Making Ebay Work

Table of Contents Introduction2 PART A Chapter Summary3 PART B stage setting and Case summary5 E speaks context5 Case Summary Making eBay work6 PART C Case Questions7 Case Question 17 Case Question 210 Case Question 310 PART D Implications and Recommendation12 Implications12 Recommendations13 Introduction St tellgic capabilities have plough a source of matched advantage for both piddling and large composition. Organizations that wish to hold up and compete in todays dynamic business world privation to implement unique and high-value strategicalalal capabilities.This typography expunges you by means of in depth analysis of strategic capabilities and how it relates to the business environs. The organization in focus is eBay, an online sales familiarity. EBay is bingle of the largest online sales and auction company with branches in over two dozen countries. Its unique resources and key competences be par quantity to its ever-growing success in the industry. The first part of this paper forget take you through the concept of strategic capability. This is the summary of the chapter 3 from the textbook, Exploring Corporate Strategy.This part lead focus on definition of strategic capability, the importance of resources and competencies to achieving strategic capabilities, cost efficiency, and how strategic capabilities quite a little lead to sustainable organic evolution. The second part focuses on the background of the case moot company, eBay. There is a brief background nearly the company and summary of the case study. Part three seeks to answer the case questions. The questions be divided into three the first talking about the analytical framework for analyzing eBays strategic capability.There are several analytical frameworks in the textbook, for in-depth and better understanding, the fancy up analysis was used. The second question seeks to know what kind of capabilities have provided eBay with agonistical advantage. The last question s deals with managing capabilities much(prenominal) as brisk resources, investing and divesting in resources, and extending resources given new entrants in the marketplace and the changing nature of eBay. Each question has been answered by expert individuals with good knowledge of strategic capabilities.The paper concludes by taking into consideration possible lessons learnt from the chapter and case study. We also give recommendations for development in eBay or new(prenominal) organizations that seek to achieve the feat of successful organizations a alike(p) eBay. PART A Chapter Summary Strategic capability can be defined as the adequacy and suitability of the resources and competencies of an organization for it to survive, prosper and deliver in the future. The strategic capability contributes to the competitive advantage of an organization by creating and implementing strategies that competitors dislodge difficult to assume or match.Unique and rare strategic capabilities gi ve organizations better reputation and goodwill when compared with their competitors. richness of resources, competences, core competences and dynamic capabilities An organizations strategic capabilities principally revolve some its resources. The resources are either tangible or intangible and they are conferenceed into four categories an organizations resources can be sensible, Financial, humane, and intellectual. Physical resources include machines, building or production capacity of the organization.Financial resources are used in the day to day running of the business they include capital, cash, debtors, creditors among differents. Human resource includes the number and mix of people in an organization. Most organizations have human resource departments that help manage the welfare of the personnel in the organization. capable resources are intangible resources that include patents, brands, business ashes, and customer data old bag. Resources are important to an organ ization because they allow the organization to produce at lower cost or get under ones skin superior product or service.The resources in an organization are of no worth if they are not being put ond effectively. Organizations must utilize their resources by being competent. Competences in business policy are used to mean the activities and processes through which an organization deploys it resources effectively. Competences can either be threshold or core. Threshold competences are the essentials needed to compete in a given market, part core competences are the effective use of resources to gain competitive advantage. Importance of cost-efficiencyThe management of cost-base of an organization can be a basis of achieving competitive advantage. cost efficiency is driven by a number of cost drivers. pic How strategic capabilities can lead to sustainable competitive advantage Value Have resources that customers value in terms of products and services. Product or services must tur n over consumer want and taste. Rarity Having unique resources and competences in terms of personnel intellect, unique services rendered among opposite things. Robustness A strong and well-built form of strategic capabilities that annot be assumed by competitors. Non-substitutability Providing value to customers and possessing competences that are complex and casually ambiguous. Diagnosing Strategic Capability If organizations are to achieve competitive advantage by delivering value to customers, they need to understand how it is created. Value Chain describes the activities within and around an