Comparison of eBay.com and Alibaba.com

Comparison of eBay.com and Alibaba.com

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q u o
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T Digitally signed by
Thomas Liquori

Thomas DN: cn=Thomas Liquori,
email=thomasliquori@a
ol.com,

Liquori o=thomasliquori.me,
l=New York, NY
Date: 2010.09.05
12/16/2009
Professor Reddi: BUS451
16:57:16 -04'00' By: Thomas Liquori, Danauda Benjamin, and Anca Barbu


TABLE OF CONTENTS

EBay.com Introduction ................................................................................................................................. 3

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EBay.com Products and Services .................................................................................................................. 5
Ebay.com Financial analysis .......................................................................................................................... 6

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Ebay.com Last Three Year Financial Graphs ................................................................................................. 7

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EBay.com TOWS Matrix Analysis .................................................................................................................. 9

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EBAY.com TOWS Matrix Graph ................................................................................................................... 13

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Competitive Forces for ebay.com ............................................................................................................... 14

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EBay.com Industry Rivalry........................................................................................................................... 14

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EBay.com Threat of Entrants ...................................................................................................................... 14

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EBay.com Supplier Power ........................................................................................................................... 15

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EBay.com Buyer Power ............................................................................................................................... 15

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EBay.com Threat of Substitute Products or Services .................................................................................. 16
Ebay.com Core Strategies .................. ……………………………………………………………………………………………………17

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EBay.com Differentiation Strategy ............................................................................................................. 17

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EBay.com Cost Leadership Strategy............................................................................................................ 18
EBay.com Growth Strategy ......................................................................................................................... 18

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EBay Growth Trend Graphs......................................................................................................................... 19

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EBay.com Differentiation Strategy ............................................................................................................. 20

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EBay.com Growth Strategy ......................................................................................................................... 20

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Alibaba.com Introduction ....... ………………………………………………………………………………………………………………25
History of Alibaba.com................................................................................................................................ 27
Alibaba.com Products, Services, and Key Brands ....................................................................................... 29
Alibaba.com Last Three Year Financial Graphs ........................................................................................... 30
Alibaba.com Core strategies ....................................................................................................................... 31
Alibaba.com Growth Strategy ..................................................................................................................... 32
Alibaba.com Differentiation Strategy ……………………………………………………………………………………………………34
Alibaba.com Price strategy ......................................................................................................................... 35
Competitive Forces for Alibaba.com........................................................................................................... 37

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Alibaba.com Threats of New Entrants ........................................................................................................ 37
Alibaba.com Rivalry..................................................................................................................................... 38
Alibaba.com Supplier power ....................................................................................................................... 39
Alibaba.com Buyer Power ........................................................................................................................... 40
Alibaba.com Threat of substitutes .............................................................................................................. 40

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Alibaba.com TOWS Matrix .......................................................................................................................... 41
Alibaba.com Strengths ................................................................................................................................ 42

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Alibaba.com Weaknesses ........................................................................................................................... 42

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Alibaba.com Opportunities ......................................................................................................................... 43

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Alibaba.com Threats ................................................................................................................................... 43

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Alibaba.com SO Strategy............................................................................................................................. 43
Alibaba.com WO Strategy ........................................................................................................................... 44

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Alibaba.com ST Strategy ............................................................................................................................. 44

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Alibaba.com WT Strategy............................................................................................................................ 44

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Comparitive Analysis ................................................................................................................................... 45
Group Investment Perspective ................................................................................................................... 46

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Group Challenges ........................................................................................................................................ 47

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Works Cited................................................................................................................................................. 48
Works Cited: Continued .............................................................................................................................. 49

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Ebay.com Last Three Years Income Statements ......................................................................... Appendix: A

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Ebay.com Last Three Years Balance Sheets .................................................................................Appendix: B

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Alibaba.com Last Three Year Income Statements .......................................................................Appendix: C

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Alibaba.com Last Three Year Balance sheets.............................................................................. Appendix: D

