Comparison of EBay and Alibaba.com
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    Comparison of EBay and Alibaba.com Comparison of EBay and Alibaba.com Document Transcript

    • Comparison of eBay.com and Alibaba.com 12/16/2009 Professor Reddi: BUS451 By: Thomas Liquori, Danauda Benjamin, and Anca Barbu
    • Comparison of eBay.com and Alibaba.com TABLE OF CONTENTSEBay.com Introduction ................................................................................................................................. 3EBay.com Products and Services .................................................................................................................. 5Ebay.com Financial analysis .......................................................................................................................... 6Ebay.com Last Three Year Financial Graphs ................................................................................................. 7EBay.com TOWS Matrix Analysis .................................................................................................................. 9EBAY.com TOWS Matrix Graph ................................................................................................................... 13Competitive Forces for ebay.com ............................................................................................................... 14EBay.com Industry Rivalry........................................................................................................................... 14EBay.com Threat of Entrants ...................................................................................................................... 14EBay.com Supplier Power ........................................................................................................................... 15EBay.com Buyer Power ............................................................................................................................... 15EBay.com Threat of Substitute Products or Services .................................................................................. 16Ebay.com Core Strategies .................. ……………………………………………………………………………………………………17EBay.com Differentiation Strategy ............................................................................................................. 17EBay.com Cost Leadership Strategy............................................................................................................ 18EBay.com Growth Strategy ......................................................................................................................... 18EBay Growth Trend Graphs......................................................................................................................... 19EBay.com Differentiation Strategy ............................................................................................................. 20EBay.com Growth Strategy ......................................................................................................................... 20Alibaba.com Introduction ....... ………………………………………………………………………………………………………………25History of Alibaba.com................................................................................................................................ 27Alibaba.com Products, Services, and Key Brands ....................................................................................... 29Alibaba.com Last Three Year Financial Graphs ........................................................................................... 30Alibaba.com Core strategies ....................................................................................................................... 31Alibaba.com Growth Strategy ..................................................................................................................... 32Alibaba.com Differentiation Strategy ……………………………………………………………………………………………………34Alibaba.com Price strategy ......................................................................................................................... 35Competitive Forces for Alibaba.com........................................................................................................... 37BUS451 Page 2
    • Comparison of eBay.com and Alibaba.comAlibaba.com Threats of New Entrants ........................................................................................................ 37Alibaba.com Rivalry..................................................................................................................................... 38Alibaba.com Supplier power ....................................................................................................................... 39Alibaba.com Buyer Power ........................................................................................................................... 40Alibaba.com Threat of substitutes .............................................................................................................. 40Alibaba.com TOWS Matrix .......................................................................................................................... 41Alibaba.com Strengths ................................................................................................................................ 42Alibaba.com Weaknesses ........................................................................................................................... 42Alibaba.com Opportunities ......................................................................................................................... 43Alibaba.com Threats ................................................................................................................................... 43Alibaba.com SO Strategy............................................................................................................................. 43Alibaba.com WO Strategy ........................................................................................................................... 44Alibaba.com ST Strategy ............................................................................................................................. 44Alibaba.com WT Strategy............................................................................................................................ 44Comparitive Analysis ................................................................................................................................... 45Group Investment Perspective ................................................................................................................... 46Group Challenges ........................................................................................................................................ 47Works Cited................................................................................................................................................. 48Works Cited: Continued .............................................................................................................................. 49Ebay.com Last Three Years Income Statements ......................................................................... Appendix: AEbay.com Last Three Years Balance Sheets .................................................................................Appendix: BAlibaba.com Last Three Year Income Statements .......................................................................Appendix: CAlibaba.com Last Three Year Balance sheets.............................................................................. Appendix: DBUS451 Page 3
    • Comparison of eBay.com and Alibaba.com EBAY.COM INTRODUCTION Once upon a time during the dawn of the internet, a man named Pierre Omidyar decidedto sell a broken laser pointer online on his website called EBay, named after his consultingcompany Echo Bay. The site at that time during the year 1995 was not primarily an auction site,the auction part was an afterthought and was named auction web. Auction web grew quicklyamong internet fanatics, and soon Pierre had to hire several employees to take care of the manytasks that involved his day to day operation. After two years, the site name was changed to EBay,a site that was devoted to online auctions, soon after, the worldwide obsession with EBay andconsumers. Currently, Pierre is ranked #40 among the 400 richest Americans in the country byForbes, released September 30, 2009. EBay’s mission statement says,” eBays mission is to provide a global trading platformwhere practically anyone can trade anything." EBay’s vision, “pioneers communities built oncommerce, sustained by trust, and inspired by opportunity. EBay brings together millions ofpeople every day on a local, national and international basis through an array of websites thatfocus on commerce, payments and communications”. Comparing the mission statement to thevision of the company gives off the impression that EBay doesn’t have focused priorities .Thismeans the mission statement seems clearly focus on the website, eBay.com, but their visionstatement is focused on the array of subsidiary websites. During the year of 1998, Pierre hired an experienced CEO named Meg Whitman tobecome head of the public exploding company who now had 130 employees and a spot on theNew York Stock Exchange with a symbol as EBAY. Over the course of the next 10 years withMeg Whitman’s leadership, EBay mania grew into an enormous multinational company who twoBUS451 Page 4