organization which together create a product or service. Value Network is the set of inter-organizational cogitate and relationships that are necessary to create a product or service. Activity Maps it shows how the different activities of the an organization are linked together Benchmarking comparison of programs and strategic positions of competitors. SWOT summary of key issues wh ich affect the business environment. Managing and evolution Strategic Capability In order for managers to manage and improve the strategic capability of an organization, in that location are certain decisions and actions which can be taken which relate to the development of strategic capabilities within the organization and external environment. These include Extending best practices managers might identify strategic capabilities in one area of the business and so seek to extend this throughout all the business units. Adding and changing activities this involves adding or changing capabilities so that they become to a greater extent reinforcing of outcomes. Stretching competencies managers may see the opportunity to build new products or services out of existing capabilities. Entrepreneurial Bricolage strategic capability can be built by exploiting resources, skills, and knowledge which have been ignored which is often what entrepreneurs who develop new business models do. Cea sing Activities involves doing away with current activities not central to the speech of value to customers. External Capability development developing capabilities by entering into alliances and joint ventures. PART B Background and Case summary EBays Background EBay is an online shopping and auction website where people and businesses defile and sell products and services. EBay was created in 1995 and they have over the years grown and expanded to over two dozen countries much(prenominal) as the United Kingdom, China and India.EBay recorded a profit of $367 million according to GAAP in their fourth quarter in the year 2008. Millions of collectibles, decor, appliances, computers, furnishings, equipment, fomites, and other miscellaneous items are listed, bought, and sold daily on eBay. In 2005, eBay launched its Business & Industrial grade, breaking into the industrial surplus business. Some items are rare and valuable, while many others are dusty gizmos that would have been dis carded if not for the thousands of eager bidders worldwide. Case Summary Making eBay workThe Making eBay Work case study is divided into three sections namely eBays business model, eBays management and Competition and cooperation. EBays business model A business model describes the twist of product, service and information flows and the roles of the participating parties. Therefore the business model in eBays case includes its products and services and the interactions between buyers and sellers. The business model includes Value in eBay which is created by providing a virtual market for buyers and sellers.EBay listens to its customers and work ups Voice of the Customer groups which involve flying in a new group of about 10 sellers and buyers from around the country to its offices every few months to discuss the company in depth. Technology allows every move of every potential customer to be traced. Workshops and classes are held to inculcate people how to make the most of the si te. EBay is governed from outside and within in the sense that the companys system has a source of automatic control in the form of buyers and sellers rating each other on each transaction.Sales of illegal products are dealt with by withdrawing the item on sale and then criminalise the seller. EBays management trillion Whitman, an ex-consultant joined eBay in 1998 and has seen then heavily influenced the companys management. Meg Whitman met a collection of Information Technology (IT) geeks who were handpicked by eBays founder Pierre Omidyar as exit management of the company. Meg Whitman felt she needed to reshuffle and change the management as most of the top executives unders excessivelyd more of the IT side of the company rather than understanding the business side of the company.Respected consultants were then assigned senior management roles. This change brought about the company be approaching data and metric driven If you cant measure it, you cant control it. This simply m eans that category managers make decisions based on measuring and acting upon the data within their fiefdom or departments. EBay has in time upgraded its ability to ensure that technology does not fail. The companys website was plagued with outages in 1999 which shut down the site for a period of 22hours. The problems were as a result of software problems and lack of backup systems.Maynard Webb joined eBay to become the president of the companys technology unit and has since then ensured a secure website by constantly upgrading the system. Meg Whitman is a manager who is known for leadership qualities such as understanding and flexible. She is a leader who buys into the company in more ways than one by auctioning some of her furniture from her ski condo in order to have an eBay selling experience. Competition and cooperation As the internet has become a more competitive arena, eBay has definitely not stood still. The company tries to be witting and flexible.EBay bought Skype, the internet telephony organization in 2005 at the cost of $2. 