External Industry Analysis

Political
Taxes
The Internet has always been a tax free zone. With the recession pummeling states' budgets, their
governments increasingly want to fill the gaps by collecting taxes on Internet sales, which are
growing even as the economy shudders. And that is sparking conflict with industries that do
business online only and have enjoyed being able to offer sales-tax free shopping.
The amount of money at stake nationwide is unclear; online sales were expected to make up
about 8 percent of all retail sales in 2008 and total $204 billion, according to Forrester Research.
This is up from $175 billion in 2007. Based on that 2008 figure, Forrester analyst Sucharita
Mulpuru says her rough estimate is that if Web retailers had to collect taxes on all sales to
consumers, it could generate $3 billion in new revenue for governments. It's uncertain how much
more could come as well from unpaid sales taxes on Internet transactions between businesses.
But even with both kinds of taxes available, state budgets would need more help. The Center on
Budget and Policy Priorities estimates that the states' budget gaps in the current fiscal year will
total $89 billion. (Never a right time to tax Internet, 2007.)
The Internet has provided a powerful economic boost to our nation, and has become an important
everyday tool for millions of Americans. By keeping Internet access tax-free and affordable,
Congress can encourage Internet use for distance learning, telemedicine, commerce and other
important services.
Levels of Government Influence
It is the federal government that passes and enforces legislation concerning the entire country.
Actions by the federal government affect a large number of firms and are consistent across state
boundaries. Environmental analysis, however, should not overlook actions by both state and
local governments.
Local governments used to have the potential to affect business practices significantly. Some
local governments may be willing to provide incentives to attract business to the area. Some may
build industrial parks, service roads, and provide low-interest bonds to encourage a desirable
business to move into the community. However, the potential of local governments dont affect
the Catalog & Mail Order Houses Industry as much as other industries. Most businesses in
Catalog & Mail Order Houses Industry have shifted the business online; therefore federal
government has more direct influence to Catalog & Mail Order Houses Industry.
Eco-Friendly
Most businesses in Catalog & Mail Order industries are doing business online. Their models are
based on the efficiencies of the internet, empowering people to do more with less, to shop
without driving to the mall, to pay without a paper check, and to connect and communicate
without special equipment and without travel.

Researchers have compared the energy use and carbon dioxide emissions associated with
delivering a flash drive from a manufacturer to a home via the traditional retail channel and via
ecommerce channel. In one scenario tested, the researchers found that buying from internet
reduced environmental impact with 35% less energy consumption and carbon dioxide emissions
than that produced in the traditional retail shopping model. (Clark, 2009.)
The largest contributors to energy consumption and carbon dioxide emissions were from
customer transport for traditional retail, and packaging and 'last mile' delivery to customer homes
for ecommerce. Approximately 65% percent of total emissions generated by the traditional retail
model stemmed from customer transport to and from retail stores. (Clark, 2009.)
This business model fits nicely with current Americas Green policy. State and local
governments and a handful of advocacy groups are releasing green-collar jobs. Venture
capitalists are making significant investments in the companies that will develop the technologies
behind the green economy. (America's Green Policy Vacuum, 2008)
Norms and Values
Norms (standard accepted forms of behavior) and values (attitudes toward right and wrong),
differ across time and between geographical areas. Lifestyles differ as well among different
ethnic groups. As an example, the application in the United States of Japanese-influenced
approaches to management has caused firms to reevaluate the concept of quality. Customers
have also come to expect increasing quality in products. Many firms have found it necessary to
reexamine production and marketing strategies to respond to changes in consumer expectations.
Population Changes
Changes in population demographics have many potential consequences for organizations. As
the total population changes, the demand for products and services also changes. For instance,
the decline in the birthrate and improvement in health care have contributed to an increase in the
average age of the population in the United States. Many firms that traditionally marketed their
products toward youth are developing product lines that appeal to an older market. Clothing from
Levi Strauss & Co. was traditionally popular among young adults. While its popularity in this
market has waned, the firm has been able to develop a strong following in the adult market with
its Dockers label.
Other firms are developing strategies that will allow them to capitalize on the aging population.
Firms in the health-care industry and firms providing funeral services are expected to do well
given the increasing age of the U.S. population. They are projected as a growth segment of U.S.
industry simply because of the population demographics.

Porters Five Forces Analysis
Power of Suppliers
Every person who has something to sell can be a potential supplier in the mail order industry, so
the suppliers are countless. The mail order industry doesnt have chain of traditional
manufacturers, but instead provides services that bring buyers and sellers together. So, there is
not an imminent threat from suppliers, because most of the time anyone can become one. EBay
and other online auctioneers also have several thousands of online store suppliers, who use their
site to reach out to new customers. In order for an online store to successful on eBay it must, first
of all, establish a brand and make sure their brand becomes well known. Things customers look
at when choosing a product to buy from a store online is the price, feedback number, and brand
name. As internet become more available to people in the United States and the rest of the world.
This gives firms using the online catalog business a chance to obtain new customers and reach
out to people they couldnt before. Firms in the online auction industry are constantly looking for
ways to market their services and make it easiest to use. Distinction is the key in the mail order
catalog industry, because of the countless suppliers on these sites. In order to be successful
sellers need to be distinct in price, reputation and quality. Because there are so many sellers in
this industry, the competition is very strict and sellers will not just stratify consumers by just
offering products. The distance between competitors is also vanishing. The online catalog
business has also increased the intensity of competition by allowing new competitors into the
market.
.Power of Buyers
One of the main advantages the industry has are its millions of buyers that view there companys
goods each day. Each item listed on these sites can be seen by customers all around the world.
The advantage it gives its customer is the million of items that is can be listed in a short amount
of time. They operate 24 hours a day, and that gives the buyer the option to buy anything they
want at anytime. The buyers can come from Asia, Europe, America and other parts of the world.
The buyers can be small businesses, ordinary people and big corporations. They make the buying
experience pleasant for the buyers because of their highly developed feedback system and rating
features. One can easily study the item they are going to buy before making a purchase. The
buyers can sell and buy items which have made these sites even more popular. You can easily
compare prices between many items and make your purchase based on your preference. Buyers
can easily communicate with their sellers and rate them. Buyers are given the option to study the
background of a particular seller. The buyer can even save a lot of money, because many items
end below market price of their value.
Threat of New Entrants
There are some factors which occur in the industries of internet auctions and catalog & mail
order houses that have to do with new entrants. It is necessary to consider the two types of
businesses which make up these industries and how they function. The boom of e-commerce has
had an effect on these industries and has made much advancement in the way these businesses
are run. These industries have also had a history of being suitable to new entrants because of the
minimum capital needed to operate.

