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mtmpa02736

  1. 1. eBay Inc. SWOT Analysis SWOT ANALYSIS eBay owns and operates eBay.com, the leading person-to-person and small-business auction community on the Internet. The company has around 62 million registered users who can buy and sell goods in more than 18,000 categories ranging from toys to antiques. As well as owning 60 smaller, location specific marketplaces in the US, eBay has also gained a foothold in Europe, Latin America, and China through a series of acquisitions and investments. Strengths Weaknesses Market leadership Advertising revenues Intellectual property Technology development Brand Litigation Double-digit growth Increased expectations Pay Pal Business model Opportunities Threats Internet usage Competition International expansion Interest and foreign currency exchange rates New markets Consumer confidence Market penetration Seasonality Strengths Market leadership eBay operates the leading online auction community on the Internet. Market leadership will benefit eBay in a number of ways. Firstly it will enable eBay to maintain a high level of brand awareness for the company and its offerings. Market leadership will also enable eBay to exert a greater influence on the marketplace. For example, the company would be in a better position to combat any new entrants into the market. Intellectual property eBay’s intellectual property such as its trademarks, copyrights, patents and domain names will help to give the company a competitive advantage over its rivals in the market place. This in turn will help eBay to generate increased sales, profits and market share. eBay Inc. FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86 © Datamonitor (Published Nov 2003) Page 19 This profile is a licensed product and is not to be photocopied
  2. 2. eBay Inc. SWOT Analysis Brand The strength of the eBay brand name is increasing. The brand is now becoming more mainstream, as it benefits from an increase in both brand awareness and brand recognition. The eBay brand name is also becoming better known internationally as the company expands its international presence to cover more markets. The increased equity of the eBay brand name will help the company to generate increased sales and profits. Double-digit growth A double-digit growth in sales has been seen in a number of the company’s eight core product categories. In the past year, eBay Motors saw its revenues increase by 88% year-on year, while eBay Media and eBay Collectibles posted a 52% and a 23% year- on-year increase in revenues respectively. Pay Pal The acquisition of Pay Pal has helped the company to enhance the experience of customers using eBay. This has had a knock on effect and helped to boost the satisfaction of customers using eBay. Pay Pal saw its revenues rise by around 90% year-on-year, while it also experienced an 80% increase in payment volumes. Business model Perhaps one of eBay’s biggest strengths is its business model. The company’s business model means that eBay has no inventory and low capital requirements. eBay’s business model also helps the company to increase gross margin while keeping customer acquisition costs fairly low. Weaknesses Advertising revenues eBay’s advertising revenues have remained flat and currently represents around 2% of the company’s total revenues. Although advertising revenue only represents a small proportion of revenues, it is an area where eBay should be looking to exploit in order to generate greater revenues for the company as a whole. Advertising revenues could become more important for the company, if as forecasted, the market for online advertising increases over the coming years. Technology development eBay Inc. FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86 © Datamonitor (Published Nov 2003) Page 20 This profile is a licensed product and is not to be photocopied
  3. 3. eBay Inc. SWOT Analysis eBay still needs to improve a number of areas of its website in order to generate increased sales in the future. The company needs to examine its user interface in order to improve its payments and search operations further. If eBay were to do this, it would benefit from enhanced customer satisfaction, as the users experience of the service would increase. Litigation eBay is facing possible legal action after a privately held company called MercExchange filed a lawsuit against the company. It is alleged that eBay infringed MercExchange’s patents covering online auction technology, shopping search engines and systems used in the creation of online electronic marketplaces. If eBay was found guilty of any patent infringement, it could seriously affect its earnings, as the company could be asked to pay compensation to MercExchange. Increased expectations The company’s recent record financial results may increase the expectations of investors to unrealistic levels. It is unlikely that eBay will continue to generate such results in the long term and increased investor confidence may mean that the company is forced to attain aggressive financial targets that it may not be able to meet in the future. Opportunities Internet usage Internet usage is expected to grow over the forthcoming years. The increase in Internet usage will present eBay with an opportunity to boost the number of users it has, as well as its revenues and profits. It is predicted that future Internet usage will be boosted by factors such as the adoption of broadband technology. International expansion eBay has already had some success in its international expansion efforts. Revenues derived from international activities currently account for around 30% of the company’s overall revenues. The company could look to further its international expansion efforts in order to capture a leading share in markets that at present are untapped but have a high potential to generate revenues in the future. New markets eBay could seek to diversify into new markets in which it does not operate at present. The company could look to diversify into markets where it can leverage the eBay Inc. FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86 © Datamonitor (Published Nov 2003) Page 21 This profile is a licensed product and is not to be photocopied
  4. 4. eBay Inc. SWOT Analysis technological know-how and brand name it possesses to its benefit. Diversification into other markets will give the company the opportunity to generate increased revenues and profits. Market penetration eBay could also choose to penetrate the market to a greater depth in order to generate revenues and profits in the future. Although eBay has around 62 million registered users at present, there are many millions more Internet users in the world that could potentially become eBay users. This represents a very large untapped market for the company. eBay should look to pursue a business strategy that will allow it to capture as much of these potential eBay users as possible. Threats Competition eBay encounters competition from a number of organizations in the marketplace. The company’s competitors include organizations such as Amazon.com, Yahoo!, Google, MSN, AOL Time Warner and uBid. All of these companies will combine to take away sales and market share from eBay. Interest and foreign currency exchange rates Fluctuating interest and foreign currency exchange rates will have a significant impact on eBay’s earnings. Consumer confidence Maintaining consumer confidence in the Internet is vital if eBay is going to continue its rapid expansion. Negative publicity regarding a possible lack of security with regards to Internet shopping or fraudulent selling on the Internet will affect the company’s sales and profits. Increasing consumer confidence should result in an increase in usage of the Internet and sites such as eBay for eCommerce style activities. Seasonality eBay’s revenues are influenced by seasonal factors. For example, fewer people use the company’s website during public holiday’s such as Christmas and Thanksgiving in the US. Fewer people also use eBay during the summer months. The company generally performs better in the first and fourth quarters of the fiscal year. This will increase eBay’s reliance on generating revenue in these particular periods, as poor performance in Q1 and Q4 will have a damaging effect on the company’s revenues for the full year. eBay Inc. FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86 © Datamonitor (Published Nov 2003) Page 22 This profile is a licensed product and is not to be photocopied

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