Comparison of eBay.com and Alibaba.com

Transcription

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Thomas
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Digitally signed by
Thomas Liquori
DN: cn=Thomas Liquori,
email=thomasliquori@a
ol.com,
o=thomasliquori.me,
l=New York, NY
Date: 2010.09.05
16:57:16 -04'00'
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12/16/2009
Professor Reddi: BUS451
By: Thomas Liquori, Danauda Benjamin, and Anca Barbu
TABLE OF CONTENTS
EBay.com Introduction ................................................................................................................................. 3
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EBay.com Products and Services .................................................................................................................. 5
Ebay.com Financial analysis .......................................................................................................................... 6
Ebay.com Last Three Year Financial Graphs ................................................................................................. 7
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EBay.com TOWS Matrix Analysis .................................................................................................................. 9
EBAY.com TOWS Matrix Graph ................................................................................................................... 13
Competitive Forces for ebay.com ............................................................................................................... 14
EBay.com Industry Rivalry........................................................................................................................... 14
EBay.com Threat of Entrants ...................................................................................................................... 14
EBay.com Supplier Power ........................................................................................................................... 15
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EBay.com Buyer Power ............................................................................................................................... 15
EBay.com Threat of Substitute Products or Services .................................................................................. 16
Ebay.com Core Strategies .................. ……………………………………………………………………………………………………17
EBay.com Differentiation Strategy ............................................................................................................. 17
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EBay.com Cost Leadership Strategy............................................................................................................ 18
EBay.com Growth Strategy ......................................................................................................................... 18
EBay Growth Trend Graphs......................................................................................................................... 19
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EBay.com Differentiation Strategy ............................................................................................................. 20
EBay.com Growth Strategy ......................................................................................................................... 20
Alibaba.com Introduction ....... ………………………………………………………………………………………………………………25
History of Alibaba.com................................................................................................................................ 27
Alibaba.com Products, Services, and Key Brands ....................................................................................... 29
Alibaba.com Last Three Year Financial Graphs ........................................................................................... 30
Alibaba.com Core strategies ....................................................................................................................... 31
Alibaba.com Growth Strategy ..................................................................................................................... 32
Alibaba.com Differentiation Strategy ……………………………………………………………………………………………………34
Alibaba.com Price strategy ......................................................................................................................... 35
Competitive Forces for Alibaba.com........................................................................................................... 37
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Alibaba.com Threats of New Entrants ........................................................................................................ 37
Alibaba.com Rivalry..................................................................................................................................... 38
Alibaba.com Supplier power ....................................................................................................................... 39
Alibaba.com Buyer Power ........................................................................................................................... 40
Alibaba.com Threat of substitutes .............................................................................................................. 40
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Alibaba.com TOWS Matrix .......................................................................................................................... 41
Alibaba.com Strengths ................................................................................................................................ 42
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Alibaba.com Weaknesses ........................................................................................................................... 42
Alibaba.com Opportunities ......................................................................................................................... 43
Alibaba.com Threats ................................................................................................................................... 43
Alibaba.com SO Strategy............................................................................................................................. 43
Alibaba.com WO Strategy ........................................................................................................................... 44
Alibaba.com ST Strategy ............................................................................................................................. 44
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Alibaba.com WT Strategy............................................................................................................................ 44
Comparitive Analysis ................................................................................................................................... 45
Group Investment Perspective ................................................................................................................... 46
Group Challenges ........................................................................................................................................ 47
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Works Cited ................................................................................................................................................. 48
Works Cited: Continued .............................................................................................................................. 49
Ebay.com Last Three Years Income Statements ......................................................................... Appendix: A
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Ebay.com Last Three Years Balance Sheets .................................................................................Appendix: B
Alibaba.com Last Three Year Income Statements .......................................................................Appendix: C
Alibaba.com Last Three Year Balance sheets.............................................................................. Appendix: D
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EBAY.COM INTRODUCTION
Once upon a time during the dawn of the internet, a man named Pierre Omidyar decided
to sell a broken laser pointer online on his website called EBay, named after his consulting
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company Echo Bay. The site at that time during the year 1995 was not primarily an auction site,
the auction part was an afterthought and was named auction web. Auction web grew quickly
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among internet fanatics, and soon Pierre had to hire several employees to take care of the many
tasks that involved his day to day operation. After two years, the site name was changed to EBay,
a site that was devoted to online auctions, soon after, the worldwide obsession with EBay and
consumers. Currently, Pierre is ranked #40 among the 400 richest Americans in the country by
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Forbes, released September 30, 2009.
EBay’s mission statement says,” eBay's mission is to provide a global trading platform
where practically anyone can trade anything." EBay’s vision, “pioneers communities built on
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commerce, sustained by trust, and inspired by opportunity. EBay brings together millions of
people every day on a local, national and international basis through an array of websites that
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focus on commerce, payments and communications”. Comparing the mission statement to the
vision of the company gives off the impression that EBay doesn’t have focused priorities .This
means the mission statement seems clearly focus on the website, eBay.com, but their vision
statement is focused on the array of subsidiary websites.
During the year of 1998, Pierre hired an experienced CEO named Meg Whitman to
become head of the public exploding company who now had 130 employees and a spot on the
New York Stock Exchange with a symbol as EBAY. Over the course of the next 10 years with
Meg Whitman’s leadership, EBay mania grew into an enormous multinational company who two
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years ago employed over 15,000 employees in 39 countries. In January 2008, John Donahoe took
over Meg Whitman’s place as CEO, and currently EBay has 16,200 employees (an 8% employee
increase in one year) in over 30 countries. EBay is an online provider of marketplaces for the
sale of goods and services. It also provides commerce, platforms, online payments services and
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online communications offerings to individuals and businesses. EBay’s foreign entry strategies
into other countries have played a key role in their success for worldwide domination in the
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online auction market. The products and services that EBay offers vary from online
communication services to the sales of goods and services.
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EBAY.COM PRODUCTS AND SERVICES
The products and services that EBay provides is an online marketplace for the sale of
goods and services. The company’s key products and services include the following:
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Online services for the sale of goods and services
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Online communication services
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Online payment and transactional credit services
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Online classifieds
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Advertising
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The key brands that the company has and operates are a number of subsidiary websites
that are under the EBay umbrella. These companies include:
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EBay's fixed price media marketplace Half.com
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EBay’s payment solution Paypal.com: Bought by EBay in Oct. 2002 for
approximately $1,492,504
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EBay’s low cost connectivity communication platform Skype.com: Bought by
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EBay in October 2005 for $3B
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EBay’s credit at point of sale payment solution Billmelater.com: Bought by EBay
in October 2008 for $910M
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EBay's marketplace to buy and sell tickets for events Stubhub.com: Bought by
EBay in February 2007 for $292M
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EBay's online shopping comparison website Shopping.com: Bought by EBay in
August 2005 for $634M
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EBay's apartment listing service platform Rent.com: Bought by EBay in February
2005 for $415M
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EBay’s Swedish online auctioneer Tradera.com: Bought by EBay in 2006 for
$48M
•
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EBay’s green marketplace Worldofgood.com
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EBAY.COM FINANCIAL ANALYSIS
The company generates about 75% of its revenues from the US, Germany and the UK.
The company recorded revenues of $8,541.3 million during the financial year ended December
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2008, an increase of 11.3% over 2007. The operating profit of the company was $2075.7 million
in financial year ending 2008, an increase from $613.18 million in 2007. Net Profit in financial
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year ending was $1,779.5 million as compared to $348.3 million in 2007. The increase in profits
is attributed to acquisitions and increased revenues from advertising and the payments business.
The current stock price as of November 5, 2009 is $23.13, can be seen in the chart on the next
page in the below bottom right table.
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The increases in EBay’s financials for the past three years have been impressive.