The e-commerce sector is an area which has changed the way businesses construct their
strategies in order to hold their market position. In a brick and mortar organization, companies
have the use of infrastructure to keep new entrants out of their industry. This is the case in the
industries eBay is in, with companies of a traditional set-up. With property, plant and equipment
(supplies) necessary to run the company, the cost of a new entrant beginning business is high.
The organization of the industry in this way works to keep power in the hands of the current
companies in the market. The advancement of the e-commerce sector of business has had a great
influence on the way the traditional business model works.
Threat of Substitutions
Buyers and sellers are strong supporters of the companies in these industries and to them
switching costs on an emotional and financial level exists. On the emotional side, buyers and
suppliers must take their trust they have applied to the companies in which they feel comfortable,
and switch it to another company which they have not been exposed. In order for a substitute
product to succeed it must enter the market with a product which is differentiated from the rest.
In order to gain some of the market share from the leaders in this industry these substitutes must
introduce a product at a lower price, of more value or something extraordinary in order to force
loyal customers to leave their trusted company and accept the new substitutable product.
The businesses making up these industries have worked to counteract the threat of substitutions
through the use of differentiated products which cannot be easily copied by its competitors. This
includes offering products of value to its buyers and sellers. Products of value in these industries
mean having the most up-to-date technological systems applied to their business in order to
create the most user friendly interface, adding additional tools for use beyond the traditional
marketplace and offering a price which cannot be competed with by any direct competitors.
Rivalry
Rivalry in the e-commerce sector has always been an area of competition since its boom began in
the late 1990s and will continue as the increase in internet usage continues on. The e-commerce
industry is expected to see double digit growth rates over the next five years (Shopall, 2008), and
this increase will continue to attract more and more businesses hoping to take advantage of the
profits.
Customers using the internet as a shopping tool are in the market to receive the lowest costs
possible for a product while sacrificing personal customer service and the benefit of seeing a
product hands-on. eBay is ranked in the top 20 for customer service for retail companies by the
National Retail Federation (EBay Ink, 2008), which shows their commitment to customers in an
industry which traditionally is solely focused on price slashing.
While rivalry is very much existent and intense in the industry which EBay exists, they are
building a system to match customers wants and needs more effectively than their competitors.




Internal Industry Analysis

Industry Key Success Factors
Expertise in Technology
The shift toward e-commerce has created some new potential areas of success for the Catalog &
Mail Order Industry. E-commerce is a logical next step in the evolution of Catalog & Mail
Order Houses Industry. E-commerce consists of the buying and selling of products or services
over electronic systems such as the Internet and other computer networks. The amount of trade
conducted electronically has grown extraordinarily with widespread Internet usage. The
historical focus of Mail Order is mainly placing an order for the desired products with the
merchant through a telephone call or mail. As e-commerce continues to develop, companies will
have to shift their focus to include e-commerce in their compound pipelines.
E-commerce also offers a much higher growth rate than any other trading method. A wide
variety of commerce is conducted in this way, spurring and drawing on innovations in electronic
funds transfer, supply chain management, Internet marketing, online transaction processing,
electronic data interchange (EDI), inventory management systems, and automated data collection
systems. The appeal of e-commerce is obvious; much higher potential returns on investment due
to economically efficient marketplace.
Services
Multi-focused Model
The services shared in multi-focused companies typically include business functions like finance,
purchasing, information technology, human resources, and executive training. The scale
advantages they provide are straightforward and include pooled purchasing, preferred access to
credit, and other cost-related benefits. Economies of experience are more difficult to realize but
can also be more valuable. Here, the successful companies in the industry have used knowledge
gained in one service model to strengthen the performance of the others. To a limited extent, this
kind of knowledge transfer occurs informally; this has always been the hope and promise of
diversified companies. The important difference in successful multi-focused firms is that they
formalize the process, designing very explicit ways of leveraging experience across service
models. Knowledge transfer is facilitated by deliberate investments in such programs as formal
best-practice sharing; centralized, dynamic employee training; and the rotation of managers
among models.
This industry shows that the best means of sustaining growth is to employ the multi-focused
model, yet it is also evident that this model requires concentrated effort to defend. Leaders of
individual service models constantly assert that dedicated, rather than shared, resources would do
more to strengthen their own businesses. Operations managers, meanwhile, raise a chorus of
complaint that shared services require more- vigilant control "below the line" if they are to
deliver the necessary economies of scope and experience. Given the perpetual assault on the
model, it may not be surprising that another common characteristic of successful multi focused
firms is directive (even autocratic) leadership. This leadership style accommodates different

personalities, but it always relies on senior managers who are able and willing to exert strong
influence on subordinates.
Marketing
Consumer Reviews
On-line consumer reviews, functioning both as informants and as recommenders, are important
in making purchase decisions and for product sales. Their persuasive impact depends on both
their quality and their quantity. The industry shows three major findings: (1) the quality of on-
line reviews has a positive effect on consumers purchasing intention, (2) purchasing intention
increases as the number of reviews increases, and (3) low-involvement consumers are affected
by the quantity rather than the quality of reviews, but high-involvement consumers are affected
by review quantity mainly when the review quality is high. These findings have implications for
on-line sellers in terms of how to manage on-line consumer reviews.
Gaining a large subscriber base
Content owners and distributors are competing not only to attract new customers, but also to
build loyalty and retention rates among existing customers. Today's mandate for "reinvention"
means the future depends not only on incremental improvements, but on quantum-leap
breakthroughs as well. Subscription-based operators are constantly developing strategies to
maintain and grow ARPU (Average Revenue Per User) through customer retention, process
improvement, and product innovation. In the wider sphere, across the E&M landscape cable and
satellite TV operators, broadcast and cable networks, cinema owners, newspaper and magazine
publishers, and Internet portals are struggling to enhance their customer care and management
operations. Companies in the industry are always seeking to derive value from the entire
customer management value chain, from database interrogation to inform and drive marketing
and cost-reduction strategies, to development of powerful people and systems strategies which
can deliver the highest level of customer service.
Standard and Custom Catalogs
On-target award options is the way to engage emotions. The catalog's design might catch the
participant's attention, but it's the merchandise that keeps it. The first thing to consider when
selecting merchandise is that there are two types of catalogs: standard and custom. The
merchandise in the standard is usually chosen by the catalog supplier, not the incentive
planner. Standard catalogs work well with a diverse audiences. With the custom catalog, the
incentive planner and supplier work together to find merchandise for very specific target
audiences. Amazon.com, for example, uses recommendation to personalize the online store
for each customer. The store radically changes based on customer interests, showing
programming titles to a software engineer and baby toys to a new mother. The bottom line is
tailoring the merchandise.

Industry Value Chain
Primary Activities
Raw materials
The main materials that are critical towards the success of the Catalog & Mail Order Houses
Industry are their networking related equipments, software used on the websites, catalog printing
and electricity. Most of the companies in the industry are shifting, or have shifted, their business
online. Doing business online requires servers for outside users to access services and products.
In addition, these servers are dependent on Dell, IBM, Sun Microsystems, etc, to manufacture.
These servers also require huge electricity to operate, so the companies have to form contracts
with local electricity providers. Backup generators are also necessary for the servers, in case
there is a blackout, backup generators would kick in and provide powers to the main servers.
Companies also have to create contracts with network providers to connect all there servers to
the World Wide Web. In order to remain successful and competitive within the industry,
companies need to obtain the most technological advanced software to build their websites.
Users are expecting secure, reliable and fast access when they use the websites. However, some
companies in the industry are still not fully internet based; they are still using print catalogs and
mail them to customers. And this requires partnering with paper suppliers.
Inbound Logistics
Every person who has something to sell can be a potential supplier in the mail order industry, so
the suppliers are countless. The mail order industry doesnt have chain of traditional
manufacturers, but instead provides services that bring buyers and sellers together. So, there is
not an imminent threat from suppliers, because most of the time anyone can become one. EBay
and other online auctioneers also have several thousands of online store suppliers, who use their
site to reach out to new customers. In order for an online store to successful on eBay it must, first
of all, establish a brand and make sure their brand becomes well known. Things customers look
at when choosing a product to buy from a store online is the price, feedback number, and brand
name. As internet become more available to people in the United States and the rest of the world.
This gives firms using the online catalog business a chance to obtain new customers and reach
out to people they couldnt before. Firms in the online auction industry are constantly looking for
ways to market their services and make it easiest to use. Distinction is the key in the mail order
catalog industry, because of the countless suppliers on these sites. In order to be successful
sellers need to be distinct in price, reputation and quality. Because there are so many sellers in
this industry, the competition is very strict and sellers will not just stratify consumers by just
offering products. The distance between competitors is also vanishing. The online catalog
business has also increased the intensity of competition by allowing new competitors into the
market.
We can fairly say that this industry is fairly diversified, in terms where they get their products.
Some of the players in this industry have their own warehouses and inventory set ups. EBay
for example has a strategic partnership with IBM, which uses eBay to sell their newest products
and offer services using competitive auctions and fixed-priced storefronts. Amazon relies on its
own warehouses to supply its customers, and it has managed to do it in the most cost saving way.