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EBAY.COM INTRODUCTION
Once upon a time during the dawn of the internet, a man named Pierre Omidyar decided

to sell a broken laser pointer online on his website called EBay, named after his consulting

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company Echo Bay. The site at that time during the year 1995 was not primarily an auction site,

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the auction part was an afterthought and was named auction web. Auction web grew quickly

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among internet fanatics, and soon Pierre had to hire several employees to take care of the many

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tasks that involved his day to day operation. After two years, the site name was changed to EBay,

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a site that was devoted to online auctions, soon after, the worldwide obsession with EBay and

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consumers. Currently, Pierre is ranked #40 among the 400 richest Americans in the country by

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Forbes, released September 30, 2009.

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EBay’s mission statement says,” eBay's mission is to provide a global trading platform

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where practically anyone can trade anything." EBay’s vision, “pioneers communities built on

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commerce, sustained by trust, and inspired by opportunity. EBay brings together millions of

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people every day on a local, national and international basis through an array of websites that

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focus on commerce, payments and communications”. Comparing the mission statement to the

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vision of the company gives off the impression that EBay doesn’t have focused priorities .This

means the mission statement seems clearly focus on the website, eBay.com, but their vision

statement is focused on the array of subsidiary websites.

During the year of 1998, Pierre hired an experienced CEO named Meg Whitman to

become head of the public exploding company who now had 130 employees and a spot on the

New York Stock Exchange with a symbol as EBAY. Over the course of the next 10 years with

Meg Whitman’s leadership, EBay mania grew into an enormous multinational company who two

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years ago employed over 15,000 employees in 39 countries. In January 2008, John Donahoe took

over Meg Whitman’s place as CEO, and currently EBay has 16,200 employees (an 8% employee

increase in one year) in over 30 countries. EBay is an online provider of marketplaces for the

sale of goods and services. It also provides commerce, platforms, online payments services and

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online communications offerings to individuals and businesses. EBay’s foreign entry strategies

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into other countries have played a key role in their success for worldwide domination in the

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online auction market. The products and services that EBay offers vary from online

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communication services to the sales of goods and services.

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EBAY.COM PRODUCTS AND SERVICES
The products and services that EBay provides is an online marketplace for the sale of
goods and services. The company’s key products and services include the following:

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• Online services for the sale of goods and services
• Online communication services

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•

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Online payment and transactional credit services

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• Online classifieds

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• Advertising

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The key brands that the company has and operates are a number of subsidiary websites

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that are under the EBay umbrella. These companies include:

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• EBay's fixed price media marketplace Half.com

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• EBay’s payment solution Paypal.com: Bought by EBay in Oct. 2002 for
approximately $1,492,504

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• EBay’s low cost connectivity communication platform Skype.com: Bought by

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EBay in October 2005 for $3B
• EBay’s credit at point of sale payment solution Billmelater.com: Bought by EBay

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in October 2008 for $910M

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• EBay's marketplace to buy and sell tickets for events Stubhub.com: Bought by

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EBay in February 2007 for $292M

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• EBay's online shopping comparison website Shopping.com: Bought by EBay in
August 2005 for $634M
• EBay's apartment listing service platform Rent.com: Bought by EBay in February
2005 for $415M
• EBay’s Swedish online auctioneer Tradera.com: Bought by EBay in 2006 for
$48M
• EBay’s green marketplace Worldofgood.com

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EBAY.COM FINANCIAL ANALYSIS
The company generates about 75% of its revenues from the US, Germany and the UK.

The company recorded revenues of $8,541.3 million during the financial year ended December

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2008, an increase of 11.3% over 2007. The operating profit of the company was $2075.7 million

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in financial year ending 2008, an increase from $613.18 million in 2007. Net Profit in financial

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year ending was $1,779.5 million as compared to $348.3 million in 2007. The increase in profits

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is attributed to acquisitions and increased revenues from advertising and the payments business.

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The current stock price as of November 5, 2009 is $23.13, can be seen in the chart on the next

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page in the below bottom right table.