According to Annualreports.com 2008 annual report for EBay, the company has seen
tremendous increases and growth for the online giant. Some examples of the increases over the
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past year for EBay and some of its platforms include its payment option paypal.com. In 2007
delivered a total of $1.9 billion in revenue, as of EBay’s 2008 annual report, paypal.com not
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hosts nineteen currencies with more than $60 billion dollars in revenue. A tremendous increase
in EBay’s payment platform suggests that more people are becoming comfortable sending and
receiving money over the internet, as well as the number of internet users are growing as well. In
EBay’s communication segment platform of skype.com, in 2007 skype.com hosted more than
276 million users, as of EBay’s 2008 annual report, skype.com now registers more than 405
million users. The increase of more than 47% shows that consumers are very comfortable with
EBay and the platforms that the company provides. As of EBay’s 2008 annual report, there are
more than $100 billion worth of pre-owned items on EBay, making it the world’s largest engine
for reuse.
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EBAY.COM LAST THREE YEAR FINANCIAL GRAPHS
2007 Year Income
2008 Year Income
$9,000.00
$8,000.00
$7,000.00
$6,000.00
$5,000.00
$4,000.00
$3,000.00
$2,000.00
$1,000.00
$-
$8,541.30
Revenue
(Millions U.S.
Dollars)
$6,313.20
$1,779.50
Fiscal Year
Ending
2008
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions U.S.
Dollars)
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$5,969.70
$4,713.00
$1,125.60
Fiscal
Year
Ending
2006
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$7,672.30
$5,909.40
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2006 Year Income
$6,000.00
$5,000.00
$4,000.00
$3,000.00
$2,000.00
$1,000.00
$-
$8,000.00
$7,000.00
$6,000.00
$5,000.00
$4,000.00
$3,000.00
$2,000.00
$1,000.00
$-
$348.30
Fiscal
Year
Ending
2007
Revenue
(Millions
U.S. Dollars)
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions
U.S. Dollars)
Stock price as of 12/15/09: $22.50
Revenue
(Millions
U.S. Dollars)
Gross Profit
(Millions of
U.S. Dollars)
Net Income
(Millions
U.S. Dollars)
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EBay.com TOWS MATRIX ANALYSIS
EBay faces high risk of internet fraud due to which it is involved in various litigations.
Below we will go over EBay’s strengths, weaknesses, opportunities, threats, and strategies to get
a better understanding of the strategic choices that EBay faces.
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The strengths that the company has can be argued that they were the first to enter the
online auction business, as well as having a majority of the marketplace. The external strength
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opportunities of EBay can be consisted of a strong market position due to wide usage. This
strength can maximize EBay’s opportunities, over the years, the company has built a strong
brand, currently the brand value stood at $12.9 billion and was ranked 54th in brand value
rankings. EBay’s internal strengths have focused on a swift increase in the number of users and
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number of product listings. As of 2009, EBay has 88 million active users and about 150 million
listings worldwide and in any given day, has about 14 million listings. An increased number of
customers contributed to the growth of the company, and it emerged as one of the largest global
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online auction website with presence in 39 countries. EBay’s strong customer base and market
position provides competitive advantage and gives EBay considerable bargaining power which
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will have a positive impact on the top line of the company. EBay’s strength threats strategies can
be consisted of reinforcement of marketing, management, and systems as a concentrated effort.
EBay’s weaknesses can be favorably argued that the company has an insufficient
screening process to control counterfeit products. EBay does not have an effective screening
process in place to control sale of counterfeit products on its market places. While some sellers
commit fraud intentionally, some of them are unaware of any infringement. For instance, some
sellers might not be aware that certain products are not allowed for resale. The company does not
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have effective tools to monitor and weed out such instances. In most cases, the company is able
to identify counterfeit products only after the items have been listed.
The weakness threat strategies can be categorized as having an exposure to large
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contingent liabilities due to litigations. EBay has consistently been involved in various lengthy
litigations, stretched over a period of two to three years because of which it is exposed to large
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contingent liabilities. Many complaints were filed against EBay for offering counterfeit items.
This being the main area of contention, there were lawsuits filed by companies like Net2Phone,
Netcraft Corporation, and PartsRiver which claim that EBay, Skype and PayPal have infringed
their patent rights. In 2007, a lawsuit was filed alleging that EBay and PayPal, through various
anti competitive acts, were monopolizing markets. Most of these lawsuits filed in 2006 and 2007
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are still pending. Lengthy litigations are expensive, and they expose the company to uncertainty
and large contingent liabilities. The damages awarded were as large as $56.8 million in a lawsuit
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which claimed that EBay failed to curb sale of counterfeit products. Other than having to pay
damages, EBay might be prohibited from selling certain items or continuing certain business
practices. This affects the operations adversely. Litigations are expensive, time consuming and
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they result in diversion of significant operational resources. EBay has to actively take measures
to ensure it is not involved in any further litigation as they are counterproductive.
The company’s weakness opportunities strategies can consist of diversifying into new
product markets, as they have been over the years. The company can also try to implement an
online verification of goods being auctioned to avoid very expensive lawsuits and time
consuming litigations that hurt the company. The weakness threats of the company can consist of
the alliance with postal carriers implemented on the company’s website for sellers to choose
from when shipping their items.
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Some opportunities that EBay faces are rapid growth of internet display advertising and
classifieds. Online advertising, both display ads and through classifieds, has been growing at a
fast pace. Revenues from interactive advertising which comprises search, display advertising and
classifieds is expected to grow as at rate of 23.4% during 2007- 2012 and generate $147 billion
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by 2012. Increasing popularity of used goods is another opportunity for the company. In the
current uncertain economic situation where consumer spending has been decreasing, pre-owned
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items have been increasingly popular. Since 1998, EBay marketplace has facilitated the reuse of
an estimated $100 billion in goods. Industry trends indicate the US consumers are buying used
goods as a way to save money. In 2008, according to EBay sources, 75% of adults purchased
used goods to save money. More than a quarter of adults who had purchased used goods in the
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past six months (since August 2008) saved 76% or more off the retail price of the last item they
purchased. Apart from this, 88% of Americans believe that buying pre-owned goods amounts to
recycling and is therefore environment friendly.
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The threats that EBay faces are exposure to internet fraud that will increase costs and
affect customer confidence adversely. Online marketplaces have a high exposure to different
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types of fraud. There are various types of internet frauds including the sale of fake or counterfeit
products, credit card fraud or non delivery of goods, etc. According to the Internet Crime
Complaint Center’s (IC3) statistics, internet fraud has been on a rise. During 2008, IC3
registered 275,284 complaints which indicate an increase in complaints by 33.1% from 2007.
The total dollar loss due to these frauds has been $264.6 million which works out to be an
average loss of $934 per complaint. Effectively eliminating frauds is costly as the company as to
incur large recurring expenses to monitor and prevent such frauds. In case of litigations, EBay
would have to incur legal expenses, and there is a possibility that heavy penalty or compensation
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would have to be paid. Another example of a threat for EBay would be the unavailability of
services that leads to loss of income. System failures for long duration operational risk for EBay
in 2008 had periods of interruptions for periods for as long as 22 hours, and PayPal was
unavailable for five continuous days. In early 2007 Skype was unavailable for two continuous
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days. Repeated failures might lead customers to believe that the systems are unreliable and
reliability is especially crucial for the payments division which is seeking to expand its merchant
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services business. Due to frequent unscheduled interruptions for long periods, the company’s
reputation and reliability will be affected negatively.
EBay’s competitive analysis in the marketplace gives the company a higher advantage
over their competitors such as ioffer.com, sell.com, and alibaba.com. Although the company has
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similar commonalities with their rivals, eBay has several different platforms and segmentations
under the company’s umbrella to help keep them afloat. This is the difference between eBay and
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their competitors. Since they were the first to the market for online auctions, this gives the
company an advantage of trust and well being to consumers who may be new to the internet as
well as online auctions. Consumers and competitors alike recognize eBay as a dominant force on
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the internet, and they are aware of its capability of providing far better than competition.
