Rift Valley University
MBA Program
Strategic Management Group Assignment
Review the following case:
STRATEGIC PRACTICE EXERCISE
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 Jeff Skoll as a partner and the venture was
incorporated as eBay. Two years later, Omidyar asked Meg Whitman to direct
corporate strategy to continue the accelerated growth rate of the company. Whitman
brought to the company global management and marketing experience and soon
became President and CEO. In almost no time, the company became one of the
Web’s most successful sites, with 233 million registered users. By 2007, the average
eBay user spent nearly two hours a month on the site—more than five times the time
spent on [Link].
Whitman expanded the company’s operations and spent more than $6 billion to
acquire companies, such as Internet phone operation Skype, online payments service
PayPal, ticket reseller StubHub, property rental and roommate search firm [Link],
comparison shopping site [Link], Web site recommender Stumble upon, and
25% interest in Craigslist. Expansion and diversification provided revenue and profit
growth plus stock price appreciation. Although financial analysts wondered how all
these businesses would fit together, Whitman argued that she wanted eBay to be
everywhere users wanted to be. At developer conferences, company representatives
unveiled new services that let buyers shop for and purchase eBay items outside of the
core [Link] site.
By 2008, eBay was in trouble. Its stock price had lost half its value over the past
three years. The core auction and retail businesses, which accounted for the majority
of revenue, were showing signs of weakness. The number of active users had been
flat for three quarters, at 83 million. The number of new products listed on the site
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had increased only 4% from the previous year. The number of stores selling goods at
fixed prices on eBay declined from a year earlier to 532,000. The company had not
done a good job of integrating Skype with its main business. Since its acquisition,
Skype’s service had actually deteriorated. Competition had increased as rival Web
sites, particularly Amazon, now provided similar Web services and eroded eBay’s
competitive advantage.
On January 23, 2008, CEO Whitman announced that John Donahoe would take over
as the company’s CEO. Donahoe stated that his first priority would be to revitalize
eBay’s core business, even at the expense of investors. “We need to aggressively
change our product, our customer approach, and our business model,” announced the
new CEO.
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?
N.B. your review report should have the following contents to the minimum:
Introduction
Case summary
Answer to the questions
Conclusion
Lesson learned from the case
