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Case study the globalization of ebay v 1.1

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Case study the globalization of ebay v 1.1

  1. 1. eBay Inc. is an American multinational internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded in 1995, and became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries. The company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. Case: The Globalization of eBay
  2. 2. International Business the Globalization of eBay Case study I. Case Background eBay Inc. is an American multinational internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded in 1995, and became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries. The company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. (Wikipedia) Operations eBay created an efficient distribution system that demanded virtually little supervision. Sellers paid eBay for the opportunity to design, set up, monitor, and supervise their particular auctions while buyers used eBay's software to search for products and place bids. After the auction clock ran out, the seller contacted the winning bidder to negotiate payment and shipping terms. For this matchmaking service, eBay charges between 7 and 18 percent of the closing auction price. In 1999, net revenues topped $225 million. By 2006, revenues grew to $6 billion with net income of $1.1 billion. The company projects revenue near $7.5 billion in 2007. Core vision To support interaction in the eBay community by providing a useful online platform to value-oriented buyers and sellers; to uphold the principles of trust and safety, guaranteeing low fraud losses and high transaction protection to its community; and to focus on market efficiency by delivering state-of-the-art information technology. Depicted as a Venn diagram, eBay saw its competitive advantage residing in the overlapping center zone whereby it could pioneer new communities around the world built on commerce, sustained by trust, and inspired by opportunity. Three Revenue Streams 1. Payment Fees (21 percent of the total revenue) 2. Final value fees (31 percent of total revenue) 3. Insertion Fees (48 percent of total revenue) Global Expansion
  3. 3. The success of U.S. operations had, by the turn of the century, inspired eBay to define its mission as providing a global trading platform where practically anyone, anywhere, could trade practically anything at anytime. By 2007, eBay's growing global reach meant its members could rely on local sites that served customers in such countries as Australia, Austria, Belgium, Canada, France, Germany, India, Ireland, Italy, South Korea, Singapore, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom. Once eBay was firmly established in the United States, management looked to the overseas market as the best opportunity to sustain growth; eBay's international markets had more than twice as many Internet users. In terms of market potential, eBay estimated it had less than 10 percent penetration of the combined annual $30 trillion-plus global merchandise market. International expansion then became the goal. During the expansion period or globalization period they have encountered difficulties such as different government regulations on the various countries, language barrier because of the website translation difficulty, cultural attitude about the ecommerce, challenges brought by the expansion itself. II. Statement of the Problem 1. As the eBay is becoming global, how are they going to deal with the challenges that they are currently facing such as: a) translation software weaknesses b) various rules and regulations c) cultural attitudes d) pace of international expansion III. Alternatives A great strategy defines the perspectives and tools managers use to appraise the company’s present situation, identifies the direction the company should go and determine how the company will get there. The fundamental principle is on how to create value. A value that measure the firms capability to sell what it makes for more than the cost incurred to make it. Operationally, the strategy of differentiation should be exercise in able to convert customer insights, skilled and creative product development, persuasive marketing programs and premier reputations for quality into superior value creation. We find it fit to eBay to continuously develop unique features that are impossible to match or copy and lead buyers to prefer their goods and services versus those by rivals.
  4. 4. Technology availability to users - as eBay localize their website around the world, they should also keep up with social media trends and mobile phones application for them to stay ahead of competition. Technology will enable eBay to offer new attractive services for loyal and new users in an easy and convenient way. As eBay keep on expanding internationally they should also look for additional acquisitions or partnerships of other online auction sites eBay should expand community services as a way to educate their loyal and prospective customers in selling their products online with the use of internet. IV. Recommended Solution The fundamental value of strategy for the international company is to manage the tension between global integration and local responsiveness in a way that converts a unique strategy into superior value. At this time, companies must identify the force of the particular change, estimate the impact it may have on their industry’s structure, include changes in the long term growth rate, new technologies, and manufacturing innovations that revise cost and efficiency frontiers and technical expertise across countries, change in government regulations or the entry or exit of major firms. It is worthwhile to note that while many forces of change may be in play in a given industry, it is best to separate major factors from minor ones and best position the firm to compete and create value in the likely new industry. Given the growing appreciation of the performance and the competitive benefits a core competency should be linked in the value chain. Technically a core competency is a special outlook that creates unique value for the firm by creating an acknowledged thread that runs through all of the firm’s value activities like information management and product distribution system. For eBay, thought is the main problem of the translation software that they used. We therefore recommended that the sellers (customers/clients) should include two translations in the product description (English and the native language) to make the site command tools as the concern of language translation for eBay though they should be responsible in monitoring the message content. With regards to various rules and regulations and cultural issues, eBay may maintain the fundamental divergences in consumer tastes and preferences across countries. No matter the moderating functions of money or technologies, the reasoning goes differences in consumers’ tastes and preferences across countries due to cultural predisposition, historical legacy, emergent nationalism and economic prosperity. eBay should consider that “Consumers prefer goods that are sensitive to their way of life. ”. When it comes to government policies, eBay should determine how to best configure and coordinate its value chain so that it provides the necessary degree of local responsiveness without jeopardizing its capability to create value.
