A Complete Analysis of the External Environment and Ebay free essay sample

Although there are sporadic months where the increase in personal income actually met or exceeded the increase in consumer spending, in general the increase in consumer spending was well above the increase in income rates2. See graph {draw:frame} 52% of Americans describe the economy as excellent or good and an additional 33% rate it as fair. This translates to average consumers willing to spend and invest more into the economy. 28 Americans seem to be most upbeat about the stock market, local economic conditions, and their own financial situations. 8 However, the higher oil prices are projected to really cut into the amount of income put back into the economy. With the constant rising of prices, consumers are trying to conserve money and are not sure how long prices will continue to go up. The National Economic and Social Development Board has reduced its estimates of growth rate from 5. 56% to 4. 55%. 2 Analysis of trends in the legal environment and their potential impacts on the industry- All companies within each specific industry are subject to certain regulations. We will write a custom essay sample on A Complete Analysis of the External Environment and Ebay or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page One regulation is the Federal Trade Commission, which deals with issues that effect everyday economic issues. It aims for both consumer protection and competitive jurisdiction. The FTC pursues vigorous and effective law enforcement, advances consumers interest, and develops policy and research tools. The FTC affects the world of business in that it forces participants to abide by a certain code of standards. 3 Tax laws affect anything that involves spending or earning money. Companies have to adhere to tax laws in order to be allowed to continue being in existence as a company. In the U. S. different states have different tax laws. Companies targeting an online audience must keep in mind that when making a sale to residents of different locations, there might be different tax laws and codes. Ignoring these laws has produced trouble for many companies in the past. Analysis of trends in the social environment and their potential impacts on the industry- The average life expectancy is on the rise and is now said to be between 65-75 years of age1. With the increase in life expectancy, industries can expect each individual to consume their products longer and expect more revenue er person. Levels of immigration into the U. S. continue to grow and with more people in the U. S. , the more likely they are to become familiar with and to invest money into particular industries1. The retail industry, both online and traditional, can expect exceptional growths as people from foreign countries move to U. S. the attempt to customize or adapt their culture to match those of current Americans. Previously people did not know about computers and the internet or they were simply afraid to use it. As technology becomes more advance, and the internet is becoming an everyday part of life, more and more consumers are willing to acquire their needs via internet sites. This trend will continue to increase growth and profitability of websites, such as Wal-Mart and the auction based eBay, which offer a variety of products to meet the needs of customers. Analysis of trends in the technological environment and their potential impacts on the industry- Technology is becoming more and more advanced on a daily basis. With laptop computers and wireless internet becoming more popular among consumers, the market possibilities for online retailing will continue to grow as long as technology does. It is expected that connections for wireless internet will continue becoming stronger and dead spots will become a thing of the past. The technology for online credit card payment has recently revitalized itself with security being a main issue. Modern technology is beginning to put consumers at ease concerning the entering of information online, although this process is far from being perfect4. As the process betters itself, more traditional shoppers will become online shoppers, which will boost the online economy. The Industry Major competitors- Major competitors of the industry include eBay, Amazon, Yahoo, and Google. 5 The competition consists primarily of these four companies and the on going possibility of potential new entrants offering similar and substitute products. Other similar industries that are considered to be major competitors are those in traditional retailing, e-tailing, and trade auctions with a common goal of creating or combining sellers and buyers. Product innovations and barriers- The product life cycle in the industry is short and it can be difficult to keep up with competition while seeing to the needs of customers. Some product innovations in the field include the globalization of online person-to-person trading, payment systems, and a variety of tools to lessen the complexity of the industry25. Barriers to the industry are at a minimum. Potential competitors are free to start up potential auction sites but are hesitant mainly because of the economies of scale. 