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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 1. 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. ...read more.


It would behoove eBay to aid in the education, of employees and managers at these stores, since using their great management and organizational prowess they will create social complexity and allow for a consistent culture up and down organization; one voice, one experience. The control provided by these strategic alliances will allow addressing some of eBay's most common complaints; post purchase service in the form of lack of consistency in shipping times and billing errors via requirements in contracts. One last area of concern for eBay and these independents is the variability in pricing structures. If eBay controls these price structures (Create a structured fee schedule for organization), it will be able to maintain fixed costs for consumers in order to challenge the threat of substitutes. In breaking down eBay's value chain and in discussing one other area of concern as per the study, we address web-site attacks, faulty billing complaints and customer service. Given these are considerable weaknesses in eBay's organizational structure the solution could be "Vertical disintegration". In taking this approach, eBay should seek an outsourcing strategy. Given that these services are no longer a source of competitive advantage for eBay or any other organization due to lack of rarity and reduced imitation costs, they should follow in the footsteps of other successful organizations such as Dell in order to concentrate on what they do best; online auctions. By outsourcing these services to specialized companies, they will enhance the user experience and therefore deter any attrition in their overwhelmingly superior customer base. ...read more.


Finally, in terms of demographics and as previously mentioned, the current Hispanic population in the US is projected to increase exponentially throughout the next 40 years. This represents a significant wealth of consumer spending for all companies not only eBay. By capitalizing on the Hispanic culture of trust and loyalty, if eBay can capture the attention of this market early in its development they could position them to be a service provider for the Hispanic community for years to come. The only setback to increased advertising is in terms of expense dollars spent, however based on the foreseeable rate of return on this investment it would be money well spent. Conclusion Based on the analysis conducted the "Vertical Integration and flexibility" suggestion appears to be the more feasible strategic managerial option. Although vertical integration into the drop-off store industry would appear to be a logical step (why share the $20-25 billion potential profits with these independents) based on the uncertainty factor eBay need consider a strategic alliances more specifically non-equity alliances via licensing agreements with these independent drop-off stores to manage this exchange. As indicated this strategy would address some of eBay's major concerns by improving current operations and facilitating entry into a potential segment of the market which hopefully encompasses the 70 plus million of inactive registered users. If eBay can successfully coordinate the education of employees and managers at these stores they will create social complexity and allow for a consistent culture up and down organization; one voice, one experience. They will allow address the issues of post purchase service and consistent pricing structures. ...read more.

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