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The increases in EBay’s financials for the past three years have been impressive.

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According to Annualreports.com 2008 annual report for EBay, the company has seen

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tremendous increases and growth for the online giant. Some examples of the increases over the

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past year for EBay and some of its platforms include its payment option paypal.com. In 2007

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delivered a total of $1.9 billion in revenue, as of EBay’s 2008 annual report, paypal.com not

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hosts nineteen currencies with more than $60 billion dollars in revenue. A tremendous increase

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in EBay’s payment platform suggests that more people are becoming comfortable sending and

receiving money over the internet, as well as the number of internet users are growing as well. In

EBay’s communication segment platform of skype.com, in 2007 skype.com hosted more than

276 million users, as of EBay’s 2008 annual report, skype.com now registers more than 405

million users. The increase of more than 47% shows that consumers are very comfortable with

EBay and the platforms that the company provides. As of EBay’s 2008 annual report, there are

more than $100 billion worth of pre-owned items on EBay, making it the world’s largest engine

for reuse.

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EBAY.COM LAST THREE YEAR FINANCIAL GRAPHS

2008 Year Income 2007 Year Income

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$9,000.00 $8,541.30
$8,000.00 $7,672.30
Revenue

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$8,000.00 $7,000.00 $5,909.40
Revenue

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$7,000.00 $6,313.20 (Millions U.S. $6,000.00
$5,000.00 (Millions

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$6,000.00 Dollars)
$5,000.00 $4,000.00
U.S. Dollars)

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$4,000.00 Gross Profit $3,000.00
$3,000.00 (Millions of $2,000.00 Gross Profit

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$1,779.50 $348.30
$2,000.00 $1,000.00 (Millions of
$1,000.00
U.S. Dollars) $-

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$-
U.S. Dollars)
Net Income Fiscal

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(Millions U.S. Net Income
Fiscal Year Year

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Dollars) (Millions
Ending Ending

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U.S. Dollars)
2008 2007

2006 Year Income

a s Stock price as of 12/15/09: $22.50

$6,000.00
$5,000.00
$4,000.00

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$5,969.70
$4,713.00

m Revenue
(Millions

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U.S. Dollars)
$3,000.00
$2,000.00 $1,125.60 Gross Profit
$1,000.00 (Millions of
$-
U.S. Dollars)
Fiscal Net Income
Year (Millions
Ending U.S. Dollars)
2006

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EBay.com TOWS MATRIX ANALYSIS
EBay faces high risk of internet fraud due to which it is involved in various litigations.

Below we will go over EBay’s strengths, weaknesses, opportunities, threats, and strategies to get

a better understanding of the strategic choices that EBay faces.

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The strengths that the company has can be argued that they were the first to enter the

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online auction business, as well as having a majority of the marketplace. The external strength

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opportunities of EBay can be consisted of a strong market position due to wide usage. This

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strength can maximize EBay’s opportunities, over the years, the company has built a strong

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brand, currently the brand value stood at $12.9 billion and was ranked 54th in brand value

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rankings. EBay’s internal strengths have focused on a swift increase in the number of users and

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number of product listings. As of 2009, EBay has 88 million active users and about 150 million

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listings worldwide and in any given day, has about 14 million listings. An increased number of

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customers contributed to the growth of the company, and it emerged as one of the largest global

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online auction website with presence in 39 countries. EBay’s strong customer base and market

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position provides competitive advantage and gives EBay considerable bargaining power which

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will have a positive impact on the top line of the company. EBay’s strength threats strategies can

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be consisted of reinforcement of marketing, management, and systems as a concentrated effort.

EBay’s weaknesses can be favorably argued that the company has an insufficient

screening process to control counterfeit products. EBay does not have an effective screening

process in place to control sale of counterfeit products on its market places. While some sellers

commit fraud intentionally, some of them are unaware of any infringement. For instance, some

sellers might not be aware that certain products are not allowed for resale. The company does not

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have effective tools to monitor and weed out such instances. In most cases, the company is able

to identify counterfeit products only after the items have been listed.