The advantage this industry has over other traditional retailers is that their warehouses and
inventory can be located in strategic locations around the world, from which they can distribute
their product from (skipping the cost of a middle man). Others in this industry rely on its sellers
and buyers to make the market (eBay). Bills of materials in eBay can be identified as small
businesses selling used cars, books, music, and cloths etc. They can be private sellers who want
to get rid of their old car or used book. So, eBay is not dependent on its suppliers, but its sellers
and buyers who operate on its site.
Operations
The catalog and mail order industry is focused on the development of marketplaces in order to
bring their suppliers and buyers together in a single platform. The traditional businesses in this
industry compete with hard-copy catalogs which display and list the each suppliers good to be
viewed and purchased by buyers. Currently, newly formed electronic functions of catalogs have
entered the market and include television, telephone and e-commerce. Revenues are generated
through the sale of retail goods via mail order, television and catalog channels.
Recently the growth of electronic forms of catalogs has cut costs and added competition into the
industry. Their operations and activities focus on developing marketplace platforms for products
to exist, which have the capability of being shopped by buyers. These companies go through the
process of collecting suppliers goods, much the same way as hard-copy catalogs do, and place
them into virtual marketplaces. This includes using various tools to sell the products, such as
fixed-price listings, auctions, trading and various other methods which will transfer the product
from the supplier to the buyer.
Marketing and Sales
After the operations have been completed in developing product marketplaces it is necessary to
effective distribute and market the catalog. An investment is needed in the presentation of the
catalog in order to attract buyers through highlighting the products. This is also very important in
this industry as customers are able to control how and when they decide to shop because this
industry is constantly open for shopping. By distributing a quality, eye-catching product the
catalog company is more likely able to attract buyers. General advertising is also being
completed by these companies and has seen its advances with the introduction of the internet.
Outbound Logistics
There are two aspects pertaining towards outbound logistics in Catalog & Mail Order Houses
Industry. First, companies would have to distribute catalogs either over by the internet or print. If
it is distributed by the internet, the search engine plays the main role for customers to locate the
product. Keyword is used in a search query initiated by a user or when specific content is being
viewed by a user on the website. Companies also would distribute print catalogs to the
customers. Second aspect would be delivering purchased products to the buyers. Catalog & Mail
Order Houses Industry depend on suppliers to finalizing the purchases to the buyers.
After-Sales Services

Although the suppliers in this industry are not the companies producing and distributing the
catalogs, they still take a great deal of pride in taking care of their customers. Most commonly in
this industry the catalog and mail order house is the face of the product and service, so in turn
they will be first responsible for customer satisfaction. As with traditional retail companies they
develop return policies, which are negotiated earlier with the suppliers, and dedicated customer
service/support communications to handle any problem which may arise. In following this
process a company participating in this industry can build a name for themselves in reliability,
trust and reputation, all of which are very important to customers. This value given to the
customer will create return customers, who will also advertise through word-of-mouth to those
surrounding them. By finishing the value chain in this manner will leave the customer with the
best possible image of your company, rather than ruining their experience. This is a goal
commonly shared by both the suppliers to the catalogs and the catalogs themselves in order to
create a shared vision for customer satisfaction.
Secondary Activities
Firm Infrastructure
Specification applies to the industry in a variety ways. These include government relations,
company policies, financial regulations and environmental policies. While meeting these rules
and regulations, the companies of this industry must also focus on scanning the external
environment for potential business opportunities.
Human Resources Management
Companies in Catalog & Mail Order Houses Industry have to effectively hire, train, and manage
new employees. The employees needed cover wide range of skill sets to meet product demands
such as marketing, finance, engineering and others. If their new hires perform poorly, if they are
unsuccessful in hiring, training, managing, and integrating these new employees, or if they are
not successful in retaining their existing employees, their business may be harmed. To manage
the expected growth of their operations and personnel, they will need to improve their
transaction processing, operational and financial systems, procedures and controls.
Technology Development
Within this industry, technology has played an important role in the way in which the companies
function and the future of the industry. The internet has played an important role in allowing new
entrants to enter the market while also making a cost cutting business which is meets the wants
and needs of todays customers.
Procurement
Procurement for Catalog & Mail Order Houses Industry is the section of companies that oversees
the purchasing of the materials that are necessary for the company to operate. These include
purchase networking related equipments from their manufactures, conducting contracts with its
local electricity suppliers, forming agreements with Internet Service Providers, printing
companies and delivery companies.

eBay Profile
Overview
eBay is an online company that provides online marketplaces for the sale of goods and services.
It also provides commerce, platforms, online payments services and online communications
offerings to individuals and businesses.The company primarily operates in the US. It is
headquartered in San Jose, California and employs 15,500 people.
The company recorded revenues of $7,672.3 million during the financial year ended December
2007 (FY07), an increase of 28.5% over FY06. The operating profit of the company was $613.2
million during FY2007, a decrease of 56.9% compared to FY06. The net profit was $348.3
million in FY07, a decrease of 69.1% over FY06.


Leadership at eBay
Primary Focus
Raw Materials
Being a technological e-commerce based company eBay originates from computer coding and
software to develop its companys requirements. In addition to these technologies, electricity is
necessary to support all functions within the development stages of the product.
Inbound Logistics
eBay consists of technological system development to support their services. These technological
systems began through the use of simple coding and have since required the development and
enhancement of computer systems. The requirements have included the use of data management
systems to handle the large amount of data which is used in the creation and support of eBay
marketplaces. Servers are needed to store this data and also back-up servers to be used in the
instance of system crashes. Also needed is obtaining database software through a third party
vendor, Sun Microsystems. The collection of these logistics provides a backbone for the
operations that will be completed in the final product.
Operations
Continuing on with the development of inbound logistics, eBay is able to offer their final product
to customers. The products offered by suppliers in the eBay marketplace are brought together in
an online type of catalog for buyers to view and purchase. This marketplace platform is
developed and enhanced through the use of the following features of value it offers its
customers:
Turbo Lister, eBay Blackthorne, ProStores, Selling Manager and Selling Manager Pro,
each of which helps to automate the selling process

Picture Services, which enables sellers to include pictures in their listings
Shipping Calculator, which makes it easier for buyers and sellers to calculate shipping
costs
Shipping Labels, which allows sellers to print certain postage and UPS labels
Shipment Tracking, which enables sellers to track their shipped packages
eBay operates its marketplace platforms with two types of structures to offer its customers.
These include auction-style listings and fixed-price listings. Auctions are the traditional offering
of eBay and are administered through IT coding and software in a similar, but modified way a
normal auction is held, but electronically. The other type of listing structure is through a fixed
price format. This allows buyers and sellers to complete the transaction process in a timely
manner rather than waiting for the auction period to expire. The Half.com subsidiary of eBay
also provides a fixed-price, person-to-person online platform that allows customers to buy and
sell new and previously owned books, movies, music and games at discounted prices. These
listing are all brought together onto one platform within the eBay.com marketplace.
Outbound Logistics
The end of operations brings in the outbound logistics of the company. In eBays case this
represents finalization of bringing together suppliers and buyers and the processing of payments.
During the outbound logistics phase, suppliers and buyers enter into an order contract which
commits each other into the purchase. eBay facilitates this action through administering the
communication between each party.
Handling payments from buyers involves the use of eBay owned PayPal, to transfer money
directly from buyer to seller, while making payment for usage back to eBay. PayPal enables
individuals and businesses to securely, easily and quickly send and receive payments online in
approximately 190 markets worldwide. The other aspect of payments which eBay owns is the
use of Bill Me Later, enabling online U.S. merchants to offer, and U.S. consumers to obtain,
credit for the transaction at point of sale. These economic tools have given eBay a financial
network to support global, real-time payments.
Marketing and Sales
Market and sales directly completed by eBay is on a broad level in order to obtain both new
buyers and suppliers. They also offer their customers a way to market and sell their own products
through the use of their marketplace.
They directly market and sell their product through the use of product differentiation, such as
online auctions, and the use of promotions. These occur through marketing campaigns in the
U.S. and pricing promotions within the website to drive traffic and continue the growth in the
amount of products listed and purchased.