3 They know of the high switching cost and potential customer reluctance to switch to a new auction site, due to missing out on the larger customer database of the already established firms. These existing firms are using the scales of economy as roadblocks when it comes to gaining market share, distribution of its services, and securing financial support. Potential competitors know that if they wish to enter the industry they are going to have to enter at a high level, if at all. Another barrier is the ability to differentiate their product from existing products13. The core of the industry is the same no matter which way you shape it. Lastly is the existence of the experience curve. The big four have established ways of doing things and have learned through experience before there were any other dominating forces. Most of the start up companies can’t afford to go through the process of the learning and experience curve and will therefore be out of the business before they actually learn the business. _Bargaining power of buyer / suppliers13-_ With the market becoming flooded almost daily with start up companies that usually flop the next day the bargaining power of buyers and sellers differ. Suppliers with bargaining power in the industry would consist of the major internet and technology providers whom provide these online auction sites with the required systems and programs necessary. Buyers with bargaining power in the industry would consist of, ironically enough, the sellers on eBay. The sellers are the ones paying the listing fees, insertion fees, and commission fees. The product represents a significant fraction of the cost and if the seller wishes to he can integrate backwards and market his items to the public himself. Nature of rivalry- Rivalry continues to become more and more intense as more competitors attempt to enter the industry. The competitors are bringing a wide variety and mixture of backgrounds to the field. The intense rivalry, primarily between eBay, Yahoo, and Amazon, continue to slow down due to the maturity of the industry. Majority of the rivalry stems back to the fact that low entry costs lead to easy access of competitors into the industry. Substitute products- As the industry continues to gain in popularity, new competitors to the market are attempting to offer a variety of substitute products. A primary example would be a site offering a fixed price auction as opposed to an ongoing highest bid auction. Other companies are following traditional blueprints for online auctions and offering their version. Additionally search engine companies, such as Yahoo, and price comparison websites, such as Amazon, are making their moves into the field of online auctions. Industry problems and issues- A major problem facing all companies who offer an online auction service is that a majority of the time, the item being sold is never actually in the possession of the company nor is the payment. This is very different from the traditional model of business where payment is rendered for a product or service simultaneously as the product is received. Therefore with all online auction providers, trust is a huge issue due to a certain period of down time between payment and receiving the goods or services7. Another problem in the industry is the ratio of buyers to sellers. As the industry continues to grow, due mainly to the low entry barriers, the number of potential buyers are starting to be greatly outweighed by the mass of sellers in the market7. An additional problem in the industry is security. A majority of potential customers, both buyers and sellers, have a problem with putting all their credit card numbers and other personal information on the internet. They fear that they may be at risk for computer hackers or other forms of fraudulent activities. Fear of fraud goes back to the issue of trust. The main types of fraud in this industry include paying for a product and never receiving it, receiving fake or bootleg items, or sellers receiving payment from a falsified account and sending the item to later realize the payment was fraudulent. Other problems in the industry include those involving positioning, specialization, and fixed price auctions. Strategic factors necessary for a firm to be successful in the industry Strategic factors necessary for a firm to be successful would primarily be in the field of marketing due to the abundance of firms in the industry. 3 Marketing factors include making consumers aware of brand name, advertising that will entice curiosity of your company, superior customer service, easy and accurate billing methods, and the ability to offer guarantees to calm potential customers who may worry about switching to your company from a company that they already trust. Other important key success factors are gaining and retaining a customer cliental, offe ring a sense of security when dealing with customer information that is private, and to have a balanced but unique product mix13. Some secondary success factors would include an expertise in technology and the ability to offer customer service in that field, hiring the right people that will represent what you as a company are trying to represent, product innovation, and lastly how well you treat customers after the service has been used. Important threats and opportunities facing the industry and eBay- The main threat of the industry is its competitors, whether its one of the existing big four firms pulling away from the pact or a start up company finding the right mix. The main opportunity is the ability to successfully globalize the business. Many of the firms have already begun to tap into the international market in hopes of being the first. If you can be the first to globalize to the highest extent of the industry then you may