Ebay Problem and Market Strategy Essay

810 Words Jul 1st, 2013 4 Pages
1. What is eBay’s problem?
2. Which marketing strategy was eBay following: market development or product development? Do you agree with it?
3. What decision-making process should CEO Donahoe utilize to make the decisions necessary to change the company’s product, customer approach, and business model?

Pierre Omidyar founded a sole proprietorship in September 1995 called Auction Web to allow people to buy and sell goods over the Internet. The new venture was based on the idea of developing a community-driven process, where an organic, evolving, self-organizing web of individual relationships, formed around shared interests, would handle tasks that other companies handle with customer service operations. By May 1996, Omidyar had added
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Competition had increased as rival web sites, particularly Amazon, now provided similar web services and eroded eBay’s competitive advantage. All this information is presented in the case exercise. These are symptoms of an underlying problem. Although PayPal was an example of vertical growth, the rest of the acquisitions were either horizontal growth or concentric diversification. A good argument can be made that although each of these acquisitions looked appealing, they were too many, too soon. Management appears to have been distracted by new business growth opportunities, took its eye off its core business, and was unable to integrate the new businesses with the old. Whitman and her team probably assumed that eBay’s lead in web auctions was sustainable without much reinvestment and thus wasted time and money on other ventures. This mistake has been made by many other companies, most notably by Sears, Roebuck when it acquired insurance and real estate businesses instead of investing in its retail stores.

2. Using a market development strategy, a company or business unit can (1) capture a larger share of an existing market for current products through market saturation and market penetration or (2) develop new uses and/or markets for current products. Using the product development strategy, a company or unit can (1) develop new products for existing markets or (2) develop new products for new markets. Aside from PayPal, eBay appeared to follow a…

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