eBay Inc. is an ecommerce company that connects buyers and sellers, facilitates online payment and organizes shipping and communications services for the businesses and individuals online. This company is based in California and employs more than 15,000 people. It also has customers all over the world including China and Africa. eBay, as a world leading e-commerce brand, is especially known for its successful online auctions that enable over 100 million buyers and sellers to conduct business in a competitive environment thus getting the best deals that they can afford. The company’s business model is rather simplistic and the company is affected by a lot of external factors. This paper provides a SWOT analysis for eBay with a focus on its internal and external environment in relation to its competencies and competitive advantage. In addition, the paper provides recommendations that eBay can adopt to harness its investments.
eBay was among the first companies in the e-commerce sector. Therefore, the first strength that eBay enjoys in this sector is a strong brand name. eBay is known worldwide as the leading online marketplace for buyers and sellers of both new and used goods. As such, the company has a strong global brand name that implies brand recognition in all the markets. This makes it rather difficult to compete with them at a fair level since they already have a brand name advantage.
The second strength is a strong market position. There are other online market places like Amazon, Craigslist and Alibaba among others but eBay stands out as the largest, with over 100 million regular users. This means that they have the strongest market position despite having such aggressive competitors. The market position in this case is especially useful in building brand loyalty due to the customers’ brand recognition. The third strength is a strong technical platform. eBay was set up as the first online marketplace with a comprehensive technological backing, by the founder and his team of experts. This means that the company has a great background in terms of technology and it can thus be considered reliable. This is the strength because the e-commerce business relies greatly on the ability of the company to be functional and available online. The technical team also ensures that any possible server or satellite glitches are noted and solved or mitigated against on time.
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Another advantage refers to economies of scale. eBay established an international presence in almost all parts of the world, the company is able to maximize their productivity using economies of scale. They have especially invested in very large countries like the US that have larger population and even larger economies thus keeping the e-commerce moving. The more products are sold on the website, the cheaper it becomes to operate it. Similarly, eBay has a good record in terms of safe transfer of funds. The company is credited with enabling the sellers to receive their funds from the buyers without a glitch. This improves the trust ratings among the buyers and sellers alike, thus improving the website’s statistics in terms of business transactions. As more people find it a viable option, the business continues to grow in sales volumes.
Finally, easy transaction of making transition gives eBay the advantage in the e-commerce sector. E-commerce is generally a convenient concept that attracts people with a busy schedule or those who simply like getting what they want without too much of a hustle. eBay allows customers to find what they need, while also enabling sellers to sell their merchandise without struggling with traffic or queues. The products can also be easily paid for online, which makes eBay an attractive alternative to conventional shopping. In addition, by bringing more than 100 million buyers and sellers on one platform, the product assortment on this platform is astounding. Their position as the largest online market place only increases the ease with which customers can shop and entrepreneurs sell their merchandise.
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Like most online businesses, eBay has challenges with scams. Today most online businesses have to deal with fraud at one point or another. It is especially difficult for companies that depend on the customer’s ability to trust the transaction for them to make a sale. With some people emailing eBayers and pretending to be eBay staff, and other sellers providing false information about the products that they are selling, the company has lost a lot of frequent customers. If this continues, the credibility of the business will drop drastically thus killing the company altogether.
Another weakness that is bedeviling eBay is strong competition in emerging markets. The company is considered an innovator in its line of business within the US but in other parts of the world, eBay is just a new market entrant. In China for example, eBay is struggling with Alibaba for the leading market share and this is a problem given the company’s need to use its global presence as a strategy for gaining competitive advantage. Other than just getting into new markets, they have to consolidate their position as the leading online market platform in all parts of the world.
The concept of online shopping is still alien to many markets. Therefore, the first opportunity that eBay has in this sector is market penetration. eBay is yet to reach each country on the map, and this means that they still have the chance to get into new markets. With globalization, this is easy and can be done at a low cost compared to previous years. This opportunity will ensure that the company manages to overcome the limitation of competition in the new markets and thus effectively use their global market presence as a competitive advantage.
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The second opportunity lies in the increasing number of Internet shoppers. Internet shopping is a growing phenomenon that continues to dominate in most parts of the world. Even in places where it is yet to take root, internet shopping offers a unique opportunity for a company that depends on online sales as its main line of business. The growth in Internet shopping implies an opportunity for eBay to grow since they are an online marketplace.
