Finally, the Communications division of eBay consists of Skype- an Internet communication product, which facilitates VoIP (Voice over Internet Protocol) communications between Skype users. At the same time, it ensures effective connectivity to traditional fixed-line and mobile telephones for the Skype users. The software offered by this division is distributed in more than 30 languages in various countries.
Financial Position: eBay has a strong financial position, which is evident from the analysis of its financial statements and ratios. The company has registered significant growth in net income as well as total assets. In addition to this, the financial ratios indicate that eBay has constantly growing cash flows and has sufficient short-term assets in order to cover the immediate liabilities. eBay also has an increasing ROE and gross profit margin, which are strong indicators of its solid financial status. (Ebay, 2008)
Internal Environment
In order to investigate the strengths and weaknesses inherent in eBay, a SWOT analysis is performed. (Kazmi, 2002) Similar to many organizations, eBay also has many opportunities as well as threats in its course to the future.
Strengths: eBay possesses a large number of competencies which have played a major role in its success. These primarily include:
- It is the largest online trading forum in the world. (eBay- A Strategic Analysis, 2008)
- eBay exhibits strong sense towards the various communities.
- It has a well-established and recognizable brand name.
- It has more than 250 Alliances across the world and a large no. of partnerships with international organizations.
- eBay is a global player and has its presence all major business destinations.
Weaknesses: In addition to the various strengths, eBay also possesses certain weaknesses.
- The company does not have the ability to measure illegal activities on site.
- It is incapable to penetrate certain foreign markets.
- eBay fails to provide detailed and comprehensive descriptions of its products & services.
- It also faces technology malfunctions in various divisions on a regular basis.
- eBay is unsuccessful in controlling the extent of fraudulent activities in its business operations.
External Environment
In today’s world, no organization can continue its business operations without monitoring the developments taking place in the external environment. (Ramaswamy & Namakumari, 2002) In fact, an analysis of the external environment assists an organization to locate the various opportunities & threats.
Opportunities: The online business environment offers huge opportunities for eBay. These include:
- The constantly changing lifestyles of people around the world offer huge potential for the company.
- By acquiring Yahoo.com, eBay has a huge market segment to serve.
- The constant international expansion will lead to increased revenues and high profitability.
- Increasing use of the internet in various parts of the world provides immense opportunity to the company for expanding its business.
- Current markets of the company are still offering huge opportunities due to constant developments in the information technology.
Threats: eBay works in a volatile business environment and hence has to deal with certain threats.
- Attack by illegal practices is a major threat for the company.
- There is a constant increase in the number of online auction sites which serve as major competitors for the company.
- eBay’s major competitor Amazon.com is growing at a phenomenal pace.
- The number of online stores has increased significantly.
Environmental Sectors:
Economic Factors-
- Globalization has emerged as a major trend to follow for various business organizations as the global economy has become fully integrated and trade barriers continue to diminish.
- With constant recovery in economies all over the world, online business segment is expected to grow at a fair pace.
- The role of Information technology in monetary transactions is making a significant impact on the routine lives of the people in all the nations.
- The online business processes need to take into consideration the economic and taxation policies of different countries.
Technological Factors-
- Constant improvements in information technology and its influence in various processes enable eBay to expand its operations in other areas.
- The governments of various countries show keen interest in the increased utilization of online services by their citizens.
Socio-cultural Factors-
- In general, global traders search for an integrated solution that can serve their transaction needs.
- With modernization, there is a phenomenal change in the behavior of consumers.
- High quality & hassle free services are demanded by the customers to engage with an organization on a regular basis.
- Due to a diverse market, consumers today demand a service –provider capable of delivering customized products and services.
Political-Legal Factors-
- The distribution of online services is highly dependent on the regulatory practices of a particular country.
- The opportunities for success of a foreign player depend heavily on the political framework of the host nation.
Financial Factors-
- The consolidation of financial information of the business segments across the world is essential owing to the variations in the accounting practices & rules in different countries.
- Appropriate guidelines and policies need to be framed to safeguard against fraudulent financial processes.
Strategic alternatives and Recommended Strategy
The company has a number of alternatives to pursue currently as well as in the near future.
Strategic Alternatives-
- Growth: By saving costs from certain unprofitable segments of the company, eBay can make investments in untapped segments.
Pro: eBay may gain huge market shares and gain an edge over its immediate competitors.
Con: In addition to the risk generally associated with new investments, new segments may not adapt well with the existing operations of the company.
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Stability: eBay also has the alternative to continue with the current set of operations and business practices.
Pro: The Company already has a strong financial position, significant market share and can successfully sustain in the present level of competition.
Con: With the help of current technology, it cannot maintain a high growth rate and might lose the market share gradually.
c. Retrenchment: Finally, eBay has the option of dominating one market at a time and limiting its operations in other segments.
Pro: eBay will generate high revenues by concentrating on limited segments and become a dominant player in them.
Con: The growth of the company in other markets will become stagnant and the competitors will take advantage of this situation.
d. The company has to develop its competitive advantage. It needs to perform a market research program to know the trends in the market and differentiate its brand from the competitors.
- The company should maintain its cash flows in a balanced form and there should be equilibrium between the cash inflows and cash outflows. Thus, the company should work efficiently to hold a strong financial position.
Recommended Strategy-
On analyzing the various strategic alternatives, it is believed that the most appropriate alternative for eBay is the growth alternative. eBay should invest in new & profitable market and explore the segments which are still unexplored. At present, the company is in a strong position and there are no major reasons for it to pursue the stability option. However, it needs to ensure that the new segments adapt well and integrate successfully with the existing operations. It also needs to adopt a flexible approach about various other alternatives as the business environment is changing on a regular basis.
Implementation
The company is required to follow a logical & coherent approach for the implementation of its strategies.
- Adequate amount of research-work is needed to be done before undertaking new investments.
- Development of a growth-oriented culture is essential for successful implementation of the strategies.
- The top management should play a pivotal role in the implementation process.
- Constant review of this implementation process is necessary to recognize any obstacle in the initial stages.
Evaluation and Control
The fundamental objective of strategic evaluation is to assess the effectiveness & significance of strategy in achieving organizational objectives. In fact, the strategic evaluation and control is defined as the process of determining the effectiveness of a specific strategy in achieving the organizational objectives and the subsequent corrective action as per the demand of the situation. eBay needs to control the extent of illegal practices in its operations. At the same time, sophisticated systems need to be installed for minimizing the errors caused due to technology failures.
References
eBay- A Strategic Analysis. (2008). Retrieved June 25, 2008, from content.grin.com/data/29/21549.pdf
eBay- Company Profile. (2008). Retrieved June 25, 2008, from
Ebay. (2008). Retrieved June 25, 2008, from
Kazmi, A. (2002). Business Policy and Strategic Management. Delhi: Tata McGraw-Hill Publishing Company Limited.
Ramaswamy, V.S. & Namakumari, S. (2002). Strategic Planning. Delhi: Macmillan India Ltd.
