PEST analysis is a business management tool that helps analysing the political, economical, socio-cultural and technological factors affecting the overall functioning of an organisation (SWOT analysis and PEST analysis, 2!"#$ PEST analysis for e%ay is sho&n belo&'
Political: This element of PEST analysis evaluated the political factors that affect e%ay$ e%ay has its operations in almost ) countries across the globe thus is affected by different government la&s and regulations of each country$ *o&ever E-commerce as of no& is not that much affected by national governments (+dler, 2!#$ They are greatly affected by taation la&s, employment la&s, security regulations related to online payments etc (+rmstrong, 2!2#$
Economical: i.e all other businesses e%ay is greatly affected by the overall &orld economical conditions$ They are affected by economical factors li.e inflation, unemployment, rate of interest, currency fluctuation and changes in taes (/ar.eting /i, 2!#$ 0hanges in economical conditions directly affect consumer buying po&er &hich in turn has direct influence on e%ay1s overall business ( %ining 3a.il, 2!2#$
Socio-Cultural: e%ay overall business if greatly affected by changing customer preferences, changes in lifestyle trends and consumer buying patterns$ 4esearches reveal that there has been a significant rise in the number of consumers preferring online retailing as compared to offline retailing (+rmstrong, 2!2#$ There has been a huge shift in consumers1 &ays of buying and selling products &ith so much information available to them at the clic. of a button$
Technological: 4apid advancement in technology has sho&n a huge impact on all business across the &orld (+rmstrong, 2!2#$ e%ay1s complete business model is based on internet thus it is greatly affected by technological factors li.e security threats, server brea.do&ns and changes in terms of online payments$
Porter1s five forces model is a tool that helps analysing the eternal competitive environment of an organisation (Porter, 25#$ Porter1s five forces analysis for e%ay is sho&n belo&'
Threat of new entrants: /edium6 E-commerce industry provide lo& barriers to ne& entrants (7robes, 2!"#$ 8t re9uires high investment in order to compete on a large scale$ Online payments are seen as a comple processes$
Threat of Competitive Rivalry: /edium to *igh6 %oth online and offline companies compete &ith e%ay$ 8t faces high competition from big online players li.e +maon and +libaba (7robes, 2!"#$ ess entry barriers result in development of a number of ne& online companies operating on same business model as e%ay
Bargaining power of customers: *igh6 &ith too many options available customers en:oys high bargaining po&er ( %ining 3a.il, 2!2#$ E-commerce companies have to offer fe&er prices in order to attract more customers$ 0ustomer today has ample of information related to the products thus they .no& &here they can get &hat they desired at best price$
Bargaining power of Suppliers: o&6 e%ay is a big brand name and suppliers all over are eager to get associated &ith it (7robes, 2!"#$ /illions of sellers ma.e product listing on e%ay thus bargaining po&er of individual suppliers is very less$
Threat of Substitute product : o&6 e%ay has a uni9ue business model &here numerous products are sold thus they do not feel any threat from substitute products (7robes, 2!"#$ They can easily change to different products to meet changing needs of customers$
S&ot analysis is a strategic management tool that helps analysing a company1s strengths, &ea.nesses, opportunities and threats (Pahl ; 4ichter, 2<#$ 8t the strengths and opportunities combined together outnumbers &ea.nesses and threats then the outcome is considered positive and predicts future gro&th$ S&ot analysis for ebay is sho&n belo&$ Strengths
Weaknesses
Giant online marketplace: != million active users and != million live listings
Extensive global presence: Present in ) countries
Economies of Scale: 3ery less investment &ith high earning
Strong business model: +cts as an intermediate bet&een sellers and buyers$ + uni9ue business model that serves as a competitive advantage
High Fees: /ar.et research reveals that e%ay charges comparatively high fees &hen compared to other online service providers$ Sellers are hardly able to ma.e profits$
Scams: + number of shipping scams and frauds
Brand reputation: + multi billion brand &ith have been reported lately as no 8T system can be !@ secure$ huge brand loyalty Lacks strong future groth strategies Strong payment methods: >ses PayPal &hich is considered a secure and convenient payment system
Localisation: ?isplays in local languages and is adapted to local product offerings Opportunities
Threats
Groth of online market: 4eports indicate
#nline Security: +s the model is completely 8T
remar.able gro&th in online mar.et$ 8t is an
bases its al&ays open to security threats
emerging mar.et and provides ample
$ncreased "ompetition: *igh competition from
opportunities$
big brands li.e +maon and ne& entrants
!eveloping economies: 0ountries li.e 8ndia and
"hanging economies and exchange
0hina present good gro&th opportunities
rate: 0hanges in economical conditions affects
"hange in customer preference: 0ustomers