    • Comparison of eBay.com and Alibaba.comyears ago employed over 15,000 employees in 39 countries. In January 2008, John Donahoe tookover Meg Whitman’s place as CEO, and currently EBay has 16,200 employees (an 8% employeeincrease in one year) in over 30 countries. EBay is an online provider of marketplaces for thesale of goods and services. It also provides commerce, platforms, online payments services andonline communications offerings to individuals and businesses. EBay’s foreign entry strategiesinto other countries have played a key role in their success for worldwide domination in theonline auction market. The products and services that EBay offers vary from onlinecommunication services to the sales of goods and services.BUS451 Page 5
    • Comparison of eBay.com and Alibaba.com EBAY.COM PRODUCTS AND SERVICES The products and services that EBay provides is an online marketplace for the sale ofgoods and services. The company’s key products and services include the following: • Online services for the sale of goods and services • Online communication services • Online payment and transactional credit services • Online classifieds • Advertising The key brands that the company has and operates are a number of subsidiary websites that are under the EBay umbrella. These companies include: • EBays fixed price media marketplace Half.com • EBay’s payment solution Paypal.com: Bought by EBay in Oct. 2002 for approximately $1,492,504 • EBay’s low cost connectivity communication platform Skype.com: Bought by EBay in October 2005 for $3B • EBay’s credit at point of sale payment solution Billmelater.com: Bought by EBay in October 2008 for $910M • EBays marketplace to buy and sell tickets for events Stubhub.com: Bought by EBay in February 2007 for $292M • EBays online shopping comparison website Shopping.com: Bought by EBay in August 2005 for $634M • EBays apartment listing service platform Rent.com: Bought by EBay in February 2005 for $415M • EBay’s Swedish online auctioneer Tradera.com: Bought by EBay in 2006 for $48M • EBay’s green marketplace Worldofgood.comBUS451 Page 6
    • Comparison of eBay.com and Alibaba.com EBAY.COM FINANCIAL ANALYSIS The company generates about 75% of its revenues from the US, Germany and the UK.The company recorded revenues of $8,541.3 million during the financial year ended December2008, an increase of 11.3% over 2007. The operating profit of the company was $2075.7 millionin financial year ending 2008, an increase from $613.18 million in 2007. Net Profit in financialyear ending was $1,779.5 million as compared to $348.3 million in 2007. The increase in profitsis attributed to acquisitions and increased revenues from advertising and the payments business.The current stock price as of November 5, 2009 is $23.13, can be seen in the chart on the nextpage in the below bottom right table. The increases in EBay’s financials for the past three years have been impressive.According to Annualreports.com 2008 annual report for EBay, the company has seentremendous increases and growth for the online giant. Some examples of the increases over thepast year for EBay and some of its platforms include its payment option paypal.com. In 2007delivered a total of $1.9 billion in revenue, as of EBay’s 2008 annual report, paypal.com nothosts nineteen currencies with more than $60 billion dollars in revenue. A tremendous increasein EBay’s payment platform suggests that more people are becoming comfortable sending andreceiving money over the internet, as well as the number of internet users are growing as well. InEBay’s communication segment platform of skype.com, in 2007 skype.com hosted more than276 million users, as of EBay’s 2008 annual report, skype.com now registers more than 405million users. The increase of more than 47% shows that consumers are very comfortable withEBay and the platforms that the company provides. As of EBay’s 2008 annual report, there aremore than $100 billion worth of pre-owned items on EBay, making it the world’s largest enginefor reuse.BUS451 Page 7
    • Comparison of eBay.com and Alibaba.com EBAY.COM LAST THREE YEAR FINANCIAL GRAPHS 2008 Year Income 2007 Year Income$9,000.00 $8,541.30 $8,000.00 $7,672.30$8,000.00 Revenue $7,000.00 $5,909.40$7,000.00 $6,313.20 (Millions U.S. $6,000.00 Revenue$6,000.00 Dollars) $5,000.00 (Millions$5,000.00 $4,000.00 U.S. Dollars)$4,000.00 Gross Profit $3,000.00$3,000.00 $1,779.50 (Millions of $2,000.00 $348.30 Gross Profit$2,000.00 $1,000.00 (Millions of$1,000.00 U.S. Dollars) $- $- U.S. Dollars) Net Income Fiscal (Millions U.S. Net Income Fiscal Year Year Dollars) (Millions Ending Ending U.S. Dollars) 2008 2007 2006 Year Income Stock price as of 12/15/09: $22.50 $6,000.00 $5,969.70 Revenue $5,000.00 $4,713.00 (Millions $4,000.00 U.S. Dollars) $3,000.00 $2,000.00 $1,125.60 Gross Profit $1,000.00 (Millions of $- U.S. Dollars) Fiscal Net Income Year (Millions Ending U.S. Dollars) 2006 BUS451 Page 8
    • Comparison of eBay.com and Alibaba.comEBay.com TOWS MATRIX ANALYSIS EBay faces high risk of internet fraud due to which it is involved in various litigations.Below we will go over EBay’s strengths, weaknesses, opportunities, threats, and strategies to geta better understanding of the strategic choices that EBay faces. The strengths that the company has can be argued that they were the first to enter theonline auction business, as well as having a majority of the marketplace. The external strengthopportunities of EBay can be consisted of a strong market position due to wide usage. Thisstrength can maximize EBay’s opportunities, over the years, the company has built a strongbrand, currently the brand value stood at $12.9 billion and was ranked 54th in brand valuerankings. EBay’s internal strengths have focused on a swift increase in the number of users andnumber of product listings. As of 2009, EBay has 88 million active users and about 150 millionlistings worldwide and in any given day, has about 14 million listings. An increased number ofcustomers contributed to the growth of the company, and it emerged as one of the largest globalonline auction website with presence in 39 countries. EBay’s strong customer base and marketposition provides competitive advantage and gives EBay considerable bargaining power whichwill have a positive impact on the top line of the company. EBay’s strength threats strategies canbe consisted of reinforcement of marketing, management, and systems as a concentrated effort. EBay’s weaknesses can be favorably argued that the company has an insufficientscreening process to control counterfeit products. EBay does not have an effective screeningprocess in place to control sale of counterfeit products on its market places. While some sellerscommit fraud intentionally, some of them are unaware of any infringement. For instance, somesellers might not be aware that certain products are not allowed for resale. The company does notBUS451 Page 9
    • Comparison of eBay.com and Alibaba.comhave effective tools to monitor and weed out such instances. In most cases, the company is ableto identify counterfeit products only after the items have been listed. The weakness threat strategies can be categorized as having an exposure to largecontingent liabilities due to litigations. EBay has consistently been involved in various lengthylitigations, stretched over a period of two to three years because of which it is exposed to largecontingent liabilities. Many complaints were filed against EBay for offering counterfeit items.This being the main area of contention, there were lawsuits filed by companies like Net2Phone,Netcraft Corporation, and PartsRiver which claim that EBay, Skype and PayPal have infringedtheir patent rights. In 2007, a lawsuit was filed alleging that EBay and PayPal, through variousanti competitive acts, were monopolizing markets. Most of these lawsuits filed in 2006 and 2007are still pending. Lengthy litigations are expensive, and they expose the company to uncertaintyand large contingent liabilities. The damages awarded were as large as $56.8 million in a lawsuitwhich claimed that EBay failed to curb sale of counterfeit products. Other than having to paydamages, EBay might be prohibited from selling certain items or continuing certain businesspractices. This affects the operations adversely. Litigations are expensive, time consuming andthey result in diversion of significant operational resources. EBay has to actively take measuresto ensure it is not involved in any further litigation as they are counterproductive. The company’s weakness opportunities strategies can consist of diversifying into newproduct markets, as they have been over the years. The company can also try to implement anonline verification of goods being auctioned to avoid very expensive lawsuits and timeconsuming litigations that hurt the company. The weakness threats of the company can consist ofthe alliance with postal carriers implemented on the company’s website for sellers to choosefrom when shipping their items.BUS451 Page 10
    • Comparison of eBay.com and Alibaba.com Some opportunities that EBay faces are rapid growth of internet display advertising andclassifieds. Online advertising, both display ads and through classifieds, has been growing at afast pace. Revenues from interactive advertising which comprises search, display advertising andclassifieds is expected to grow as at rate of 23.4% during 2007- 2012 and generate $147 billionby 2012. Increasing popularity of used goods is another opportunity for the company. In thecurrent uncertain economic situation where consumer spending has been decreasing, pre-owneditems have been increasingly popular. Since 1998, EBay marketplace has facilitated the reuse ofan estimated $100 billion in goods. Industry trends indicate the US consumers are buying usedgoods as a way to save money. In 2008, according to EBay sources, 75% of adults purchasedused goods to save money. More than a quarter of adults who had purchased used goods in thepast six months (since August 2008) saved 76% or more off the retail price of the last item theypurchased. Apart from this, 88% of Americans believe that buying pre-owned goods amounts torecycling and is therefore environment friendly. The threats that EBay faces are exposure to internet fraud that will increase costs andaffect customer confidence adversely. Online marketplaces have a high exposure to differenttypes of fraud. There are various types of internet frauds including the sale of fake or counterfeitproducts, credit card fraud or non delivery of goods, etc. According to the Internet CrimeComplaint Center’s (IC3) statistics, internet fraud has been on a rise. During 2008, IC3registered 275,284 complaints which indicate an increase in complaints by 33.1% from 2007.The total dollar loss due to these frauds has been $264.6 million which works out to be anaverage loss of $934 per complaint. Effectively eliminating frauds is costly as the company as toincur large recurring expenses to monitor and prevent such frauds. In case of litigations, EBaywould have to incur legal expenses, and there is a possibility that heavy penalty or compensationBUS451 Page 11