5 billion. A lot of controversy marked this acquisition as people considered it too risky and eBay fired back by precept the company can create an unparallel e-commerce engine, pointing to their 2002 purchase of the online defrayment system, PayPal. eBay also supported their action by saying three benefits would be realized as a result of the purchase the more members the company will acquire, the more valuable the company will become, and lastly the more likely eBay will become a world leader in managing network effects. In 2006, eBay announced a deal with Google and has since then become one of Googles biggest advert customers. EBay also partnered with Baidu Inc, a Chinese web portal bought by eBay in 2002. Baidu promotes PayPal Beibao as the preferred method of presentment on Baidu. Despite eBay success in the west, it is not as successful in the east. EBay had to pull out of Japan and is currently struggling in chin w itting and lagging behind a rival in China. GMarket in Korea had a less complex system and so had a larger market base so eBay had to come up with eBay express to meet up to the customer involve in Korea.PART C Case Questions Case Question 1 Analyze eBay strategic capability using an analytical framework from the chapter Strategic Capability can be defined as the resources and competences of an organization needed for it to survive and prosper. EBays case shows us the necessity of an organization having sustainable resources and competences. In analyzing their strategic capability, the SWOT framework (strength, weakness, opportunities and threats) projects, clearly, the issues surrounding a business and deduces how this issues makes them strategically capable. Strengths Bays greatest strength is that it is the first online auction site. Because of that, eBay is well trusted. The customers perception that he/she can buy a good without worrying, keeps him/her coming back. That is why , in 2006, eBay had 200 million customers. Out of that, 750,000 made their living from eBay. (Johnson, Scholes, & Whittington, 2008) From the case study, you can see a strong relationship between the business-to-customer and customer-to-customer relationship. For ensample, when a category manager sees a customer is having difficulty selling a product, he helps the customer by improving their presentation of the product.Also, eBay organizes Voice of the Customer were a group of 10 sellers and buyer are flown in from around the world, to discuss the company in depth. In regard to the customer to customer relationship, customers help each other by creating rules and norms to keep themselves safe from fraud. They also have websites, offering advice on how to sell on eBay. This relationship seems little, but it is not. It has taken at least 13 years to build it that is why it would be very difficult for another company to break in. Another major(ip) strength eBay has is Meg Whitman who is a unique resource. She is well experienced.She previously worked with Procter and Gamble, Hasbro and Stride Rite, and went to Harvard business school. When she came in, she multi-tasked, filling many of the senior management roles such as the head of the US business, head of world(prenominal) operations and vice president of consumer marketing with consultants. Through her eBay has been re-defined eBay has over thirty categories now (you can buy items ranging from books, cars, antiques to houses), their sales have increased and have acquired several firm- like Skype and PayPal- strengthening eBay alive and keeping it flourishing. WeaknessAlthough things seem perfect, eBay has a number of weaknesses Because items are sold online you cant be certain of the person you are transacting with. EBay customers suffer from other duplicitous activities by other customers. For voice, another customer maybe selling a Gucci hand bag for a reasonable price. When you pay for it and receive th e bag, you realize the bag is not original. Another case of fraud occurs when stolen goods are sold. Fraudulent situations affect the customer to customer relationship. In addition, according to the case, in 1999 the site was shut down for 22 hours courtesy of software problems.This is a major weakness because eBays site cannot function when the system breaks down auctioning cannot take place. During these periods, a lot of profit will be lost, affecting the business and customers. EBay would be affected more because of the amount spent on repairing. In the past, even out the payment system, PayPal, has been shut down. Opportunities Opportunities are lucky breaks entrepreneurs use to get ahead of competition. Acquisitions provide new business strategy opportunities. In 2005, according to the case study, eBay bought Skype. It is an online headphone company.EBay acquired the firm for $2. 6 billion. Skypes software lets PC users talk to each other for free and make cut-price calls to mobiles and landlines. A lot of critics didnt see the effect but for eBay it was a great opportunity. They were strengthening their threshold and unique resources. Skype is a unique resource because not a lot of businesses can afford to imitate that feat (spending $ 2. 