Providing products and services for the use of customers also promotes the eBay name, in an
indirect manner. Marketing in this way adds into advertising which is ultimately received by the
company, and aids in the sale of products within the marketplace.
Customer Service and Retention
In order to remain successful and hold market share in the catalog and mail order business,
customer service and retention is a key function of eBays business. This is facilitated through
the use of feedback forums and the use of several features added onto the platform to gain trust
and loyalty of the customers.
The feedback forum encourages users to provide feedback ratings and comments on other users
with whom they trade. It requires feedback to be related to specific transactions and provides an
easy tool for users to match specific transactions with the user names of their trading partners.
This information is recorded in a profile that includes a feedback rating for the user, with
feedback sorted according to whether the feedback has been provided over the past month, six
months or twelve months. Users who develop positive reputations have color-coded star symbols
displayed next to their user names to indicate the number of positive feedback ratings they have
received. As a customer-focused company, eBay no longer allow sellers to leave negative
feedback for buyers, but do give them the tools designed to avoid negative feedback.
The other areas of value for customers are the creation of trust and safety features integrated to
the platform. These include the Safe Harbor Program and Verified Rights Owner Program,
Customer Support and Value-Added Tools and Services, as well as Loyalty Programs, such as
PowerSeller, top buyer and coupons and buyer rewards. These features are designed to make
users more comfortable dealing with unknown trading partners and completing commercial
transactions on the internet which can be a stressful idea.
Supporting Activities
Procurement
eBays activities within procurement involve creating systems for suppliers to be successful in
their use of the marketplace platform. They complete activities in order to consume the inputs
needed for the companys products. In this case computer servers, database systems and IT
software is combined to create a strong online marketplace.
Technological
Engineering is a strong focus at eBay in order to strengthen its innovation and technological
development. In the e-commerce industry this focus in necessary in order to keep the advantage
on new entrants attempting to enter the market and also those which already exist. Research and
development totaled $736M for the 2008 year and this applies to new product design, product
upgrades and services additions to the website.
Human Resource Management

eBay currently holds a veteran management team under the control of the newly appointed CEO
John Donahue. Donahues predecessor was the well known Meg Whitman who had many
successes after her arrival at eBay in its infant stages. Whitman took the company public and
through many successful years she was able to create an effective executive work force which
was made to last.
Firm Infrastructure
eBay, being an online company has also advanced their infrastructure online as well. Financially,
all reports are easily accessible through the company website along with media on quarterly
statements and company updates, available for all to access. These display the structure which
has been applied both financially and executively in order to support their company goals and
vision. This business is also susceptible to government relations dealing with issues of the law
and eBay has a strategy to deal with these government relationships. Finally, an important detail
in todays markets includes the development and promotion of environmentally sustainable
actions. eBay sees this as a need to give back to their communities through various community
wide and broad activities to support environmental friendliness.

SWOT Analysis

Strengths
Weaknesses
Brand Name
Economies of Scale
Internet Sales
Open Seller Platform
Low-Cost Provider
Paypal
Market Leading
Low Debt
Non-Business Related Acquisitions
Moving away from auctions being the primary
business
Mature Market

Opportunities Threats
International Expansion
NetBook Computers
Department Store Failures
Amazon.com
E-commerce Tax
Litigation
Economy

Strengths
Brand name - Strong brand name helps to increase margins by charging premium prices for
goods, because customers perceive a higher standard of quality from companies with strong
brands. The strong brand name eBay has obtained has increased the number of customers they
draw into their business because of the common name they have throughout consumers.
Economies of scale - eBay has economies due to its large supply of buyers and sellers. Having a
large number of active users as they do, they are able to protect themselves from new entrants to
the industry. This retains their market share and provides them with a strong foundation for
successful business.
Internet Sales Internet sales are increasing at a fast pace. This has come to benefit eBay and the
industry as a whole because of the recent advancement to using technological based systems to
run the businesses. The continued growth of the internet and also its expected growth into the
future greatly supports eBays business and success.
Open Seller Platform - The ability to allow businesses to sell their products on a website
enhances liquidity for such products, gives better options to users and allows the platform
provider to increase the number of goods they have for sale, which increases their revenue and
margins. When buyers can get new or used products from one place, the customer relationships
between the buy and the preferred platform will increase.
Low-Cost Product Low cost provides significant barriers to entry if that company is the only
low cost product among many other higher cost products. Also, companies that save businesses

money will also benefit when businesses have to cut cost over time, either through greater
efficiency or cheaper goods. eBay is able to have low costs in an industry which requires
somewhat of a technological investment, which allows it to have high margins.
Paypal/Non-Cash Society - The growing use of credit cards and debit cards are increasing the
trend towards a cash-less society. Card companies and those that process card transactions
should benefit from the shift away from using cash. The growing use of these forms of payment
will allow Paypal to generate substantial growth to the eBay company.
Market Leading - Market leading position brings many benefits to those companies. Generally,
they possess good brand names, economies of scale, higher margins, revenues and other
significant benefits, such as the ability to raise debt at lower cost. They generally have a more
stable business than their competitors and are more likely to acquire other businesses as
opportunities come about.
Low Debt Without long term liabilities facing the company, eBay is able to avoid constant
interest payments which cut into cash flows each period. This lowers the risk of the company
because without debt taken out, there is no default risk of the company. Free cash flows can then
be used to finance growth of the company and on innovation, rather than making payments to
bondholders.
Weaknesses
Non-Business Related Acquisitions - The acquisition of Skype did not add value for eBay's
customers. Non-essential acquisition can distract a company and dilute the management
expertise and financial results. It would be a significant weakness for eBay to continue making
non-essential acquisitions.
Moving away from auctions being the primary business Through various business related
moves, eBay has faced weaknesses in their company distracting their focus away from their core
business of auctions. This has placed management in a situation to run the eBay company with a
strategy different then what had been put in place in the past and also what has been successful
for them. The last part of the weakness which effects the company is getting outside the range of
managements expertise.
Mature Market - Mature markets result in slower growth of revenue and lower margins as
companies begin to compete on price and service versus the past driver of value, growth.
Competitors usually have to differentiate themselves in the customer's eye to maintain value.
Some become lost cost suppliers, high quality suppliers of products, or niche suppliers of
services. If companies are able to create a natural monopoly (economies of scale, buyer power,
etc.) then mature markets can turn into cash cows, where the main company needs very little
investment to produce very large amounts of free cash flow. eBay must handle their situation as
a mature company by introducing new strategies to enhance their business.
Opportunities
International Expansion Because of the increasing growth in buyers globally, there are many
opportunities in globalization for growth. The type of business eBay is in has the potential to be