    • Comparison of eBay.com and Alibaba.comwould have to be paid. Another example of a threat for EBay would be the unavailability ofservices that leads to loss of income. System failures for long duration operational risk for EBayin 2008 had periods of interruptions for periods for as long as 22 hours, and PayPal wasunavailable for five continuous days. In early 2007 Skype was unavailable for two continuousdays. Repeated failures might lead customers to believe that the systems are unreliable andreliability is especially crucial for the payments division which is seeking to expand its merchantservices business. Due to frequent unscheduled interruptions for long periods, the company’sreputation and reliability will be affected negatively. EBay’s competitive analysis in the marketplace gives the company a higher advantageover their competitors such as ioffer.com, sell.com, and alibaba.com. Although the company hassimilar commonalities with their rivals, eBay has several different platforms and segmentationsunder the company’s umbrella to help keep them afloat. This is the difference between eBay andtheir competitors. Since they were the first to the market for online auctions, this gives thecompany an advantage of trust and well being to consumers who may be new to the internet aswell as online auctions. Consumers and competitors alike recognize eBay as a dominant force onthe internet, and they are aware of its capability of providing far better than competition.BUS451 Page 12
    • Comparison of eBay.com and Alibaba.com EBAY.COM TOWS MATRIX GRAPH Strengths – S Weaknesses – W Own majority of Poor screening marketplace by process to control being first counterfeit goods Opportunities – O SO Strategies WO StrategiesDiversification with Global expansion in Online product the growth of products and verification to consumers services control fraud Threats – T ST – Strategies WT – StrategiesCompetition among Reinforcement of Alliance to postal rival internet sites marketing and services management BUS451 Page 13
    • Comparison of eBay.com and Alibaba.com COMPETITIVE FORCES FOR EBAY.COM Porter’s Five Force model of competition is a key tool for diagnosing the competitiveenvironment:EBay.com Industry Rivalry Industry rivalry is high when it is easy for new competition to enter the market. In thecase of eBay, it is not so simple for new entrants to compete with the online giant. Being thateBay was first to the market in 1995, it gave the company an edge early during the dawn of theinternet. Since then, the company has become a notable household brand name and customers areconfident using eBay’s online software for buying and selling items. The threat of competitionand rivalry is still there for eBay, which will be talked about in the next force of Porter’s model.EBay.com Threat of Entrants Recently, many new entrants have been trying to catch up to eBay. For example,Amazon.com has come long way as well since it opened up on the web a few years back, andearned customer loyalty very quickly among consumers. Some people might feel morecomfortable shopping on this site more than eBay, because it is more commercialized in someways. Another example of a threat of entry would be another auction site ioffer.com. Ioffer.comclaims that they are an easier way o buy and sell items, and have been in competition with eBayever since they popped up online in the yearly millennium. Instead of auction style listings,buyers and sellers can make offers’ to one another rather than waiting for an auction to end topurchase an item. EBay saw this type of strategy and quickly implemented it in the site tocompete with ioffer.com by using eBay’s ‘buy it now or make an offer’ option.BUS451 Page 14
    • Comparison of eBay.com and Alibaba.comEBay.com Supplier Power Supplier power is higher when buyers have fewer choices from whom to buy. Theinternet has increased the amount of supplier power to consumers. Buyers have an option now tobecome a supplier themselves by becoming a drop shipper for suppliers. The drop shipper doesnot have to store any items in a warehouse or factory with this option, thanks to the power of E-Commerce. Drop shippers can earn money by listing items for suppliers and forwarding theorders to the main supplier. The logistics part is also at the main suppliers’ expense, really nothaving to do too much work on the drop shippers’ part except collect their share from the sale.This type of supplier power gives an increase in products and services to the marketplace, and inturn continues the growth of eBay’s online website. Especially for eBay, there are numerousdrop shippers that have set up their own stores on eBay’s site. EBay gives sellers an option to setup an online store for a monthly fee where shoppers can browse through products as they please.EBay.com Buyer Power Buyer power is higher when buyers have more choices. Businesses are forced to addvalue to their products and services to get loyalty. Many loyalty programs include excellentservices that customers demand on-line. Customers want to solve their problems and many timesthey are more successful on-line than on-phone. Also, we see internet savvy businesses springingup offering more valuable goods and services at lower costs. Now with the advent of eBay, manypeople are assuming roles as drop shippers. Individuals can have a thriving business sellinggoods of larger companies without having to carry inventory, as mentioned earlier in supplierpower. Another positive aspect for buyer power would be bargain shoppers surfing the web,especially eBay. EBay offers all prices for all items, especially for bargain and impulse shoppers.Both shoppers alike can find great deals at affordable prices from the comfort of their own home.BUS451 Page 15
    • Comparison of eBay.com and Alibaba.comEBay.com Threat of Substitute Products or Services The strong competitive pressures coming from the attempts of companies outside of theindustry to win buyers over have become more widespread in today’s E-Commerce market.There have been an increasing number of fixed price sales over auction style listings over onlineauction sites such as eBay. Search engine and price comparison websites are moving in thedirection of online retailing and auctions. Yahoo shopping and price comparison search enginessuch as Microsoft’s Bing.com have recently been becoming a more popular way to pricecomparison shop online. The internet offers avenues of competition to existing companies andopportunities for start ups. Now businesses can enter the market on-line with few barriers toentry. Porters Five Forces Model can help demonstrate the attractiveness of starting your on-linebusiness or evaluating a current one such as eBay. The model below will help to better illustrateeBay’s five forces: Threats Competition with rival sites Supply Power Rivalry Buyer Power Drop Bargain shipping for Ioffer.com shopper suppliers paradise Amazon.com Substitute Price comparisonBUS451 Page 16 sites
    • Comparison of eBay.com and Alibaba.com EBAY.COM CORE STRATEGIES EBay’s strategic statement describes EBay’s activities, “by allowing customers to createindividual auctions and online stores in order to sell new and used products. This process isfacilitated by the ability to create communities of interest, providing secure transaction services,and a peer review process in a global environment”. So what does this strategic statementactually mean to the consumers of eBay? The opportunity to have individual auctions and onlinestores removes the physical barriers between buyers and sellers. The communities of interestcreates added value through base of additional information. The ability to have peer reviewevokes customer confidence in buying from a seller that you never met or will see. The globalenvironment is open to all and new markets alike. The strategy describes the core competenciesof eBay through the several factors that are addressed. A competitive advantage will be created ifeBay keeps it first mover advantage, and always stays one step ahead of their competition.EBay.com Differentiation Strategy EBay pursues a cost leadership, differentiation, and growth strategy. A differentiationstrategy that the company possesses is the quality service security that the online website offers,which is very impressive. EBay monitors many if not all of the listings posted on the site throughthe service of thousands of employees. Another impressive tool that EBay has was the first toimplement as part of their differentiation strategy was the ability of quality control by offeringpeer review. Buyers and sellers both have the opportunity to “rate” how the transaction went.Whether the item was received as described and the shipment was fast, causing a positive rating,or the item was not as described or not received at all, and all buyers should beware resulting in anegative rating, or whether the transaction was just ok, resulting in a neutral rating.BUS451 Page 17
