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Marketing Case Study: eBay

Online trading program eBay were only available in 1995 when Pierre Omidyar began his unique online public sale site. Originating from United States, eBay grew rapidly and soon, internet surfers from worldwide were market size that was double that of US. With eBay's globalization into more than 23 countries, problems started to rise. The speed of eBay's globalization was, perhaps, too fast for the foreign countries to adapt to the e-commerce that is operated as an auction site such as eBay.

In basic, problems such as translation software, administration legislation on various regions of business, digital separate on earth, and culture of anticipants' attitude toward e-commerce hindered eBay's expansion. eBay's ex - CEO, Meg Whitman, acquired a perspective of providing a worldwide trading program where pretty much anyone, everywhere, could trade almost anything at anytime. However, critics of eBay stay skeptical on if eBay can conquer its components of barriers and obtain growth. The problems mentioned above are definitely factors of eBay's barriers to development, but eBay's stall on progress can be described in conditions of strategies that they use overseas.

eBay wanted to extend internationally using global strategy of AAA-Acquisition, Activation, and Activity. The strategy did the trick successfully in Europe, but in the face of East Asia, they confronted some hardships. First, value chain of eBay really helps to know very well what eBay is all about.

eBay's Value Chain

Because eBay is a company that provides online platform for individuals to trade with one another, eBay does not sell anything directly to the users of eBay. Somewhat, eBay's product is the website itself. This makes the worthiness chain of eBay to be quite unique compared to other many e-commerce companies. You will discover five main activities of which create worth for eBay:

Website Building

Maintenance of the Website

Regulation of Policies

Marketing

Service

As eBay's past CEO, Meg Whitman, said, eBay's perspective is to construct an online platform to let anyone, whenever, and at anywhere trade anything. In other words, their ultimate goal is providing an excellent system that anyone can use. So, the first and foremost value creating activity is the basis for website building. That's where most of the value for eBay is established. Next value addition is how the website is managed. As the web site itself is a electronic product, it can create problems for the internet users on the process of using it, and the web site is rather susceptible to disorders from outsiders such as hackers. Therefore, strong maintenance to donate to operation of this excellent website is a trust-building activity that contributes value for the clients. Next activity that also develops trust to its users is the rules of the web site. Procedures that help users to have a good experience with usage of the website are extremely important to building trust between eBay and the users.

Marketing of eBay can refer to TV commercials, adverts, and extension of eBay to international marketplaces. As eBay is subjected more to the people through advertisings, value of eBay will be added through brand recognition. Lastly, through supporting users with specialized problems, communication problems, repayment problems, and other method of problems regarding the usage of the website, eBay can add more prices for itself from its service activity.

As one might expect, eBay's value chain is mainly exclusive. Only a fraction of eBay's "product" is a physical form which is the servers they use. In order to handle a whole lot of traffic to the website and improve the capacity of information uploading, physical servers have to be set up in several regions of the geographical parts. Besides that, all of the alternative activities are virtual. The product of eBay only interacts in a digitized world of internet with the end-users. Because eBay's product is exclusive, marketing strategies abroad have been not so successful when it comes to building the brand eBay.

Its unique structure of value chain demands specific coordination for marketing. It made a good settings to the product of eBay. Yet, in terms of marketing, the strategy of global AAA does not seem to be to work proficiently to increase "eBay". There is a dependence on some local responsiveness for eBay to succeed in foreign marketplaces. However, when eBay acquires local online trading sites, it loses its value as what eBay has been located for because its placement doesn't fully comply with the center competency of eBay. Actually, an option such as "buy it now"-starting in US-made eBay lose its value as an auctioning website. Not only that, but also that a few of the acquired companies do not operate their trading system in a form of auctioning, but instead just sales list. This makes the eBay's worth to decrease, effectively losing the worthiness that it has generated and added through other principal activities. Simply, settings for primary activities apart from marketing has been adding value to the business, but marketing activity has resulted in eBay's placement to be obscure. Quite simply, eBay is disregarding its primary competency.

