keep its appeal and positive brand image intact.

Bargaining power of the suppliers

            There are a high number of suppliers who are distributed in different parts of the world. The suppliers have a medium bargaining power as there are hundreds of thousands who are willing to supply. However, security of the transaction is important for eBay as majority of the suppliers want protection for their products. The suppliers of high-end products have a high bargaining power.

Bargaining power of the buyers

            The buyers have low bargaining power as there are limitless buyers; this makes eBay very powerful. Each item that is being sold on eBay can be seen all around the world. Initially, eBay was not listening to their customers thus prompting the use of feedback programs. The feedback was used to weed out the dishonest buyers and sellers.

Internal Environment analysis

Value chain analysis

            Value chain model highlights the primary and support activities that add margins of value to the services of products of a firm so that it can be able to achieve competitive advantage. The primary activities that are undertaken in the firm include inbound logistics, outbound logistics, operations, marketing and service. The support includes the infrastructure of the firm, the procurement, technology and HR management.

Inbound logistics

            The firm offers a venture where buyers and sellers can meet. The sellers list the items and offer their descriptions and auctions are conducted where buyers bid for a specified time. The operations that are carried out include the provision of information and registration.

Operations

eBay has been able to develop categories for the products that were offered for sale in the firm. The firm was not bothered with the assembling, individual operations of the manufacturer of the goods. The firm also built databases for the products and offered the payment mode which is PayPal.

Outbound logistics

            The firm acts as an auction site thus it is not concerned with the shipment of the good along the supply chain. The products are removed from the database

Sales and marketing

            The firm focuses on ways through which the payments that are made can be secured. The firm also had a feedback system for keeping the reputation. Also, the purchases were protected by insurance. The firm also engages in the advertising of its products.

Service

            eBay offers a number of services for instance handling of complaints, training on the use of the products, installation and service after-sale.

Procurement

eBay is not responsible for the purchasing of the materials, goods and services thus the costs of inventory are greatly reduced. The firm however engages in the procurement of ISP hosts and other forms of technology.

Technology development

            eBay uses a number of online options to innovate, and reduce costs. This is a source of competitive advantage in the firm. The firm focuses on customer relationship management (CRM), online marketing and lean manufacturing

HR management

            The firm considers the employees as very vital resources in the firm. The recruitment, selection, training and development, remuneration and rewards at the firm are geared towards motivating the employees. The strategy that is used is to build an anonymous community that would ensure that trust was achieved.

Firm infrastructure

            The firm has a Management Information System (MIS) that ensures efficiency in various activities of the firm especially the keeping of the information and data regarding the transactions.

Example VRIN analysis

E-bay VRIN
Primary activities
	Competency	Valuable		Rare		Imitations			Substitutes	Advantage
Inbound Logistics	Provision of information and registration	Yes		No		Yes			Yes	No
Operations	Building of databases	Yes		No		Yes			Yes	No
	Offering the payment mode	Yes		Yes		Yes			Yes	No
Outbound Logistics	Auction services	Yes		Yes		Yes			Yes	Yes
Service	After-sale service	Yes		No		Yes			Yes	No
	Handling of complaints	Yes		Yes		No			No	Yes
Sales & Marketing	Sales Function	Yes		No		Yes			Yes	No
	Marketing Function	Yes		No		Yes			Yes	No
	Brand Equity	Yes		Yes		Yes			No	Yes
Secondary Activities
HR management	Recruitment		Yes		No		No	Yes			No
	Selection		Yes		Yes		No	No			Yes
	Training		Yes		Yes		Yes	No			Yes
Procurement	Procurement of ISP	Yes			No		No	Yes		Yes
Technology	Customer Relationship Management (CRM)	Yes			Yes		No		No	Yes
Infrastructure	Management Information System	Yes			No		No		Yes	No

Financial analysis

            Times interest earned ratio is a measure for long term solvency. It is calculated by considering EBIT divided by the interest. It stood at 46.77 times in 2010 as compared with 2.024 times in 2009 and 18.83 times in 2008. From the figures it can be noted that the firm is properly covered against it interest bills. In 2010, the interest bills of the firm were covered 46.77 times.

Resource Based View (RBV) of the firm

            For the firm to be able to assess the value of the different resources that are available in the firm, it is important for the firm to be able to examine the intangible and tangible resources together with the different organizational capabilities.

Tangible resources

            The tangible resources that will be considered include the physical and financial assets. The total net revenues of the firm have been increasing over the years. In 2008, the total net revenues stood at $ 8,541,261. The figure increased to $ 8,727,362 in 2009 and to $ 9,156,274 in 2010. eBay has also been involved in a series of expansion which entailed a number of acquisitions. First, Eachnet which was based in China, Baazee which was based in Brazil and Internet Auction Co of Korea and acquired Alando Auction house at a total costs of 43 million. Finally, the firm also owns a number of websites for instance Skype, Rent.com, PayPal and market places.

Intangible resources

The intangible assets include the intellectual property in the online auction. The firm has been able to benefit from the knowledge of auction with the firm just providing the platform for the various activities. Innovation has also been at the core of the operations of the firm especially considering the CRM and the lean management methods. The workers of the firm have great knowledge in ensuring that they can be able to undertake the various activities that they are required to undertake. Finally, the firm also enjoys a good reputation in the industry where it operates. The firm’s operations guarantees security of the operations and also ensuring that trust is built between the sellers and the buyers.

Capabilities

            The employees of the firm are highly skilled and motivated to be able to undertake the various operations that are required of them. The commitment has been instrumental towards ensuring a proper service customer service to both the sellers and the buyers who pos their products on the site. The firm also has capabilities in ensuring the safety of the payments and operations that take place over the internet. Finally, the firm has proper communication channels for the interaction between the sellers and the buyers. It has also been involved in massive collaboration especially with its erstwhile competitors so that it can be able to develop strong synergy in the market.