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EBAY.COM TOWS MATRIX GRAPH
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Strengths – S
Weaknesses – W
Own majority of
marketplace by
being first
Poor screening
process to control
counterfeit goods
SO Strategies
WO Strategies
Diversification with
the growth of
consumers
Global expansion in
products and
services
Online product
verification to
control fraud
Threats – T
ST – Strategies
WT – Strategies
Reinforcement of
marketing and
management
Alliance to postal
services
Opportunities – O
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Competition among
rival internet sites
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COMPETITIVE FORCES FOR EBAY.COM
Porter’s Five Force model of competition is a key tool for diagnosing the competitive
environment:
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EBay.com Industry Rivalry
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Industry rivalry is high when it is easy for new competition to enter the market. In the
case of eBay, it is not so simple for new entrants to compete with the online giant. Being that
eBay was first to the market in 1995, it gave the company an edge early during the dawn of the
internet. Since then, the company has become a notable household brand name and customers are
confident using eBay’s online software for buying and selling items. The threat of competition
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and rivalry is still there for eBay, which will be talked about in the next force of Porter’s model.
EBay.com Threat of Entrants
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Recently, many new entrants have been trying to catch up to eBay. For example,
Amazon.com has come long way as well since it opened up on the web a few years back, and
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earned customer loyalty very quickly among consumers. Some people might feel more
comfortable shopping on this site more than eBay, because it is more commercialized in some
ways. Another example of a threat of entry would be another auction site ioffer.com. Ioffer.com
claims that they are an easier way o buy and sell items, and have been in competition with eBay
ever since they popped up online in the yearly millennium. Instead of auction style listings,
buyers and sellers can make offers’ to one another rather than waiting for an auction to end to
purchase an item. EBay saw this type of strategy and quickly implemented it in the site to
compete with ioffer.com by using eBay’s ‘buy it now or make an offer’ option.
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EBay.com Supplier Power
Supplier power is higher when buyers have fewer choices from whom to buy. The
internet has increased the amount of supplier power to consumers. Buyers have an option now to
become a supplier themselves by becoming a drop shipper for suppliers. The drop shipper does
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not have to store any items in a warehouse or factory with this option, thanks to the power of E-
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Commerce. Drop shippers can earn money by listing items for suppliers and forwarding the
orders to the main supplier. The logistics part is also at the main suppliers’ expense, really not
having to do too much work on the drop shippers’ part except collect their share from the sale.
This type of supplier power gives an increase in products and services to the marketplace, and in
turn continues the growth of eBay’s online website. Especially for eBay, there are numerous
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drop shippers that have set up their own stores on eBay’s site. EBay gives sellers an option to set
up an online store for a monthly fee where shoppers can browse through products as they please.
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EBay.com Buyer Power
Buyer power is higher when buyers have more choices. Businesses are forced to add
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value to their products and services to get loyalty. Many loyalty programs include excellent
services that customers demand on-line. Customers want to solve their problems and many times
they are more successful on-line than on-phone. Also, we see internet savvy businesses springing
up offering more valuable goods and services at lower costs. Now with the advent of eBay, many
people are assuming roles as drop shippers. Individuals can have a thriving business selling
goods of larger companies without having to carry inventory, as mentioned earlier in supplier
power. Another positive aspect for buyer power would be bargain shoppers surfing the web,
especially eBay. EBay offers all prices for all items, especially for bargain and impulse shoppers.
Both shoppers alike can find great deals at affordable prices from the comfort of their own home.
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EBay.com Threat of Substitute Products or Services
The strong competitive pressures coming from the attempts of companies outside of the
industry to win buyers over have become more widespread in today’s E-Commerce market.
There have been an increasing number of fixed price sales over auction style listings over online
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auction sites such as eBay. Search engine and price comparison websites are moving in the
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direction of online retailing and auctions. Yahoo shopping and price comparison search engines
such as Microsoft’s Bing.com have recently been becoming a more popular way to price
comparison shop online. The internet offers avenues of competition to existing companies and
opportunities for start ups. Now businesses can enter the market on-line with few barriers to
entry. Porter's Five Forces Model can help demonstrate the attractiveness of starting your on-line
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business or evaluating a current one such as eBay. The model below will help to better illustrate
eBay’s five forces:
Threats
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Supply Power
Drop
shipping for
suppliers
Competition
with rival
sites
Rivalry
Ioffer.com
Amazon.com
Buyer Power
Bargain
shopper
paradise
Substitute
Price
comparison
sites
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EBAY.COM CORE STRATEGIES
EBay’s strategic statement describes EBay’s activities, “by allowing customers to create
individual auctions and online stores in order to sell new and used products. This process is
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facilitated by the ability to create communities of interest, providing secure transaction services,
and a peer review process in a global environment”. So what does this strategic statement
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actually mean to the consumers of eBay? The opportunity to have individual auctions and online
stores removes the physical barriers between buyers and sellers. The communities of interest
creates added value through base of additional information. The ability to have peer review
evokes customer confidence in buying from a seller that you never met or will see. The global
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environment is open to all and new markets alike. The strategy describes the core competencies
of eBay through the several factors that are addressed. A competitive advantage will be created if
eBay keeps it first mover advantage, and always stays one step ahead of their competition.
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EBay.com Differentiation Strategy
EBay pursues a cost leadership, differentiation, and growth strategy. A differentiation
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strategy that the company possesses is the quality service security that the online website offers,
which is very impressive. EBay monitors many if not all of the listings posted on the site through
the service of thousands of employees. Another impressive tool that EBay has was the first to
implement as part of their differentiation strategy was the ability of quality control by offering
peer review. Buyers and sellers both have the opportunity to “rate” how the transaction went.
Whether the item was received as described and the shipment was fast, causing a positive rating,
or the item was not as described or not received at all, and all buyers should beware resulting in a
negative rating, or whether the transaction was just ok, resulting in a neutral rating.
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EBay.com Cost Leadership Strategy
A cost leadership strategy that eBay has is the ability to form alliances with numerous
companies. An example of this strategy could be the alliance by eBay and Tom.com. In 2006,
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Tom.com and EBay Eachnet (eBay’s China Auction Site) decided to announce a joint venture
agreement in China. The two companies would need to build a new China marketplace in 2007
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to compete with China’s top auction site rival Taobao.com. EBay would have a 49% stake in the
company and tom.com will have a 51% stake in the joint venture. In addition, EBay will
contribute its Eachnet subsidiary, while Tom Online will contribute local management expertise,
technology, and brand.
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EBay.com Growth Strategy
Another strategy that an eBay implement is a growth strategy that involves the fight to
keep up with rival competitors while still trying to grow and expand into an ever so competitive
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market. Amazon is significantly, methodically, and relentlessly eating away at eBay's market
share. Amazon is the largest beneficiary of eBay's decline, but certainly Amazon is not the only
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company causing extensive damage to eBay’s growth process. Online retailers from Zappos to
Newegg to Wal-Mart among others are all doing their part in taking share from eBay. In fact,
many of eBay's changes are actually self-inflicting further declines.
The three bright spots for eBay's quarter were:
•
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Items sold were up 3% y/y
Active users increased 4% y/y (a small acceleration, well big percentage-wise, but small
in absolute terms) from the Q3 3% y/y gain.
•
Fixed price items are now 49% of GMV
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EBay Growth Trend Graphs
Here are some graphs from Jeetil Patel that show the trends in the item sold and active user
metrics:
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The transaction growth chart shows that while eBay held onto a y/y growth on this
metric, the trend is definitely decelerating. It will be interesting to see if this goes negative in Q1
or if eBay can hold the line here.
