After looking at the strategies that were developed from our SWOT Matrix there are three strategies that we have picked to analyze. These include further establishing our company in mobile platforms and payments,
advertising the bargain capabilities of our websites, and lowering our product fees to users. These strategies initially seem to us that they would have the greatest impact on our company in the future. Throughout this section we will discuss each of these strategies based on the information that we have discussed from previous sections of this analysis. Another analysis tool that will help us evaluate each of these solutions will be certain matrices.
The first step in evaluating these strategies is by completing matrices to determine which course of action best suits our company‟s current position. The first matrix that we have used to determine where our strategies should focus is the Boston Consulting Group or BCG Matrix which is located in Appendix E. The BCG Matrix graphically portrays our companies standing in terms of relative market share position and industry growth rate. The relative market share position is the ratio of our company‟s market share to the market share of the largest rival firm in our industry. To determine our company‟s relative market share position we compared our revenues to the
revenues of Amazon. The revenues that were used are from the 2010 income statements for both companies. EBay‟s revenue on this income statement was $9,156.27 and Amazon‟s revenue from 2010 was $34,204.00. These income statements can be found from each company‟s 2010 Annual Report. These numbers are also in millions of dollars. After analyzing these numbers we determined that eBay‟s relative market share position was at 27% in comparison to Amazon‟s revenue. The second step in setting up the BCG Matrix is to determine the industry growth rate. In order to figure out our industry‟s growth rate, we analyzed the average annual increase in revenues for several leading firms in our industry. The firms that we used to determine this were Amazon, Overstock, and our company. To attempt to determine the best industry growth rate we calculated the growth percentage for each company between 2009 and 2010 and between 2008 and 2009. We then averaged those two percentages for each company and totaled them up and divided by three to figure out the industry growth rate. The number that we finally determined for the growth rate is 18.36%. Then, using these two numbers we were able to plot eBay on the BCG Matrix. The two numbers that we calculated place eBay in Quadrant 1. This means that our company is a “Question Mark” according to this analysis tool. Being a “Question Mark” means that we have a low relative market share position but we compete in a high-growth industry. This also shows that our cash needs are high but cash generation is low. We should decide whether or not to strengthen our company or to make moves to minimize or eliminate parts of our company.
The second matrix that we used to evaluate what strategies we should pursue is the Grand Strategy Matrix which is located in Appendix F. This matrix is used to evaluate two dimensions of our company which are
competitive position and market growth. We determined from our opinion and the research that we have conducted throughout this analysis that eBay has a strong competitive position. We feel this way because we are an established company and we have been competitive for a number of years and we believe that we are very able to capitalize in new and current markets with proper strategy implementation. We also placed our company in the rapid market growth segment of the Grand Strategy Matrix. We determined this because our industry‟s annual sales growth that we determined for the BCG Matrix was at 18.36%. This number is well above the 5% that is considered to be rapid growth for an industry. When we combine the market growth and competitive position areas, we have determined that eBay should be placed in Quadrant 1 of the Grand Strategy Matrix.
This means that our company should not switch too notably from established competitive advantages that we possess. This also indicates that we can afford to take advantage of external opportunities that fit our company‟s objectives. There are also times that we can be aggressive at taking risks if we feel that it is necessary.
The first strategy that we will evaluate in this section is to further establish our company in mobile commerce platforms and payments. Our company has already been reaching into the mobile commerce and payment market and to this point the response by consumers has been wonderful. Mobile commerce platforms and payments are to become the next big market in buying and paying for items that consumers want. ABI research states that the mobile commerce market is expected to grow to $119 billion globally by 2015 (Batista, Amanda F). Seeing as how we have already been improving our company‟s portfolio to develop this market, we should continue these efforts to further our reach to these markets. Gaining control over this up and coming market will benefit our company by placing us ahead of our competitors and establishing a strong relationship between our products and our customers. This strategy will fit into the recommendations that we generated by forming the BCG and Grand Strategy Matrix. With this strategy we can focus more on market development and product development.
The second strategy to evaluate is extensively advertising the bargain capabilities of our websites. Due to the recent economic downturn more consumers have been looking for better deals and bargains. Our ecommerce sites have been known as a place where you can find good deals on things you want. In order to further establish this capability of our sites and remind consumers of this benefit of our sites, an extensive advertising plan could do that for our company. By forming and implementing a successful advertising plan we could increase traffic to our sites not only by buyers but also sellers. Implementing an effective advertising plan of our services features, advantages, and benefits would also help to lure customers away from other services similar to ours. This strategy would increase the expenses that we currently generate through advertising. However, if we are able to draw more customers to our site then the increased revenue that we generate from this increase should outweigh the expenses. Also, if we generate more traffic to our website then we should develop relationships with customers that last longer than we incur the expenses of the advertising. This will help our company in further penetrating the market we participate in.
The final strategy for evaluation is to lower our product fees for users. This strategy would entail lowering the fees that we charge to users when they use each of our services. Increasing our fees has been a main reason in
the past as to why we lost customers to other companies. Lowering our fees may be a way to draw consumers back to our services or to draw new consumers to use our services. This strategy will lower our revenue per purchase or transaction on our sites. This strategy may increase the volume of consumers that use our services though. This increase in volume could be expected to offset the lost revenue from decreasing our service fees. Lowering our fees will be another way to further penetrate our market and take market share away from our competitors.
To officially determine which of these strategies fits our organization‟s current position we have
constructed a Quantitative Strategic Planning Matrix or a QSPM. The QSPM objectively indicates which alternative strategies are best. This matrix uses inputs and matching results to decide among a set of strategies. The strategies are evaluated based on the critical success factors that were identified earlier in the company analysis.
The QSPM that we completed for eBay is located in Appendix G. As previously mentioned, the three strategies that we evaluated in the QSPM are further establishing our company in mobile platforms and payments, advertising the bargain capabilities of our websites, and lowering our product fees to users. We evaluated each of these strategies against the strengths and weaknesses from the IFE Matrix and the opportunities and threats from the EFE Matrix. The weights that we used for each factor remained the same as the weights used in the IFE and EFE matrices.
After evaluating the three strategies the strategy that possessed the highest score was to lower our product fees to users. This strategy received a score of 2.48 while the strategies of further establishing our company in mobile platforms and payments and advertising the bargain capabilities of our websites scored 2.37 and 2.15 respectively. Factors where lowering our product fees to users scored high on include the opportunity of bargain hunting consumers, the threat of the current economic downturn, the strength of users being able to find nearly anything with our products and being able to pay with our secure payment services, and the weakness of charging fees to users when a product is listed and when it‟s sold. This strategy received a score of four in each of these areas which indicates a highly attractive score. A rating of four indicates that a strategy capitalizes on a strength,
improves a weakness, exploits an opportunity, or avoids a threat.