echange rates &hich in turn affects e%ay$
today have less time thus prefer to use online Other 8T related issues li.e server crash, hac.ing
mar.etplace &hich helps saving time$
$mpact of social media' use of social media helps in attracting more customers
etc$
%c&uisitions and 'ergers: S.ype deal opens more opportunities Table.1. Source: Made by Student (2015
SWOT analysis for e%ay predicts high future gro&th ho&ever they have to &or. on their future strategies in order to align &ith changing business needs$
Core Competence: 0ore competence refers to an organisation1s resources and capabilities that server as a competitive advantage against its competitors (+nsoff, 2)#$ 8t emerges &ithin an organisation over a period of time and defines its capacity to ta.e actions$ 8t helps adding uni9ue value for its customers and represents only those resources and capabilities that have strategic values$ e%ay1s complete business model is an unmatched core competence and serves as prime competitive advantage for the company$ 8t is recognised &orld&ide for its innovative ideas &hich cannot be imitated by any of its rivals$ 8ts %rand reputation is another core competence that attracts high customer traffic to&ards its &ebsite$ e%ay considers its human resources as one of the primary forces that helped it develop a strong brand reputation in the online mar.etplace$ Eauction service is another core competence of e%ay &hich has brought considerable gro&th to the company$
!eco""endation #or #uture de$elop"ent: 4esources and competence analysis of e%ay predicts high gro&th opportunities in coming future$
The company ho&ever must emphasie more on developing strategies that can help them prevent frauds especially in customer to customer mar.eting of products$ e%ay recently has faced a number of legislation related to selling of counterfeit products$ 8t must deploy effective screening processes in order to control the sale of counterfeit products$ 8t must epand to developing economies and ta.e advantage of ample opportunities presented by them$ 8t is essential for them to formulate future gro&th strategies in order to meet the dynamic needs of online mar.etplace and further strengthen their technological portfolio in order to retain their competitive advantage$
TOWS analysis is referred to as a variant of SWOT analysis (%aines, 7ill, ; Page, 2!#$ 8t helps in bettering understanding of the various strategic choices available to the organisation$ TOWS analysis for e%ay is present belo&'
TOWS Matri% #or e&ay '%ternal O pportunities ( O
'%ternal T hreats(T
Security threats
TOWS Matri% #or e&ay
Aro&ing demand for online
0hanging economic conditions
retailing
0urrency fluctuation
+c9uisitions and mergers
Sale of counterfeit products
Aro&th in digital mar.et sector Emergence of small domestic ?iversification
players
?eveloping economies
0ompetition from big brands
(SO )sing strengths to
(ST )sing strengths to
li.e +maon nternal Strengths (S
"a%i"ise opportunities
Online mar.et place leader *uge mar.et share 7inancial Stability Strong leadership %rand reputation %usiness /odel *uman resources
"ini"ise threats
>sing %rand reputation to Epanding to ne& mar.ets li.e 8ndia and 0hina Epanding product portfolio ?iversifying into ne& product mar.ets
E-auction
attract more customers Online verification to control sale of counterfeit products Strategic alliances to further increase mar.et share 4estructuring mar.eting and management strategies
Strong technological portfolio (WO Mini"ising *eaknesses nternal Weaknesses (W
to take ad$antage o# opportunities
(WTMini"ise *eaknesses to a$oid threats
Wea. control illegal and fraud
%ric. and /ortar stores for
8mplement strategies that can
selling of products
e%ay to enhance physical
better control frauds$
0omplete dependence on
evidence element
Strengthen online payments
technology
+ltering pricing strategies to
security$
0omparatively high prices
provide cost advantage
Strategic alliances
Table.2. Source: Made by Student (2015
The outcome of TOWS analysis for e%ay presents ample opportunities for e%ay in international online mar.et place$ They must consider /ar.et development, strategic alliance and pricing strategies as primary future gro&th strategies$
!eco""endation:
/ar.et development, strategic alliance and ne& pricing strategies are the most sustainable, feasible and acceptable future gro&th strategies$ They should consider countries li.e 8ndia and 0hina for further epansion$ %oth these countries are developing economies &ith huge population thus provide ample gro&th opportunities$ 8n order to ta.e maimum advantage they should focus on developing strategic alliance &ith local enterprises that have better .no&ledge of local community preferences$ +s they enter these ne& mar.ets they should emphasie on restructuring their pricing strategies as these countries have lo&er buying po&er o&ing to less stable economic conditions and lo& currency value$ e%ay en:oys a huge mar.et share and has high brand reputation &hich can help them attract target customers in ne& mar.ets$ They should deploy strategies by &hich can control sale of counterfeit products &hich &ill further help them increase brand image and loyalty$
