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eBay SWOT Analysis Assignment

Chatchompoo Nuttasophon 212110056


eBay SWOT Analysis Assignment

eBay Overview and


Company Background

eBay is an international online marketplace with a global customer


base of 233 million. It is a multibillion business operating in 37
countries. It was founded in September, 1995 by Pierre Midyear, a 28-
year-old software developer and Originally called AuctionWeb.
Nowadays, eBay is headquartered in San Jose, California and run by
it’s CEO, John Donahoe. There are millions of items listed on eBay
across thousands of categories, including antiques, toys, books,
computers, sports and electronics, amongst many others.

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eBay SWOT Analysis Assignment

Strengths

Market Leadership
eBay operates the leading online auction community on the
Internet. Market leadership will benefit eBay in a number of ways. Firstly
it will enable eBay to maintain a high level of brand awareness for the
company and its offerings. Market leadership will also enable eBay to
exert a greater influence on the marketplace. For example, the
company would be in a better position to combat any new entrants into
the market.

Business model
eBay only acts as a middleman between sellers and buyers, who
bid and sell items in eBay’s marketplace. Perhaps one of eBay’s biggest
strengths is its business model. The company’s business model means
that eBay has no inventory and low capital requirements. Being a
pioneer in online auctions, eBay had no competition and currently has
only few strong direct competitors. Thus, company’s business model is
a competitive advantage over such giant retailers as Amazon.

Economies of scale
In the beginning, eBay had to invest heavily to gain IT and
customer relationship management (CRM) knowledge and skills, but
since then, used its skills to serve over 100 million users and to create
the largest online marketplace with little additional costs.

Localization
The company operates its marketplaces in 37 countries. Each
marketplace is using local language and is adapted to local product
offerings. No other global online marketplace is localized to such
degree.

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eBay SWOT Analysis Assignment

Pay Pal

eBay uses PayPal, its own payment system, to proceed nearly all
of the payments going from eBay’s marketplace. From eBay’s
perspective, such tight integration has the benefits of more fees
collected (PayPal takes transaction fees from the businesses) and
tighter control over buyer’s shopping experience. From buyer’s
perspective, PayPal provides easy to use online payment method. This
has had a knock on effect and helped to boost the satisfaction of
customers using eBay. Pay Pal saw its revenues rise by around 90%
year-on-year, while it also experienced an 80% increase in payment
volumes.

Brand

The strength of the eBay brand name is increasing. The brand is


now becoming more mainstream, as it benefits from an increase in both
brand awareness and brand recognition. The eBay brand name is also
becoming better known internationally as the company expands its
international presence to cover more markets. The increased equity of
the eBay brand name will help the company to generate increased
sales and profits.

Intellectual property

eBay’s intellectual property such as its trademarks, copyrights,


patents and domain names will help to give the company a competitive
advantage over its rivals in the market place. This in turn will help eBay
to generate increased sales, profits and market share.

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eBay SWOT Analysis Assignment

Weaknesses
High fees

eBay’s fees for the sellers has risen significantly over the years.
The firm receives fees on listed goods, sold goods, some adornment
fees and PayPal transaction fees. The sellers often make zero profit on
their low price products sold on eBay due to its high fees.

No further growth strategy

eBay hasn’t unveiled any plans on how the company is going to


sustain its growth. Firm’s top management team is unsure whether eBay
should become a retailer or to introduce new products and services
and how to do that: developing its own products or acquiring new
business. As a result, there is high uncertainty over eBay’s future and
business direction.

Litigation

eBay is facing possible legal action after a privately held


company called MercExchange filed a lawsuit against the company. It
is alleged that eBay infringed MercExchange’s patents covering online
auction technology, shopping search engines and systems used in the
creation of online electronic marketplaces. If eBay was found guilty of
any patent infringement, it could seriously affect its earnings, as the
company could be asked to pay compensation to MercExchange.

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eBay SWOT Analysis Assignment

Increased expectations

The company’s recent record financial results may increase the


expectations of investors to unrealistic levels. It is unlikely that eBay will
continue to generate such results in the long term and increased
investor confidence may mean that the company is forced to attain
aggressive financial targets that it may not be able to meet in the future.