    • Comparison of eBay.com and Alibaba.comEBay.com Cost Leadership Strategy A cost leadership strategy that eBay has is the ability to form alliances with numerouscompanies. An example of this strategy could be the alliance by eBay and Tom.com. In 2006,Tom.com and EBay Eachnet (eBay’s China Auction Site) decided to announce a joint ventureagreement in China. The two companies would need to build a new China marketplace in 2007to compete with China’s top auction site rival Taobao.com. EBay would have a 49% stake in thecompany and tom.com will have a 51% stake in the joint venture. In addition, EBay willcontribute its Eachnet subsidiary, while Tom Online will contribute local management expertise,technology, and brand.EBay.com Growth Strategy Another strategy that an eBay implement is a growth strategy that involves the fight tokeep up with rival competitors while still trying to grow and expand into an ever so competitivemarket. Amazon is significantly, methodically, and relentlessly eating away at eBays marketshare. Amazon is the largest beneficiary of eBays decline, but certainly Amazon is not the onlycompany causing extensive damage to eBay’s growth process. Online retailers from Zappos toNewegg to Wal-Mart among others are all doing their part in taking share from eBay. In fact,many of eBays changes are actually self-inflicting further declines. The three bright spots for eBays quarter were: • Items sold were up 3% y/y • Active users increased 4% y/y (a small acceleration, well big percentage-wise, but small in absolute terms) from the Q3 3% y/y gain. • Fixed price items are now 49% of GMVBUS451 Page 18
    • Comparison of eBay.com and Alibaba.comEBay Growth Trend GraphsHere are some graphs from Jeetil Patel that show the trends in the item sold and active usermetrics:BUS451 Page 19
    • Comparison of eBay.com and Alibaba.com The transaction growth chart shows that while eBay held onto a y/y growth on thismetric, the trend is definitely decelerating. It will be interesting to see if this goes negative in Q1or if eBay can hold the line here.EBay.com Differentiation Strategy Some of eBay’s features to their cost leadership and differentiation strategy consist ofoffering all types of items, including innovative products. The ability of M-Commerce is a bigplus for the online giant. By having the ability of a mobile application, users can use eBay on thego through their phones, PDA’s, and laptops. Being user friendly and simple is the way eBaywill stay on top of the competition. Also, having the ability of online verification against fraudand counterfeit products makes eBay a number one source for buyers and sellers to stay loyal tothe company by having the confidence in the company as they keep up with the industrystandards.EBay.com Growth Strategy EBay’s growth strategy has a very extensive and impressive portfolio, as it has gainedacquisitions and joint ventures over the years with global companies. In 2001, eBay joined forceswith MercadoLibre (free market in Spanish) the leading online trading site in Latin America.MercadoLibre will acquire iBazar Com Ltda., the Brazilian subsidiary of iBazar SA, which wasrecently acquired by eBay in return eBay will receive a 19.5% ownership interest inMercadoLibre and will share best practices with the company. The relationship enhancesMercadoLibre’s leadership position in Brazil and the rest of Latin America, and expands eBay’sreach throughout the region. In March of 2006, eBay invested in Meetup.com. Meetup.com is alocal community organizing network. Over 5 million people have created and joined long-lastingBUS451 Page 20
    • Comparison of eBay.com and Alibaba.comlocal Meetup Groups around shared interests and purposes. These groups and clubs have heldover 1 million local meetups. In April of 2006 eBay acquired Tradera.com for $48.3 MillionUSD. Tradera.com is an auction site based in Sweden. In June of 2006 eBay Inc. and PCHome Online announced that they have agreed to forma joint venture in Taiwan. Under the agreement, the companies will leverage eBays globalexperience and PCHome Onlines local ecommerce expertise to launch a new co-branded websitethat will bring new online trading opportunities to buyers and sellers in Taiwan under the nameof Ruten.com.tw. Focused on the needs of Taiwan consumers, the website specializes in onlineauction-style trading and also offers the ability to buy and sell at a fixed price. In January of 2007 eBay acquired Stubhub.com for $310 Million USD. Stubhub.com isan online marketplace for concert, sport, and Broadway event tickets. In April of 2007 eBayacquired Microplace.com. MicroPlace is a social business owned by eBay. It focuses onmicrofinance loans sent via the internet, utilizing PayPal, allowing users to choose specificlending clients and businesses and loan them money over a designated period of time. Unlikecompetitor Kiva, investments are returned to the lendee with interest. Microplace’s statedmission is to alleviate global poverty by offering investments that enable loans to hardworkingpoor people. May 2007 was a busy month for eBay; they acquired three companies and invested inanother. The first company which was Stumbleupon.com that eBay acquired for $75 MillionUSD on May 1st. StumbleUpon is a website and content discovery service enabled by a browsertoolbar. StumbleUpon uses positive and negative user ratings to form collaborative opinions onwebsite quality. When users stumble, they will only see pages which friends and like-mindedstumblers’ have recommended. More often than not, it’s something almost serendipitouslyBUS451 Page 21
    • Comparison of eBay.com and Alibaba.cominteresting to the reader. The StumbleUpon site says they have nearly 7.5 million users as ofApril, 2009, up from 1.7 million in December 2006. Over 15 million personalizedrecommendations (“stumbles”) are delivered daily. The same day on May 1st eBay invested inChanneladvisor.com. ChannelAdvisor Corporation provides technology and services that enableonline retailers to maximize their profits across multiple e-commerce marketplaces such as eBay,Amazon.com and Overstock.com, comparison shopping engines such as Shopping.com,Shopzilla, Nextag and Google Product Search and search engines such as Google, Yahoo andMSN. In 2007, ChannelAdvisor managed over $2.1 billion in gross merchandise value (GMV)on behalf of its customers. Two days later, on May 3rd, eBay acquired Gittigidiyor.com, which in Turkish meansgoing, going, gone. Gittigidiyor is a Turkish online marketplace similar to eBay that offersauctions, stores and fixed price listings. Gittigidiyor is Turkey’s leading online marketplacecompany. It was founded in 2000 by local entrepreneurs in Turkey and is headquartered inIstanbul. Auctions began at 5 February 2001. Gittigidiyor has over 1.5 million registered usersand more than 500,000 daily visitors. Since 2001, 3.5 million sales have been successfullycompleted. Finally, for the month of May, eBay acquired Gumtree.com on May 19th.Gumtree.com was started in March 2000 as a local London classified ads and community site,designed to connect people who were either planning to move, or had just arrived in the city, andneeded help getting started with accommodation, employment and meeting new people.Gumtree.com now covers 60 cities across 6 countries - the UK, Ireland, Poland, Australia, NewZealand and South Africa - and are the UK’s biggest website for local community classifiedsincluding flat share, flat rentals and jobs. More than 25,000 new rooms are advertised a month,which means at least 10,000 rooms are rented a month through Gumtree.BUS451 Page 22
    • Comparison of eBay.com and Alibaba.com On October 4th 2007, eBay acquired Via Online. Via-Online GmbH is an auctionmanagement software company. The company operates web-portal, Afterbuy.com, which helpsusers manage various aspects of the selling process, with features like inventory managementand item listing. The company is based in Krefeld, Germany. On January 1st 2008, eBay acquiredFraud Sciences for $169 Million USD. Israel and Palo Alto based Fraud Sciences offersautomated anti-fraud systems including SpotLight VFX and SpotLight T2T, merchant solutionsthey provide are transaction verification with fraud prevention. Fraud Sciences has beenintegrated into eBay’s PayPal product to help fight against fraud prevention. On May 2nd 2008,eBay acquired Vuvox. Vuvox makes technology for presenting rich media in slideshows. On September 25th 2008, eBay acquired Gmarket.com. Gmarket.com is a financialinformation company specializing in the delivery of global fixed income and capital marketsdata. The flagship product PILOT is a real-time desktop workstation for financial professionalsdelivered via the Internet. Pilot’s customizable desktop aggregates the world’s leading sources ofcapital markets content onto one singular platform for ease of access. It also includes a real-timedirect interface to MS-Excel. They pride themselves on delivering quality content in one easy touse, flexible, and affordable package.] In October 2008, eBay acquired Den Bla Avis for $380 Million USD. Den Bla Avis andBilBasen are leading classifieds businesses in Denmark and operate dba.dk, an online classifiedssite that generates more than 120 million page views per month, and bilbasen.dk, an onlinevehicle classifieds site that generates 66 million page views per month. Founded as printedclassified advertising circulars, Den Bla Avis and BilBasen have successfully made the transitionto fast-growing, profitable online businesses while maintaining the publication of its circulars.Den Bla Avis and BilBasen have offices in Aarhus and Copenhagen, Denmark.BUS451 Page 23