The weakness threat strategies can be categorized as having an exposure to large

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contingent liabilities due to litigations. EBay has consistently been involved in various lengthy

litigations, stretched over a period of two to three years because of which it is exposed to large

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contingent liabilities. Many complaints were filed against EBay for offering counterfeit items.

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This being the main area of contention, there were lawsuits filed by companies like Net2Phone,

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Netcraft Corporation, and PartsRiver which claim that EBay, Skype and PayPal have infringed

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their patent rights. In 2007, a lawsuit was filed alleging that EBay and PayPal, through various

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anti competitive acts, were monopolizing markets. Most of these lawsuits filed in 2006 and 2007

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are still pending. Lengthy litigations are expensive, and they expose the company to uncertainty

and large contingent liabilities. The damages awarded were as large as $56.8 million in a lawsuit

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which claimed that EBay failed to curb sale of counterfeit products. Other than having to pay

damages, EBay might be prohibited from selling certain items or continuing certain business

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practices. This affects the operations adversely. Litigations are expensive, time consuming and

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they result in diversion of significant operational resources. EBay has to actively take measures

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to ensure it is not involved in any further litigation as they are counterproductive.

The company’s weakness opportunities strategies can consist of diversifying into new

product markets, as they have been over the years. The company can also try to implement an

online verification of goods being auctioned to avoid very expensive lawsuits and time

consuming litigations that hurt the company. The weakness threats of the company can consist of

the alliance with postal carriers implemented on the company’s website for sellers to choose

from when shipping their items.

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Some opportunities that EBay faces are rapid growth of internet display advertising and

classifieds. Online advertising, both display ads and through classifieds, has been growing at a

fast pace. Revenues from interactive advertising which comprises search, display advertising and

classifieds is expected to grow as at rate of 23.4% during 2007- 2012 and generate $147 billion

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by 2012. Increasing popularity of used goods is another opportunity for the company. In the

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current uncertain economic situation where consumer spending has been decreasing, pre-owned

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items have been increasingly popular. Since 1998, EBay marketplace has facilitated the reuse of

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an estimated $100 billion in goods. Industry trends indicate the US consumers are buying used

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goods as a way to save money. In 2008, according to EBay sources, 75% of adults purchased

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used goods to save money. More than a quarter of adults who had purchased used goods in the

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past six months (since August 2008) saved 76% or more off the retail price of the last item they

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purchased. Apart from this, 88% of Americans believe that buying pre-owned goods amounts to

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recycling and is therefore environment friendly.

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The threats that EBay faces are exposure to internet fraud that will increase costs and

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affect customer confidence adversely. Online marketplaces have a high exposure to different

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types of fraud. There are various types of internet frauds including the sale of fake or counterfeit

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products, credit card fraud or non delivery of goods, etc. According to the Internet Crime

Complaint Center’s (IC3) statistics, internet fraud has been on a rise. During 2008, IC3

registered 275,284 complaints which indicate an increase in complaints by 33.1% from 2007.

The total dollar loss due to these frauds has been $264.6 million which works out to be an

average loss of $934 per complaint. Effectively eliminating frauds is costly as the company as to

incur large recurring expenses to monitor and prevent such frauds. In case of litigations, EBay

would have to incur legal expenses, and there is a possibility that heavy penalty or compensation

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would have to be paid. Another example of a threat for EBay would be the unavailability of

services that leads to loss of income. System failures for long duration operational risk for EBay

in 2008 had periods of interruptions for periods for as long as 22 hours, and PayPal was

unavailable for five continuous days. In early 2007 Skype was unavailable for two continuous

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days. Repeated failures might lead customers to believe that the systems are unreliable and

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reliability is especially crucial for the payments division which is seeking to expand its merchant

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services business. Due to frequent unscheduled interruptions for long periods, the company’s

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reputation and reliability will be affected negatively.

