ORGANISATIONAL BEHAVIOUR

Introduction

            Organisational behaviour refers to the study of the individual as well as the group dynamics in an organisation. McShane & Von Glinow (2000) argued that the main goal that organisational behaviour serves is to help the various members of the organisation to forge helpful relationships between themselves, the groups as well as in the whole organisation so as to allow for the achievement of the personal goals as well as the organisational goals. The interactions between the inherent characteristics of the different members of the firm will lead to the creation of an organisational characteristic. The paper will be useful in gaining an understanding the role that leadership can play in a firm towards the achievement of the goals of an organisation. Above all else, the paper will also be important in helping to understand both the theoretical as well as practical aspects of OB. IKEA group is a Sweden based company that was founded in 1943. The company deals with home furniture and furnishing products which are old through the firm’s chain of stores which are found in the different parts of the world (28 countries) with a high concentration being in Europe, Asia and the Middle East. The firm started out mostly with the Scandinavian countries but currently the firm has over 148 chain stores distributed in the different countries (IKEA, 2012). The paper is about the organisational behaviour that is exhibited at IKEA especially with a focus on the group and team work at the organisation. The paper will also delve into how the problems related to the organisational behaviour at IKEA can be dealt with. The paper has a literature review that will give the theoretical background of the concept of organisational behaviour with a specific focus on leadership and the various components of group and team work. The literature review will be followed by an analysis which will combine the various elements of the literature review with the issues that are found at IKEA. A discussion will then ensue regarding the findings from the analysis; here, possible solutions and way forward will be given. A brief conclusion will then be given regarding the issues that are discussed in the paper.

Literature review

Leadership

Leadership refers to the will to trigger other people to work towards the achievement of a variety of goals that they seek to achieve. The leadership has also been defined as a trigger to people so that they can work towards the achievement of a variety of goals. The leaders in a firm influence how people behave, how they work towards the achievement of the various goals of the firm as well as establish a common bond between themselves and her followers. Leadership is important for a number of reasons. The first is to motivate the various employees of the firm. The motivation is necessary so that the employees can be able to perform their duties as is required by the management of the firm. The leaders must work towards the creation of an environment in which the different members of the organisation can interact, release their energies and engage in hard work towards the achievement of the various goal of the firm (Paglis & Green, 2002). The leadership is also important as it will leads to the creation of confidence amongst the employees thus they will be aided in the achievement of both their personal and collective goals. Otherwise, the employees of the firm will not be able to use their potentials towards the achievement of the different goals of the firm. Also, there will be a very low rate of commitment amongst the employees if they do not receive proper.

Thirdly, the leadership also ensures that there is a high level of morale amongst the employees thus the result will be timely and efficient completion of the different duties of the employees. This will lead to higher rates of productivity as well as stability in the organisation. A strong leadership also ensures that there is a high rate of cooperation between the employees of the firm. There will be a high rate of team work as the leader will create an environment where the employees of the firm will voluntarily work as a group and a team (Paglis & Green, 2002). Moreover, leadership also ensures that there is a serene environment in which work can be carried out in the organisation. The leader will ensure that there is a unity of purpose amongst the employees especially in regards to how the leader uses his power. Finally, in the organisation where group and team working is encouraged, the leader works as the glue or the force that bring that brings the different members of the groups together.

Leadership styles

            The leadership style that is adopted in an organisation will determine whether the leadership in the organisation is a success or a failure. There are two general styles; positive leadership where the motive of the leader is to create a conducive environment where the needs of the employees will be satisfied so that the employees can have both the morale and the commitment to work for the firm. The other is negative leadership where fear and force is used by the leader so that they can influence the followers. Under such style of leadership, formal authority is invoked by the leaders so that the employees can work towards the achievement of the goals of the organisation. There are four (4) main leadership styles that any organisation can take (Fulop & Linstead, 1999).

The first is autocratic leadership where the decision making power in an organisation is highly centralised and the employees of the firm carry out the roles that have been assigned to them. In such an organisation, the leader is considered as superior to the employees and in most cases, the leader uses fear, force and threats to get his way. There are three main types of autocratic leadership. The first is where the leader heavily uses negative approach especially by ordering employees around. This is the best recipe for resentful behaviour amongst the employees (Fulop & Linstead, 1999). The second type is where the leader makes decisions by themselves and then influences the employee to accept the decisions. This is an example of positive approach. Thirdly, the leader can also manipulate the subordinates to the extent that they may feel they are involved in the decision making while in the real case, the decisions are made by the leader. The main advantage of autocratic leadership is that it allows for quick decision making. The downsides of this style include the employees relegating the goals of the organisation to their own personal goals; there are low morale and motivation amongst the employees.

