Online Auction Company Called Ebay The Information Term Paper

Excerpt from Term Paper :

online auction company called eBay. The information gathered on eBay was gathered through various techniques including the Ten Commandments of case analysis, ESP-TE, PETR-PEC and AM-FAMUS. The report tries to therefore present eBay's strategic and long-term plans, criteria objectives, and other key data facts through statistical information and models and other indicators of key success factors. The report is presented in a SWOT analysis format so as to simplify the presentation but the detailed insights into factors like organizational strategies, strategic and partnership alliances have also been incorporated.

Company Past

Pierre Omidyar founded the Internet auction site called eBay in 1995 and named it after the San Francisco Bay Area. Omidyar's fiancee had complained to him that she was not able to find people interested in collecting or trading Pez dispensers online so he intervened and created an online auction service. Prior to eBay, online auctions were either business-to-business or business-to-consumer. There had been nothing comparable to his concept either online or off.

The idea of eBay can be compared to a local flea market or yard sale. The concept was obviously a good concept and well received so in 1996 the site was incorporated and Omidyar became CEO.

Today, eBay is the largest site of its kind. Many erroneously think that the "E" in eBay stands for the word electronic like a company Omidyar had started a few years before called "EShop." But Omidyar actually named eBay "EchoBay" but when he tried to trademark the name it was already taken. "Within a moment of consideration "EBay" was born. But why 'EchoBay' in the first place? "Because it had a nice sound to it" Omidyar said." (Griffith, 2003)

Company Present

eBay Inc. continues to serve as an Internet-based community market for buyers and sellers to meet and buy or sell just about anything. The eBay online service still provides the same services as its founder envisioned: to have sellers list items and buyers bidding on those items. The service is available 24/7 and continues to bring in huge profits because of cost efficient technology handling the majority of the process. The site has shown that it is not seasonal yet profits do dramatically increase during the Christmas and holiday seasons.

'Through the PayPal service, the Company enables any business or consumer with e-mail in 38 countries to send and receive online payments." (Yahoo Finance, 2004) PayPal service is a wholly and majority-owned subsidiary of eBay. eBay has sites all over the world including the United States, Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, Ireland, Italy, The Netherlands, New Zealand, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.

Company Future

The eBay stock is a buy and hold opportunity with the potential of eclipsing Microsoft of the late 1980's. The five years past performance (See Appendix A) has not been affected by economic shifts and will continue to buck economic trends. "Well, I want you to know that eBay's business is thriving, and the proof, as always, is in our metrics and results. In Q3, confirmed registered users grew 56% year over year to 86 million people. If eBay were a country, we'd be the 12th most popular country in the world. Gross merchandise sales, or the value of the goods and services sold by those users, increased 53% year over year to a record $5.8 billion." (Rubash, 2003)

The stock analysts seem to all concur that the eBay as a company will continue to do extremely well. (See Appendix B) EBay is a full twenty percentage points above industry standards which makes them a force to be reckoned with. (See Appendix C) The biggest concerns the company has is how best to use their profits. "First of all, with $850 million in operating cash this year, and that billion next year and bunch of it around already, what are you going to do with it?" (Rubash, 2003)

How it works

Unlike the vast majority of e-commerce sites, eBay was profitable almost immediately. eBay serves in the role of broker in online auctions. Initially, eBay did not own items being sold on its site and therefore was not responsible for distribution. Over two million people visited eBay a week, and the amount of money exchanged for goods sold exceeded $6 million for the year. (Griffith, 2003)

Bidding was free but there was a range of twenty five cents up to two dollars per item for listing items. There was also a two and a half percent commission based on the ending sales price. "Much of the site's success appeared due to Omidyar's sense that while people wanted a central location to buy and sell items, they also wanted to be able to talk with people with similar interests. From the beginning, eBay's auction service sought to create the sense of an old-fashioned market and encouraged communication between hobbyists and collectors." (Griffith, 2003) -- Official Website

SWOT - Strengths

Every organization has some strength. For eBay, it is market leadership and immunity to economic downturns as well as the potential for even bigger profits through currently untapped partnerships. As can be demonstrated by the company common stock growth, eBay is a market leader that is close to being considered a monopoly even though there are no barriers for competition entry.

Unlike any other commerce destination in the world, eBay has demonstrated unprecedented growth in users, product breadth, and sales volume. As great as individual buyers and sellers have done on eBay, the company has the potential for very lucrative partnerships with merchandisers and manufactures form all over the world. eBay is not bound by the customary boarder and tariff issues most companies have to contend with which makes it a viable solution as a tax shelter for companies.


Every organization has some weakness. For eBay, the weakness is in excess inventory and idle assets caused by large manufacturers, retailers and distributors using eBay as a clearing house. "More and more large companies view eBay as a necessary part of channel strategy to access a broad market of consumers, businesses, and reseller buyers (Business Editors, From the North Pole to the Net: eBay Makes Better Gift-Giving Possible This Holiday, 2003) eBay is put in a position where the individual consumer cannot complete with the larger companies dumping product.

Another weakness is that short product returns are not eBay's responsibility so when liquidators or other sellers do not refund purchases or honor exchanges, eBay is labeled by the consumer. "These methods, however, tend to potentially create, high carrying costs, slow inventory turns, negative brand impact, loss of customer relationships while resulting in minimal margins." (Business Editors, From the North Pole to the Net: eBay Makes Better Gift-Giving Possible This Holiday, 2003)


All organizations have some opportunities. eBay has vast opportunities because they are cash strong. The company has the opportunity to invest heavily in research and development regarding internet technology advances. This foot in the door will guarantee that they are never behind the eight ball so to speak.

Another opportunity is that they have yet to tap the potential of partnering. An example of lucrative partnership can be demonstrated by Sure Fit and Accenture. Sure Fit Inc. is the furniture cover company in the United States. In 2003, Sure Fit announced that their gross merchandise sales sold on the Sure Fit eBay outlet exceeded one million dollars since the launching of the new store on eBay. (Business Wire Logitech Brings the Power of Video to eBay, 2003) As an example for other companies, the Sure Fit eBay collaboration could potentially work for any merchandising or manufacturing organization in the world. eBay would surly profit from other such negotiations.


No organization is immune to threats. For eBay, the threats are numerous. The first threat to eBay is fraud. The problem related to fraud and the internet will always be a problem. When eBay was still young, many sellers were not delivering goods that were paid for. "In November of 1997, the U.S. Senate's Permanent Subcommittee on Investigations conducted hearings. The National Consumers League found that fraud reports tripled after it created its Internet Fraud Watch project in March of 1996." (Business Wire Logitech Brings the Power of Video to eBay, 2003) "The problem basically is that auction sites really don't take responsibility for the sales if they go bad. They merely put the buyer together with the seller" (Business Wire Logitech Brings the Power of Video to eBay, 2003)


This paper was a summary of my full case study of the online auction company called eBay. The information gathered regarding the company was gathered by using the Ten Commandments of case analysis, ESP-TE, PETR-PEC and AM-FAMUS. The report attempted to present eBay's strategic and long-term plans, criteria objectives, and other key data facts by presenting statistical information and key success factors. The report was presented in a SWOT analysis to simplify presentation but the detailed insights into factors like grand strategies, subsidiaries…

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