Problem Ebay’s revenues from foreign operations don’t exceed domestic revenues. II. Background In 1998, Meg Whitman the CEO of eBay, wanted to perfect eBay’s concept in the United States before going abroad. However, she soon realized that many small competitors were springing up around the world. She became concerned that unless eBay went global, she would forfeit many opportunities to these small local firms or to major firms such as Amazon and Yahoo!. Meg Whitman decided to expand around the globe with its first foreign country, Germany. It was chosen in because of its 40 million Internet users.
The company purchased Alando, an eBay copycat site, for $47 million in June 1999. Today, Germany is eBay’s largest international site, with estimated annual total sales of $7 billion versus $20 billion for the United States. In 2000, eBay had virtually no international operations, by 2005, the firm had sites in 31 countries around the world ranging from Brazil to Germany and China. eBay’s 2005 foreign operations generated well over $1 billion in revenues. And of eBay’s 135 million registered users, about half live outside the United States. Shortly after purchasing Alando, eBay launched its own site in Great Britain and Australia.
In 2001, eBay purchased Korea’s Internet Auction Co. And Europe’s iBazar that gave eBay immediate access to Italy, the Netherlands, and Spain. eBay then purchased a minority interest in MercadoLibre, Latin America’s leading auction firm. In total, eBay has invested nearly $2 billion in its international acquisitions. III. Objectives To increase revenues to not less than $13 Billion from foreign operations in the next year and expand in other international markets with the least cost possible. IV. Assumptions (SWOT Analysis) Strengths: World’s largest online auction website No retailer has more products than eBay
Virtually no direct competition in the online auction space Platform tools: Customer relationship management, connecting sellers with buyers. Stronghold of online payment Brand / Market Leadership Innovative developments Weaknesses: Service only available online Capabilities more easily replicated as technologies become more readily available and cheaper to implement. System shutdown and outages. The market of some of the products is saturated. Opportunities: Further expansion into international markets Branch out into other online services Skype divestment Countries with high number of internet user
Other retailers who want to go On-line Threats: Google Checkout expanding into core eBay products (Paypal) Other e-commerce sites (Amazon, specialty retailers) Online security – a online security scandal could be disastrous to the company Competition Seasonality of some products Interest and foreign currency exchange rates Competition from new auction websites such as ebid. com, madbid. com. New competition also arising in the ‘hot food’ market with sites such as Bid2eat. co. uk Scammers and phishers V. Alternative Courses of Actions Maintain foreign web companies, because eBay already has 4 foreign acquired web companies.
It is already enough to make the expansion globally. Alando’s strategic location can target the continent of Europe, Korea’s internet auction company can target Asia and Australia, since Australia is near Asia. Europe’s iBazar can include Africa at the same time Europe while Mercadolibre can empower the local operations in North and South America. They could use geographic segmentation in order to empower the global strategy that they are using. These foreign web companies which have been acquired by eBay are strategically located to target the different continents.
Since in a geographic area most cultures are the same they could just customize the language for each location in the specific continents. The website will still be flexible to adapt other countries with far locations. Through this eBay could reach the geographically dispersed consumer that could add to the revenues from foreign operation and reach the objective of increasing revenues by $13 Billion. We’ve assumed this figures because 46% of the trading revenues are coming from foreign operations and the current estimated annual total sales of eBay is $20 Billion for domestic market. Bay could also capitalize on customer information and relationship to convert on-line non-shoppers to trust eBay retailers with the convincing low prices, money-back guarantees and wide product selection. This would also give other retailers from distant places an opportunity to sell their products on-line and enabling the company to empower their global strategy. Non-online buyers could shift to on-line buying that could add up to the revenues in order to level the foreign revenues from domestic revenues.
The company can also refurnish the playbook strategy in order to eliminate competitors which are only using eBay to gain information from the web. VI. Solution / Conclusion We therefore conclude that eBay should intensify its efforts to increase the revenues from foreign operations. Because of about half of the registered users who live outside the United States their efforts were only able to generate revenue of $7 Billion (Germany) compared to half of the registered users who live in the United States that were able to generate a revenue of $20 Billion. Bay should also target the different countries with high internet usage ratio that could add up to the revenues. It is evident that when eBay targeted Germany it was able to generate $7 Billion at the present period. They could also use the foreign acquired web companies to intensify its efforts, through this they could expand at the least possible cost at the same time generate more revenues.