The second style of leadership is democratic where the employees or the subordinates are involved in the decision making ventures of the firm. Douglas McGregor categorised this style under his theory Y where subordinates assume responsibility and are also involved in the decision making. There is a high rate of team work and participation of the different employees of the firm (Baruch, 1998). The welfare of the employees are considered in such instances thus there is a high level of support and commitment of the employees towards the achievement off the goals of the organisation.

Thirdly is the laissez faire where there is a general lack of control and the leader in most instances is engaged in passing the buck of responsibility to the subordinates. The employees of the firm are given freedom to do as they wish. It is characterised by a high level of delegation of duties (Mason, 1992). For the style to b successful, the employees must be very well aware of the goals of the organisation, the leader must fully delegate power, high skill level amongst the subordinates and they also have the urge to assume the responsibility they are given. Finally, there is paternalistic where the leader views himself as the parent to the employees and he therefore seeks to keep them happy (McShane & Von Glinow, 2000). The emphasis is thus laid on a good working environment.

Analysis

            The leadership at IKEA has been on that greatly promoting the development of team work and group working among the different employees at the firm. At the firm, the leaders, group heads and the managers, highly consult the employees of the firm before they can embark on any activities that will affect the way the work in the organisation is carried out. The management of IKEA practices democratic leadership style where the different employees in the departments set goals so that they greatly understand what they are working towards. The employees do not feel coerced into doing anything in the firm and thus in most cases, they greatly like the wok that they are doing in the firm.

Secondly, the employees in the organisation are rewarded for their divisions’ achievement on top of their salaries which are always due every month end. The culture of group rewards is very common in the firm thus the different employees who work in the various divisions will work so hard towards the realisation of the goals of the departments where they work so that when the rewards come about, they will be considered. This has made the firm more inclined to communism where all strive to achieve the goals of the department thus by extension contributing to the achievement of the overall goal of the organisation.

Also, the leadership of the firm also ensures there is a culture of respect that is in existence between the various employees of the firm; be them in the management or are just working their way through the ranks of the firm. The IKEA’s management philosophy requires the leaders to respect, understand and also motivate the various employees so that they can not feel inferior to the leaders. There is also a cordial relationship between the different employees in the departments so that there is always a team mentality (IKEA, 2012). No one in the firm is made to feel as if they are small; though in reality they may be subordinates. It can thus be said that the management and the leaders in the firm are working so hard towards the creation of a conducive environment where all the employees of the firm feel appreciated. This culture of respect sometime dissolves especially between the employees who have different cultures especially in regard to the power distance, and individualism (Hofstede, 1980). This has been a major problem for the firm between the employees from the Middle East and those from Central Europe.

Moreover, through the provision of a variety of benefits to the employees of IKEA, the leaders of the work have greatly satisfied their role of motivating the employees of the firm. The benefits that the employees of the firm have include dental cover which goes all year round thus the employees do snot have to worry about medical expenses. The employees are also given such benefits as education funds so that they can complete their education (Paglis & Green, 2002; IKEA, 2012). The insurance that the employees pay is also low thus the employees feel greatly motivated to reciprocate the goodness that they have been offered by the firm. The benefits differ across the country operations of the firm thus when a person is moved from one country to another they will be disadvantaged.

The leaders at IKEA trust the employees including a belief that they have the capacity to carry out the different kinds of duties that are allocated to them. However, this is not true for the entire department of the firm. While some departments’ exhibit democratic leadership where the employees contribute towards setting of the different goals of the firm, there are others where there is a laissez faire leadership. The laissez faire is found in the departments where the managers or the team leaders completely have trust in the ability and the commitment of the various employees (Fulop & Linstead, 1999). The trust in the ability of the employees will give them confidence in their activities and thus they will not only work to accomplish their personal goals, they will also work harder at the achievement of the goals of the organisation. There are however employees who do not have the requisite skills and have a high dislike for the leaders to watch them as they carry out their duties.

Implications and challenges

            The leadership style that is most prevalent in the firm; democracy, will ensure that the goals that are set are binding and acceptable to both the employees and the leaders. This will ensure that benefits are reaped for both the employees in terms of personal growth and for the firm in terms of increased profitability. There may arise instances where the goal of the firm are not achieved in the cases where the employees who are entrusted completely with the duties have very little skill and or commitment to carry out the different types of jobs that are given to them (Baruch, 1998). The other challenge is in terms of the different cultures of the employees who may be working in the different divisions thus leading to lack of team work between the different employees of the firm.

