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Case Study

eBay's problem was that it had lost half its value due to weaknesses in its core auction and retail business. Merchants were declining to sell on eBay and moving to other sites like Amazon that provided better service. eBay was following a market development strategy by focusing on new ways to sell existing products rather than improving products. This led customers to find other sites with more products. The new CEO, John Donahoe, needs to utilize a decision-making process to change eBay's products, customer approach, and business model in order to turn the company around. This may involve finding new ways to incentivize merchants and using promotions to improve the customer experience and drive customers back to eBay.

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PALE ELIJAH JOSHUA D.
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178 views3 pages

Case Study

eBay's problem was that it had lost half its value due to weaknesses in its core auction and retail business. Merchants were declining to sell on eBay and moving to other sites like Amazon that provided better service. eBay was following a market development strategy by focusing on new ways to sell existing products rather than improving products. This led customers to find other sites with more products. The new CEO, John Donahoe, needs to utilize a decision-making process to change eBay's products, customer approach, and business model in order to turn the company around. This may involve finding new ways to incentivize merchants and using promotions to improve the customer experience and drive customers back to eBay.

Uploaded by

PALE ELIJAH JOSHUA D.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Answer the following questions after reading the case.

What is eBay’s problem?

eBay had lost half of its value because of the weakness of their company in core auction and
retail. Also, merchants in eBay declined to sell goods and many of them transferred to different websites
like Amazon because they probably have a much better service for their merchants and customers.

Which marketing strategy was eBay following: market development or product development? Do you
agree with it?

eBay was following market development as their marketing strategy because they focused more
on developing new ways to sell their already existing products. They didn’t focus on improving their
Product which lead the customers in finding new websites that had more products.

What decision-making process should CEO Donahoe utilize to make the decisions necessary to change
the company’s product, customer approach, and business model?

I think changing the customers approach and company’s products are necessary for eBay to
make a comeback in the business world. Company’s products are dependent on the merchants that are
selling in their website, so they must think of new ways to make the merchants use eBay as their
platform in selling goods. Sales and vouchers are also effective in improving customers approach and
eventually lead them to use eBay as their main e-commerce website.

Part 2. DISCUSSION QUESTIONS

Are functional strategies interdependent, or can they be formulated independently of other functions?

Why is penetration pricing more likely than skim pricing to raise a company’s or a business unit’s
operating profit in the long run?

How does mass customization support a business unit’s competitive strategy?

When should a corporation or business unit outsource a function or an activity?


What is the relationship of policies to strategies?

Part 3. STRATEGIC EVALUATION

Choose a company that is currently in a turnaround situation or a situation likely to result in a


turnaround situation. This might be a company that is in the news or a small company with which you
are familiar. The important issue is access to information about the problem. The aim of the project is to
prepare a report which will suggest how the turnaround might be achieved, following the procedure
outlined below.

The project should involve the following steps:

Analysis of the nature of the problem which has emerged. Is it the result of a poor or non-existent
strategy or a failure to realize the strategy already adopted? The focus of this project is on the latter kind
of problem.

Diagnosis of the causes of the problem with the help of the concepts introduced in this chapter. What
are the causes, characteristics, and consequences of the crisis?

Comparison with a similar turnaround problem or problems in the past.

An indication of what is required to turn the company around.

Part 1. CASE ANALYSIS Pierre Omidyar founded a sole proprietorship in September 1995 called Auction
Web to allow people to buy and sell goods over the Internet. The new venture was based on the idea of
developing a community-driven process, where an organic, evolving, self-organizing web of individual
relationships, formed around shared interests, would handle tasks that other companies handle with
customer service operations. By May 1996, Omidyar had added Jeff Skoll as a partner and the venture
was incorporated as eBay. Two years later, Omidyar asked Meg Whitman to direct corporate strategy to
continue the accelerated growth rate of the company. Whitman brought to the company global
management and marketing experience and soon became President and CEO. In almost no time, the
company became one of the Web’s most successful sites, with 233 million registered users. By 2007, the
average eBay user spent nearly two hours a month on the site—more than five times the time spent on
Amazon.com. Whitman expanded the company’s operations and spent more than $6 billion to acquire
companies, such as Internetphone operation Skype, online payments service PayPal, ticket reseller
StubHub, property rental and roommate search firm Rent.com, comparison shopping site
Shopping.com, Web site recommender Stumbleupon, and 25% interest in Craigslist. Expansion and
diversification provided revenue and profit growth plus stock price appreciation. Although financial
analysts wondered how all these businesses would fit together, Whitman argued that she wanted eBay
to be everywhere users wanted to be. At developer conferences, company representatives unveiled new
services that let buyers shop for and purchase eBay items outside of the core eBay.com site. By 2008,
eBay was in trouble. Its stock price had lost half its value over the past three years. The core auction and
retail businesses, which accounted for the majority of revenue, were showing signs of weakness. The
number of active users had been flat for three quarters, at 83 million. The number of new products
listed on the site had increased only 4% from the previous year. The number of stores selling goods at
fixed prices on eBay declined from a year earlier to 532,000. The company had not done a good job of
integrating Skype with its main business. Since its acquisition, Skype’s service had actually deteriorated.
Competition had increased as rival Web sites, particularly Amazon, now provided similar Web services
and eroded eBay’s competitive advantage. On January 23, 2008, CEO Whitman announced that John
Donahoe would take over as the company’s CEO. Donahoe stated that his first priority would be to
revitalize eBay’s core business, even at the expense of investors. “We need to aggressively change our
product, our customer approach, and our business model,” announced the new CEO.

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