successful in other markets if they can fix some of the problems with their services that other
locations expect.
NetBook Computers - Low cost notebook computers are gaining in popularity. They run on the
Linux platform, which undermines Microsofts Windows operating software system.
Department Store Failures - Slowdown in department store's popularity may cause long-term
growth problems. This also affects all merchandisers who want to sell their clothing through
department stores.
Threats
Amazon.com - Increased competition is a threat to Ebay's business, but Amazon.com provides
an acute threat to eBay, through their advancement into used goods and auction style online
commerce.
E-commerce Tax - Potential tax on e-commerce transactions will decrease the demand for goods
online. This will affect the prices of services which need to be charged in order to make up for
the increase in costs for the company, suppliers and buyers.
Litigation - Litigation risk might not be priced into the beta. The potential of litigation risk
increases the uncertainty for companies, which lowers the value of a company. Until the risk is
gone, a company tends to trade based on any news concerning the litigation potential.
Economy - A global slowdown or recession will hurt all companies, but mostly those whose
products sell in economies that experience the worst declines. Commodity prices will also
decline, because economies slow down and the current resource supply is static; therefore,
oversupply ensues. A global slowdown also affects advertising/service companies, which are
typically very cyclical industries.












Leadership principles at eBay:

In the words of John Danahoe:
Leadership is a topic I have spent much of my life exploring, trying to be the best leader I can
be while also trying to be the best person I can be. And for me, the challenges of being a good
leader and leading a full life are deeply intertwined.
This past Saturday, I had the honor of addressing Stanfords Graduate Business School Class of
2013. As a 1986 graduate of the GSB, it was a real privilege to share four leadership principles
Ive learned over the past 25 years. These timeless principles have helped me navigate my work
and my life. I now want to share these principles with you.
Principle No. 1: Link your work with a sense of purpose.
It doesnt matter what industry you choose, what company you join, or what your particular role
may be. What does matter is connecting your day-to-day energies to something that is deeply
meaningful to you.
Thats what brought me to eBay. At first, I didnt think eBay was right for me. But then I met
eBays founder, Pierre Omidyar. And I asked Pierre how he defined success for eBay. He didnt
talk about growth rates, revenues or stock price. Pierre said: John, its not about the numbers;
its about how much impact we can have in peoples lives around the world. I knew then that I
had found my next opportunity to deeply link my work with a sense of purpose.
Discover what really motivates and inspires you, and make sure you can link this to your work.
This will make you a more authentic and effective leader, and it will give you the perseverance
required to succeed over time.
Principle No. 2: Never stop learning.
No one will care about your career as much as you do. And only you can be responsible for your
learning. It cant be delegated. One common trait I have observed in the most successful leaders
is that they take their own growth and development very seriously. Great leaders are never too
proud to learn.
When I was a student, I believed my bosses would impart everything I needed to know to be
successful. In the workforce, I quickly learned that the perfect Yoda-like mentor didnt exist and
no one person had all the wisdom I was searching for.
Instead of learning a lot from one person, I now learn a little from a lot of people. Every
interaction teaches me something and in this way, everyone is my teacher.

And heres a secret: The more successful you are, the more you need to learn and grow. Your
commitment to learning has to be continuous and unrelenting.
Principle No. 3: The most valuable learning often comes during difficult times.
Tough times teach character and character is the most important quality a leader can have.
Let me share a personal example from my own career: In the early 1990s, Bain nearly went
bankrupt. The whole world had written us off, our outlook was grim, and there was a brief time
where we couldnt even make payroll.
Yet this turned out to be a defining moment in the firms history and in my career. A few
leaders came together to make a shared commitment to overcome adversity and build a great
company. This was a true character-building moment, both for the organization and for me as a
young leader. Over the past seven years, I have had a similar experience leading the turnaround
at eBay.
In difficult periods, you really get a sense of who you are, what youre made of, and whats
really important to you. It is during the difficult periods that you learn the importance of
teamwork and commitment, as well as how to persevere and have faith.
Principle No. 4: Build your full life, not just your work life.
Many of you are concerned about work-life balance, and how your employers are going to
address it. I would turn the question back to you: How will you create your own balance?
My wife and I have tried to balance dual careers for the past 30 years. We are partners and true
equals. There have been periods where I have followed her career, and times where she has
sacrificed for mine. At the same time we worked very hard at building a healthy family life, and
today we are blessed with four wonderful children. This has meant many trade-offs and lots of
second-guessing.
There has been no single moment where we achieved the perfect work-life balance and thats
okay. We have realized that pursuing a full life and pursuing balance is a journey and not a
destination. The fact that we are willing to keep at it is what counts.
I will also tell you that some of my most valuable leadership training has come from my
experience being a husband, a father and a friend. The skills you learn in your personal life
listening, empathy, and humility are invaluable for success at work.
So embrace the challenge of building your full life, not just your work. Real life gives you the
stuff to be a real leader.

In summary, I hope these four timeless principles give you some guideposts to staying true to
who you are. I want to conclude by sharing some words from John Gardner, who has written
extensively on the topic of personal renewal. Over the past 20 years, I have kept a laminated
copy of this quote in my wallet and I use it as a source of inspiration:
Meaning is not something that you stumble across, like the answer to a riddle or the prize in a
treasure hunt. Meaning is something you build into your life. You build it out of your own past,
out of your affections and loyalties, out of the experience of humankind as it is passed on to you,
out of your own talent and understanding, out of the things you believe in, out of the things and
people you love, out of the values for which you are willing to sacrifice something. The
ingredients are all there. You are the only one who can put them together into that unique
pattern that will be your life. Let it be a life that has dignity and meaning for you.


















Amazon- Profile
Overview
Amazon.com (Amazon) is an online retailer. The companys retail websites include
www.amazon.com, www.amazon.ca, www.amazon.de, www.amazon.fr, www.amazon.co.jp,
www.amazon.co.uk, www.joyo.com, www.shopbop.com, and www.endless.com. The company
primarily operates in the US. It is headquartered in Seattle, Washington and employs 17,000
people.
The company recorded revenues of $14,835 million in the financial year (FY) ended December
2007, an increase of 38.5% over 2006.The operating profit of the company was $655 million in
the FY2007, an increase of 68.4% over 2006. The net profit was $476 million in FY2007, an
increase of 150.5% over 2006.
Company summary
Amazon.com is a leading online retailer company, offering for sale different items such as
books, music, DVDs videos, toys, electronics, software, video games and home improvement
products serving over 45.5 millions customer in 150 different countries. Jeff Bezos in the state of
Washington, USA, founded the company in July 1995. Amazon has become the dominant e-
retailer in its field of online book selling. Amazon has grown fast from its initial beginnings as a
small online bookseller to a giant superstore company. During its process of growth, it incurred
significant losses and it became more exposed to greater competition and threats. Cutting costs
and achieving profitability has become Amazons greatest key to success. Also, its strong brand
name, outstanding customer value, massive sales volume and its implementation of economies of
scale has contributed a lot to its success.
Products
Amazon started as an online bookstore but soon diversified to other product lines like VHS,
DVD, music, CDs and MP3s, computer software, video games, electronics, apparel, furniture,
food, toys, etc. Amazon has established separate websites in Canada, UK, Germany, France,
China, and China. It also provides international shipping services for some its products.
The company launched Amazon.com auctions, its own web auctions services, in March 1999.
However, it failed to keep up with growth of industry pioneer eBay. Amazons auction was
followed by the launch of its fixed price market place business called zShops in September 1999.
However, Amazon no longer mentions either auctions or zshops on its main pages, but refers
them as the marketplace. Although zShops failed to live up to its expectation, it laid the ground
work for the hugely successful Amazon Marketplace services launched in 2001 that let
customers sell used books, CDs, DVDs and other products alongside new items. Today,
Amazon Marketplaces main rival is eBays Half.com service.