  5. 5. V. Answers to the case questions (if there are any) 1. What is eBay’s core competency? How does is relate to their chosen strategy? After reading the case, we thought that the eBay’s core competency are the developing software program for the online platform, and improving digital infrastructure tools as like proprietary payment system that seamlessly linked buyers and sellers, also lead to the created a safe, secure environment for the online trading community. The creative freedom is the company’s strategy as allow users to using the tools that the eBay provides to design, set up, monitor, and supervise their particular auctions, and also eBay no matter what they are buying or selling or where they are buying or selling the merchandise, and eBay never tough the goods during the whole deal between buyer and seller. 2. How would you explain how eBay has decided to configure and coordinate its value chain? eBay linked its initial success to its core vision: to support interaction in the eBay community by providing a useful online platform to value-oriented buyers and sellers; to uphold the principles of trust and safety, guaranteeing low fraud losses and high transaction protection to its community; and to focus on market efficiency by delivering state-of-the-art information technology. Since the eBay initial vision haven’t changed, eBay have a very poor value chain as support activities with just providing the tools to make transactions, technology and system development, and the online platform user go to use the tools and system to managing the transaction. The core technologies of eBay use to developing and improving the online trading platform, because of the eBay want to provide a global trading platform, the need to face much issues like conduct many transaction in local currencies, and list product description in local languages, for the solve the issues, eBay has decentralized its value chain configuration by developing largely independent subsidiaries in other country as more than 18 countries. 3. Would you characterize eBay’s value chain as virtual or real? Why? eBay’s value chain is virtual, the reason as eBay works by helping individuals, and interested big businesses, buy and sell items in thousands of categories including antiques and art, books, business and industrial,
  6. 6. cars, CDs and DVDs, clothing and accessories, coins, collectibles, computers and electronics, home furnishings, real. estate, sporting goods and memorabilia, stamps, tickets, toys, and travel, but doesn’t real produce or handle any of the products that sold on the eBay sites. In reality, eBay’s an intermediary during the deal process; it acted like a sophisticated software program running on a bunch of networked Web .servers that left much of the work to sellers and buyers. Operationally, then, eBay created an efficient distribution system that demanded virtually little supervision. Sellers paid eBay for the opportunity to design, set up, monitor, and supervise their particular auctions while buyers used eBay’s software to search for products and place bids. After the auction clock ran out, the seller contacted the winning bidder to negotiate payment and shipping terms. 4. Consider again your description of eBay’s strategy. Is it different from what it was ten years ago? Why? eBay’s essential strategy has same with ten years ago as global strategy; eBay’s platform was the premier segment website in more than 18 countries and has 114 million registered members from more than 150 countries. But only implemented of strategy has changed, like eBay has expanded its presence in its core market USA, and extended its operations to other countries, and rely on local sites that served Australia Austria, Belgium, Canada, France, Germany, Ireland, Italy, Korea, the Netherlands, New Zealand, Singapore, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom. In addition, eBay had built a presence in Latin America, China and India. 5. What implication to the challenges identified in the case have for eBay’s strategy-today and in the future? The main challenge for eBay is how to extend e-commerce business globally. eBay needs to focus on developing more tools and sophisticated software that support sellers to interact with buyers in many other countries, and include development the advantage translation software and more secure and more sophistical payment system that could support to exchange currency of buyers from different countries. And other challenge is government regulation which is inevitably stymie for eBay, the company should be try to avoid the activities that infringe local rules, and reminder the seller follow the local government regulation for reduce the risks.
  7. 7. VI. Leanings After study the Globalization of eBay case, we learned that the configuration and coordination of a value chain responds to changes in customers, competitors, industries, and environments. Like, eBays’s value chain it’s from discovery the buyers and seller products that typically don’t have an efficient distribution system and develop, improve, provide the platform to the buyer and seller. And eBay’s success and become a international company, because of its ability to bring customers and businesses together at a relatively low cost and overcome barriers such as geographical location, language, government regulation, cross cultural/ race getting in the way. It has allowed a lot of people to become an entrepreneur through the sale of goods and provision of services over the internet.

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