Growth strategy is also one of eBay’s choice particularly horizontal growth and related diversification strategy. Horizontal growth is the expansion of the company’s existing product into other locations or market segments while related diversification strategy is expanding into related industry, one having synergy with the company’s existing lines of business (Mitchell, 2007). Specifically, broadening the trading platform and local and international expansion are two of eBay’s core strategies (Moraes 7 Smit, 2007).
By 1999, 4 years after eBay’s launch, eBay’s competitors began to emerge including its biggest rival up the Amazon. eBay responded to the challenge by expanding its core businesses through several acquisitions. It acquired the offline auction house Butterfield & Butterfield and created the eBay Premier which allows user to bid online for antiques and collectibles on offline auction house floors (Moraes & Smit, 2007). It created the eBay motors by acquiring Kruse International, the largest collector-car auction in the United States, and the AutoTrade. com (Moraes & Smit, 2007).
eBay Motors is basically the market place specifically designed for car auctions with supporting features like car financing, auto insurance and lemon checks. eBay Stores was also created after the acquisition of Half. com. It was created for buyers who do not want to bid, allowing for the immediate purchase of multiple fixed price and auction-style items. eBay expanded also expanded its market geographically by putting up sites on various countries like Austria, Australia, Canada, France, Germany, Ireland, Italy, Japan, Korea, Philippines, China, new Zealand, Switzerland and the United Kingdom.
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This expansion enables eBay to allow trading outside the United States, overcoming the problems created by trade barriers, political environment and financial barriers. In the United States, alone, eBay has local sites in 53 markets. The company has plans of acquiring other related companies in foreign markets where eBay has not penetrated yet and where customers are not yet aware about eBay (Moraes & Smit, 2007). Creation of a strong brand is another core strategy of eBay (Moraes & Smit, 2007).
The company’s CEO along with her management talent and experiences has been an asset to the company and the driver behind the choice of this strategy. She clearly devised a clear market segmentation strategy and marketing strategies that would make the eBay brand known to many. Before the emergence of various competitors, eBay was marketed in publications, and exhibitions at collector trade shows. When its competitors increased, it invested so much on marketing campaigns such a television ads resulting to popularity that eBay easily introduced its services to other market.
eBay also established a large user base by establishing relationships with more than 60 websites including American Online, providing eBay the access to the largest user base on the Internet and prevented AOL from entering the auction business (Moraes & Smit, 2007). eBay also created the Business Exchange targeting the small business market for businesses to buy and sell business merchandise and professional tools in their local market (Moraes & Smit, 2007). Conclusion The business model of eBay can be infinite depending on the capacity of its infrastructure and the number of customers who uses the site.
Thus, the core strategies of eBay are very balanced that as it expand its market, its IT infrastructure and capabilities is also upgraded, ensuring that it support the infinite scalability of eBay’s business. This balance in strategy is also brought about by the balance in the organisation; its founder is technologically inclined while its management is a group of people with wide experiences in the business arena, making the eBay organisation appropriate for the business model of the company.
So far, its choice of strategies has been very effective in sustaining its advantages over its rival companies as reflected by its market share over the past years. However, the company is very reliant on the Internet and related technologies, making it a pure e-business that is vulnerable to the changes in its technological environment.
References: Anonymous, Chapter 1: eBay’s Business Model Retrieved online on January 13, 2007 http://faculty.washington.edu/sandeep/d/amazonebay.pdf