The implications for the employees will be to be highly involved in the various activities of the firm especially by showing the potential they have to carry out the different duties that they may be given by the team leaders.  The manager and the employees must work together so that any problems that may arise between the different employees of the firm can be dealt with before they escalate into full blow conflicts in the firm. According to Hofstede (1980) the managers and or the team leaders must be at hand to ensure that the grouping of employees into groups consider the compatibility of their cultures or knowledge of the other cultures so that there can be no cases of misunderstanding in terms of the different cultures.

Conclusion

            Leadership is important for a number of reasons in any given firm. They include providing a conducive atmosphere for the employees, to motivate, create confidence and increase the levels of the morale of the employees of the firm. The employees of IKEA are governed under the democratic leadership style as they are involved in the various activities; from the decision making in the firm to the actual implementation of the ideas. This ensures that the different employees highly understand the different roles that they are supposed to play in the firm. IKEA promotes the development of team and group working amongst the employees on top of providing an increased level of incentive to the employees in terms of the various benefits that the employees have. Majority of the employees of the firm are friendly thus there is a high level of respect between the different groups of people. However, the firm must deal with the laissez faire ideologies that are found in some departments especially if the employees who are left on their own do not have the necessary skills to carry out the duties without the leader’s guidance.

References

Baruch, Y. (1998), "Leadership—Is That What We Study?" Journal of Leadership Studies,5(1): 100–124

IKEA (2012), IKEA, [online] <from http://www.ikea.com/ms/en_GB/about_ikea/index.html> Retrieved on 03/02/2012

Fulop, L. & Linstead, S. (1999), Management: A Critical Text, South Yarra: Macmillan

Hofstede, G. (1980), Culture’s Consequences: International differences in work related values, New York: Sage Publications

Mason, J. C. (1992), "Leading the Way into the 21st Century", Management Review, 81(10): 16–20

McShane, S. & Von Glinow, M.A. (2000), Organisational Behaviour, Boston, MA: McGraw-Hill

Paglis, L. & Green, S. 2002, "Leadership self-efficacy and manager’s motivation for leading change", Journal of Organisational Behaviour, 23(2): 215-235

International human resources: Expatriate Adjustment

Introduction

            The issue of expatriate’s adjustment has been in the HRM literature for a long time. The globalization of the operations of many firms in the world is leading to a scenario where many managers will spend many of their years or careers while working abroad. The issue of the management of expatriates has been a very important one in these organizations. The costs that the firms usually incur in having the expatriates are high for instance in terms of the fringe benefits, the education and health allowances, return air fairs and the huge salaries. There is usually a noted high failure rate that can be faced by the companies that use expatriates due to the fact that the expatriates had difficulty adjusting to the life and work in a different culture. This can happen due to abrupt and little preparation on the part of the employee who is being sent to go and work abroad (Andreason & Kinneer, 2005). The paper will explore how Coca Cola Company expatriate from South Africa can adjust to the working conditions in China.

Company Background

            Coke was founded in 1886 by an Atlanta chemist, John Pemberton. During that period, the company was selling just 9 glasses per day. The company was later sold to Candler who later sold it to Woodruff in 1923. The products of the firm started to be marketed all over the world after the purchase by Woodruff. The firm had reached the mark of selling 1 billion bottles per day in 1997. In 2011, 11.7 billion bottles were sold throughout the world (Coca Cola, 2012). The mission of Coke was to inspire moments of optimism, refresh the world, make a difference and create value for people (Pendergrast, 2004). The firm’s visions include lean and effective production, responsibility to the planet and maximization of shareholders returns. The firm has over 6000 brands which are sold all over the world.

The critical success factors of Coca Cola Company

            The marketing operations of the firm have ensured that the firm remains the world’s most recognized brand. The firm greatly differentiates it products from those of the competitors and thus allowing the firm to have a sustainable competitive advantage from the product quality that result from the differentiation. The other success factor of the firm is the integration of technology and the high level of innovation that is found in the operation of the firm. The firm used vending machines especially in North America, where the customers could be able to buy the products of the firm more easily. The fridge pack innovation that the firm came up with also led to an increase in the growth of the firm (Mobley, Wang & Li, 2009). The low mark up pricing of the products of the firm during the festive seasons has also contributed to the success of the firm. the firm’s other critical success areas lies in the promotional activities that the firm engages in for instance the firm has been a sponsor of major world events such as the Olympic and FIFA world cups.