6 billion). It is a threshold resource because Skype helps customers communicate more effectively. Through Skype, customers can see and hear each other reducing the rate of fraudulent activities.In addition, eBay has opportunities through new and emerging markets. EBay has over 30 sites, were language differs. For example, if you go to the Chinese site, it wouldnt be in English. But it wasnt always like that before. This opportunity occurs when a country becomes more modernized, like Singapore. When it happens, eBay has an opportunity to increase its market segment. This is how eBay has been able to grow, over the years. Also, a product produced 5 years ago can still be sold and found on eBay. In a way, eBay keeps p roducts alive. You can find a first discrepancy magazines and old models of cars on eBay.This is one of eBays core competences. EBay keeps Markets current. Threats As with many of the global Internet brands, success attracts competition. (SWOT Analysis Lesson, 2008) Competition is a threat because it reduces the amount of customers you have. From the case study, eBay has a big threat in Korea. GMarket is the Korean version of eBay. It is partly owned by Yahoo. Although Yahoos auctioning unit isnt as strong as eBay, it can become a threat in the future. Already, because of Yahoo in Japan, eBay has pulled out. It doesnt do well in the East because international competitors have a cultural edge over them.Furthermore, some costs cannot be controlled by eBay, which is a threat. It is a threat because if a customer doesnt understand why he has to pay extra, for example delivery charges and credit card charges, he might feel cheated. If fuel prices were to rise, the cost is passed on to t he consumer in terms of delivery and postal fees. This could make the overall cost of an auctioned item too expensive, making customers look for cheaper prices(SWOT Analysis Lesson, 2008) Also, individuals pretend to be eBay staffs, using their logos, the send illegal e-mails.Case Question 2 What are the capabilities that have provided eBay with competitive advantage and why? hjogdnfjuhfe Case Question 3 using the concept of sustainability and dynamic capabilities how would you manage (creating new resources and competences, investing/divesting in others extending others) Given New entrants to market and the changing nature of eBay. Concept of Sustainability Concepts of sustainability and dynamic capabilities are major strategies that organizations use to capture competitive edge over competitors.Sustainability of strategic capability deals with the criterion that organizations use to achieve and maintain competitive advantage over a long and sustainable period of time. Three main factors influence sustainable strategic capabilities Inimitability, Rarity, and Value. Inimitability refers to the robustness or sturdiness of the strategic capability. It involves identifying capabilities that are likely to be persistent and which competitors find difficult to imitate or obtain (Johnson, Scholes, & Whittington, 2008). Inimitability can be achieved through three main ways, they are Complexity Complexity of strategic capabilities is the gauge of being intricate and compounded. When organizations like eBay have very complex strategies, it will be very difficult for new entrants to the market to imitate such strategies. An example of a complex strategy in eBay could be the internal linkages in the organization. These internal linkages deal with how eBay internally links activities and processes together to deliver customer value. privileged linkages can be in form of relationship between top-management, middle-management and lower management staff.EBay has a very goo d communication network that allows for efficiency which will in turn produce efficiency and increase customer satisfaction. Organization can also build external interconnectedness with its customers to make it difficult for their strategies to be imitated. When developing new resources, organizations can seek opinions or partner with their customers or clients to generate idea that will add value to the company and also generate strategic capabilities that are robust in nature. Culture and history Culture and history are very unique to each organization.It is almost impossible to find two organizations with similar cultural background. When investing or divesting in resources, organization should make sure their investment is culturally inclined. When strategies are linked to cultural embeddedness, there is the likelihood that such competences have developed over time and in particular way. The origins and history by which competences have developed over time are referred to as pa th dependency, are specific to the organization and cannot be imitated (Johnson, Scholes, & Whittington, 2008). Causal Ambiguity Ambiguity deals with not being able to discern the meaning or cause of a particular effect. It is very difficult for organizations to imitate another organization when the former cannot easily discern the cause and effect of the latters success. Organizations like eBay have varying causal factors that affect its success in the industry that other competitors find hard to discern. Other factors that affect sustainable development include the rarity and value of the strategic capability.When an organization is seeking competitive advantage, it needs to make sure the resources its investing in have wide values to the customers and they should be very unique and rare capabilities. Unique resources and competences can include marketing strategies that are peculiar to the particular organization. Dynamic Capabilities The changing environment in the business wor ld today calls for the implementation of dynamic capabilities. Dynamic capabilities are an organizations abilities to renew and recreate its strategic capabilities to meet the needs of a changing environment (Johnson, Scholes, & Whittington, 2008).Dynamic capabilities help organization to integrate, build, and reconfigure internal and external competences to address