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EBay’s competitive analysis in the marketplace gives the company a higher advantage

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over their competitors such as ioffer.com, sell.com, and alibaba.com. Although the company has

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similar commonalities with their rivals, eBay has several different platforms and segmentations

under the company’s umbrella to help keep them afloat. This is the difference between eBay and

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their competitors. Since they were the first to the market for online auctions, this gives the

company an advantage of trust and well being to consumers who may be new to the internet as

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well as online auctions. Consumers and competitors alike recognize eBay as a dominant force on

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the internet, and they are aware of its capability of providing far better than competition.

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EBAY.COM TOWS MATRIX GRAPH

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Strengths – S Weaknesses – W

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Own majority of Poor screening

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marketplace by process to control

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being first counterfeit goods

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Opportunities – O SO Strategies WO Strategies

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Diversification with Global expansion in Online product
the growth of products and verification to

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consumers services control fraud

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Threats – T
Competition among
rival internet sites
ST – Strategies
Reinforcement of
marketing and
management
WT – Strategies
Alliance to postal
services

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COMPETITIVE FORCES FOR EBAY.COM
Porter’s Five Force model of competition is a key tool for diagnosing the competitive

environment:

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EBay.com Industry Rivalry

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Industry rivalry is high when it is easy for new competition to enter the market. In the

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case of eBay, it is not so simple for new entrants to compete with the online giant. Being that

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eBay was first to the market in 1995, it gave the company an edge early during the dawn of the

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internet. Since then, the company has become a notable household brand name and customers are

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confident using eBay’s online software for buying and selling items. The threat of competition

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and rivalry is still there for eBay, which will be talked about in the next force of Porter’s model.

EBay.com Threat of Entrants

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Recently, many new entrants have been trying to catch up to eBay. For example,

Amazon.com has come long way as well since it opened up on the web a few years back, and

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earned customer loyalty very quickly among consumers. Some people might feel more

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comfortable shopping on this site more than eBay, because it is more commercialized in some

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ways. Another example of a threat of entry would be another auction site ioffer.com. Ioffer.com

claims that they are an easier way o buy and sell items, and have been in competition with eBay

ever since they popped up online in the yearly millennium. Instead of auction style listings,

buyers and sellers can make offers’ to one another rather than waiting for an auction to end to

purchase an item. EBay saw this type of strategy and quickly implemented it in the site to

compete with ioffer.com by using eBay’s ‘buy it now or make an offer’ option.

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EBay.com Supplier Power

Supplier power is higher when buyers have fewer choices from whom to buy. The

internet has increased the amount of supplier power to consumers. Buyers have an option now to

become a supplier themselves by becoming a drop shipper for suppliers. The drop shipper does

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not have to store any items in a warehouse or factory with this option, thanks to the power of E-

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Commerce. Drop shippers can earn money by listing items for suppliers and forwarding the

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orders to the main supplier. The logistics part is also at the main suppliers’ expense, really not

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having to do too much work on the drop shippers’ part except collect their share from the sale.

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This type of supplier power gives an increase in products and services to the marketplace, and in

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turn continues the growth of eBay’s online website. Especially for eBay, there are numerous

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drop shippers that have set up their own stores on eBay’s site. EBay gives sellers an option to set

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up an online store for a monthly fee where shoppers can browse through products as they please.

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EBay.com Buyer Power

Buyer power is higher when buyers have more choices. Businesses are forced to add

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value to their products and services to get loyalty. Many loyalty programs include excellent

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services that customers demand on-line. Customers want to solve their problems and many times

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they are more successful on-line than on-phone. Also, we see internet savvy businesses springing

up offering more valuable goods and services at lower costs. Now with the advent of eBay, many

people are assuming roles as drop shippers. Individuals can have a thriving business selling

goods of larger companies without having to carry inventory, as mentioned earlier in supplier

power. Another positive aspect for buyer power would be bargain shoppers surfing the web,

especially eBay. EBay offers all prices for all items, especially for bargain and impulse shoppers.

Both shoppers alike can find great deals at affordable prices from the comfort of their own home.