Environmental analysis of the firm

The environment of the firm can be analyzed through the use of a number of instruments for instance through the use of PESTEL, Porters 5 forces and SWOT analysis

PESTEL analysis

            Political factors that affect the operations of the Coca Cola Company include the different tax regimes that characterize the countries where the firm operates. There are also labor laws that restrict the minimum wages that should be paid out to the workers of the firm. Finally, there are also the political stability and or instability issues that affect the operation of the firm for instance conflicts and other political upheavals that affect the operations of the firm (Daft & Marcic, 2009). There are also economic factors that affect the various operations of the firm. The first includes the volatilities in the foreign exchange market especially due to the fact that the firm operates in over 200 countries. The increasing interest rates are also leading to an increase in the costs to the firm for instance the debt financing of the operations is increasingly becoming difficult. The bleak global economic outlook would also have a negative effect on the purchasing power of the various consumers thus a potential for reduction in revenues (Madura, 2007).

            The socio-cultural factors that affect the operations of the firm include the changing consumer preferences especially due to the realization of the effect of the products of the firm. Coke has been able to respond to this through the addition of diet products. The firm has also been able to add new products such as water and sports drinks due to the social trend of fitness (Singla, 2010). Technology has also affected the operation of the firm; the company has been able to increase the quality of its products through the use of new technologies. The firm has also been able to adopt technologies such as those that allow for recycling bottles so that the effects on the environment can be minimal. According to Boone & Kurtz (2010), the firm has also used technology to makes trendy bottles that have a higher appeal to the youthful consumers.

The legal factors that affect the operations of the firm include those related to the safety of the various products of the firm. The Food and Drug Administration (FDA) produces laws that govern the packaging and labeling of products, and the general safety of the products (Pendergrast, 2004). The firm is also affected by the issues of the environmental protection as water is a major ingredient that the firm uses. Finally, there are environmental issues for instance the sales are dependent on the weather with the products being sold mostly in the summer and hot weather. The sales are very low during the winter and rainy weather.

Porter’s 5 forces analysis

            The porter’s five forces are used to determine the competitiveness and thus the attractiveness of the industry in which the firm operates. The threat of new entrants is low due to a number of reasons. There is a high costs that are involved in the marketing and advertisement of the products and brands of the firm thus block some firms. The firms in the industry have high customer loyalty thus will most likely not switch. The new entrants will also fear retaliation in the form of new product lines and price wars (Pendergrast, 2004). 

The competition within the industry is intense between Pepsi and Coke as they both compete globally in over 200 countries. The market growth has been declining in all sectors by about 1.1 % for all the firms and the market share is majorly captured by Coke and Pepsi. The two major firms also compete in terms of differentiation and advertising rather than on prices. The threats of substitutes are high in the industry for instance tea, juices, coffee, beer and water. This threat is high as there are low switching costs on the part of the consumers. The perceived value or price is low in the industry as the consumer choices are informed by the advertisement. Thus, for the substitutes to establish, they will need to invest in massive advertisement and brand awareness (Pendergrast, 2004).

The bargaining power of the buyers is high to medium depending on the outlet. For the fasts food outlets, the power is high due to the fact that they purchase the products in bulk. However, in the convenience stores, the power is slightly low to high as the customers have to pay superior prices. Finally, the bargaining power of the suppliers is low due to a number of reasons. The switching cost from one supplier to another is low due to the basic nature of the raw materials that they supply. The suppliers are also many and thus when the firm severs link with one they can easily jump onto another (Hill & Jones, 2010).

Challenges faced by expatriates

            The major problem that affects the expatriates is how they can be able to adapt to the organizational and the new national culture. These arise from the personality of the expatriate and the differences in the home and foreign country (Routamaa & Rautiainen, 2002). Expatriate adjustment refers to the degree of the environment coordination of the person and their personal feelings. The adjustment therefore refers to the comfort of the person to the job, socialization and the aspects of psychological comfort with the host culture in terms of the housing, food and transportation. There are three main dimensions that can be learnt from the case. They include work adjustment, general living adjustment and social interaction adjustment (Lan, 2002).

Expatriate adjustment problem

            There were a variety of problems that were noted. The problems that the firm was undergoing through were greater than those that the employees had been told. There was also a low skill of the workforce of the firm and a general lack of professionalism in the running of the firm. There were also problems that were noted in some very optimistic break even analysis and profitability. The board members of the bottling company in china were not sure of how the problems that were being faced could be solved. The Board also had some members who could not be able to carry out their jobs although they were promoted on the basis of their seniority and loyalty to the firm. The collectivism and high power distance in China led to the formation of a special relationship between the members of the firm. The low level employees offered obedience and loyalty to the superiors who in turn offered protection and consideration. This brought about problems in implementing the changes that were proposed.