Core Competences

Amazons constant ways of improvement and innovations such as low inventory costs superior
brand recognition, and technology has made it a leader in among its competitors. Amazon has
the upper hand vs. other traditional retailers in sense that it uses information technology to be
cost efficient and offer better customer service. Other retailer and other eCommerces lack the
partnerships Amazon has established over the years. Others retailer in the industry would find it
to costly to imitate, because of Amazons brand recognition, innovation and several very
important partnerships. If other traditional book stores would want diversify into areas like music
and movies, like Amazon has managed to do, they would find the costs to be to high to imitate.
Amazon.com has also several core values which has played an important part in the growth of
the business. The first one is their excellent customer service based on their innovative
technology. The company has a range of services such as book reviews from other customers,
from staffs, as well from its editors. In addition, many featured books contained descriptions,
highlights, a chance to see the content of the books and interviews posted by authors.
Convenience and price is another core value the company has. It sells books through Internet and
has its own distribution system. Similarly, Amazon does not have to spend too much money on
properties and other operations because it is an Internet-based business. Thus, it can reduce its
inventory expenses.
The most valuable core competency the firm has is it strategic plot of expansion through
customer innovation. It has the costly to imitate financial and technological resources, valuable
firm infrastructure, rare strategic leader and management composition and non substitutable
software technology. These resources and capability combinations has made the company to be
able to sustain its competitive advantage, that is still present to the firms patented innovation.

Leadership at Amazon
Primary Focus
Logistics
Amazons primary activities such as the inbound logistics are thoroughly supported by secondary
activities such as selective procedures and technology development that filters the choice of
products and services from retailers/manufacturers, which also has enabled it to be more price
saving and customer satisfying. In addition, its firm infrastructures allows its operations and
marketing to be integrated in one commission based scheme provided to its 900,000 and growing
associate partners.
Further, its infrastructure allows its Seattle headquarters to minimize its tax costs, not to mention
the strategic outbound logistics of the Delaware center that has enabled the inventories closer to
East country markets like Japan and other European countries. Thanks to this, the value chain
combines the relatively low cost and support for its headquarter in Seattle, that support the
technology development while creating efficient procurement for storing and delivering products
through closing of inefficient warehouses and opening strategic and value adding ones.

The company also in a marketing strategy aimed to increase customer traffic to their website,
drive awareness of products and services they offer, promote repeat purchases, develop
incremental product and service revenue opportunities and strengthen and broaden the Amazon
brand name. The company relays much on word of mouth promotion and repeat customer visits.
The company also employs a variety of advertising, which consist primarily of online
advertising, associate programs, sponsored search, portal advertising, email campaigns and other
initiatives. Their associate program directs customers to their websites by enabling independent
websites to make millions of products available to their customers.
Services
A service that is very popular at Amazon is that they offer programs that enable seller customers
to sell their products on their websites and fulfill order through them, allow consumer customers
to shop for products owned by sellers using our features and technologies, and allows individual
customers to complete transactions that include multiple sellers in a single checkout process.
Allowing them to earn fixed fees on every seller item sold (competing with eBay). In addition
their seller programs serve individuals, small businesses, and large branded businesses, enabling
them to offer their new and used products for sale on their websites along side their products and
products made available by other sellers.
Marketing and Sales
Amazon.com opened its doors to the web in July 1995 and they offer the worlds biggest
selection of book. They generate their revenue through co-branded credit card agreements and
through marketing and promotional services, such as online advertising. Generally, Amazon.com
recognizes gross revenue from items they sell from their inventory and recognizes a net share of
revenue of items sold by other sellers. They direct customers to their website primarily through a
number of targeted online marketing channels, such as their associate programs, sponsored
search, portal advertising, email campaigns, and other initiatives.
Human Resource Management
The company employed approximately 20000 full time and part time employees as 2008. The
company constantly competes with other firms to employ the only best, and it owes much of
its success to the well qualified people it employees. It constantly trains its employees and
employees only the best.
The Company depends on their senior management and other key personnel, particularly Jeffrey
P. Bezos, President, CEO, and Chairman. The loss of any of their executive officers or other key
employees could potentially harm their business.
Technology
Amazon has a team of software engineers, computer scientists, merchandisers, and management
team that continuously focuses to enhance their technological innovation. They do this by
offering easy to use functionality, fast and reliable fulfillment, timely customer service, featured
rich and authorative content, and a trusted transaction environment. Key features of their website

includes editorial and customer reviews, products information, personalized web pages, secure
payment system.
They seek to efficiently invest in several areas of technology and content including seller
platforms, web services, digital initiatives, and expansion of new and existing product categories,
as well as technology infrastructure so that they can enhance their customers experience,
improve their process efficiency and support infrastructure web services.

SWOT Analysis
Strengths
The strength of Amazon is in its continuous and fast growth over the years. This gives the
company a distinct identity separate from its competitors. The continuous and fast growth of the
company shows how well they are operating and how efficient they really are. Another strength
of the company is the extended promotional relationships with established internet player. Also,
Amazon works closely with internet players so that they can make use of each others to achieve
their goals. Through this cooperation with these key players it enables it to increase and improve
the services they give to their customers.
Moreover, the strength of the company is its powerful search facility wherein there is personal
notification service to email its clients, a recommendation section, an awards section containing
award winning books, and an associate program with other sites. This enables Amazon to give its
customers convenience and ease in finding the books they want. It also helps in giving its
customers some ideas on what to buy. Another strength of the company is its ability to give a
vast and wide collections of books to its customers. Lastly, it was one of the original
dotcommers, and over the decade it has built a customer base of millions of people thanks to its
popular services. Amazon also has strong customer established customer loyalty, Its well
developed software helps improve customer experience. Over the years it has also built a
sophisticated logistics system that has enabled it to reduce its costs.
Weakness
The weakness of Amazon is not having an attractable website. Having an attractable and user
friendly website makes its products more attractive to purchase. It increases customer
satisfaction and leads to more people suggesting it to the people they know. Also, It has not
diversified into other business endeavor other than website. By doing so it can increase it
chances to increase revenue and increase its market power. Amazon might find new
opportunities in other sectors related to its core business. It also doesnt have the ability to reach
sectors of society that does not have internet access. The company can further increase its
profitability and revenue if it can reach sectors not having access to the internet or its website.
Opportunities
Amazons opportunity is its website. The website of the company can still be improved and
given a new look and be made more attractive and informative. The website of the company can
be made more up to date and convenient to use for its customers. Also, the company is now
increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to
major store groups. For example, British retailer Marks and Spencer announced a joint venture
with Amazon to sell its products and services online. Amazon has also agreed on similar
cooperation with Target, Toy-R-Us and NBA. Amazons new Luxembourg based division aims
to provide tailored services to retailers as a technology service provider in Europe. There are also
opportunities for Amazon to build partnership with the public sector.