    • Comparison of eBay.com and Alibaba.com During the same month and year of 2008, eBay acquired Billmelater.com for $945Million USD. Bill Me Later, Inc. provides payment and marketing technology solutions tomultichannel retailers. It offers PayCapture, a set of credit tools; and Bill Me Later that enablescustomers to pay for purchases without providing credit card information. The company supportsand delivers a suite of web-engineered payment solutions; and offers consulting services in theareas of payments, risk management, marketing, and technology. Bill Me Later, Inc. wasformerly known as I4 Commerce, Inc. and changed its name to Bill Me Later, Inc. in August,2007. The company was founded in 2000 and is based in Timonium, Maryland. As of November7, 2008, Bill Me Later, Inc. operates as a subsidiary of eBay Inc. EBay has certainly taken their growth strategy process to new levels, buying everycompany that will give eBay a threat in the future. It is a very good strategic move on the internetgiant to invest and acquire numerous companies around the globe. This strategy will onlystrengthen eBay as a company and brand name for years to come. EBay is in a league of theirown and at that moment it seems like no competition can stop them or even compare to themarket share that eBay possess.BUS451 Page 24
    • Comparison of eBay.com and Alibaba.com ALIBABA.COM INTRODUCTION Alibaba is a B2B e-commerce company founded in 1999 by Ma Yun. Alibaba is also theflagship company of the Alibaba Group. With more than 40 million users and 5 million virtualstorefronts, Alibaba has been able to climb to the top as one of the most useful online e-commerce businesses. Alibaba’s primary business is to serve as a directory of Chinesemanufacturers connecting them to other companies around the world looking for suppliers. Itconnects companies with suppliers and manufacturers throughout the world. By creating theconnection for business, Alibaba specializes in trade between buyers and sellers. Its primarybusiness is to serve the Chinese market with a directory of the Chinese manufacturers. Alibabaalso offers business management software solutions to small businesses across China using the"Alisoft" brand. Alibaba was founded in Hangzhou, China. Alibaba.com has offices in morethan 50 cities across Greater China, Japan, Korea, Europe and the United States. The mission/vision statement of the company can be defined as; Alibaba Group (Alibabafor short) is a global e-commerce leader basing in China. Alibaba has 7 subsidiary companies,which are involved in the business of B2B, C2C, online payments, software service, searchengine, online advertising, local living, and consumption community, etc. Alibaba is committedto building the worlds leading e-commerce infrastructure and high quality online livingplatform. CSR should be born from business model. Only by this, corporation’s can realizesustainable development. CSR isn’t a burden. Every corporation can find a point to combineitself with CSR. Everyone should assume social responsibility and can assume socialresponsibility in the convenient network environment.BUS451 Page 25
    • Comparison of eBay.com and Alibaba.com While holding the Chinese market as its first customer base, Alibaba also worksinternationally throughout the world. Alibaba operates in two different marketplaces; the first isan international marketplace in English personalized to global importers and exporters in China;the second is a Chinese marketplace that focuses on suppliers and buyers trading domestically inChina. It also reaches buyers and sellers in more than 240 countries around the world. SinceSeptember 2009, Alibaba.com had gained 45.276 million registered users, which add up to be anincrease of 27% since the previous year. Of these users, 10.48 million were from theinternational trade market and 35.8 million were from the Chinese trade market. AlthoughAlibaba started out as an independent company, Yahoo currently holds a 40% share holder in theparent Alibaba Group. Alibaba plans to raise $1.5 billion in the next year, making it the second-biggest Internet IPO ever, after Google’s $1.9 billion offering in 2004. The IPO will valueAlibaba.com at up to $7.8 billion. The company recorded revenues of CNY 3,001.2 million(approximately $432.6 million) in the fiscal year ended December 2008, an increase of 38.8%over 2007. The companys operating profit was CNY 1,192.4 million (approximately $171.9million) in fiscal 2008, an increase of 48.2% over 2007. Its net profit was CNY 1,205.2 million(approximately $173.7 million) in fiscal 2008, an increase of 24.5% over 2007. By the end of 2008, Alibaba launched business to business sites in six foreign languageversions, in order to make trading easier for foreigners. The International sites for Alibabaconsist of: Spanish.alibaba.com, german.alibaba.com, Italian.alibaba.com, Russian.alibaba.com,Portugese.alibaba.com, and german.alibaba.com.BUS451 Page 26
    • Comparison of eBay.com and Alibaba.com HISTORY OF ALIBABA.COM1999 Alibaba Group was established2000 Launched the Gold Supplier membership to serve exporters in China.2001 Launched the International TrustPass membership to serve exporters outside China.2002 Launched the TrustPass membership to serve SMEs engaging in domestic China trade. Launched keyword ranking services in the international marketplace.2003 Launched TradeManager Instant Messenger software for easy communication. Established Ali-Institute to offer customer training and higher-education e-commerce2004 certification in China.2005 Launched keyword ranking services on the China marketplace.2007 Launched branded advertisements in the Chinese marketplace. Introduced the Gold Supplier membership to Hong Kong.2007 Launched premium placement display in the Chinese marketplace. Launched an SME financing scheme in collaboration with leading banks in China. Successfully listed on the Hong Kong Stock Exchange. Re-launched our upgraded Alibaba Japan marketplace. Became a constituent stock of Hang Seng Composite Index Series and Hang Seng2008 Freefloat Index Series. Launched Winport to help SMEs build their own presence in the China marketplace. Formed an associated company, Alibaba Japan, with Softbank to take over the operation of the Japanese marketplace. Launched the China TrustPass for Individuals membership to serve entrepreneurs engaging in domestic China trade.BUS451 Page 27
    • Comparison of eBay.com and Alibaba.com Introduced the Gold Supplier membership to Taiwan. Launched the Export-to-China service to help SMEs sell direct to China. Launched the Gold Supplier Starter Pack, on the international marketplace.2009 Launched Ali-Advance, a pay-for-performance based keyword bidding system Launched Gold Supplier International Edition Upgraded Ali-Institute to be a new business unit to better cultivate e-commerce talent for SMEs. Acquired the Business Management Software division of Alisoft to further the goal of transforming from "Meet at Alibaba" to "Work at Alibaba." Acquired controlling stake in HiChina to enhance our ability to provide additional Internet infrastructure services to Chinese small businessesBUS451 Page 28
    • Comparison of eBay.com and Alibaba.com ALIBABA.COM PRODUCTS, SERVICES, AND KEY BRANDSAlibaba like eBay does not carry specific products, but a very different mix of items and brands.Some of the products the offer include everything from Agriculture to Transportation items. • Agriculture • Apparel • Automotive • Chemicals • Energy • Environment • Lights and lighting • Luggage • Printing and Publishing • Rubber and Plastic • Security and Protection • Service Equipment • Textiles and Leather ProductsBUS451 Page 29
    • Comparison of eBay.com and Alibaba.com ALIBABA.COM LAST THREE YEAR FINANCIAL GRAPHS 2008 Year Income 2007 Year Income¥4,000.00 ¥2,500.00 Revenue ¥2,162.80 Revenue¥3,000.00 ¥3,001.20 (Millions of ¥2,000.00 (Millions of ¥1,882.60 ¥2,613.80 CNY Yuan) ¥1,500.00 CNY Yuan)¥2,000.00 ¥967.80 ¥1,205.20 Gross Profit ¥1,000.00 Gross Profit¥1,000.00 (Millions of ¥500.00 (Millions of CNY Yuan) CNY Yuan) ¥- ¥-Rev. USD: $432.6M Net Income Net Income Fiscal Year (Millions of Fiscal Year (Millions ofGross: USD: $171.9M Ending CNY Yuan) Ending CNY Yuan)Net: USD: $173.7M 2008 2008 2006 Year Income Stock price as of 12/15: $18.12¥1,500.00 ¥1,363.90 Revenue ¥1,126.20 (Millions of¥1,000.00 CNY Yuan) Gross Profit ¥500.00 ¥219.90 (Millions of CNY Yuan) ¥- Net Income Fiscal Year (Millions of Ending CNY Yuan) 2008 BUS451 Page 30
    • Comparison of eBay.com and Alibaba.com ALIBABA.COM CORE STRATEGIES Alibaba Group is formerly the world’s leading business-to-business e-commercecompany. It was started only 9 years ago, and so growth strategies are expected to be a mainstrategy of the company so that it can continue to effectively compete with world leaders in theindustry. Despite the present economic crisis in the world’s economy, Alibaba has positioneditself to overcome that obstacle and move forward to declare an even bigger market share. Anaggressive expansion is underway to keep the company ahead. The company believes that giventhe weak state of the economic environment that Allibaba.com will increase its revenue by 13 %billion Yuan this year. Alibaba.com CEO David Wei Zhe said the global economic crisisprovided “a great opportunity to help more small and medium-sized enterprises move online, andexpand our market leadership and investment for growth”. Thisstrategy included spending on a global marketing drive worth atleast $30US million, the hiring of 30,000 employees and thelaunching of a new service center in northern China. China isone of the few areas that survived the crisis remaining as one ofthe largest consumer markets after the economic turn. This iswhy the company maintains major operations in China becauseof its economic safeguards. It’s backed by 8 of China’s largestbanks because it really is developing the economy of china byreviving entrepreneurial spirit. . It aims to help small and medium –sized companies conducttrade. The recent focus has been to increase the growth of B2B and B2C business.BUS451 Page 31