have national and global power which will in turn drive out competitors and make your company a monopoly of the market. The Firm _History26-_ eBay was founded on September 3, 1995 in San Jose, Californiaby Pierre Omidyar as AuctionWeb. AuctionWeb was part of a larger company that Omidyar worked for. In 1997, in order to gain media attention, a story was fabricated by a public relations manager that went along the lines as saying Omidyar began eBay to help his then fiance sell Pez candy dispensers. The story worked and gained eBay some national exposure and thus began the empire know as eBay. The first president of eBay was Jeff Skool. Shortly after his hiring in 1996 eBay entered into its first third-party licensing deal with Electronic Travel Auction. This deal gave eBay the right to use SmartMarket technology to sell plane tickets and other products associated with the travel industry. The name eBay actually came from the company Omidyar worked for when he started eBay. The company name was Echo Bay Technology group and Omidyar tried to register the domain name EchoBay. com, for the then known AuctionWeb, but realized it was already registered by Echo Bay Mines. He then decided to shorten the name and the site eBay was created. eBay went public in 1998, shortly after establishing the name, and made instant billionaires out of Omidyar and Skool. eBay purchased its main subsidiary, and primary method used for payments, Paypal in October 2002. eBay Subsidiaries and Affiliates- Paypal, eBay Express, eBay Motors, eBay Stores, eBay Business, Half. com, Rent. com, StubHub tickets, Shopping. com, Skype, StumbleUpon, Craigslist, and a variety of global marketplaces. 31 _The relative position of eBay in the industry7-_ Company Profile**- Organization General Management31 Organizational Structure- Auction market is the organizational structure used An auction market is when buyers and sellers confront each other directly and negotiate or bid on prices. In an auction someone must serve as the auctioneer and this would represent eBay. Key characteristic of an auction is the highest bidder wins and all other subsequent low bids are made known. Firm’s image and Prestige- eBay is viewed as the largest and industry leader of online auction services bringing people from around the world to a single site. Firm’s record in achieving objectives- eBay continues to reach a majority of its company goals branching from expansion, both nationally and globally, to financial goals. eBay marketplace reaches 20+ localized site including areas of North America, Europe, and Pacific Asia In an attempt to increase its earnings per hare, eBay has continued to repurchase its shares from the public and will continue to do so until 2009. In the first quarter of this year alone it has spent over $330 million in its effort to repurchase stock. In 2000, eBay projected its growth through 2005 and it has surpassed that projection as it continues to grow into 2007. 8 Earnings per share is expected to increase by over 30% in 2007 a nd again in 2008. 8 Communication System- eBay offers a 24 hour online support system to its customers, both buyers and sellers. They also offer a feedback system that attempts to let buyers and sellers build an online reputation based on previous buying and selling experiences. *Marketing31*- Firm’s Products-services- eBay offers an extremely wide variety of products in numerous categories ranging from sports to half eaten celebrity sandwhich’s. Online auctions with choices of fixed price auctions or the traditional type of auctions where the highest bidder wins Additionally they offer methods of convenient payment through one of its subsidiaries, Paypal. Product/ Service mix and expansion potential- eBay offers an extremely wide variety of products including sports, collectibles, automobiles, events tickets, etc Although the products offered are extensive, it boils down to one service being offered which is acting as a middle man via an online auction The ability for expansion is great due to the fact that eBay has built a credible name and reputation. The globalization process for eBay has already begun. They offer auctions worldwide in a variety of markets. Channels of distribution- Bay does not really use channels of distribution since they are not selling products directly, meaning they are not trying to push goods through grocery stores and other types of retail stores. They do pay advertising to other popular internet sites to display ads for eBay. However, other companies regularly use eBay as a distribution channel to sell and have products seen by a large database of consumers. For certain charges sellers can get their produ cts advertised on the front page of eBay, or on the top of search result pages. Product/ Service image- The name eBay is usually what first comes to mind when consumers hear of online auctions. A reputation has been built that sets them on top of industry The products and services issued by eBay range from new to used Pricing- Since eBay offers an auction service, the final price of products or services purchased in an auction may vary. However, some auctions may have a fixed price31. Either way, based on the final price, sellers are charged a commission by eBay ranging from 1. 25% to 5%. Sellers must also pay an insertion fee to list their products on the eBay web page which ranges between . 30-$3. 