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EBay.com Differentiation Strategy
Some of eBay’s features to their cost leadership and differentiation strategy consist of
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offering all types of items, including innovative products. The ability of M-Commerce is a big
plus for the online giant. By having the ability of a mobile application, users can use eBay on the
go through their phones, PDA’s, and laptops. Being user friendly and simple is the way eBay
will stay on top of the competition. Also, having the ability of online verification against fraud
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and counterfeit products makes eBay a number one source for buyers and sellers to stay loyal to
the company by having the confidence in the company as they keep up with the industry
standards.
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EBay.com Growth Strategy
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EBay’s growth strategy has a very extensive and impressive portfolio, as it has gained
acquisitions and joint ventures over the years with global companies. In 2001, eBay joined forces
with MercadoLibre (free market in Spanish) the leading online trading site in Latin America.
MercadoLibre will acquire iBazar Com Ltda., the Brazilian subsidiary of iBazar SA, which was
recently acquired by eBay in return eBay will receive a 19.5% ownership interest in
MercadoLibre and will share best practices with the company. The relationship enhances
MercadoLibre’s leadership position in Brazil and the rest of Latin America, and expands eBay’s
reach throughout the region. In March of 2006, eBay invested in Meetup.com. Meetup.com is a
local community organizing network. Over 5 million people have created and joined long-lasting
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local Meetup Groups around shared interests and purposes. These groups and clubs have held
over 1 million local meetups. In April of 2006 eBay acquired Tradera.com for $48.3 Million
USD. Tradera.com is an auction site based in Sweden.
In June of 2006 eBay Inc. and PCHome Online announced that they have agreed to form
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a joint venture in Taiwan. Under the agreement, the companies will leverage eBay's global
experience and PCHome Online's local ecommerce expertise to launch a new co-branded website
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that will bring new online trading opportunities to buyers and sellers in Taiwan under the name
of Ruten.com.tw. Focused on the needs of Taiwan consumers, the website specializes in online
auction-style trading and also offers the ability to buy and sell at a fixed price.
In January of 2007 eBay acquired Stubhub.com for $310 Million USD. Stubhub.com is
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an online marketplace for concert, sport, and Broadway event tickets. In April of 2007 eBay
acquired Microplace.com. MicroPlace is a social business owned by eBay. It focuses on
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microfinance loans sent via the internet, utilizing PayPal, allowing users to choose specific
lending clients and businesses and loan them money over a designated period of time. Unlike
competitor Kiva, investments are returned to the lendee with interest. Microplace’s stated
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mission is to alleviate global poverty by offering investments that enable loans to hardworking
poor people.
May 2007 was a busy month for eBay; they acquired three companies and invested in
another. The first company which was Stumbleupon.com that eBay acquired for $75 Million
USD on May 1st. StumbleUpon is a website and content discovery service enabled by a browser
toolbar. StumbleUpon uses positive and negative user ratings to form collaborative opinions on
website quality. When users stumble, they will only see pages which friends and like-minded
stumblers’ have recommended. More often than not, it’s something almost serendipitously
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interesting to the reader. The StumbleUpon site says they have nearly 7.5 million users as of
April, 2009, up from 1.7 million in December 2006. Over 15 million personalized
recommendations (“stumbles”) are delivered daily. The same day on May 1st eBay invested in
Channeladvisor.com. ChannelAdvisor Corporation provides technology and services that enable
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online retailers to maximize their profits across multiple e-commerce marketplaces such as eBay,
Amazon.com and Overstock.com, comparison shopping engines such as Shopping.com,
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Shopzilla, Nextag and Google Product Search and search engines such as Google, Yahoo and
MSN. In 2007, ChannelAdvisor managed over $2.1 billion in gross merchandise value (GMV)
on behalf of its customers.
Two days later, on May 3rd, eBay acquired Gittigidiyor.com, which in Turkish means
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going, going, gone. Gittigidiyor is a Turkish online marketplace similar to eBay that offers
auctions, stores and fixed price listings. Gittigidiyor is Turkey’s leading online marketplace
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company. It was founded in 2000 by local entrepreneurs in Turkey and is headquartered in
Istanbul. Auctions began at 5 February 2001. Gittigidiyor has over 1.5 million registered users
and more than 500,000 daily visitors. Since 2001, 3.5 million sales have been successfully
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completed. Finally, for the month of May, eBay acquired Gumtree.com on May 19th.
Gumtree.com was started in March 2000 as a local London classified ads and community site,
designed to connect people who were either planning to move, or had just arrived in the city, and
needed help getting started with accommodation, employment and meeting new people.
Gumtree.com now covers 60 cities across 6 countries - the UK, Ireland, Poland, Australia, New
Zealand and South Africa - and are the UK’s biggest website for local community classifieds
including flat share, flat rentals and jobs. More than 25,000 new rooms are advertised a month,
which means at least 10,000 rooms are rented a month through Gumtree.
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On October 4th 2007, eBay acquired Via Online. Via-Online GmbH is an auction
management software company. The company operates web-portal, Afterbuy.com, which helps
users manage various aspects of the selling process, with features like inventory management
and item listing. The company is based in Krefeld, Germany. On January 1st 2008, eBay acquired
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Fraud Sciences for $169 Million USD. Israel and Palo Alto based Fraud Sciences offers
automated anti-fraud systems including SpotLight VFX and SpotLight T2T, merchant solutions
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they provide are transaction verification with fraud prevention. Fraud Sciences has been
integrated into eBay’s PayPal product to help fight against fraud prevention. On May 2nd 2008,
eBay acquired Vuvox. Vuvox makes technology for presenting rich media in slideshows.
On September 25th 2008, eBay acquired Gmarket.com. Gmarket.com is a financial
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information company specializing in the delivery of global fixed income and capital markets
data. The flagship product PILOT is a real-time desktop workstation for financial professionals
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delivered via the Internet. Pilot’s customizable desktop aggregates the world’s leading sources of
capital markets content onto one singular platform for ease of access. It also includes a real-time
direct interface to MS-Excel. They pride themselves on delivering quality content in one easy to
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use, flexible, and affordable package.]
In October 2008, eBay acquired Den Bla Avis for $380 Million USD. Den Bla Avis and
BilBasen are leading classifieds businesses in Denmark and operate dba.dk, an online classifieds
site that generates more than 120 million page views per month, and bilbasen.dk, an online
vehicle classifieds site that generates 66 million page views per month. Founded as printed
classified advertising circulars, Den Bla Avis and BilBasen have successfully made the transition
to fast-growing, profitable online businesses while maintaining the publication of its circulars.
Den Bla Avis and BilBasen have offices in Aarhus and Copenhagen, Denmark.
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During the same month and year of 2008, eBay acquired Billmelater.com for $945
Million USD. Bill Me Later, Inc. provides payment and marketing technology solutions to
multichannel retailers. It offers PayCapture, a set of credit tools; and Bill Me Later that enables
customers to pay for purchases without providing credit card information. The company supports
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and delivers a suite of web-engineered payment solutions; and offers consulting services in the
areas of payments, risk management, marketing, and technology. Bill Me Later, Inc. was
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formerly known as I4 Commerce, Inc. and changed its name to Bill Me Later, Inc. in August,
2007. The company was founded in 2000 and is based in Timonium, Maryland. As of November
7, 2008, Bill Me Later, Inc. operates as a subsidiary of eBay Inc.
EBay has certainly taken their growth strategy process to new levels, buying every
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company that will give eBay a threat in the future. It is a very good strategic move on the internet
giant to invest and acquire numerous companies around the globe. This strategy will only
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strengthen eBay as a company and brand name for years to come. EBay is in a league of their
own and at that moment it seems like no competition can stop them or even compare to the
market share that eBay possess.
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ALIBABA.COM INTRODUCTION
Alibaba is a B2B e-commerce company founded in 1999 by Ma Yun. Alibaba is also the
flagship company of the Alibaba Group. With more than 40 million users and 5 million virtual
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storefronts, Alibaba has been able to climb to the top as one of the most useful online ecommerce businesses.
