eBay Case Study & Questions

ad the case “eBay” attached and answer the following 5 questions below.

Question 1: How did eBay pursue international growth through a corporate strategy (corporate strategy framework)?
Question 2: What are the criteria of a company to expand into international markets (Porter Diamond Model)?
Question 3: What international strategy does eBay follow (international strategy framework)?
Question 4: What source of competitive advantage does eBay have, and is that position supported by its resources and assets (competitive dynamic framework)?
Question 5: How does eBays’ strategy affect its financial performance (analyze three financial ratios)?

ANSWER

eBay Case Study and Question

International Growth Through a Corporate Strategy

eBay relied on the corporate level strategy to diversify its business through increasing the product offerings, boosting its customer bases, and increasing its global reach. The corporate strategy has focused on how the business is being managed to create value by entering into new markets. Through diversification, eBay has been able to expand its operations and entered new markets through which it has benefited from sharing activities such as acquisitions and mergers, joint ventures, strategic alliances, and internal development.

eBay has huge competition from the online auction industry through engaging in acquisitions of several online businesses globally. eBay has also been involved in joint venture partnerships with marketers and providers and strategic alliances with companies such as Yahoo, Tom Online, and Google to effectively expand into the new markets. For instance, expansion into new markets through acquisition has been effective since eBay has been able to slowly incorporate the newly acquired sites within the Asia Pacific region into their global platform.

The Criteria of a Company To Expand Into International Markets

Considerably, assessing, identify, and selecting the right foreign markets to pursue can impact the success of a company in the international market. A company planning to expand into international markets has to consider all the factors that are essential in global business competition. These factors are tied together to determine the competitiveness of the business in the international market. Michael Porter has offered the basic factors that an organization should consider before expanding into the international market.

The porter diamond model identifies the factors that can generate advantages at the international level. These include home demand conditions, government, firm strategy, rivalry and structure, chance, related and support industries as well as factor conditions. For instance, the success of the market is highly reliant on the presence of related supporting industries and suppliers. Depending on the company’s product competitiveness, objectives, and level of resources, the markets to purse can vary considerably.

eBay International Strategy

eBay follows the transnational strategy where the company can offer the standard product as well as meet the specific local needs. eBay has succeeded in this strategy through local acquisition, merges, and joint ventures which have enabled the company to tailor customized local sites for every market.  This strategy has presented centralization benefits that increase global integration and local responsiveness.

Considerably, through this strategy, the company has been able to achieve economies of scale, and boost sales. eBay examines the local market, the United States, and assess the needs of the local consumers and fulfill the demands. Through global integration, they have been able to maintain centralized management to oversee the company’s international operations. The transnational strategy has enabled the company to deeply penetrate into the local markets which facilitate global standardization and efficiency.

Sources of Competitive Advantage

eBay’s competitive advantages pay attention to increased customer base to boost the success of e-commerce. EBay’s low operating costs, cutting edge technologies, acquisition strategies, and economies of scale are the reasons why the eCommerce thrives as well as globally develops. Considerably the economies of scale offer large companies such as eBay with a competitive advantage since the company gains large entities over small ones. Additionally, eBay has developed and maintained a competitive advantage grounded on cost minimization which leads to lower prices and increased profit margins.

Cost minimization at eBay is involved in technologies that lower the variable and fixed costs in e-commerce operations. Cost leadership strategy has enabled the company to expand the market share by focusing on the middle class which has made the biggest portion of the consumer market. Brand awareness, easy accessibility, and affordability across the globe have led to a strong competitive advantage boosting sales and encouraging consumption. Therefore, capitalizing on low operating costs, cutting edge technologies, and economies of scale have increased the population of users who rely on eBay’s online retail platform.

eBay’s Strategy and Its Financial Performance

eBay business strategy can be considered as service differentiation since it focuses on the user experiences of both the sellers and buyers. eBay strategy has improved its financial performance through the volume of transactions, attracting buyers and sellers, brand recognition, pricing, and a variety of products and services. eBay management team has paid attention to acquisition strategy over the last 10 years where it has acquired more than 40 companies globally.

eBay’s rate of equity has increased over the past three years which means that the company is effectively utilizing the shareholder’s resources to generate revenue. The high return on equity indicates that the firms are achieving more profit. EBay’s gross profit margin has increased which indicates that they have been making a reasonable profit on sales. The net profit margin has indicated the increased profitability of eBay. Considerably, the increase in the net profit margin shows that there is enough profit from the sales. Therefore, eBay’s strategy has been appropriate with regards to boosting the financial health of the company.