    • Comparison of eBay.com and Alibaba.comAlibaba.com Growth Strategy One of its recent strategic moves was the acquisition of Yahoo China. This was expectedto have a large impact and allow the companies to integrate and join forces with their combinedresources that will with time lead to growth. A restructuring strategy of Yahoo China began afterYahoo failed to generate profits. In December 2007, Yahoo China removed the three originaldepartments: new media, network search and communications departments. In turn two newdepartments: website operating and mailbox departments. Merging of network search and e-business and digging into the potential of network search will be the future direction fordevelopment within Yahoo! China. E-business search technology will also be a main focusbecause the company believes that developing this technology will lead to greater profits. Thisstrategy is extremely focused because Alibaba realizes that the acquisition of Yahoo representsan overwhelming opportunity to grow and gain a larger market share because Yahoo is such arecognized company. The company realizes that for optimal results changes within the companyhas to take place. Restructuring of Yahoo is a step in the right direction. Alibaba is very focused on expanding overseas Mr. Wei, chief executive at the company,continued to explain that his strategic move is to attract more clients in markets including Indiaand Japan, because according to Wei “more suppliers outside China will look for new marketslike China.” At present, about 4% of its 400,000 users Alibaba have chosen to look moreoutwardly to Chinese markets. To show how committed the company was to broaden itsboarders, it announced a joint venture with Japan’s Softbank Corp. This together with otherinternational alliances has helped to elevate this company into the Global marketplace.BUS451 Page 32
    • Comparison of eBay.com and Alibaba.com Another of Alibaba’s main strategies involves capitalizing on its international consumerbase and driving a large successful marketplace between businesses. The company’s leadershave shown that they know how to seize market opportunities and to expand its strategy to thesmall and medium sized enterprises (SME) economic growth throughout Asia, USA, Europe andSouth America. In order to achieve this, the company uses its strengths. The combination ofEastern wisdom, western operational techniques and international capital invested in the globalmarket reflect the power that this company manages to maintain in the industry. This strategyallows the company to be more flexible and efficient. Alibaba understands change and the everevolving of the external environment in which it competes and thanks to environmental studiesand expectation studies the company is well aware of these changes. Today, the company canfairly be referred to as a giant global trade market because the company is one of the most activein B2B marketplaces. Its main goal is to make conducting business easier for small businessesaround the world which makes sure that each business capitalizes on all the advantages of havingan international business. Furthermore, Alibaba operating as an Asian company wants to still beknown as an inter-cultural organization that has an inter-cultural management team and thusfocus. Alibaba is constantly working on ways to make business easier for its members. Itrecently unveiled a new pricing model to draw more members. They launched a starter packagefor Gold Suppliers which offers fewer services for a 60% discount. Alibaba.com David Wei saysthat the program is interested in increasing website’s customers even at a risk of set backing itsprofit margins. He stated in an interview, “We believe if we increase our customers, we willincrease our revenue later and the process will take care of itself.” This strategy is more of along-term one that illustrates that the company understands that creating a loyalBUS451 Page 33
    • Comparison of eBay.com and Alibaba.comcustomer/supplier base is what’s most important because loyal suppliers will eventually raiseprofits from the raised sales revenue. When this first strategy was introduced, signs pointed to apositive result in the first period under the new pricing model, total sales were higher than whatthe company usually receives in a month. Analysts seem to like the new pricing model. Citigroupsays it expects the company to decline in 2009, but 2010 should be a rebounding year because” itshould benefit from a more sustainable model, delivering a faster growth and higher margins.”Alibaba.com Differentiation Strategy It has already been noted that Alibaba.com is presently the world leader in business tobusiness e-commerce. This is something that the company has capitalized on in the most uniqueway. Alibaba.com targets small to medium sized businesses. It focuses on buying and sellingamong small and midsized organizations, and it has more than five million suppliers.Alibaba.com has successfully recognized that it could fill a gaping market need that China has.The country has virtually no printed directories or electronic databases that allow companies todescribe their products and help buyers and sellers find one another while still providing acertain level of comfort that these companies are on the up and up. Alibaba.com focuses on smallfamily type businesses in China of which are many in number. According to Yuxin Chen, a marketing professor at New York University’s stern schoolof Business, “Alibaba’s major advantage is that it is located in a country that has emerged as themanufacturing base of the world.” Most companies in China are these small businesses andAlibaba has put itself in the position to take advantage of this. Most companies exporting inChina are not big companies, so for these companies Alibaba provides a platform. To continue toprovide for this market of small businesses, access to Alibaba’s portals is mostly free of charge.BUS451 Page 34
    • Comparison of eBay.com and Alibaba.comMembership fees are charged ranging from $300-$8000 and various membership programs isoffered which provide different membership opportunities.Alibaba.com Price strategy Alibaba’s primary revenue is derived from charging customers for value-added servicesand from subscription fees, listing fees and secondarily through advertising avenues. In terms ofthe price ( membership fees) paid by B2B clients , the business buyers and supplier who want tofind potential trading partners via e-commerce marketplaces have available to them certainmembership packages to appeal to the most varied amount of businesses. Fee-paying memberscan enjoy “priority placement of supplier storefront”, priority listings in the industry directoryand advanced search results at Alibaba.com marketplaces. Alibaba.com promises price savingsthat can’t be found through more traditional forms of business. The marketplaces provide manyadvantages to businesses; businesses can get access to the active global buyer community andvice versa for buyers, businesses can launch marketing activities to potential buyers in aeconomical way, buyers can get access to high quality and organizational information onproducts, potential sellers, and additionally the convenience which is real time and 24 hoursservices for both the buyers and the sellers. One specific pricing strategy that Alibaba has put in place is the Gold supplier premiummembership. This is a certification that the site offers to specific supplier companies which givesthem the opportunity to post an unlimited number of products online. Gold suppliers also havemore of an advantage with global trade because of the certification Alibaba has providedshowing that this organization is authenticated. This means much more access to customers thanthe business man who doesn’t have a paid membership. Testimonials from gold suppliers speakBUS451 Page 35
    • Comparison of eBay.com and Alibaba.comto the effectiveness of this pricing strategy. Customers believe that the price for the membership,which varies, is a small cost to pay for the services that are available as a registered member. Therealm of possibility is great which makes global trade a possibility for small companies whowouldn’t have this opportunity otherwise. Customers are jumping at the opportunity to sign up tobe a Gold supplier which gives Alibaba the upper hand and the opportunity to create revenue.Many spin off’s of the gold supplier membership have provided other services and benefits atlower cost to the customer but with fewer benefits. The gold supplier tag is more prominent still.BUS451 Page 36
    • Comparison of eBay.com and Alibaba.com COMPETITIVE FORCES FOR ALIBABA.COM Porter’s Five Force model of competition is a key tool for diagnosing the competitiveenvironment:Alibaba.com Threats of new Entrants Alibaba has always welcomed the idea of competing companies entering the industry. Aspokesperson of Alibaba stated this in reference to the news that Chinese search engine firmBaidu.com is beginning beta testing for an ecommerce site. Christina Splinder continued to saythat “competition would help grow the entire ecommerce market in China.” The consumerecommerce penetration rate in China is 33% compared to over 90% in developed economiessuch as the US and Europe. Early competition from eBay is what Alibaba credits for growing theecommerce industry in China from several hundred million RMB back in 2003 to over 100billion RMB this year. They are also hopeful that the new wave of companies to come willfurther grow the company from then on. Evidently, this company is concentrated on limiting new entrants into the market becauseof its goals as a company is build the consumer market in Asia and subsequently in the world. Ofcourse, new entrants could cause external difficulties for this company, but with competitioncomes the success of being the people’s premier site to deal business. Alibaba has developedquite the reputation for new innovation and its Global influence, and it credits fierce competitionfor helping it to have developed this much.BUS451 Page 37