Alibaba’s primary business is to serve as a directory of Chinese
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manufacturers connecting them to other companies around the world looking for suppliers. It
connects companies with suppliers and manufacturers throughout the world. By creating the
connection for business, Alibaba specializes in trade between buyers and sellers. Its primary
business is to serve the Chinese market with a directory of the Chinese manufacturers. Alibaba
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also offers business management software solutions to small businesses across China using the
"Alisoft" brand. Alibaba was founded in Hangzhou, China. Alibaba.com has offices in more
than 50 cities across Greater China, Japan, Korea, Europe and the United States.
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The mission/vision statement of the company can be defined as; Alibaba Group (Alibaba
for short) is a global e-commerce leader basing in China. Alibaba has 7 subsidiary companies,
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which are involved in the business of B2B, C2C, online payments, software service, search
engine, online advertising, local living, and consumption community, etc. Alibaba is committed
to building the world's leading e-commerce infrastructure and high quality online living
platform. CSR should be born from business model. Only by this, corporation’s can realize
sustainable development. CSR isn’t a burden. Every corporation can find a point to combine
itself with CSR. Everyone should assume social responsibility and can assume social
responsibility in the convenient network environment.
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While holding the Chinese market as its first customer base, Alibaba also works
internationally throughout the world. Alibaba operates in two different marketplaces; the first is
an international marketplace in English personalized to global importers and exporters in China;
the second is a Chinese marketplace that focuses on suppliers and buyers trading domestically in
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China. It also reaches buyers and sellers in more than 240 countries around the world. Since
September 2009, Alibaba.com had gained 45.276 million registered users, which add up to be an
increase of 27% since the previous year.
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Of these users, 10.48 million were from the
international trade market and 35.8 million were from the Chinese trade market. Although
Alibaba started out as an independent company, Yahoo currently holds a 40% share holder in the
parent Alibaba Group. Alibaba plans to raise $1.5 billion in the next year, making it the second-
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biggest Internet IPO ever, after Google’s $1.9 billion offering in 2004. The IPO will value
Alibaba.com at up to $7.8 billion. The company recorded revenues of CNY 3,001.2 million
(approximately $432.6 million) in the fiscal year ended December 2008, an increase of 38.8%
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over 2007. The company's operating profit was CNY 1,192.4 million (approximately $171.9
million) in fiscal 2008, an increase of 48.2% over 2007. Its net profit was CNY 1,205.2 million
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(approximately $173.7 million) in fiscal 2008, an increase of 24.5% over 2007.
By the end of 2008, Alibaba launched business to business sites in six foreign language
versions, in order to make trading easier for foreigners. The International sites for Alibaba
consist of: Spanish.alibaba.com, german.alibaba.com, Italian.alibaba.com, Russian.alibaba.com,
Portugese.alibaba.com, and german.alibaba.com.
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HISTORY OF ALIBABA.COM
1999
Alibaba Group was established
2000
Launched the Gold Supplier membership to serve exporters in China.
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2001
Launched the International TrustPass membership to serve exporters outside China.
2002
Launched the TrustPass membership to serve SMEs engaging in domestic China trade.
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Launched keyword ranking services in the international marketplace.
2003
Launched TradeManager Instant Messenger software for easy communication.
Established Ali-Institute to offer customer training and higher-education e-commerce
2004
certification in China.
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2005
Launched keyword ranking services on the China marketplace.
2007
Launched branded advertisements in the Chinese marketplace.
Introduced the Gold Supplier membership to Hong Kong.
2007
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Launched premium placement display in the Chinese marketplace.
Launched an SME financing scheme in collaboration with leading banks in China.
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Successfully listed on the Hong Kong Stock Exchange.
Re-launched our upgraded Alibaba Japan marketplace.
2008
Became a constituent stock of Hang Seng Composite Index Series and Hang Seng
Freefloat Index Series.
Launched Winport to help SMEs build their own presence in the China marketplace.
Formed an associated company, Alibaba Japan, with Softbank to take over the
operation of the Japanese marketplace.
Launched the China TrustPass for Individuals membership to serve entrepreneurs
engaging in domestic China trade.
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Introduced the Gold Supplier membership to Taiwan.
Launched the Export-to-China service to help SMEs sell direct to China.
Launched the Gold Supplier Starter Pack, on the international marketplace.
2009
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Launched Ali-Advance, a pay-for-performance based keyword bidding system
Launched Gold Supplier International Edition
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Upgraded Ali-Institute to be a new business unit to better cultivate e-commerce talent for
SMEs.
Acquired the Business Management Software division of Alisoft to further the goal of
transforming from "Meet at Alibaba" to "Work at Alibaba."
Acquired controlling stake in HiChina to enhance our ability to provide additional Internet
infrastructure services to Chinese small businesses
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ALIBABA.COM PRODUCTS, SERVICES, AND KEY BRANDS
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Alibaba like eBay does not carry specific products, but a very different mix of items and brands.
Some of the products the offer include everything from Agriculture to Transportation items.
•
Agriculture
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Apparel
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Automotive
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Chemicals
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Energy
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•
•
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Environment
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Lights and lighting
Luggage
Printing and Publishing
Rubber and Plastic
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Security and Protection
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Service Equipment
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Textiles and Leather Products
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ALIBABA.COM LAST THREE YEAR FINANCIAL GRAPHS
2008 Year Income
¥4,000.00
¥3,001.20
¥3,000.00
¥2,613.80
¥2,000.00
¥1,205.20
¥1,000.00
¥Rev. USD: $432.6M
Gross: USD: $171.9M
Net: USD: $173.7M
Fiscal Year
Ending
2008
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
¥1,000.00
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¥500.00
¥-
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¥1,363.90
¥1,126.20
¥219.90
Fiscal Year
Ending
2008
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¥2,500.00
¥2,162.80
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¥2,000.00
¥1,500.00
¥1,882.60
¥967.80
¥1,000.00
¥500.00
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2006 Year Income
¥1,500.00
2007 Year Income
¥-
Fiscal Year
Ending
2008
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
Stock price as of 12/15: $18.12
Revenue
(Millions of
CNY Yuan)
Gross Profit
(Millions of
CNY Yuan)
Net Income
(Millions of
CNY Yuan)
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ALIBABA.COM CORE STRATEGIES
Alibaba Group is formerly the world’s leading business-to-business e-commerce
company. It was started only 9 years ago, and so growth strategies are expected to be a main
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strategy of the company so that it can continue to effectively compete with world leaders in the
industry. Despite the present economic crisis in the world’s economy, Alibaba has positioned
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itself to overcome that obstacle and move forward to declare an even bigger market share. An
aggressive expansion is underway to keep the company ahead. The company believes that given
the weak state of the economic environment that Allibaba.com will increase its revenue by 13 %
billion Yuan this year. Alibaba.com CEO David Wei Zhe said the global economic crisis
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provided “a great opportunity to help more small and medium-sized enterprises move online, and
expand our market leadership and investment for growth”. This
strategy included spending on a global marketing drive worth at
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least $30US million, the hiring of 30,000 employees and the
launching of a new service center in northern China. China is
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one of the few areas that survived the crisis remaining as one of
the largest consumer markets after the economic turn. This is
why the company maintains major operations in China because
of its economic safeguards. It’s backed by 8 of China’s largest
banks because it really is developing the economy of china by
reviving entrepreneurial spirit. . It aims to help small and medium –sized companies conduct
trade. The recent focus has been to increase the growth of B2B and B2C business.
