After completing my analysis of eBay, I have come to several conclusions that I would like to share with you. First, I will outline the problems that eBay and the rest of the online auction industry will face in the future. Then I will discuss my analysis and evaluation of eBay within the industry. Finally, I will conclude with some specific recommendations that eBay should take advantage of in the future.
The online auction industry is a huge market, but the growth is slowing down. In 1999, U.S. e-commerce revenue accounted for 65% of the total amount. In 2003, it had declined to only 38%. It is becoming more and more saturated with new entrants due to the low entry barriers.
[...] In order to maintain that position, eBay must evolve with consumer preferences. The online auction industry is attractive to established companies more than new entrants. Due to the industry being dominated by only a few companies, new entrants will have a hard time competing for a big portion of the market share. To maintain a current position in the market or gain market share, a company needs to take advantage of opportunities that are present. Opportunities are easier to be obtained by already established companies like eBay. [...]
[...] Latin America Industry 2,750 auction sites, but only dominated by a few large companies Slowly becoming more mature Becoming more competitive due to the shrinking amount of market share up for grabs Barriers to entry Start-up costs are relatively low to begin with due to the small amount of inventory required if any Costs become higher when expanding internationally and needing more technological equipment to maintain the website Pace of Technological Change Industry members need strong technological capabilities Rapid innovation due to the technologically-based industry Upgrading programs required Seller Needs and Requirements Ability to post information about products in a timely manner Fast turnover of items Low fees involved Buyer Needs and Requirements Desired product at the right price Five Forces Model: eBay Driving Forces eBay.com Growth in Internet usage (profitability increasing) g. [...]
[...] The driving forces of the industry will allow eBay to recognize situations and adjust strategic positions in order to perform well and increase profitability in the future. The industry is driven by the consumer. More and more consumers are obtaining access to the Internet. With available Internet access, consumers are turning more towards commerce because it is faster and eliminates the “middle man.” The demographics are also changing the industry. With society aging, online auction websites need to be more consumer friendly, especially for the computer-illiterate consumer (see appendix 3). [...]
[...] Return on assets ratio shows that eBay has been successfully increasing the amount of income coming from each dollar's worth of their assets. aw. This is also a sign of good company leadership. Return on Equity from 1999 to 2003 ax. Return on equity revealed that eBay has obtained a higher return on equity over the past several years. eBay is getting better at generating more cash internally. ay. The higher the ROE, the better. eBay's Stock Price Performance from March 2003 to February 2004 Date Open High Low Close Volume Adj Close Source: www.finance.yahoo.com, September eBay's Consolidated Balance Sheets 2003 (in thousands) Year Ended December 31st Assets Current assets: Cash and cash equivalents $ $ $ $ $ $ $ Short-term investments Accounts receivables, net Funds receivable Total current assests $ $ $ $ $ $ $ Long-term investments Restricted cash and investments Property and equipment, net Goodwill Investments Deferred tax assets Intangible and other assets, net Total assets $ $ $ $ $ $ $ Liabilities and stockholder's equity Current liabilities: Accounts payable $ $ $ $ $ $ $ Funds payable and amounts due to Accrued expenses and other Deferred revenue and customer Debt and leases, current portion Income taxes payable Deferred tax liabilities Other current liabilities Total current liabilities $ $ $ $ $ $ $ Debt and leases, long-term Deferred tax liabilities, Other liabilities Minority interests Total liabilities $ $ $ $ $ $ $ Series B redeemable convertible warrants Total stockholder's equity $ $ $ $ $ $ $ eBay's Income Statements 2002 (in thousands, except per share figures) Source: Company financial documents Competitor Analysis Amazon.com Auctions Amazon.com is considered the closest overall competitive threat to eBay. [...]
[...] If that side of the business is lost, eBay will be in big trouble. The company needs to develop a separate catalog for professional sellers with massive amounts of items. Consumers use eBay not only for collectible items, but staple items as well. It is a huge market eBay needs to get better at. Another opportunity that eBay needs to be more aggressive on is the international market. Western Europe is expected to have a huge expansion in Internet users. [...]
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