There was also the issue with the organizational structure of the firm (Matrix structure). There were unclear responsibilities and reporting lines, little duty delegation and centralized decision making in the firm. The expatriate offered a number of changes for instance decentralization of the decision making and many other. The Board Chairman did not back the changes due to the opposition from senior staff. There were disagreements as the expatriate’s actions according to the Chairman were rattling the people who are important to the firm and thus led to the termination.

Reflection of the problems

            The expatriate would have taken more time in building relationships that would help in the selling of the various change proposals that he had. He never backed down as taking the time would lead to his assimilation into the culture. On the  other hand, the expatriate GM misjudged the importance of culture for instance in terms of the power distance and decision making, the long term orientation of the Chinese where activities are to be done for their long term benefits and the collectivist views for instance seniority in the promotions and other benefits. The promotion issues and the membership of the board should have been resolved if the General Manager (GM) understood the intricacies and the working of the Chinese (Hofstede, 1991).

How Coke bottling plant deals with the issues of expatriate adjustment

            The problems that were faced in expatriate adjustment can be understood from the theory of work role transitions; this has been used to explain the varied transitions that expatriates make in adjusting to their new roles in the host countries and how they can adopt the culture. First, there can be personal development and change to accommodate the new roles or changing the way in which the role is done. This latter option failed at the Coca Cola bottling plant in China.

            The focus should be on adjusting to the new role. The strategies include replication, exploration, determination and absorption. Determination involves changing the parameters of the role and not the skills and core values. Exploration involves the change in role and person parameters as the new roles will influence the person (Nicholson, 1984). Absorption involves undertaking a lot of personal change so that the demands of the new job can be accommodated; involves little change to how the job is done. Finally, replication involves making slight changes to adjust to new role; thus continuing to behave as before without consequences (negative) to the settling on the job and performance.

At the firm, the GM was employed to bring about changes to the practices and norms. Later, the Chairman wanted the GM to show conformity to the very norms and practices (Nicholson, 1984). The implied psychological contract of the GM was that he could use determination strategy to bring about the changes that were needed. The changes that were proposed were thwarted as the chairman who had apparently given him the free hand in running the organization. The GM was encouraged to use more of absorption strategy through conforming to the organizational practices and norms. However, this would conflict with the goals of his hiring; improved profitability.

The expatriate, GM, was also faced with novel social and cultural ways as he had never worked in SE Asia before. This could have been bridged through the use of seminars where the expatriates are introduced to the local business scene. They can learn about the culture characteristics such power distance, collectivism, time orientation and uncertainty avoidance etc. Other cross cultural management training can also be able to help for instance acculturation which would lead to the adoption of the exploration strategy where he would change himself to improve his understanding of the local Chinese culture (Nicholson, 1984).

Conclusion

The expatriate adjustment is a very important factor that must be considered by a firm. The problems that are found out in the firm include both the different in organizational and national culture. The effects were massive as the partnership crumbled just after take off. It is important that the terms are clearly indicated in writing to avoid the cases of the Board going back on their word. Also, the expatriates should be able to clearly understand the culture in which they are going to work in before they can embark on the journey. When the two considerations are looked into the adjustment will be easier.

References

Boone, L.  & Kurtz, D. (2010), Contemporary Business, Hoboken, N.J: John Wiley

Coca Cola (2011), Mission, vision & Values, Retrieved on May 4 2012 from http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html

Daft, R. & Marcic, (2009), Understanding management, Mason, OH: South-Western

Hill, C. & Jones, G (2010), Strategic management theory: an integrated approach, Boston, MA: Houghton Mifflin

Hofstede, G. (1991), Culture and organizations, London: McGraw-Hill

Lan, Y.S. (2002), The Relationship between Expatriate Capability and Overseas Adjustment-A case study of Taiwanese expatriates in China, Unpublished master’s thesis, Chung Yuan Christian University

Madura, J. (2007), Introduction to business, Mason, OH: Thompson/South-Western

Mobley, W.H.; Wang, Y. & Li, M. (2009), Advances in global leadership, Bingley, UK: Emerald Group Pub.

Nicholson, N (1984), "A theory of Work role Transitions", Administrative Science Quarterly, 25: 226-251

Routamaa, V. & Rautiainen, L. (2002) "Type and expatriate adjustment in a new culture", Proceedings of the 6th AAPT Conference, Sydney

Singla, R. K. (2010), Business Organisation and Management, V.K (India) Enterprises

Pendergrast, M. (2004), For God, country and Coca-Cola: the definitive history of the great American soft drink and the company that makes it, New York: Basic Book

Andreason A. & Kinneer, K. (2005) "Repatriation Adjustment Problems and the Successful Reintegration of Expatriates and Their Families", Journal of Behavioral and Applied Management 6(2): 109-126

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.