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Alibaba.com Growth Strategy
One of its recent strategic moves was the acquisition of Yahoo China. This was expected
to have a large impact and allow the companies to integrate and join forces with their combined
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resources that will with time lead to growth. A restructuring strategy of Yahoo China began after
Yahoo failed to generate profits. In December 2007, Yahoo China removed the three original
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departments: new media, network search and communications departments. In turn two new
departments: website operating and mailbox departments. Merging of network search and ebusiness and digging into the potential of network search will be the future direction for
development within Yahoo! China. E-business search technology will also be a main focus
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because the company believes that developing this technology will lead to greater profits. This
strategy is extremely focused because Alibaba realizes that the acquisition of Yahoo represents
an overwhelming opportunity to grow and gain a larger market share because Yahoo is such a
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recognized company. The company realizes that for optimal results changes within the company
has to take place. Restructuring of Yahoo is a step in the right direction.
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Alibaba is very focused on expanding overseas Mr. Wei, chief executive at the company,
continued to explain that his strategic move is to attract more clients in markets including India
and Japan, because according to Wei “more suppliers outside China will look for new markets
like China.” At present, about 4% of its 400,000 users Alibaba have chosen to look more
outwardly to Chinese markets. To show how committed the company was to broaden its
boarders, it announced a joint venture with Japan’s Softbank Corp. This together with other
international alliances has helped to elevate this company into the Global marketplace.
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Another of Alibaba’s main strategies involves capitalizing on its international consumer
base and driving a large successful marketplace between businesses. The company’s leaders
have shown that they know how to seize market opportunities and to expand its strategy to the
small and medium sized enterprises (SME) economic growth throughout Asia, USA, Europe and
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South America. In order to achieve this, the company uses its strengths. The combination of
Eastern wisdom, western operational techniques and international capital invested in the global
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market reflect the power that this company manages to maintain in the industry. This strategy
allows the company to be more flexible and efficient. Alibaba understands change and the ever
evolving of the external environment in which it competes and thanks to environmental studies
and expectation studies the company is well aware of these changes. Today, the company can
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fairly be referred to as a giant global trade market because the company is one of the most active
in B2B marketplaces. Its main goal is to make conducting business easier for small businesses
around the world which makes sure that each business capitalizes on all the advantages of having
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an international business. Furthermore, Alibaba operating as an Asian company wants to still be
known as an inter-cultural organization that has an inter-cultural management team and thus
focus.
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Alibaba is constantly working on ways to make business easier for its members. It
recently unveiled a new pricing model to draw more members. They launched a starter package
for Gold Suppliers which offers fewer services for a 60% discount. Alibaba.com David Wei says
that the program is interested in increasing website’s customers even at a risk of set backing its
profit margins. He stated in an interview, “We believe if we increase our customers, we will
increase our revenue later and the process will take care of itself.” This strategy is more of a
long-term one that illustrates that the company understands that creating a loyal
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customer/supplier base is what’s most important because loyal suppliers will eventually raise
profits from the raised sales revenue. When this first strategy was introduced, signs pointed to a
positive result in the first period under the new pricing model, total sales were higher than what
the company usually receives in a month. Analysts seem to like the new pricing model. Citigroup
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says it expects the company to decline in 2009, but 2010 should be a rebounding year because” it
should benefit from a more sustainable model, delivering a faster growth and higher margins.”
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Alibaba.com Differentiation Strategy
It has already been noted that Alibaba.com is presently the world leader in business to
business e-commerce. This is something that the company has capitalized on in the most unique
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way. Alibaba.com targets small to medium sized businesses. It focuses on buying and selling
among small and midsized organizations, and it has more than five million suppliers.
Alibaba.com has successfully recognized that it could fill a gaping market need that China has.
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The country has virtually no printed directories or electronic databases that allow companies to
describe their products and help buyers and sellers find one another while still providing a
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certain level of comfort that these companies are on the up and up. Alibaba.com focuses on small
family type businesses in China of which are many in number.
According to Yuxin Chen, a marketing professor at New York University’s stern school
of Business, “Alibaba’s major advantage is that it is located in a country that has emerged as the
manufacturing base of the world.” Most companies in China are these small businesses and
Alibaba has put itself in the position to take advantage of this. Most companies exporting in
China are not big companies, so for these companies Alibaba provides a platform. To continue to
provide for this market of small businesses, access to Alibaba’s portals is mostly free of charge.
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Membership fees are charged ranging from $300-$8000 and various membership programs is
offered which provide different membership opportunities.
Alibaba.com Price strategy
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Alibaba’s primary revenue is derived from charging customers for value-added services
and from subscription fees, listing fees and secondarily through advertising avenues. In terms of
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the price ( membership fees) paid by B2B clients , the business buyers and supplier who want to
find potential trading partners via e-commerce marketplaces have available to them certain
membership packages to appeal to the most varied amount of businesses. Fee-paying members
can enjoy “priority placement of supplier storefront”, priority listings in the industry directory
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and advanced search results at Alibaba.com marketplaces. Alibaba.com promises price savings
that can’t be found through more traditional forms of business. The marketplaces provide many
advantages to businesses; businesses can get access to the active global buyer community and
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vice versa for buyers, businesses can launch marketing activities to potential buyers in a
economical way, buyers can get access to high quality and organizational information on
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products, potential sellers, and additionally the convenience which is real time and 24 hours
services for both the buyers and the sellers.
One specific pricing strategy that Alibaba has put in place is the Gold supplier premium
membership. This is a certification that the site offers to specific supplier companies which gives
them the opportunity to post an unlimited number of products online. Gold suppliers also have
more of an advantage with global trade because of the certification Alibaba has provided
showing that this organization is authenticated. This means much more access to customers than
the business man who doesn’t have a paid membership. Testimonials from gold suppliers speak
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to the effectiveness of this pricing strategy. Customers believe that the price for the membership,
which varies, is a small cost to pay for the services that are available as a registered member. The
realm of possibility is great which makes global trade a possibility for small companies who
wouldn’t have this opportunity otherwise. Customers are jumping at the opportunity to sign up to
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be a Gold supplier which gives Alibaba the upper hand and the opportunity to create revenue.
Many spin off’s of the gold supplier membership have provided other services and benefits at
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lower cost to the customer but with fewer benefits. The gold supplier tag is more prominent still.
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COMPETITIVE FORCES FOR ALIBABA.COM
Porter’s Five Force model of competition is a key tool for diagnosing the competitive
environment:
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Alibaba.com Threats of new Entrants
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Alibaba has always welcomed the idea of competing companies entering the industry. A
spokesperson of Alibaba stated this in reference to the news that Chinese search engine firm
Baidu.com is beginning beta testing for an ecommerce site. Christina Splinder continued to say
that “competition would help grow the entire ecommerce market in China.” The consumer
ecommerce penetration rate in China is 33% compared to over 90% in developed economies
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such as the US and Europe. Early competition from eBay is what Alibaba credits for growing the
ecommerce industry in China from several hundred million RMB back in 2003 to over 100
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billion RMB this year. They are also hopeful that the new wave of companies to come will
further grow the company from then on.
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Evidently, this company is concentrated on limiting new entrants into the market because
of its goals as a company is build the consumer market in Asia and subsequently in the world. Of
course, new entrants could cause external difficulties for this company, but with competition
comes the success of being the people’s premier site to deal business. Alibaba has developed
quite the reputation for new innovation and its Global influence, and it credits fierce competition
for helping it to have developed this much.
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Alibaba.com Rivalry
The auction ecommerce industry is quite the growing one. In recent years, it has become
very concentrated with equally large global companies which have been able to develop core
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competencies in the industry. One of Alibaba’s rivals is eBay Eachnet. Both Alibaba and eBay
Eachnet operate in the Chinese e-commerce industry, so it is understandable that these are close
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competitors. Alibaba acquired Yahoo! China as well as other subsidiaries to help grow its
company and develop it into the company it is today. EBay is a global giant in ecommerce and it
has the advantage of owning a recognizable brand that had global attention and had a loyal
customer base in the US.