Core competency and problems with Korea

The core competency of eBay is as simple as an analyst places it: "The 3 key options to eBay's success were community, community, and community" In other words, eBay's primary competency is 'public sale predicated on community. ' Along with the first increase that eBay gained by first-mover's-advantage in the online public sale market, eBay gained lasting competitive benefit by operating its business through equality, trust, common admiration and responsibility of the community. This is especially important to eBay because as Pierre Omidyar said, "people do not do business without trust and trust is shown when people treat others with value. Therefore how they treat others has immediate influence with this business. " eBay created and reinforced this community culture with several methods:

Being in a position to publish information about 'me'

Uploading personal information about owner themselves (for example, brief information about their company or types of procedures of the development)

Feedback grading

Enabling customers and sellers to rank each others' performance through the transaction which makes them to become more respectful and well-mannered; therefore, it eventually added to the entire standing of the community

eBay caf

Chatting site for the purchasers and retailers to converse where users can exchange information about the needs or needs of every other, enhancing the business deal of products

customer(both potential buyers and vendors) support

voice of customer(both buyers and vendors) day

Overall, the platform itself was reinforced by eBay itself by the constant effort to help make the exchange easier and secure. However, offering a shape to the core competency may vary from country to country and the method that eBay decided to go with for globalization, which is through acquisition, made eBay more challenging to exploit its core competency. That is due to the fact it is hard to copy or build the community culture of eBay if there already can be an existing culture or structure. eBay recently got over G-market, who once was the main rival to eBay in Korea's online market, increasing 90% of the online market show (Chosun. com) in Korea. Playing a job of monopoly, eBay will gain substantive amount of income for another few years in Korea. However, until 2008 eBay possessed to go through a huge have difficulty in fighting with each other against G-market.

"When compared with the meteoric climb of G-market, Internet Public sale even appears like a setting sunshine, " - Kim Chang Kwon, an online analyst at Daewoo Securities in Seoul (Bloomberg business week)

The reason behind a failure in the battle against G-market though Public sale, in our point of view, is fundamentally linked to auction that's not adapting to eBay's key competencies. The culture of Koreans definitely played out role in avoiding eBay's growth, but if eBay realized concerning this, there must have been an action to help Koreans to prefer auctioning rather than simply plain listing. Providing community with the auction as eBay used to in early on years would have helped to execute better in Korea. Simply by taking over a company to maintain earnings is not a good idea for eBay over time because acquisition is too costly as well as that acquired company might not exactly match the central competency of eBay.

Strategy and the Problem

For e-commerce company like eBay, it's best to adapt high global integration as well as high local responsiveness. eBay has been using global AAA strategy which called for acquisition, activation, and activity. In 23 countries, they used acquisition, South Korea and other two countries with a variety of acquisition and activation, and other 3 countries with all three mechanisms. Their initial strategy of their international market was global strategy that was best for high global integration, yet lacked local responsiveness. This type of strategy is good for standardization of the product and cost decrease overall. However, because they wished to flourish in their expansion, that they had to switch into the local culture to create more profits. What this made eBay transform into was a "multi-domestic strategy" which really is a strategy focusing only on local responsiveness. Yet, problems still surfaced and there is a stall in eBay's growth.

With the intensive use of acquisition overseas, eBay make an effort to dominate international market segments. But with the fast growing e-commerce market, eBay possessed to face much more competition which became the targets for eBay's acquisition. This is not good in conditions of cost because acquiring a firm is very costly. For example, eBay has failed to break into Chinese market because they applied wrong strategies. To begin with, eBay directed a German manager to lead the China operation and earned a chief technology officer from the United States. They didn't speak and Chinese language, and didn't have a good knowledge of Chinese language culture. This led those to fail their marketing promotions and their rival Chinese company, Taobao, took over 67% of the marketplace shares in Chinese market. Jack port Ma, a creator and CEO of Alibaba group (Parent company of Taobao), understood that TV commercials were better than bus advertisings or billboards. Also the web site itself only held 10% of its list as auctions while eBay put 40% of listings as auctions. Being at a disadvantage, in the end eBay taken out of Chinese market.

There are many other cases where eBay didn't fully succeed in international market. Often multi-domestic strategy of acquiring companies and working in the ways of these companies led to too much localization. eBay lost the central of what they were about through these acquisitions and high localization. Localization is an essential factor in international business strategy, but global integration is also another factor that must not be forgotten. Over time, a company's identification, core competency, and brand awareness are what determine the higher value of the company. In other words, transnational strategy should be regarded as with strong attention for eBay to efficiently enter new markets.