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EBay.com Threat of Substitute Products or Services

The strong competitive pressures coming from the attempts of companies outside of the

industry to win buyers over have become more widespread in today’s E-Commerce market.

There have been an increasing number of fixed price sales over auction style listings over online

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auction sites such as eBay. Search engine and price comparison websites are moving in the

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direction of online retailing and auctions. Yahoo shopping and price comparison search engines

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such as Microsoft’s Bing.com have recently been becoming a more popular way to price

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comparison shop online. The internet offers avenues of competition to existing companies and

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opportunities for start ups. Now businesses can enter the market on-line with few barriers to

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entry. Porter's Five Forces Model can help demonstrate the attractiveness of starting your on-line

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business or evaluating a current one such as eBay. The model below will help to better illustrate

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eBay’s five forces:
Threats

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Competition

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with rival
sites

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Supply Power Rivalry Buyer Power
Drop Bargain
shipping for Ioffer.com shopper
suppliers paradise
Amazon.com

Substitute
Price
comparison

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EBAY.COM CORE STRATEGIES
EBay’s strategic statement describes EBay’s activities, “by allowing customers to create

individual auctions and online stores in order to sell new and used products. This process is

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facilitated by the ability to create communities of interest, providing secure transaction services,

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and a peer review process in a global environment”. So what does this strategic statement

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actually mean to the consumers of eBay? The opportunity to have individual auctions and online

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stores removes the physical barriers between buyers and sellers. The communities of interest

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creates added value through base of additional information. The ability to have peer review

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evokes customer confidence in buying from a seller that you never met or will see. The global

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environment is open to all and new markets alike. The strategy describes the core competencies

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of eBay through the several factors that are addressed. A competitive advantage will be created if

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eBay keeps it first mover advantage, and always stays one step ahead of their competition.

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EBay.com Differentiation Strategy
EBay pursues a cost leadership, differentiation, and growth strategy. A differentiation

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strategy that the company possesses is the quality service security that the online website offers,

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which is very impressive. EBay monitors many if not all of the listings posted on the site through

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the service of thousands of employees. Another impressive tool that EBay has was the first to

implement as part of their differentiation strategy was the ability of quality control by offering

peer review. Buyers and sellers both have the opportunity to “rate” how the transaction went.

Whether the item was received as described and the shipment was fast, causing a positive rating,

or the item was not as described or not received at all, and all buyers should beware resulting in a

negative rating, or whether the transaction was just ok, resulting in a neutral rating.

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EBay.com Cost Leadership Strategy

A cost leadership strategy that eBay has is the ability to form alliances with numerous

companies. An example of this strategy could be the alliance by eBay and Tom.com. In 2006,

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Tom.com and EBay Eachnet (eBay’s China Auction Site) decided to announce a joint venture

agreement in China. The two companies would need to build a new China marketplace in 2007

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to compete with China’s top auction site rival Taobao.com. EBay would have a 49% stake in the

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company and tom.com will have a 51% stake in the joint venture. In addition, EBay will

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contribute its Eachnet subsidiary, while Tom Online will contribute local management expertise,

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technology, and brand.

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EBay.com Growth Strategy

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Another strategy that an eBay implement is a growth strategy that involves the fight to

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keep up with rival competitors while still trying to grow and expand into an ever so competitive

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market. Amazon is significantly, methodically, and relentlessly eating away at eBay's market

share. Amazon is the largest beneficiary of eBay's decline, but certainly Amazon is not the only

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company causing extensive damage to eBay’s growth process. Online retailers from Zappos to

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Newegg to Wal-Mart among others are all doing their part in taking share from eBay. In fact,

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many of eBay's changes are actually self-inflicting further declines.

The three bright spots for eBay's quarter were:

• Items sold were up 3% y/y

• Active users increased 4% y/y (a small acceleration, well big percentage-wise, but small

in absolute terms) from the Q3 3% y/y gain.