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AliPay is the payment tool that Taobao, Alibaba’s subsidiary uses for business –tobusiness e-commerce website. With this AliPay, buyers can deposit money into a bank account
designated by Alibaba Taobao. The sellers receive payment when the deal is verified by buyers.
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EBay Eachnet the fierce competitor it is also announced that it would spend more than 100
million Yuan (Us$12 million) to launch a new online payment system as well. EBay plans to
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invest heavily to make sure that it has available a secure system for payment on their site. EBay
Eachnet launched a payment system called Escrow in October very similar to AliPay which was
set up to create a more secure online payment environment for members. EBay, just like Alibaba,
gained success in the Chinese market quite rapidly but, Alibaba has a larger hold on the Chinese
market because of its global reach and innovative systems.
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Alibaba.com Supplier power
Alibaba has many alliances with companies that keeps the auction site running and on the
cutting edge of technology in the external environment. VeriSign Inc is a well known provider of
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Internet infrastructure for Networked worlds. This helps companies and consumers all over the
world communicate and deal commerce. The A&V is a product designed and launched by Asian
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Company Profiles Ltd. It is an application conduct B2B partner screening, pre-L/C beneficiary
screening, and Para-legal support for contractual purposes. The American International
Underwriters China (China’s AIU) provides quality commercial and consumer insurance to the
company.
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These suppliers are a key to Alibaba’s credibility and quality management efforts.
Ecommerce organizations have to have safeguards available for its consumers and companies
especially when large transactions are taking place. Each of these supplier companies help to
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make sure that the consumer is protected. These organizations have a certain level of power
because if A&V decides to not partner with the company another company would have to be
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sought out to fill the need but it can be done. Just like if the insurance company doesn’t want to
be affiliated with Alibaba anymore, it is at that’s company’s own detriment because Alibaba is a
growing company that has a reputation of having a large member based which means large
insurance dollars for the insurance company.
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Alibaba.com Buyer Power
These are the core of the organization as an auction site. The success of the company is
dependent on the customers who are willing to buy online products. Alibaba is a global company
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and so businesses from different areas of the world are a key to its success. Alibaba offers small
businesses the opportunity to grow through its site, and they give these owners power to expand
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and really make their products available to a global customer base quite easily. This Alibaba
Company is a growing one and already has a large global marketplace the largest B2B one in the
world, so buyer with the power that they have would be wiser to choose Alibaba as it is the
world leader and the opportunity for growth is great. Yes, there are other competitors, but
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Alibaba has established a loyal customer base and as a global leader in ecommerce it seems like
it’s a secure professional site.
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Alibaba.com Threat of substitutes
Alibaba offers one of the easiest ways to conduct a small-medium business and that’s
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though ecommerce. It’s simple and offers a large global marketplace for transactions to take
place. Any substitute to come along would have to be an easier, more effective way of
conducting business on a global arena. No new substitute for the online auction industry has been
introduced yet, but the opportunity is there. Right now online auction is the simplest and most
effective ways to grow a small or medium sized business.
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Alibaba.com TOWS Matrix
Strengths – S
Alibaba.com, the
•
It has a reputation of
world’s largest
ecommerce
•
organization, is one
that generates income
through their site.
•
•
•
•
•
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•
•
•
•
competitive technology
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Low degree of business
e-commerce search
partnerships with
technology.
•
•
Large Chinese cultural
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influence.
•
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Acquisition of an
American company in
the internet industry
could develop
recognition in the US.
•
Profitably is slowing.
WO Strategies
•
ST – Strategies
Acquisition of a
technology company
experienced in
developing ecommerce
sites.
WT – Strategies
•
Enforce differentiation
strategies using the
company’s influence in
the marketplace to
draw new members
from innovation and
quality controls.
Brand recognition is
low.
SO Strategies
•
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Strong alliances and
A bold risk taking sprit.
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Threats – T
China’s Google and the
strength of the vertical
sites.
Growth of China’s
ecommerce industry.
EBay’s new subsidiary
eBay Eachnet poses a
competitive influence.
Global Economic crisis.
Development of a more
•
A international
•
Market share possibility
in the US
growth strategies
organizational structure
Large untapped market
potential.
Labor intensive.
Global Marketplace.
Possibility for growth in
profits.
•
A strong whole in the
Opportunities – O
•
success and effective
leaders in the industry.
from influencing
business to buy and sell
Weaknesses - W
Advertising more in
international arenas to
strengthen market
share in areas of little
brand recognition. The
sponsoring of
international events like
the Olympics can help
to establish the brand
among the other global
competitors.
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Alibaba.com Strengths
Alibaba.com has much strength. It has grown quite rapidly and many great strategies
were implemented to facilitate development. From my research, it was mentioned repeatedly that
this company is a global one that has reach in several large countries in the world. This is always
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a great thing because the larger the market the larger the profit opportunity. A global reach will
only profit an organization especially with a growth strategy. Alibaba also used a great strategy
.
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of developing great acquisitions with other leaders in the industry such as Yahoo China.
Acquisitions put companies in the position to grow quite rapidly and are generally a great mode
for entry in a new untapped market. The ecommerce market in China is growing and Yahoo
being a global company with influence puts Alibaba is the position to control a large percentage
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of a Chinese market. The leaders of the company have shown how committed it is to being a
global organization and has a staff and management team just as diverse as its customers.
Alibaba.com Weaknesses
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The main weakness that this organization has is its low level of technology. Other
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businesses in the market have more complex and attractive ecommerce sites, and this is really a
detriment to the company. The company is also very labor intensive. It has 4000 employees all of
whom are well paid which means a large amount of expenses paid in salaries. This company that
operates most of its activities online should be able to limit labor expenses a bit more. Although
the organization is known as a Global one it is still not well known in the US, which is one of the
largest economies in the world. Efforts could be made to develop the brand more by increased
advertising efforts and tapping into untapped markets. Profitability is a definitely a problem for
the company. More cost strategies need to be implemented to decrease the expenses within the
company.
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Alibaba.com Opportunities
There is a great possibility for growth within the organization. Yes it is the largest
ecommerce organization in the world, but this industry will get more competitive and just like
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Alibaba grew rapidly another company can enter the market and decrease Alibaba’s market
share. The company isn’t as well known in America, so there is an opportunity for growth in this
.
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economy where so many other large ecommerce organizations exist.
Alibaba.com Threats
The main threats that exist in Alibaba’s external environment is competition from highly
competitive company’s CEO, Wei has been quoted as saying that he welcomes competition on
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any scale because competition makes other competitors work harder to improve business and its
through competitive market that that industry will see growth. The Asian web search/
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ecommerce is growing quite rapidly through the penetration by other new companies into the
market. Google China is a becoming quite a competitive force in the industry. Google is a very
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diverse company and so it has many vertical affiliations that are competitive forces for the
business that Alibaba runs. Also EBay Eachnet is a competitive rival and recently has been
developing Alibaba’s similar operations as to steal market share from the company. So far,
Alibaba has risen above the Global economic crisis but this remains a threat.
Alibaba.com SO Strategy
One strategy to get market share in the US by using it global power is to acquire a US
recognized company. This could be very effective entry mode into this economy. It really isn’t
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important if it’s another ecommerce company; the company would just have to be US based and
have high brand loyalty. The growth possibilities are great as well. Gaining resources and
information from another successful company can grow a company dramatically.
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Alibaba.com WO Strategy
In order to improve on the weakness of low technology level and take advantage of the
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opportunity for growth, they could acquire a small technology company. There is a lot of
advantages to doing this. A company with experienced staff who are capable of upgrading
technology can help to move the company into a more competitive place, technically. Also, this
is a growth opportunity for the company as well.
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Alibaba.com ST Strategy
In order to combat competition and to take advantage of the company’s influence in the
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Global marketplace, Alibaba could implement differentiation strategies that set them apart from
the other global companies in the industry. Differentiation strategies are extremely effective in
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developing customer loyalty and grabbing a large market share for growing companies.
