Strategic Management of Ebay

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Team Case Analysis

MAN 4722

To drop-Off or Not?*

July-26-2007

Leopoldo Portes

Elvis Pena

David Perez

Statement of Purpose

. To research the Case Analysis on eBay: "To Drop off or not?" in the topic areas of Strategic Management.

2. To generate a report on these findings using strategies studied and discussed throughout the semester. Strategic Managerial Applications.

Table of Contents

Introduction 4

Executive Summary 7

Conclusion 13

Sources/ Works Cited 14

Brief Synopsis of Case Analysis & History of eBay

eBay, formerly known as Echo Bay technology, formerly known as Auction Web, was the brain child of founders Pierre Omidyar and Jeff Skoll. In 1995 Omidyar was intrigued by the idea of creating an auction site with the feel of an online garage sale Community. Rumors surfaced that Omidyar's wife asked for the techy to create a website for her in order for her to buy, sell and trade into her collection of PEZ dispensers and other rare obscure items. Once the website went online, the garage sale hype created a plethora of activity, forcing Omidyar and Skoll to move the site onto a business account and begin charging users a listing fee. eBay stuck to its roots of "community membership" environment, creating member feedback mechanisms, building a certain level of trust for its end users.

In 1998 eBay hired current CEO Meg Whitman, who brought substantial business experience from her Harvard Business school degree and her previous ventures with Pepsi, Procter & Gamble and Bain & Co. Whitman from a professional perspective implemented a focus on gathering and analyzing data in order to make capital investment decisions. eBay went public in 1998 with its stock tripling in value before the end of its first full day of trading. In the third quarter of 2004, eBay's net revenue exceeded $800,000,000.00. Not bad for a 9 year return on investment.

During its yearly years, eBay's revenue was mostly from collectibles (true garage sale style). Post Whitman's entry, eBay has capitalized on product diversification by opening other product categories and specialty sites (e.g. motor vehicles/eBay Motors) which spanned over 16,000 types of goods and they have moved into e-tailing, contrasting their auction based business by bringing about half.com. In addition to diversification, Whitman has capitalized on expansion at a multi-national level going into 28 international markets with eBay International. As recent as 2004, eBay has created economies of scope, by venturing into the online payment scene by acquiring PayPal, a well known established leader in the industry. Yet another source of competitive advantage for eBay has been via economies of scale given their sheer number of registered users. By 2004 eBay reported 114 million registered users of which 41 million were considered active. In comparison to its competitors Yahoo Shopping and Overstock.com, eBay has an overwhelming advantage in Web presence and brand recognition. In 2004-05 an estimated average of 15.47 million users visited eBay on a weekly basis; this compared to 2.92 million and 1.62 million respectively for Yahoo and Overstock. In 2001 eBay gained 64.3% of all spending on online auctions. In 2005 there were estimates and projections indicating that 1.807 billion items would be listed by its community of users for that fiscal year alone. Three final sources of competitive advantage for eBay have been first mover advantage by being first to market and by establishing a unique proprietary technology platform (program and code) which has been difficult even impossible to copy or imitate and finally the trust created by their unique community feedback oriented environment. A previously discussed this has allowed eBay to create and solidify brand name recognition and has created a remarkable level of trust attached to its name. eBay has taken advantage of a successful new concept and consumer business model and good old fashioned execution by using Managerial Know-How.
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A new opportunity has risen for eBay to improve on its active user ratio which has become one of Whitman's concerns. (114 million registered users of which 41 million are active) Why have the other 73 million users abandoned the site? Enter stage left, internet drop off stores. As eBay has done remarkably well, they have presented new business opportunities for many entrepreneurs. Internet Auction drop-off stores act on a consignee, consignor basis. As the name describes, consignees drop off items they wish to sell at a certain location, allowing the consignor to list the item up for ...

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