30. Buyers are free to bid on anything and are only responsible for paying the seller if they win an auction. They do not have to pay any fees directly to eBay for buying off there auction service. After sale service- Because eBay simply acts as a middle man, their after sale service is limited due to the fact that they are not actually selling anything. They will send an automated invoice on behalf of the seller to the winners of auctions describing payment methods that the seller accepts. Buyers and sellers can choose to use Paypal, a payment branch of eBay, to pay and receive payment for goods. Using Paypal is optional and other methods such as sending of a money order are usually accepted. The only drawback is that it usually takes a little longer to complete the transaction. Goodwill- brand name loyalty- Users of eBay remain very loyal. Many of the reasons lean on the fact that eBay has established a name that is both trusted and respected by its users. It is reported that users of online auctions are hesitant to use other auction companies because of the large cliental eBay has compared to its competitors. Production, Operations31 Raw material availability and costs- There are no raw materials in terms of production but when an item is listed on eBay and doesn’t sell they will let sellers re-list their product. This allowance is the company’s form of raw materials The cost of carrying the above listed raw materials is the loss of commission that could have been had if the item had sold the first time listed. Because eBay doesn’t charge to re-list an item, they lose a listing fee and now have to wait to receive their commission fee. Inventory control system- eBay doesn’t need to keep an actual product inventory because the items sold through eBay belong to the users who list the items, rather than eBay themselves. They will keep a record of any item sold automatically for at least six months eBay also carries unsold items as inventory if the seller wishes to re-list within a month. If he wishes to do so no listing fee is charged the second go around. Location of facilities- eBay headquarters is located in San Jose, CA The eBay subsidiary Paypal headquarters is also located in San Jose, CA Being primarily an online company, it reaches out to all locations, both nationally and globally. Economies of scale- As eBay continues to dominate the industry, almost to the likes of a monopoly, it will perhaps charge even less of a commission. This will make it even harder for potential new threats to enter the market because they will no longer be able to offer a low price as an incentive for customers to use their service. Technical efficiency- eBay is among the leaders in technical efficiency. With a minimal number of actual inputs, eBay pumps out thousands of different auctions daily. The main reason eBay is able to do so is that it has really invested into making a system in which high traffic doesn’t equal slower server times. On the rare occasions when site traffic does happen or the system crashes, the eBay technical department is equipped with the knowledge to fix the malfunction in a matter of minutes leading to many users not even know there was a problem at all. Degree of vertical integration- As time passes, and eBay continues to dominate the market more each day, the degree of vertical integration is growing. As eBay continues to form more of a monopoly of the market, the few remaining competitors are losing more customers to the fully recognized and trusted eBay. With this trend eBay is gaining more control of its sellersand its buyers. This process leads eBay to have more power in that the users of their service are now less likely to look elsewhere for a provider, therefore they become more vertically integrated with each new user that signs up. Bay is also backward vertically integrated in that its many subsidiaries, such as Paypal, offer additional inputs that give the company more market power by allowing users to pay instantly after winning an auction instead of having to network with the seller/buyer as to the means of paying or receiving payment. Other types of payment often run the chance of being lost in the exchange process. Pa tents, trademarks, and other legal protection- eBay inc. has a copyright dating from 1995-2007 that protects anything that involves the name eBay or any of eBay subsidiaries. Financial and Accounting5 Ability to raise short and long term capital- Through the issuing of stock eBay has secured capital for both the short and long term, and has the ability to raise more by issuing additional stock. The current eBay stock price is around $33. 50 and is considered to be a relatively safe investment even though there are no barriers to entry in the industry. This further proves eBay’s dominance in the industry. P/E Ratio- The P/E Ratio= 32. 8 and the Relative P/E Ratio=1. 9 Ratios: Liquidity, leverage, and profitability- Liquidity=current assets / current liabilities= $4,970,586 / $2,518,395= 1. 974 Leverage=total debt / total assets= $2,589,379 /$13,494,011= . 1918= 19. 18% Profitability= Net Income / Sales= 48,294/166,767=28. 