The third opportunity lies in emerging markets. All international businesses today are running to establish themselves in the emerging markets where they are likely to build a stronger market presence with their global expertise. eBay will also benefit drastically from entering the emerging markets especially given that these markets are growing economically and the purchasing power parity is on the rise. It can be stated that emerging markets have a higher potential pool of buyers and sellers alike.
Another opportunity that eBay can leverage on is in acquisitions. Today most countries have small online market places that offer a business platform for individuals and businesses to sell their wares to customers. eBay, as a large market place can buy these smaller, established online markets and use them to establish their brand since these local markets already have a great following. With their expertise in the global arena, they can convert these small companies into large and profitable entities in the international market.
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Similarly, eBay can also benefit from increasing entrepreneurship. Today more and more people have discovered and embraced the significance of entrepreneurship. Initially, most people only got to sell stuff at a yard sale. Today however, people are selling things every other day to make money or create the space in their lives for other things. eBay is able to take advantage of this growing trend by providing the market platform for these new sellers and buyers who do not mind buying used merchandise at a good price. Lastly, higher online spending is also an opportunity for eBay. Statistics indicate an increase in online spending, and with eBay as the world’s largest online market the odds are in the company’s favor. It can be expected that with adequate practices, the company will soon be the largest mover of money from buyers to sellers in terms of the average sales volume per day. Higher online spending in this case could mean more business transactions on eBay than anywhere else.
With the current volatility in most markets, the first threat to eBay is currency volatility. The volatility of currencies is a major problem for the company. It makes it rather unfavorable for eBayers to transact business across national borders. As the currencies keep fluctuating, the company has to alter the pricing of the products for buyers who are expected to pay in a different currency. This dissuades a lot of buyers and even sellers since they end up not selling their merchandise abroad.
The second setback is server crash. This is the greatest threat for all IT based companies in the world. A server crash would cripple the organization in a second and cause major losses to the business. It can be noted that while a server crash is not exactly the end of the company, it will make their website inaccessible for a while thus making it impossible for them to conduct any business. Meanwhile, they will be losing clients to other available websites like craigslist and Amazon among others.
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The third challenge is hackers and online security in general. Hackers are a nuisance to all businesses that involve personal information from credit cards and emails. While online security is consistently being considered for reinforcement, there is always a threat that some hackers could break into the company’s servers and tamper with their systems or gather the personal details of the customers. This often discourages customers from opening personal accounts and shopping with their credit cards.
Competencies vs Core Competencies vs Distinctive Competencies vs Competitive Advantage
Competencies can be defined as the ability of the company in question to perform an internal activity, and in eBay’s case a good example would be their ability to link sellers and buyers through online auctions. The core competency here is the linking of buyers and sellers since that is the company’s core function that determines its ability to be profitable and competitive. On distinctive competence, it can be noted that eBay does a much better job on advertising owing to its large market presence and user bracket. With over 100 million users, none of the competitors can claim to reach out to potential clients more than eBay. This is their competitive advantage.
Strategic Recommendations and Conclusion
Using their strong brand name, eBay should be able to penetrate into the emerging markets and establish a strong market position. They already have the eBay brand as a competitive advantage against any existing competition and with the right skills and knowledge, the company should be able to take over the e-commerce segment of most of these new markets. They can also take advantage of higher online spending trends by focusing on the safety of their money transfer and online payment systems. The idea here is to ensure that the buyers are assured that they will get the products they have ordered and the sellers are also sure of getting their money after the transaction is complete.
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Scams and hackers can all be dealt with by increasing the website’s security. This is a rather continuous endeavor as hackers are also advancing day by day. Entrepreneurial scams can, however, be deterred by imposing a checking system to ensure that the credibility of the sellers are verifiable before allowing buyers to commit their money for the transactions. This should limit the incidences of people who are defrauded on eBay by unscrupulous sellers. The idea here is to limit the negative complaints that tarnish the organization’s name and prevent other customers from engaging in the online market platform for their shopping activities.
With a brand name as strong as eBay’s, the opportunities for growth are endless. This company can use its numerous strengths to capitalize on their opportunities within the global online market especially with their consumer-to-consumer marketing platform. By going global and getting into the emerging markets, the company is set for world domination as the most convenient, safest and most reliable online marketplace with a wide product assortment for all shoppers. The company’s strengths match their opportunities just as their weaknesses match their external threats.