the ever changing environment. When an organization is developing, investing, divesting or extending in resources, it should be able to transfer and modify existing resources to keep competitive edge over its competitors. The organization should have intellectual skills that can easily implement new capabilities to foster development. PART D Implications and Recommendation Implications The following are the implications of the case study Making eBay WorkCompetitive and Cooperative Competition and Cooperation are one of the major elements used to successfully excel in the business world. Form the case it is observed that eBay is very competitive and cooperative. Competitive in the sense that eBay bought companies like Skype, the internet telephony organization (http//www. skype. com/) and PayPal an online payment system (www. paypal. com/) in order for it to keep up with the evolving activities on the internet. GMarket in Korea had a less complex system so eBay created eBay express to meet up to customer needs in Korea. Bay is cooperative in the sense that it partnerships with companies like Google, yahoo and Baidu in other for it to be more effective in its services. Customer Friendly Some organizations do not pay attention to the needs or complaints of their customers and take the separate measures to satisfy them, but eBay listens to customers and tries to keep up with what they want to sell, buy and how they want to do it. This brings about profitability, good reputation and more customers. So every organization should try to be customer friendly because it serves as an advantage to them.The gr eat importance of Technology The basis on which eBay operates is technology thats why its of great importance to them. eBay endeavours to up grade their systems to fit the latest technology, make sure the site is accessible at all times, ensure no fraudulent activity or illegal transaction is carried out in the site and also ensures that the site is virus free. This helps eBay to operate effectively. Staying Aware and Flexible eBay tries to stay aware and flexible at all times. The company tires to get feedback from customers, complaints, suggestions and also take note of customer activity on the site.This helps eBay to make necessary adjustments in other to satisfy their customers. Nearly all of its fastest-growing new categories emerged from registering seller activity in the area and quietly giving it a nudge at the adjust moment. For example eBay noticed a few car sells on the site so the company created a separate site called eBay Motors which has special features such as vehi cle inspection and shipping. Organizations should try and stay aware and flexible in running while running their business.Good management can make a optimistic difference in an organization Having a good manager or management body in an organization can make the organization excel. When Meg Whitman came into eBay in 1998 she made eBay become data and metric driven and she also brought about strategies which made eBay work better. eBay had a software problem and this caused the site to be shut down for 22 hours. When Maynard Webb was brought into the company as the president of eBay he quickly upgraded the systems and make sure they are upgraded constantly and this makes the site function more effectively.Have a good knowledge about a particular market before entering it It is observed from the case that eBay is not doing well in the east but is doing well in the west. It pulled out of Japan, is suffering in Taiwan and it lags behind a rival in China. This shows that eBay those not have the right strategy to excel in those areas so it is advisable to have a vivid knowledge and strategy about a particular market or area before entering it in order to excel. Recommendations The following are the recommendations for the case Making eBay Work. eBay is not doing well in the east, in order for eBay to do well in the east it should either buy GMarket or partnership with GMarket in other to be successful. Since GMarket is big and successful it would not allow eBay to buy them so if eBay partnerships with GMarket it will be more successful in that area. If eBay is very tactical they can be better than GMarket in the long run. Like the saying goes If you cant beat them join them. So eBay will be better off if it partnerships with GMarket. eBay pulled out of Japan, is suffering in Taiwan and it lags behind a rival in China. In business it is advisable never to give up so eBay should reengineer its self so it can function better in countries like Japan, Taiwan and China. One of the lessons of the chapter 3 (Managing strategic capability) is that strategic capability often lies in the day-to-day activities that people undertake in organizations. So developing the ability of the people at eBay in other to recognise the relevance of what they do in terms of strategic capability of the organization is important. Bay should organize training and development in specific areas and also develop peoples awareness that what they do in their jobs matters. This will help achieve competitive success and increase their motivation. Bibliography Johnson, G. , Scholes, K. , & Whittington, R. (2008). Exploring Corporate Strategy. Essex Prentice Hall. SWOT Analysis Lesson. (2008, February 12). Retrieved March 23, 2009, from Strength, Weaknesses, Opportunities and Threats (SWOT) http//www. marketingteacher. com/Lessons/lesson_swot. htm Experience Supply cost Product/process design Economies of Scale Cost Efficiency