New technologies, especially the Internet, have a strong influence on all industries. Even the Internet has changed the way businesses expand globally and compete with each other. The Internet lowers barriers to entry, provides buyers with more information to make better buying decisions, and creates a new marketplace. As the Internet usage increased, E-commerce which means doing business transactions over the Internet becomes more popular. For example, eBay, which is the world's largest E-commerce where buyers and sellers can interact with each other with more than 100 million active users globally among 221 million registered users. Pierre Omidyar, eBay founder said "What I wanted to do was create an efficient market, where regular people could compete with big business". In 2011, $68.6 billion of goods sold on eBay, which was more than $2,100 every second. Although eBay has made outstanding performance in the E-commerce industry, there is still threat of competitors and its desire to expand market shares in Asia. As its expanding plan into global market, eBay has acquisitioned the leading auction sites in 23 countries in the Europe, North America and Asia Pacific, and eBay greatly succeed in the world except Asia market. eBay still tries to penetrate and have more market shares, but faces challenges in Asian market. There is a great of possibilities to make profits in Asia market because Asia's population is more than half the total population of the world. According to the textbook, Internet usage growth is 621.8% and usage as % of world is 42.0%. It shows that Asia market is a big market to make profits for eBay.
The main analytical model that can be used for the external environment of eBay is Global Strategy. Global strategy is characterized as "high pressures to lower costs and low pressures for local adaptation" (Dess, Lumpkin, Eisner & McNamara, 2012). This analysis of the eBay will be broken down into strengths and limitations.
Strength
The efficient distribution system of eBay applies to the strength, "standardization leads to high economies of scale, which results in lower costs". The system of eBay consists of buyers who use eBay to search for better price of products and bid for the products while sellers who pay for the opportunity to sell their auctions. Since eBay set the efficient system as an intermediary in the market, eBay has enjoyed the high economies of scale. This system generated 65 percent of eBay's revenue by charging sellers a fee when each product is sold. In 2010, this revenue was about $5.7 billion of $9.15 billion total revenue.
Another strength is helping create uniform standards of quality throughout the world.
At the time eBay started its own business, Pierre Omidyar, eBay founder based its business on five main values. One of the main values, "everyone deserves recognition and respect as a unique individual", shows exactly what eBay pursues for uniform standards of quality throughout the world. In E-commerce industry, what is the most important one? It may be the trust between its users. To gain trust between buyers and sellers was the most important issues to eBay. In this eBay case, eBay has contributed to make community values. eBay has an open forum where its users can post their opinions and feedback to create the sense of community and the trust between buyers and sellers in the world. As online trading platform, eBay depends on delivering network benefits. eBay has been developing many services to support trading on the eBay platform, such as Auctionwatch, an automated item listing service, and a dispute-resolution service to all users throughout the world. To enhance the trust between its users, eBay acquired PayPal in 2002. It is one example of eBay's uniform standards of service throughout the world. It allows its users to send and receive online payments securely with no sharing financial information between its users. eBay provides its service in 190 markets, allowing 25 currencies around the world, and PayPal service enables global commerce. Another example is Skype. eBay acquired Skype in 2005. It has improved communication between buyers and sellers. In addition to these services, eBay's feedback forum where buyers and sellers are recommended to post comments at the final of each transaction allows its users to view this information globally.
Limitations
eBay is a global auction E-commerce website which attracts buyers and sellers globally. There are some risks and challenges to eBay doing business globally. By adapting the global strategy, eBay could lead some limitations which are "limited ability to adapt to local markets and concentration of activities that may increases dependence on a single facility" (Dess, Lumpkin, Eisner & McNamara, 2012).
Even though eBay continued to performing aggressive expansion to expand its market into domestic and international, they had been struggling in international market, especially in Asia market. Because of low entry barriers to entering E-commerce industry relative to other industries, there are many existed competitors and it could be hard to adapt to local markets. eBay has adapted the global strategy to expand in Europe and Latin and eBay is a top leader of E-commerce in the world except Asia. Because it was possible to rapidly accommodate local needs working with its partners. Also with customized site, eBay matches up specific local needs with affording access to the online global community. However, eBay tried to expand their market shares to Chinese market by joint venture with Tom Online which is mainly selling cell phone add-on services. But this was turned out as failure movement to increase market shares by meeting up with local needs and lack of success to compete with Taobao which is China's top online auction market leader thereby eBay couldn't build a community effect in China. Instead of learning their culture and trends, eBay had tried to replace local management with their employees quickly. These may lead eBay's lack of success in China since Asian culture is more pure-blooded.
Another limitation is the Internet usage. As mentioned above, one limitation from employing the global strategy is that risks from concentration of activities may increases dependence on a single facility. For eBay, the internet usage is playing an important role because eBay make profits from buyer's commission. With high internet usage, eBay allows to attract more buyers and sellers which will result in more profits to them. One reason for eBay succeeds in North American and Europe is about 77 percent usage rate in North American while almost 21.5% of the Asia Pacific population using the Internet. Also almost 50 percent of the world's population lives in the Asia Pacific and many researches showing that some Asia country has the largest online usage growth rate in the world. This might be tremendous opportunities for eBay to increase market shares but as affairs stand this is main limitation for them.
The last reason for eBay struggling in global online shopping is strong competitors. eBay originally started business in America and later they tried to expand their business globally. However, there are already many competitors in the E-commerce industry and even as eBay has widen its business areas, there are more competitors to bring into the markets. In every country, there is a leading E-commerce website and even worse that Yahoo and Amazon did joint venture with strong company in globally. For example Yahoo bought stocks in Korea auction site, GMarket and Amazon took over Auction which is another major auction website in Korea. Even more Yahoo entered a strategic partnership with Alibaba which is parent company from Taobao in China. Many competitors absorbed from many auction site that already existed in other country such as business model and strategy. It might help Yahoo and Amazon to increase market share in globally, but for eBay, it might be another challenge to be a leader in Asia market.