Deriving using their company failures to contend with foreign organizations, Jay Lee, eBay's older vice-president who minds the Asia-Pacific region, says "G-market has been one of the very most successful e-commerce companies in Asia, and we want to use its model to extend our presence in the region. " However, would this strategy really help eBay stand in its original position as community-based auctioning website in the future?

Solutions

eBay must create a strong brand somewhat than expanding swiftly and declining at it. eBay's users complained that eBay was transforming into corporate and business monster. The changes that eBay has designed to its website such as removing negative feedback and changing the cost structure, made eBay's long standing brand representation of being a "democratizing drive that slice out the corporate world by allowing consumers to buy and sell directly each other" to a corporation image through changes. Nigel Walley, the taking care of director of digital mass media research and development consultancy Decipher and past marketing director of NTL's internet department, said that eBay lacked innovation and have made a strange transition from being an unruly brand to a brand struggling with too little direction. He shows that eBay build a strong brand recognition method to charm to non-users to make sure they are start trying out eBay.

Just as Nigel is suggesting there is a dependence on strong build up for primary competency again for eBay. Because eBay is not placing itself firmly, there is a blurring effect on their brand image. Non-users genuinely have no motivation to even glance at eBay. eBay doesn't need to add new features like "buy it now", but build a community. Favoring one customer over another-regulating eBay plans to prefer "better" customers like small businesses-does not go together with their visionary affirmation. We do understand that circumstances are hard in different situations, but which should not be the factor to changing the whole condition of eBay to reach at small profits.

eBay needs technology, an innovation that won't discord with the central competency or its eye-sight. Providing new service will not necessarily mean changing its trading format from auctioning to plain sales list. They could present a physical location of auctioning for anybody to come and have a great experience for auctioning. This type of new chance through for eBay could increase their brand consciousness and what they're really all about to the people in physical existence. Again, the idea here is to develop and innovate around their central competency alternatively than being influenced by revenue for success. Success will observe when brand image and reputation becomes strong through central competency and their online marketing strategy.

Another alternative solution is to stop enlargement and develop more marketing strategies. Especially in a tiny world of internet, a kind of very effective method of advertisement is oral cavity to mouth ad. Social Networking Services such as Facebook can really impact eBay if people discuss eBay on SNS. That is an effective means of low priced advertising because all eBay has to do for people to discuss it is to master what they're doing.

Surely, there could be some TV advertising, or billboard advertisings, but this is not a great way of advertising for eBay because eBay does not have a specific product. What it requires to do is to tell good testimonies about eBay. Growing brand recognition through non-business activities such as charities, or sponsorship, eBay can greatly add value with their company. eBay failed in a few countries in East Asia because they didn't contain the right marketing strategies. Commercials and ads aren't what marketing is all about. There is a product side from it. If eBay can support what it announces for through excellent service, then people will normally have positive experience which will lead to growth overall. eBay does indeed need a great deal of traffic to its website to generate more transactions to be produced; yet, eBay shouldn't do whatever it takes to just bring people to their website. eBay should make people "follow" their website because of its superiority.

So, if eBay halts their expansion and further acquisitions because of their greed on the profits and focus more on growing superior product (the web site), then the company will naturally grow in size and natural demand from abroad. Because eBay requires internet to be widely used in a country that they would like to broaden into, the natural demand that would increase would source from people with internet. After the demand gets large enough, eBay can easily break right into new market segments without too much trouble. For this to happen, they need significant demand for his or her product, and this would require significant differentiation off their competition in the e-commerce industry. Again, differentiation could emerge from product development.

Recommendation

We recommend the first solution that eBay should start building its brand in conformity with the core competency. Stopping the growth and developing the product might take too much time and may let the competitors eliminate market stocks in the short run. Although both of the solutions are aiming for the long term success, the first solution can be applied quickly without disrupting their main operation of business. Development and new ways to appeal to users as well as non-users of eBay will be the tips to success. eBay should concentrate on success not by the method of profit, but in a perspective of brand identification amongst people across the world. Success will follow once eBay is solidly set up as benevolent unique entity.

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