Alibaba.com WT Strategy
In order to improve brand recognition in the US and strengthen market share the
company should develop a real commitment to marketing on a Global scale quite like Coca Cola.
A good marketing strategy can be a real turning point for a company and increase profits
dramatically. It’s something worth developing especially if being a global company is an
important outlook as is the case with Alibaba.com
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COMPARITIVE ANALYSIS
Putting it simply, e-commerce is a form of business where an online transaction takes
place via the internet through a site that links a computer system of the vendor, host and buyer.
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Electronic transactions involve the transfer of ownership from the seller to the buyer of that good
or service. These two companies, eBay and Alibaba, are world leaders in the auction e-
.
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commerce industry. EBay operates out of the United States and Alibaba operates out of the
People’s Republic of China. These companies had quite different beginnings, eBay started as a
virtual monopoly in the American market introducing a new large scale way to conduct business.
Alibaba entered the market by acquiring the market leader at the time eBay Eachnet. Both of
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these companies sky rocketed to success really early with very little competition to affect rapid
growth.
Both companies have a similar mission and that is to promote global trade and make
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trading easier. Together, these companies have dominated the auction site industry and seen
extreme growth levels after only being in the industry for approximately 10 years. The product
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lines for both companies are quite similar, as both companies sell goods and services,
communication services, and advertising. Alibaba focuses more on the business to business sales
which can be argued is a more revenue generating route.
Both companies have their portion of competitors and essentially are each other’s
competition. They are extremely confident in their competitive advantages. EBay considers itself
as the company to lead the industry with the introduction of such auction sites, but Alibaba
thinks it has propelled past the competition because it manages to capitalize on the strategies
instituted by EBay Eachnet to a develop a global outlook. Alibaba took a hold of the business to
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business segment of the market and took it to another level. This is now Alibaba’s niche market
of suppliers. EBay however has no real supplier preference, and so markets to the average
consumer and businesses. Thus, they have competitors like Amazon which features a rather
complex e-commerce environment.
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The business model of Alibaba compared to EBay is far more simplified yet focused on
.
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achieving particular goals. Both companies seek growth, but Alibaba has the way in which they
will go by doing this clearly outlined with effective ways of entry. Alibaba is a world leader in
business to business e-commerce and this was its route to the world and globalization. The
move, whereby it purchased its own fierce competition, EBay Eachnet, was the smartest move
they could have made towards growth. EBay’s goals are far reaching and not as concentrated.
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Both companies made smart moves in the acquisition of well noted international companies like
eBay did with Swedish company, Tradera.com. Evidently, both of these companies are smart in
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their moves to acquire companies that will give them; 1) an entry into new global markets, and 2)
give them the upper hand against threats of competition.
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Group Investment Perspective
Based on the financials, eBay has Alibaba beat. The company has almost double the
revenue that Alibaba had in 2008 at $8,541,126. For this reason, we as a group think that eBay is
the better of the two companies. The main goal of business is to make sustainable income, and
this company has shown us that smart moves, global acquisitions and aspirations will enable
companies to be financial sound. EBay’s marketing efforts are quite great and recommendable in
areas that Alibaba lack. We expect Alibaba to continue to compete because this company is
nothing sort of impressive. Alibaba has managed to elevate and inspire entrepreneurial spirit
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around the world and make business easier for people that otherwise wouldn’t have the
opportunity. EBay just seems, to our group, to have the best tools for growth in their possession
and we think it’s almost impossible to compare two equally very powerful global giants in this
rather small industry.
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Group Challenges
.
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As a group, we never underestimated the enormity of the task set before us. It was a tall
order to organize a project of this magnitude with our many different schedules and personalities.
We knew it would have to be communication that led to success of this project, and so many
emails were transferred between the original four group members. Originally, we couldn’t even
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agree on the two companies to research we went back and forth between entertainment
companies, airline manufacturers and the online auction companies. Choosing these particular
companies was definitely a learning experience for most of us. We learned what drives these
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companies technically. At the beginning, of the quarter we had originally four members: Anca,
Thomas, Angelica and Danauda. Due to illness, (our presumption) communication with angelica
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was cut off. We had to make a fast decision fast and split the responsibilities between the
remaining members. We gritted our teeth because of the added work, but thankfully, we
completed it. Mostly we were working with three different leadership styles, so figuring out how
to work as a group was definitely a challenge. Compromise and allowing everyone to vote was
important when deciding things. Early on, we set goals and deadlines for when the work was
suppose to be ready etc. Deadlines were mostly met (at least by the remaining members), and
afterward, further goals were made until the completion of the project. In all, we learned a lot
about working in groups and how to compromise to see that all our expectations were met within
the timeframe allotted.
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WORKS CITED
COMPARISON OF EBAY.COM & ALIBABA.COM
PREPARED FOR BUS451
"Alibaba Company Profile." CrunchBase, The Free Tech Company Database. Alibaba.com.
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Web. 26 Nov. 2009. <http://www.crunchbase.com/company/alibaba>.
.
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"Alibaba obvious weakness Netsun carry low memeber price breakdown B2B Market." Review.
Web log post. Compass Blog. 19 Aug. 2008. Web.
<http://compassblogger.blogspot.com/2008/08/alibaba-obvious-weakness-netsun-carry.html>.
"Alibaba.com Limited." Business Source Premier. Berkeley College. Web.
<https://my.berkeleycollege.edu/webapps/portal/frameset.jsp?tab_id=_18_1>.
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"EBay annual report." File.shareholder.com. Investor.ebay.com, 19 Feb. 2009. Web.
<http://files.shareholder.com/downloads/eBay/765967544x0x281367/1b773a7c-8c14-
a
m
45b8-915a-1716ca37dda0/eBay_2008AR.pdf>.
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"EBay Inc." Business& Company Resource Center. Web.
<http://http://galenet.galegroup.com.ezproxy.library.berkeley.org/servlet/BCRC?vrsn=un
known&locID=nysl_me_berk&srchtp=glbc&cc=1&c=1&mode=c&ste=60&tab=1&tbst=
tsCM&ccmp=eBay+Inc.&mst=EBay%2C+Inc.&docNum=DC441427&bConts=3&final
Auth=true>.
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WORKS CITED: CONTINUED
COMPARISON OF EBAY.COM & ALIBABA.COM
PREPARED FOR BUS451
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"EBay Inc." Datamonitor Company Profiles Authority. Berkeley College. Web. 1 Dec. 2009.
<http://http://web.ebscohost.com.ezproxy.library.berkeley.org/ehost/detail?vid=5&hid=5
.
i
r
o
u
q
&sid=4433627e-29ed-47fe-b3c5-
a33c3f4bac0a%40sessionmgr10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bu
h&authdb=dmhco&AN=FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86>.
"EBay Inc." Hoovers.com. Proquest. Web. 01 Dec. 2009.
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<http://http://proquest.umi.com.ezproxy.library.berkeley.org/pqdweb?index=0&did=168
214571&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VNa
me=PQD&TS=1257437448&clientId=11195>.
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"EBay: The World's Online Marketplace." EBay - New & used electronics, cars, apparel,
collectibles, sporting goods & more at low prices. Web. 12 Dec. 2009.
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<http://pages.eBay.com/abouteBay/thecompany/companyoverview.html>.
"Online Auction Market in China: eBay/EachNet vs. Yahoo!/TaoBao -- Seeking Alpha." Stock
Market News, Opinion & Analysis, Investing Ideas -- Seeking Alpha. 24 July 2006. Web.
09 Dec. 2009. <http://seekingalpha.com/article/14162-online-auction-market-in-china-
ebay-eachnet-vs-yahoo-taobao>.
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Comparison of eBay.com and Alibaba.com

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