For example it struck a deal with the British Library, London, in 2004, to offer its services to
launch the librarys catalogue of published books (containing around 2.5 books). In 2004
Amazon emerged into the Chinese market, by buying chinas largest online retailer, Joyo.com.
This will allow for Amazon to grab new knowledge in that market, as well as help it further
expand in China. Also, through the constant improvement of information technology Amazon
can further improve and expand its operations.
Threats
A major threat to Amazon is its competitors. If Amazon stops being innovative and efficient in
its operations, it competitors will find ways to equal or exceed the performance of the company
in the future. Another threat to the company includes the law in that country they are operating
in. Laws can be a major hinder for expansion in new markets and Amazon needs to consider all
its options before it makes it moves. There could laws that cause some delay in selling the
products. These laws can hamper business transactions to be completed. Future joint venture,
strategic alliance and mergers could threaten Amazons role as the lead online retailer. Also,
traditional retailers are establishing online presences. Manufacturers have also recently begun
selling online directly to consumers. Also, Amazon needs to look out for competitors who try to
imitate their business model at zero cost.
Financial Health of Amazon
Amazons initial business plan was unusual: the company did not expect to make profit in the
next four to five years; the strategy was effective. Amazon grew steadily in the late while other
internet companies grew blindly fast. Amazon received complaints from its stockholders that it
wasnt profitable enough, but when the dot-com bubble bursted, and when many other e-
companies went out of business, Amazon.com preserved. Finally, it turned to its first profit in the
fourth quarter of 2001: $5million, just 1c per share, on revenues of more than $1 billion. Amazon
remained profitable all through 2001 to 2008 thanks to its diversification and international
presence.
Amazon is financially the strongest competitor out of eBay and Yahoo. Its revenue of $26.2
billion for 2008 is well above eBays and yahoos ($8.54 billion respectively $5.40 billion). It
has shown an average revenue growth rate of 29.5% and an EPS growth rate of 79.5%. This
proves to me that Amazon is growing and any investors who had money put in this company
during the last years would have seen a hefty return on their money. Its 5 year average of 51.7%
Return of Equity is well above its competitors. It has seen an average of 8.6% Return on Assets
in the last 5 years. Also, Amazon gross profit of an average of 23.7% proves that is well able to
profit from what it sales. Its current ratio of 1.4 indicates that they are able to pay their short term
liabilities if they came to due. However, its debt/equity ratio indicates that it has been financing
its expansion through debt, but I dont see a problem with this because of its high growth rates in
the past. As long as the company keeps growing and profiting this ratio will not be an issue for
concern. Its debt/asset ratio of 0.69 which indicates that majority of assets are financed through
equity and not debt.




Leadership Principles at Amazon:

1. Our Leadership Principles
Our Leadership Principles arent just a pretty inspirational wall hanging. These Principles work
hard, just like we do. Amazonians use them, every day, whether theyre discussing ideas for new
projects, deciding on the best solution for a customers problem, or interviewing candidates. Its
just one of the things that makes Amazon peculiar.

2. Customer Obsession
Leaders start with the customer and work backwards. They work vigorously to earn and keep
customer trust. Although leaders pay attention to competitors, they obsess over customers.


3. Ownership
Leaders are owners. They think long term and dont sacrifice long-term value for short-term
results. They act on behalf of the entire company, beyond just their own team. They never say
thats not my job."




4. Invent and Simplify
Leaders expect and require innovation and invention from their teams and always find ways to
simplify. They are externally aware, look for new ideas from everywhere, and are not limited by
not invented here." As we do new things, we accept that we may be misunderstood for long
periods of time.


5. Are Right, A Lot
Leaders are right a lot. They have strong business judgment and good instincts.


6. Hire and Develop The Best
Leaders raise the performance bar with every hire and promotion. They recognize exceptional
talent, and willingly move them throughout the organization. Leaders develop leaders and take
seriously their role in coaching others.


7. Insist on the Highest Standards
Leaders have relentlessly high standards - many people may think these standards are
unreasonably high. Leaders are continually raising the bar and driving their teams to deliver high
quality products, services and processes. Leaders ensure that defects do not get sent down the
line and that problems are fixed so they stay fixed.


8. Think Big

Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction
that inspires results. They think differently and look around corners for ways to serve customers.


9. Bias for Action
Speed matters in business. Many decisions and actions are reversible and do not need extensive
study. We value calculated risk taking.




10. Frugality
We try not to spend money on things that dont matter to customers. Frugality breeds
resourcefulness, self-sufficiency, and invention. There are no extra points for headcount, budget
size, or fixed expense.


11. Vocally Self Critical
Leaders do not believe their or their teams body odor smells of perfume. Leaders come forward
with problems or information, even when doing so is awkward or embarrassing. Leaders
benchmark themselves and their teams against the best.


12. Earn Trust of Others
Leaders are sincerely open-minded, genuinely listen, and are willing to examine their strongest
convictions with humility.


13. Dive Deep
Leaders operate at all levels, stay connected to the details, and audit frequently. No task is
beneath them.


14. Have Backbone; Disagree and Commit
Leaders are obligated to respectfully challenge decisions when they disagree, even when doing
so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not
compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.


15. Deliver Results
Leaders focus on the key inputs for their business and deliver them with the right quality and in a
timely fashion. Despite setbacks, they rise to the occasion and never settle.




Leadership Recommendation and Implementation Strategy 1
Leadership Recommendation for EBay Preserving Their Core Business
Weakness: Focusing on secondary market of business
Recommendation: Following their original success in the Auction industry
Problems
To compete in the fixed-price marketplace, eBay passed a series of policies and site changes that
favored power sellers at the expense of smaller sellers. As casual sellers abandoned the site,
buyers have migrated elsewhere in search of the hard-to-find products upon which eBay built its
business. eBays traffic was down 5.2% last month over the previous year, while Amazons
traffic rose 18.7%.


The more eBay has tried to be a retailer, the more its customers have gravitated to sites offering
better overall shopping experiences with lower total prices, better customer service, and
predictable deliveries; not to mention the avoidance of the risk of fraud. The percentage of
eBays visitors who shopped at Amazon jumped from 41% in February 2008 to 53% last month.
Over the same period, Amazon visitors cross-shopping of eBay has remained unchanged at
58%, suggesting eBays fixed-price strategy has failed to attract significant numbers of new
shoppers to the site.
By focusing so much on fixed-priced items sold by large sellers, eBay has blurred the distinction
between it and the litany of shopping comparison sites and tools on the web (such as
shopping.com which eBay also owns). In so doing, eBay has traded away much of the brand
equity that once set it apart from the rest of the online retailing universe.


With its greater emphasis on fixed-priced goods, its not surprising that eBay has seen a steady
increase in the number of shoppers making Buy-It-Now purchases over the past year. In
February, 11% of eBays visitors, or 7.8 million customers, made a Buy-it-Now purchase (up
20% from the previous year). However gains in fixed-priced activity have been eclipsed by
declines in eBays traditional auction business. The percentage of eBays traffic that made a bid
on an auction-style listing dropped from 13.5% in February 2008 to 12.2% last month. In total,
1.5 million fewer shoppers placed a bid on eBay last month than did last February.
Solutions
eBays challenges are multi-faceted, and it remains to be seen whether by simply returning to its
roots as an auction site it can win back buyers and sellers who have long since given up on using
the site. Online retailing has evolved significantly since eBay was founded over a decade ago.
Savvy consumers have learned how and where to find deals online, but value intangibles beyond
price when making their purchase decisions. Consumers expect a level of service that in some
respects is beyond eBays ability to control in its role as middleman. Given that, eBay would be
better served looking beyond product strategy and focusing instead on improving the shopping
experience for buyers and sellers as its constant tinkering seems to be doing more harm than
good.











