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A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 1
A Study to Evaluate the Impact of Acquisitions on the bottom line of ebay
Charm Rammandala
California Intercontinental University
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 2
Abstract
The purpose of this study is to understand the business model of E-Bay and evaluate the
management strategy to determine the overall success of the series of mergers and acquisitions
company made over the years. Study will further focus on competitive strategies in use and how
it is impacting the growth of the firm.
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 3
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay
In 1991 National Science Foundation lifted the restrictions on using NET as a commercial
platform for businesses (Snider 2008). Since then there was remarkable growth seen in the
Ecommerce sector. Within the first 5 years of opening up the NET for commercial use, number
of sites registered rose to 2 million (Mikhail 2015)
ebay was one of the first company to step in to the newly opened Ecommerce market place in
1995. Initially company went by the name of AuctionWeb and later changed to the current name
which is ebay. Since the inception, company was successful and managed to attract millions of
customers to the site. In 2015 company made US$9 billion in revenue with net income of US$1.8
billion (Grey 2016)
The impact of Acquisitions
One of the important management strategy of the company to stay ahead of the competition
was to acquire its potential competitors and complimentary service providers. This has given the
phenomenal growth for the company over the past 20 years. EBay made its first acquisition in
1998 by securing the deal of up4sale.com which was an on-line auction site for an undisclosed
sum of money. Since then every year company made at-least 2-3 acquisitions and latest being the
SalesPridict.com an on-line commerce site based in Israel acquired in July 2016. To date ebay
made 51 acquisition in total (Shahi 2016)
Some of the notable and widely known acquisitions of ebay includes, Pay-pal which is an
Ecommerce payment system in 2002 for a sum of $1.5 billion, Skype in in 2005 for $2.6 billion
& billmelater.com which was another Ecommerce company for a $1.3 billion. As a part of the
strategy, company buys rivals and supporting service providers throughout the world regardless
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 4
of the geographical location. Apart from buying up USA companies, EBay has acquired
companies from Israel, Sweden, France, UK, Netherlands, India and Spain covering spectrum of
countries (Grey 2016)
The extensive strategy of acquisition has contributed to the rapid growth of the company.
Through the acquisition, company managed to secure the market share by greatly reducing the
competition. It also helps to expand the reach of the company. EBay not only buys up its rivals,
it buys companies which provides supplementary and complementary services. PayPal, Billpoint,
Braintree are some of the companies it bought who provides payment platform to its main
business platform. Similarly, EBay bought Positronic Inc, Salespredict and GSI commerce which
helps to strengthen the ecommerce platform (Shahi 2016)
EBay believes by acquiring companies which are stablished as well as new startups,
company is able to keep the competition away. Also more importantly keep the innovation alive.
As a part of the strategy, company let the management team of the acquired company to run the
business as their own. This helps to keep the original philosophy of the startup company alive
and use the resources of EBay to pursue the goals of the company (Widmer 2015)
Acquisitions have also opened the door for EBay to acquire latest technology through the
newly integrated firms. Though company had to pay a premium price to buy the firms, it has
saved significant cost from R&D and more importantly time. Through the newly acquired
companies and its technologies, EBay managed to generate higher revenue within a short span of
time (Grey 2016)
In essence, business model EBay has deployed over the years has proved successful and
through the acquisitions it has managed to beat the competition significantly. Evidently there are
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 5
some failures in some of the choices made in the acquisition process yet overall it’s been a
winning strategy.
Core competencies of EBay and how it overcome the competition
One of the biggest strength of EBay is the wider reach it has on the internet. Through the
numerous acquisitions and partnerships as well as becoming a multinational company, it has
become a household name in the world. This is essentially gives the edge and keep the
competitors away. However, over the last decade number of competitors have emerged and
penetrating the ebay market segments (Grey 2016)
Some of the notable competitors of EBay are Amazon, Wal-Mart, Etsy & Alibaba. There are
hundreds of other home grown and international competitors are active in the market place and
competition is intensive. Amazon is somewhat a traditional seller on the internet as it started as a
B2C retailer. However, since then Amazon allows other retailers, manufactures and wholesalers
to offer their products to customers using their platform. Over the years’ company has built a
reputation among its customers through exceptional customer service and online experience
(Brad 2014)
Walmart is the world biggest retailer with the revenue of over $500 billion. Predominantly it’s
a brick and mortar retailer though recently entered the ecommerce and managed to create a
strong presence. Due to the ability of bulk buying directly from the manufacturers, it is able to
compete with the price. Price sensitive customers are increasingly using Walmart for their
FMCG needs (Widmer 2015)
Alibaba is another notable international competitor for EBay. Its business model is to create a
platform for small as well as big manufactures to reach buyers and wholesalers. At a glance ebay
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 6
and Alibaba are not direct competitors yet closer inspection indicates segment of EBay
customers are attracted to Alibaba as its much more direct and cost effective (Grey 2016)
Overall EBay still has the edge over its competitors as it managed to diversify in to every
possible area in the market place. Customers can look for second hand clothes, electronics,
apartments to rent, buy movie tickets, find rare products from around the world and virtually
anything they could think of is in the fingertips and few clicks away. In addition, Ebay has on its
portfolio, online payment systems, business and technology development firms and social
network sites as its subsidiaries. Evidently these attributes help the company to stay ahead of the
competition.