95% Personnel _Top Management personnel, skills, and capabilities9-_ Meg Whitman: President and CEO of eBay- Meg was hired as president of eBay in March of 1998 and brought with her expertise in brand building and consumer technolo gy experience. Meg received a Bachelor of Economics from Princeton Universityand went on to earn an MBA from Harvard. As well as being the CEO of eBay, Meg is also on the Board of Directors of Procter Gamble and Dream Works Animation. She is considered to be one of the main puzzle pieces that have lead eBay to become a global powerhouse in the online world. Some of Meg’s other accomplishments include being ranked the most powerful woman in business in 2005, and in 2004 being ranked the most powerful woman in American business. John Donahoe: President of eBay Marketplaces- John is responsible for the globalization of eBay. His main duties include overseeing strategic planning, financial planning, marketing, product development, operation, and business development of all eBay marketplaces. John received his Bachelor of Arts in Economics from Dartmouth College and his MBA from Stanford. Pierre Omidyar: Founder and Chairman of the Board- Pierre is the man credited with coming up with eBay. He launched eBay in 1995 as an experiment to see how equal access to information and opportunities can affect market efficiency. The launch of eBay was a sort of hobby for Pierre but has lead to global recognition for him as an online innovator. Incentive systems32-_ eBay offers a wide variety of benefits to its employees that include medical insurance, dental insurance, vision insurance, flexible spending accounts, employee assistance programs, life insurance, short and long term disability, paid time off, holidays, leave of absence, 401K, employee stock purchase plan, employee referral program, charitable contribution matching, developmental workshops, pet insurance, tuition reimbursement, pet insurance, and many other on site accommodations_. _Experience32-_ Hiring tends to go to those who have undergraduate and graduate degrees in some type of business or technology related fields. eBay offers a wide variety of internships to potential college graduates looking to further enhance their knowledge of the business world. SWOT Analysis of eBay25 Strengths- eBay is nationally and globally recognized as the leader of online auctioning. Often times when an individual says they went to an online auction, everybody around him assumes he is talking about eBay. The eBay marketplace is used by more than 100 million people looking to buy or sell a variety of items both new and used. eBay exploits all the benefits of Customer Relationship Management. They are always looking to expand their business either by going global or by acquiring other firms to conduct business under their name. Weaknesses- eBay has become somewhat of a target for fraudulent activities ranging from counterfeit goods to credit card and payment scams. As with any technology based company, system breakdowns occur which often interrupts the flow of business. The feedback system is designed to be a tool for users to gauge their potential business partners, but is often misused by participants as a measure of punishment for honesty. Opportunities- The chance for new and improved business strategies via new acquisitions. Opportunity to develop markets globally and to further expand the company. There are still lots of markets nationally that have yet to be tapped into. Threats- The potential new entry due to low entry barriers and the competition from current competitors, such as Yahoo or Google eBay must always be aware of possible sabotage or fraud of its current customers. Some believe eBay is starting to grow to fast for its own good. Sellers on eBay are starting to greatly outweigh the potential buyers _eBay competencies, core competencies, and distinctive competencies13-_ The basic competencies that eBay presents is the technical knowledge needed in the industry and its user friendly setup makes it possible for a novice to use. The core competencies of eBay are the actual bidding site and methods used as well as their ability to take web visitors or browsers and turn them into actual members. The distinctive competencies of eBay would be its feedback system. The ability to see a buyer or sellers past history of transactions, no matter good or bad, from the viewpoint of a user is a luxury that no other company offers to the extent of eBay. _Value Chain Analysis13-_ Marketing- This activity is responsible for getting the name eBay out to the public. It may include internet, radio, or T. V. advertising but is designed to entise consumers to visit and browse the website. Convert- Once you get consumers to visit your webpage, the focus then turns to converting the visitors into registered members so they may compete in auctions. Auctions- Once a registered member of eBay, the next step is the actual involvement in auctions, both buying and selling. Payment- After the auction, the buyer pays the seller and the seller pays eBay a commission for the service. Feedback- Last is the distinctive competency of eBay. This process requires both the buyer and the seller, to contribute in order to ensure the future success of the feedback system. Support Activities Human resource, finance, product and system development. {draw:g} eBay statement of strategic objectives31 eBay allows customers to create individual auctions and online stores in order to sell used and new products. This process is facilitated by the ability to create communities of interest, providing secure transaction services, and a peer review process in a global environment. † The statement of strategic objectives breaks down physical barriers that may have prevented potential buyers and sellers from existing in the same marketplace. It also crea tes a sense confidence due to the fact that processes are evaluated by peers instead of insiders for the company on both a global and national level.