Technology Development

eBay still needs to improve a number of areas of its website in


order to generate increased sales in the future. The company needs to
examine its user interface to improve its payments and search
operations further. If eBay were to do this, it would benefit from
enhanced customer satisfaction, as the users experience of the service
would increase.

Advertising revenues


eBay’s advertising revenues have remained flat and currently
represents around 2% of the company’s total revenues. Although
advertising revenue only represents a small proportion of revenues, it is
an area where eBay should be looking to exploit in order to generate
greater revenues for the company as a whole. Advertising revenues
could become more important for the company, if as forecasted, the
market for online advertising increases over the coming years.

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eBay SWOT Analysis Assignment

Opportunities
Internet usage
Internet usage is expected to grow over the forthcoming years.
The increase in Internet usage will present eBay with an opportunity to
boost the number of users it has, as well as its revenues and profits. It is
predicted that future Internet usage will be boosted by factors such as
the adoption of broadband technology.

International expansion
eBay has already had some success in its international expansion
efforts. Revenues derived from international activities currently account
for around 30% of the company’s overall revenues. The company could
look to further its international expansion efforts in order to sustain
current growth levels, eBay could open its online marketplaces in other
large and growing economies such as Asia and Europe.

Market penetration
eBay could also choose to penetrate the market to a greater
depth in order to generate revenues and profits in the future. Although
eBay has around 62 million registered users at present, there are many
millions more Internet users in the world that could potentially become
eBay users. This represents a very large untapped market for the
company. eBay should look to pursue a business strategy that will allow
it to capture as much of these potential eBay users as possible.

Become a retailer
eBay has an access to hugest online marketplace in the world
and is well placed to take an advantage of that by becoming a retailer.
The company has its IT and CRM systems in place already and could
easily stake out a market share from Amazon and other online retailers.

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eBay SWOT Analysis Assignment

Threats
Online security
PayPal stores online shoppers’ personal information, such as
bank account details, which is a target for online thefts. The more online
customers PayPal has, the more attractive as a target for identity thefts
it becomes.

Regional low cost online retailers


Regional low cost online retailers could outrival eBay on faster and
cheaper shipping, more localized product offering and better
knowledge about home market.

Increasing competition from Amazon


Amazon’s online presence has significantly increased and now
Amazon’s marketplace is just behind eBay’s.

Exchange rates
eBay receives a part of its income from foreign operations. The
profits that are sent back to US have to be converted into dollars and
may be affected by the exchange rates, especially when the dollar is
appreciating against other currencies.

Consumer confidence
Maintaining consumer confidence in the Internet is vital if eBay is
going to continue its rapid expansion. Negative publicity regarding a
possible lack of security with regards to Internet shopping or fraudulent
selling on the Internet will affect the company’s sales and profits.
Increasing consumer confidence should result in an increase in usage
of the Internet and sites such as eBay for eCommerce style activities.

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eBay SWOT Analysis Assignment

Conclusion

In conclusion, eBay still a largest and market leader in online-


marketplace. Some weakness and threats should be fix quickly such as
security to maintain confidential of customer which is eBay’s strength.
Also the strongest point of eBay such as Paypal systems should be
improve to make it even stronger. Although there are some weakness
and threats but eBay could coming up with solutions and growing
strongly.

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eBay SWOT Analysis Assignment

References
- eBay (2013). Company overview.
http://pages.ebay.co.uk/aboutebay/thecompany/companyoverview.html

- eBay (2013). Investors.


http://investor.ebay.com/annuals.cfm

- Interbrand (2013). Best Global Brands in 2012.


http://www.interbrand.com/en/best-global-brands/2012/Best-Global-
Brands-2012.aspx

- Wikipedia (2013). eBay Inc.


http://en.wikipedia.org/wiki/EaBy

- Strategic Management Insight (2013). SWOT analysis of eBay


http://www.strategicmanagementinsight.com/swot-analyses/ebay-swot-
analysis.html

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