The pros and cons of diversification
Over the years EBay adopted a strategy of acquiring companies who they thought could be a
potential treat in the future and firms which helps to strengthen their current business model.
When we closely look at the firms it has acquired over the years, it is clear that EBay wants to
dominate all the aspects of Ecommerce. Apart from creating a platform to meet sellers and
buyers, it wants to provide financial services, social media, and other related ecommerce services
(Widmer 2016)
By bringing all related aspects of ecommerce to one roof, EBay has managed to create a
secure environment for the customers as well as buyers by keeping third party involvement to the
minimum. This helps to keep the cost down and offer various value added services. Overall
diversification is a winning strategy for EBay (Frank 2015)
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 7
Conclusion
EBay is an online market place and an auction site which provides C2C, B2B & B2C products
and services. Since the beginning company pursue a strategy of acquiring companies who could
be a threat to the company or add value to its services. Over the last years company has acquired
over 50 companies and largely it’s been a winning strategy. Through the acquisitions, company
managed stay competitive, innovative and total solution provider.
A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 8
References
Brad, S (2014). Everything Store: The age of Amazon. New York, Pearson
Frank, J (2015). Ecommerce handbook: Money making strategies of Ecommerce, Pearson, NY
Grey, L. (2016). Online selling wars. New York, McMillan
Mikhail, R. (2015). Internet Marketing Business. San Francisco, Pearson
Shahi, R. (2016). Ecommerce. New York, Pearson
Snider, K. (2008). History of NET. New York, McMillan
Widmer, J (2015). How to crush your Ecommerce competitors. Irwin, McGraw-Hill

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A study to evaluate the impact of acquisitions on the bottom line of ebay

  • 1. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 1 A Study to Evaluate the Impact of Acquisitions on the bottom line of ebay Charm Rammandala California Intercontinental University
  • 2. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 2 Abstract The purpose of this study is to understand the business model of E-Bay and evaluate the management strategy to determine the overall success of the series of mergers and acquisitions company made over the years. Study will further focus on competitive strategies in use and how it is impacting the growth of the firm.
  • 3. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 3 A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay In 1991 National Science Foundation lifted the restrictions on using NET as a commercial platform for businesses (Snider 2008). Since then there was remarkable growth seen in the Ecommerce sector. Within the first 5 years of opening up the NET for commercial use, number of sites registered rose to 2 million (Mikhail 2015) ebay was one of the first company to step in to the newly opened Ecommerce market place in 1995. Initially company went by the name of AuctionWeb and later changed to the current name which is ebay. Since the inception, company was successful and managed to attract millions of customers to the site. In 2015 company made US$9 billion in revenue with net income of US$1.8 billion (Grey 2016) The impact of Acquisitions One of the important management strategy of the company to stay ahead of the competition was to acquire its potential competitors and complimentary service providers. This has given the phenomenal growth for the company over the past 20 years. EBay made its first acquisition in 1998 by securing the deal of up4sale.com which was an on-line auction site for an undisclosed sum of money. Since then every year company made at-least 2-3 acquisitions and latest being the SalesPridict.com an on-line commerce site based in Israel acquired in July 2016. To date ebay made 51 acquisition in total (Shahi 2016) Some of the notable and widely known acquisitions of ebay includes, Pay-pal which is an Ecommerce payment system in 2002 for a sum of $1.5 billion, Skype in in 2005 for $2.6 billion & billmelater.com which was another Ecommerce company for a $1.3 billion. As a part of the strategy, company buys rivals and supporting service providers throughout the world regardless
  • 4. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 4 of the geographical location. Apart from buying up USA companies, EBay has acquired companies from Israel, Sweden, France, UK, Netherlands, India and Spain covering spectrum of countries (Grey 2016) The extensive strategy of acquisition has contributed to the rapid growth of the company. Through the acquisition, company managed to secure the market share by greatly reducing the competition. It also helps to expand the reach of the company. EBay not only buys up its rivals, it buys companies which provides supplementary and complementary services. PayPal, Billpoint, Braintree are some of the companies it bought who provides payment platform to its main business platform. Similarly, EBay bought Positronic Inc, Salespredict and GSI commerce which helps to strengthen the ecommerce platform (Shahi 2016) EBay believes by acquiring companies which are stablished as well as new startups, company is able to keep the competition