Leadership Strategic Recommendation and Implementation Strategy 2
Leadership Recommendation for EBay Syncing with Skype
Weakness: Acquiring unrelated businesses which become a distraction to the core business
Recommendation: Decide a strategy which will best benefit eBays financials, while also
removing Skype from the companys profile
Problems
eBay has recently taken on the purchase of VoIP provider Skype to add to their company
portfolio. The cost of this acquisition to eBay was $2.6 Billion. This purchase has been heavily
criticized since its decision, but is still very much supported by the management at eBay. It has
seen growth in revenues and also customers since its acquisition, along with becoming one of the
largest long distance phone companies. The issue which arises from this business is the concern
of its success into the future and also its relevance to eBays core business.
Solutions
The economy will play a large role in the timing and success in handling a move with this
business. The two potential strategies to follow would be most successful in a time of expansion,
when more money is available to be invested. A spin-off of Skype through an IPO is the first
strategy to consider given its recent success. This would allow eBay to receive some return on its
original investment while allowing Skype to be ran under its own ownership. Although, the issue
with this strategy is two-fold. First, the markets are currently not successful in IPOs because of
the riskiness and also the lack of additional funds by investors. This has placed nearly all IPOs
on hold for the near future. The expectation is that this will be the case until at least 2010, with
the possibility that it may take longer, when markets become more successful and investors will
be looking for investments to take with this sort of risk. The issue of this for eBay comes with
the need of extra cash flow to handle new strategies and growth. Also, it will be important for
them to
A more successful approach for eBay to take would be the strategy of making Skype look very
attractive for a straight buyout. This is a situation which could happen quickly as there are some
companies, especially in the technology sector, which have stable business with enough cash to
handle a purchase of this size. Another reason for a company to choose a take over this business
would be to set themselves up for high growth, in faster pace then the economy. This will happen
due to having additional free cash flow from the sale which would be used in other areas of its
business. This will become available more rapidly then other strategies which could take time
waiting to implement. Skype is currently a profit making business and would need to market its
financial highlights to suit a buyer. This business is nearing $600 Million in revenue and is still
showing signs of growth in the industry. With the right buyer, Skype has potential to reach new
heights by partnering with another successful product. There are companies which have shown
interest in the purchase of Skype and this includes the original founders. With many suitors
interested in the company, eBay can build a sort of bidding war in order to receive a return on
their investment. The current valuation of the Skype company has come to equal about $2

billion, while the purchase price in 2005 was $2.6 billion. It has also been mentioned that it
could receive between $5-6 billion from a larger company interested in increasing the technology
in one of their previously existing products (Blodget, 2008). The recent success of the company
leads us to suggest purchase of this company by Apple, Google or Verizon Wireless. These
companies are the big three which should be considered and contacted for the sale of this
company. They all have free cash flow and other strong financials which could support this type
of purchase and most importantly, pre-existing products which could adapt the new technology
they obtain to be more successful in their industry.

Leadership Recommendation and Implementation Strategy 1
Leadersip Recommendation for Amazon
Weakness: Weak expansion results in China.
Recommendation: Boost efforts to become a key player in the Chinese market.
Why expansion would be good?
In Japan, Amazon lost a very important market (the second largest online market in the world)
when Amazon was aced out by a joint venture between Yahoo and Softbank. Yahoo only entered
that market 9 months head of Amazon, and they took control of that market and never gave it up.
Thanks to that move, Yahoo now sees more than $5 billion in transactions a year in Japan.
Amazon eventually gave up that market entirely in 2002. So an expansion into the Chinese
market would be crucial for any furthers success stories for Amazon, and Amazon doesnt want
to make the same mistake they made in Japan, by losing this huge lucrative market to its
competitors. Besides, it is estimated that China will overtake America with the largest number of
Web surfers as early as 2010. So, overlooking and not taking this market seriously would be a
huge mistake for eBay.
Problems
One of the challenges Amazon face in China is thats countrys difficulty to adapt readily to the
PayPal system eBays uses. In much parts of China, for example, such electronic payment
systems remain a mystery, and many eBay deals are sealed only with face to face cash payments.
For instance, China Unionpay holds credit card monopoly in China, which makes it hard for
Paypal to expand its services in China. Other concerns facing eBay in China is that people feel
insecure with making payments online. However, in 2005 it was announced that eBay had agreed
with a partnership with China Pay, the online payment arm of the countrys official band card
information switch centre, China UnionPay. In 2005 Yahoo agreed to buy a 40% stake in eBay
main competitor in that country, Alibaba.com, for $1 billion. The expertise of the two giants can
easily cause more trouble for eBay, and unless eBay acts quickly to counter this, eBay can once
gain be out competed like it did in a similar way in Japan.
Solutions
Further strengthen the partnership with China Pay: The fact that many people in China do not
have Visa, MasterCard or other western payment systems is a huge hinder for any future success
in China. By further strengthening its partnerships with China Pay, Amazon can make payment
from its customers easier, which in the long run leads to a broader market share.
Hire a country manager: Today, Korea is eBays third largest international market. But when
Jay Lee was installed as country manager there in May 2002, he inherited a catastrophe. The
business was bleeding cash. A Korean himself, Lee understood that in Asia theres a stigma
against buying used goods. He moved the business from unrelated areas like real estate listings
and insurance to auction off newer items like digital electronics, computers and fashion.

Today, eBay Korea is on track to produce $1 billion in annual online sales. Because of his
success in Korea, eBays head management put him in charge of its expansion in China as well,
which we believe is a wrong move.
We think this is country-by country-race, and putting someone charge who had success in Korea
doesnt necessarily mean he is going to be successful in China likewise. By hiring a local
manager that has the experience and reputation would be the best move for any future success in
that region. Lee understood the Korean market, because hes Korean. EBay needs to find
someone who his similar to Lee, but has the expertise in the Chinese market instead. That way
eBay can gain on all the advantages the Chinese market has to offer.
Conduct research: eBay needs to put more effort into researching that market. It needs to
conduct more market researches and find out what the needs of those customers are. This can be
done through surveys, interviews and tests. This will give EBay valuable information on what is
lacking and what it needs to do. Once its results of that information is clear it needs to implement
those strategy in areas they are weak. Change agent programs that are working should be kept
and those which are not should be abounded.
Increase advertisement: After all the plans above have been implemented, eBay should increase
its efforts to advertise its services to its customers. Letting people know the benefits of shopping
on eBay and eliminating its customers doubts and insecurity of shopping online. Good and
beneficial services along with strong marketing are well know ingredients in any corporate
success.



References
100 Best Companies to Work For. (2008.) Retrieved March 18, 2009, from Money CNN Web
site: http://money.cnn.com/magazines/fortune/bestcompanies/2008/snapshots/87.html
2007 Annual Report. Retrieved March 18, 2009, from Yahoo.com Web site:
http://yhoo.client.shareholder.com/annuals.cfm
Amazon.com. Amazon Announces Beginning of Multi-Year Frustration-Free Packaging
Initiative. Retrived march 17 2009. http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-
newsArticle&ID=1220930
Amazon.com. Amazon Announces Beginning of Multi-Year Frustration-Free Packaging
Initiative. Retrived march 17 2009. http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-
newsArticle&ID=1220930
Amazon.com. Amazon annual report 2007. Retrieved march 20 2009. http://media.corporate-
ir.net/media_files/irol/97/97664/2007AR.pdf
Amazon.com. Amazon annual report 2007. Retrieved march 20 2009. http://media.corporate-
ir.net/media_files/irol/97/97664/2007AR.pdf
Amazon.com. Amazon is able to leverage the internet to significantly beat its competitors
prices. Retrived march 17 2009. http://www.ocf.berkeley.edu/~elram/
Amazon.com. Amazon is able to leverage the internet to significantly beat its competitors
prices. Retrived march 17 2009. http://www.ocf.berkeley.edu/~elram/
America's Green Policy Vacuum. (2008.) Retrieved February 23, 2009, from Business Week.
Website: http://www.businessweek.com/innovate/content/feb2008/id20080211_334519.htm