    • Comparison of eBay.com and Alibaba.comAlibaba.com Rivalry The auction ecommerce industry is quite the growing one. In recent years, it has becomevery concentrated with equally large global companies which have been able to develop corecompetencies in the industry. One of Alibaba’s rivals is eBay Eachnet. Both Alibaba and eBayEachnet operate in the Chinese e-commerce industry, so it is understandable that these are closecompetitors. Alibaba acquired Yahoo! China as well as other subsidiaries to help grow itscompany and develop it into the company it is today. EBay is a global giant in ecommerce and ithas the advantage of owning a recognizable brand that had global attention and had a loyalcustomer base in the US. AliPay is the payment tool that Taobao, Alibaba’s subsidiary uses for business –to-business e-commerce website. With this AliPay, buyers can deposit money into a bank accountdesignated by Alibaba Taobao. The sellers receive payment when the deal is verified by buyers.EBay Eachnet the fierce competitor it is also announced that it would spend more than 100million Yuan (Us$12 million) to launch a new online payment system as well. EBay plans toinvest heavily to make sure that it has available a secure system for payment on their site. EBayEachnet launched a payment system called Escrow in October very similar to AliPay which wasset up to create a more secure online payment environment for members. EBay, just like Alibaba,gained success in the Chinese market quite rapidly but, Alibaba has a larger hold on the Chinesemarket because of its global reach and innovative systems.BUS451 Page 38
    • Comparison of eBay.com and Alibaba.comAlibaba.com Supplier power Alibaba has many alliances with companies that keeps the auction site running and on thecutting edge of technology in the external environment. VeriSign Inc is a well known provider ofInternet infrastructure for Networked worlds. This helps companies and consumers all over theworld communicate and deal commerce. The A&V is a product designed and launched by AsianCompany Profiles Ltd. It is an application conduct B2B partner screening, pre-L/C beneficiaryscreening, and Para-legal support for contractual purposes. The American InternationalUnderwriters China (China’s AIU) provides quality commercial and consumer insurance to thecompany. These suppliers are a key to Alibaba’s credibility and quality management efforts.Ecommerce organizations have to have safeguards available for its consumers and companiesespecially when large transactions are taking place. Each of these supplier companies help tomake sure that the consumer is protected. These organizations have a certain level of powerbecause if A&V decides to not partner with the company another company would have to besought out to fill the need but it can be done. Just like if the insurance company doesn’t want tobe affiliated with Alibaba anymore, it is at that’s company’s own detriment because Alibaba is agrowing company that has a reputation of having a large member based which means largeinsurance dollars for the insurance company.BUS451 Page 39
    • Comparison of eBay.com and Alibaba.comAlibaba.com Buyer Power These are the core of the organization as an auction site. The success of the company isdependent on the customers who are willing to buy online products. Alibaba is a global companyand so businesses from different areas of the world are a key to its success. Alibaba offers smallbusinesses the opportunity to grow through its site, and they give these owners power to expandand really make their products available to a global customer base quite easily. This AlibabaCompany is a growing one and already has a large global marketplace the largest B2B one in theworld, so buyer with the power that they have would be wiser to choose Alibaba as it is theworld leader and the opportunity for growth is great. Yes, there are other competitors, butAlibaba has established a loyal customer base and as a global leader in ecommerce it seems likeit’s a secure professional site.Alibaba.com Threat of substitutes Alibaba offers one of the easiest ways to conduct a small-medium business and that’sthough ecommerce. It’s simple and offers a large global marketplace for transactions to takeplace. Any substitute to come along would have to be an easier, more effective way ofconducting business on a global arena. No new substitute for the online auction industry has beenintroduced yet, but the opportunity is there. Right now online auction is the simplest and mosteffective ways to grow a small or medium sized business.BUS451 Page 40
    • Comparison of eBay.com and Alibaba.comAlibaba.com TOWS Matrix Strengths – S Weaknesses - W Alibaba.com, the • It has a reputation of success and effective • Labor intensive. world’s largest growth strategies • Low degree of business ecommerce • Strong alliances and e-commerce search organization, is one partnerships with technology. leaders in the industry. • Large Chinese cultural that generates income • A strong whole in the influence. from influencing Global Marketplace. • Brand recognition is business to buy and sell • A international low. organizational structure • Profitably is slowing. through their site. • A bold risk taking sprit. Opportunities – O SO Strategies WO Strategies • Possibility for growth in • Acquisition of a profits. • Acquisition of an technology company American company in • Large untapped market experienced in the internet industry developing ecommerce potential. could develop sites. recognition in the US. • Market share possibility in the US Threats – T ST – Strategies WT – Strategies • China’s Google and the strength of the vertical • Advertising more in sites. international arenas to • Growth of China’s • Enforce differentiation strengthen market ecommerce industry. strategies using the share in areas of little • EBay’s new subsidiary company’s influence in brand recognition. The eBay Eachnet poses a the marketplace to sponsoring of competitive influence. draw new members international events like • Global Economic crisis. from innovation and the Olympics can help • Development of a more quality controls. to establish the brand among the other global competitive technology competitors.BUS451 Page 41
    • Comparison of eBay.com and Alibaba.comAlibaba.com Strengths Alibaba.com has much strength. It has grown quite rapidly and many great strategieswere implemented to facilitate development. From my research, it was mentioned repeatedly thatthis company is a global one that has reach in several large countries in the world. This is alwaysa great thing because the larger the market the larger the profit opportunity. A global reach willonly profit an organization especially with a growth strategy. Alibaba also used a great strategyof developing great acquisitions with other leaders in the industry such as Yahoo China.Acquisitions put companies in the position to grow quite rapidly and are generally a great modefor entry in a new untapped market. The ecommerce market in China is growing and Yahoobeing a global company with influence puts Alibaba is the position to control a large percentageof a Chinese market. The leaders of the company have shown how committed it is to being aglobal organization and has a staff and management team just as diverse as its customers.Alibaba.com Weaknesses The main weakness that this organization has is its low level of technology. Otherbusinesses in the market have more complex and attractive ecommerce sites, and this is really adetriment to the company. The company is also very labor intensive. It has 4000 employees all ofwhom are well paid which means a large amount of expenses paid in salaries. This company thatoperates most of its activities online should be able to limit labor expenses a bit more. Althoughthe organization is known as a Global one it is still not well known in the US, which is one of thelargest economies in the world. Efforts could be made to develop the brand more by increasedadvertising efforts and tapping into untapped markets. Profitability is a definitely a problem forthe company. More cost strategies need to be implemented to decrease the expenses within thecompany.BUS451 Page 42
    • Comparison of eBay.com and Alibaba.comAlibaba.com Opportunities There is a great possibility for growth within the organization. Yes it is the largestecommerce organization in the world, but this industry will get more competitive and just likeAlibaba grew rapidly another company can enter the market and decrease Alibaba’s marketshare. The company isn’t as well known in America, so there is an opportunity for growth in thiseconomy where so many other large ecommerce organizations exist.Alibaba.com Threats The main threats that exist in Alibaba’s external environment is competition from highlycompetitive company’s CEO, Wei has been quoted as saying that he welcomes competition onany scale because competition makes other competitors work harder to improve business and itsthrough competitive market that that industry will see growth. The Asian web search/ecommerce is growing quite rapidly through the penetration by other new companies into themarket. Google China is a becoming quite a competitive force in the industry. Google is a verydiverse company and so it has many vertical affiliations that are competitive forces for thebusiness that Alibaba runs. Also EBay Eachnet is a competitive rival and recently has beendeveloping Alibaba’s similar operations as to steal market share from the company. So far,Alibaba has risen above the Global economic crisis but this remains a threat.Alibaba.com SO Strategy One strategy to get market share in the US by using it global power is to acquire a USrecognized company. This could be very effective entry mode into this economy. It really isn’tBUS451 Page 43