away. Also more importantly keep the innovation alive. As a part of the strategy, company let the management team of the acquired company to run the business as their own. This helps to keep the original philosophy of the startup company alive and use the resources of EBay to pursue the goals of the company (Widmer 2015) Acquisitions have also opened the door for EBay to acquire latest technology through the newly integrated firms. Though company had to pay a premium price to buy the firms, it has saved significant cost from R&D and more importantly time. Through the newly acquired companies and its technologies, EBay managed to generate higher revenue within a short span of time (Grey 2016) In essence, business model EBay has deployed over the years has proved successful and through the acquisitions it has managed to beat the competition significantly. Evidently there are
  • 5. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 5 some failures in some of the choices made in the acquisition process yet overall it’s been a winning strategy. Core competencies of EBay and how it overcome the competition One of the biggest strength of EBay is the wider reach it has on the internet. Through the numerous acquisitions and partnerships as well as becoming a multinational company, it has become a household name in the world. This is essentially gives the edge and keep the competitors away. However, over the last decade number of competitors have emerged and penetrating the ebay market segments (Grey 2016) Some of the notable competitors of EBay are Amazon, Wal-Mart, Etsy & Alibaba. There are hundreds of other home grown and international competitors are active in the market place and competition is intensive. Amazon is somewhat a traditional seller on the internet as it started as a B2C retailer. However, since then Amazon allows other retailers, manufactures and wholesalers to offer their products to customers using their platform. Over the years’ company has built a reputation among its customers through exceptional customer service and online experience (Brad 2014) Walmart is the world biggest retailer with the revenue of over $500 billion. Predominantly it’s a brick and mortar retailer though recently entered the ecommerce and managed to create a strong presence. Due to the ability of bulk buying directly from the manufacturers, it is able to compete with the price. Price sensitive customers are increasingly using Walmart for their FMCG needs (Widmer 2015) Alibaba is another notable international competitor for EBay. Its business model is to create a platform for small as well as big manufactures to reach buyers and wholesalers. At a glance ebay
  • 6. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 6 and Alibaba are not direct competitors yet closer inspection indicates segment of EBay customers are attracted to Alibaba as its much more direct and cost effective (Grey 2016) Overall EBay still has the edge over its competitors as it managed to diversify in to every possible area in the market place. Customers can look for second hand clothes, electronics, apartments to rent, buy movie tickets, find rare products from around the world and virtually anything they could think of is in the fingertips and few clicks away. In addition, Ebay has on its portfolio, online payment systems, business and technology development firms and social network sites as its subsidiaries. Evidently these attributes help the company to stay ahead of the competition. The pros and cons of diversification Over the years EBay adopted a strategy of acquiring companies who they thought could be a potential treat in the future and firms which helps to strengthen their current business model. When we closely look at the firms it has acquired over the years, it is clear that EBay wants to dominate all the aspects of Ecommerce. Apart from creating a platform to meet sellers and buyers, it wants to provide financial services, social media, and other related ecommerce services (Widmer 2016) By bringing all related aspects of ecommerce to one roof, EBay has managed to create a secure environment for the customers as well as buyers by keeping third party involvement to the minimum. This helps to keep the cost down and offer various value added services. Overall diversification is a winning strategy for EBay (Frank 2015)
  • 7. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 7 Conclusion EBay is an online market place and an auction site which provides C2C, B2B & B2C products and services. Since the beginning company pursue a strategy of acquiring companies who could be a threat to the company or add value to its services. Over the last years company has acquired over 50 companies and largely it’s been a winning strategy. Through the acquisitions, company managed stay competitive, innovative and total solution provider.
  • 8. A Detailed Study to Evaluate the Impact of Acquisitions on the bottom line of E-Bay 8 References Brad, S (2014). Everything Store: The age of Amazon. New York, Pearson Frank, J (2015). Ecommerce handbook: Money making strategies of Ecommerce, Pearson, NY Grey, L. (2016). Online selling wars. New York, McMillan Mikhail, R. (2015). Internet Marketing Business. San Francisco, Pearson Shahi, R. (2016). Ecommerce. New York, Pearson Snider, K. (2008). History of NET. New York, McMillan Widmer, J (2015). How to crush your Ecommerce competitors. Irwin, McGraw-Hill