    • Comparison of eBay.com and Alibaba.comimportant if it’s another ecommerce company; the company would just have to be US based andhave high brand loyalty. The growth possibilities are great as well. Gaining resources andinformation from another successful company can grow a company dramatically.Alibaba.com WO Strategy In order to improve on the weakness of low technology level and take advantage of theopportunity for growth, they could acquire a small technology company. There is a lot ofadvantages to doing this. A company with experienced staff who are capable of upgradingtechnology can help to move the company into a more competitive place, technically. Also, thisis a growth opportunity for the company as well.Alibaba.com ST Strategy In order to combat competition and to take advantage of the company’s influence in theGlobal marketplace, Alibaba could implement differentiation strategies that set them apart fromthe other global companies in the industry. Differentiation strategies are extremely effective indeveloping customer loyalty and grabbing a large market share for growing companies.Alibaba.com WT Strategy In order to improve brand recognition in the US and strengthen market share thecompany should develop a real commitment to marketing on a Global scale quite like Coca Cola.A good marketing strategy can be a real turning point for a company and increase profitsdramatically. It’s something worth developing especially if being a global company is animportant outlook as is the case with Alibaba.comBUS451 Page 44
    • Comparison of eBay.com and Alibaba.com COMPARITIVE ANALYSIS Putting it simply, e-commerce is a form of business where an online transaction takesplace via the internet through a site that links a computer system of the vendor, host and buyer.Electronic transactions involve the transfer of ownership from the seller to the buyer of that goodor service. These two companies, eBay and Alibaba, are world leaders in the auction e-commerce industry. EBay operates out of the United States and Alibaba operates out of thePeople’s Republic of China. These companies had quite different beginnings, eBay started as avirtual monopoly in the American market introducing a new large scale way to conduct business.Alibaba entered the market by acquiring the market leader at the time eBay Eachnet. Both ofthese companies sky rocketed to success really early with very little competition to affect rapidgrowth. Both companies have a similar mission and that is to promote global trade and maketrading easier. Together, these companies have dominated the auction site industry and seenextreme growth levels after only being in the industry for approximately 10 years. The productlines for both companies are quite similar, as both companies sell goods and services,communication services, and advertising. Alibaba focuses more on the business to business saleswhich can be argued is a more revenue generating route. Both companies have their portion of competitors and essentially are each other’scompetition. They are extremely confident in their competitive advantages. EBay considers itselfas the company to lead the industry with the introduction of such auction sites, but Alibabathinks it has propelled past the competition because it manages to capitalize on the strategiesinstituted by EBay Eachnet to a develop a global outlook. Alibaba took a hold of the business toBUS451 Page 45
    • Comparison of eBay.com and Alibaba.combusiness segment of the market and took it to another level. This is now Alibaba’s niche marketof suppliers. EBay however has no real supplier preference, and so markets to the averageconsumer and businesses. Thus, they have competitors like Amazon which features a rathercomplex e-commerce environment. The business model of Alibaba compared to EBay is far more simplified yet focused onachieving particular goals. Both companies seek growth, but Alibaba has the way in which theywill go by doing this clearly outlined with effective ways of entry. Alibaba is a world leader inbusiness to business e-commerce and this was its route to the world and globalization. Themove, whereby it purchased its own fierce competition, EBay Eachnet, was the smartest movethey could have made towards growth. EBay’s goals are far reaching and not as concentrated.Both companies made smart moves in the acquisition of well noted international companies likeeBay did with Swedish company, Tradera.com. Evidently, both of these companies are smart intheir moves to acquire companies that will give them; 1) an entry into new global markets, and 2)give them the upper hand against threats of competition.Group Investment Perspective Based on the financials, eBay has Alibaba beat. The company has almost double therevenue that Alibaba had in 2008 at $8,541,126. For this reason, we as a group think that eBay isthe better of the two companies. The main goal of business is to make sustainable income, andthis company has shown us that smart moves, global acquisitions and aspirations will enablecompanies to be financial sound. EBay’s marketing efforts are quite great and recommendable inareas that Alibaba lack. We expect Alibaba to continue to compete because this company isnothing sort of impressive. Alibaba has managed to elevate and inspire entrepreneurial spiritBUS451 Page 46
    • Comparison of eBay.com and Alibaba.comaround the world and make business easier for people that otherwise wouldn’t have theopportunity. EBay just seems, to our group, to have the best tools for growth in their possessionand we think it’s almost impossible to compare two equally very powerful global giants in thisrather small industry.Group Challenges As a group, we never underestimated the enormity of the task set before us. It was a tallorder to organize a project of this magnitude with our many different schedules and personalities.We knew it would have to be communication that led to success of this project, and so manyemails were transferred between the original four group members. Originally, we couldn’t evenagree on the two companies to research we went back and forth between entertainmentcompanies, airline manufacturers and the online auction companies. Choosing these particularcompanies was definitely a learning experience for most of us. We learned what drives thesecompanies technically. At the beginning, of the quarter we had originally four members: Anca,Thomas, Angelica and Danauda. Due to illness, (our presumption) communication with angelicawas cut off. We had to make a fast decision fast and split the responsibilities between theremaining members. We gritted our teeth because of the added work, but thankfully, wecompleted it. Mostly we were working with three different leadership styles, so figuring out howto work as a group was definitely a challenge. Compromise and allowing everyone to vote wasimportant when deciding things. Early on, we set goals and deadlines for when the work wassuppose to be ready etc. Deadlines were mostly met (at least by the remaining members), andafterward, further goals were made until the completion of the project. In all, we learned a lotabout working in groups and how to compromise to see that all our expectations were met withinthe timeframe allotted.BUS451 Page 47
    • Comparison of eBay.com and Alibaba.com WORKS CITED COMPARISON OF EBAY.COM & ALIBABA.COM PREPARED FOR BUS451"Alibaba Company Profile." CrunchBase, The Free Tech Company Database. Alibaba.com.Web. 26 Nov. 2009. <http://www.crunchbase.com/company/alibaba>."Alibaba obvious weakness Netsun carry low memeber price breakdown B2B Market." Review.Web log post. Compass Blog. 19 Aug. 2008. Web.<http://compassblogger.blogspot.com/2008/08/alibaba-obvious-weakness-netsun-carry.html>."Alibaba.com Limited." Business Source Premier. Berkeley College. Web.<https://my.berkeleycollege.edu/webapps/portal/frameset.jsp?tab_id=_18_1>."EBay annual report." File.shareholder.com. Investor.ebay.com, 19 Feb. 2009. Web. <http://files.shareholder.com/downloads/eBay/765967544x0x281367/1b773a7c-8c14- 45b8-915a-1716ca37dda0/eBay_2008AR.pdf>."EBay Inc." Business& Company Resource Center. Web. <http://http://galenet.galegroup.com.ezproxy.library.berkeley.org/servlet/BCRC?vrsn=un known&locID=nysl_me_berk&srchtp=glbc&cc=1&c=1&mode=c&ste=60&tab=1&tbst= tsCM&ccmp=eBay+Inc.&mst=EBay%2C+Inc.&docNum=DC441427&bConts=3&final Auth=true>.BUS451 Page 48
    • Comparison of eBay.com and Alibaba.com WORKS CITED: CONTINUED COMPARISON OF EBAY.COM & ALIBABA.COM PREPARED FOR BUS451"EBay Inc." Datamonitor Company Profiles Authority. Berkeley College. Web. 1 Dec. 2009. <http://http://web.ebscohost.com.ezproxy.library.berkeley.org/ehost/detail?vid=5&hid=5 &sid=4433627e-29ed-47fe-b3c5- a33c3f4bac0a%40sessionmgr10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bu h&authdb=dmhco&AN=FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86>."EBay Inc." Hoovers.com. Proquest. Web. 01 Dec. 2009. <http://http://proquest.umi.com.ezproxy.library.berkeley.org/pqdweb?index=0&did=168 214571&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VNa me=PQD&TS=1257437448&clientId=11195>."EBay: The Worlds Online Marketplace." EBay - New & used electronics, cars, apparel, collectibles, sporting goods & more at low prices. Web. 12 Dec. 2009. <http://pages.eBay.com/abouteBay/thecompany/companyoverview.html>."Online Auction Market in China: eBay/EachNet vs. Yahoo!/TaoBao -- Seeking Alpha." Stock Market News, Opinion & Analysis, Investing Ideas -- Seeking Alpha. 24 July 2006. Web. 09 Dec. 2009. <http://seekingalpha.com/article/14162-online-auction-market-in-china- ebay-eachnet-vs-yahoo-taobao>.BUS451 Page 49