• Fixed price items are now 49% of GMV

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EBay Growth Trend Graphs
Here are some graphs from Jeetil Patel that show the trends in the item sold and active user

metrics:

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The transaction growth chart shows that while eBay held onto a y/y growth on this

metric, the trend is definitely decelerating. It will be interesting to see if this goes negative in Q1

or if eBay can hold the line here.

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EBay.com Differentiation Strategy

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Some of eBay’s features to their cost leadership and differentiation strategy consist of

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offering all types of items, including innovative products. The ability of M-Commerce is a big

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plus for the online giant. By having the ability of a mobile application, users can use eBay on the

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go through their phones, PDA’s, and laptops. Being user friendly and simple is the way eBay

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will stay on top of the competition. Also, having the ability of online verification against fraud

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and counterfeit products makes eBay a number one source for buyers and sellers to stay loyal to

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the company by having the confidence in the company as they keep up with the industry

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standards.

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EBay.com Growth Strategy

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EBay’s growth strategy has a very extensive and impressive portfolio, as it has gained

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acquisitions and joint ventures over the years with global companies. In 2001, eBay joined forces

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with MercadoLibre (free market in Spanish) the leading online trading site in Latin America.

MercadoLibre will acquire iBazar Com Ltda., the Brazilian subsidiary of iBazar SA, which was

recently acquired by eBay in return eBay will receive a 19.5% ownership interest in

MercadoLibre and will share best practices with the company. The relationship enhances

MercadoLibre’s leadership position in Brazil and the rest of Latin America, and expands eBay’s

reach throughout the region. In March of 2006, eBay invested in Meetup.com. Meetup.com is a

local community organizing network. Over 5 million people have created and joined long-lasting

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local Meetup Groups around shared interests and purposes. These groups and clubs have held

over 1 million local meetups. In April of 2006 eBay acquired Tradera.com for $48.3 Million

USD. Tradera.com is an auction site based in Sweden.

In June of 2006 eBay Inc. and PCHome Online announced that they have agreed to form

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a joint venture in Taiwan. Under the agreement, the companies will leverage eBay's global

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experience and PCHome Online's local ecommerce expertise to launch a new co-branded website

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that will bring new online trading opportunities to buyers and sellers in Taiwan under the name

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of Ruten.com.tw. Focused on the needs of Taiwan consumers, the website specializes in online

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auction-style trading and also offers the ability to buy and sell at a fixed price.

q u
In January of 2007 eBay acquired Stubhub.com for $310 Million USD. Stubhub.com is

i
L
an online marketplace for concert, sport, and Broadway event tickets. In April of 2007 eBay

acquired Microplace.com. MicroPlace is a social business owned by eBay. It focuses on

a s
microfinance loans sent via the internet, utilizing PayPal, allowing users to choose specific

lending clients and businesses and loan them money over a designated period of time. Unlike

m
competitor Kiva, investments are returned to the lendee with interest. Microplace’s stated

h o
mission is to alleviate global poverty by offering investments that enable loans to hardworking

T
poor people.

May 2007 was a busy month for eBay; they acquired three companies and invested in

another. The first company which was Stumbleupon.com that eBay acquired for $75 Million

USD on May 1st. StumbleUpon is a website and content discovery service enabled by a browser

toolbar. StumbleUpon uses positive and negative user ratings to form collaborative opinions on

website quality. When users stumble, they will only see pages which friends and like-minded

stumblers’ have recommended. More often than not, it’s something almost serendipitously

BUS451 Page 21


interesting to the reader. The StumbleUpon site says they have nearly 7.5 million users as of

April, 2009, up from 1.7 million in December 2006. Over 15 million personalized

recommendations (“stumbles”) are delivered daily. The same day on May 1st eBay invested in

Channeladvisor.com. ChannelAdvisor Corporation provides technology and services that enable

e
online retailers to maximize their profits across multiple e-commerce marketplaces such as eBay,

m
Amazon.com and Overstock.com, comparison shopping engines such as Shopping.com,

i .
Shopzilla, Nextag and Google Product Search and search engines such as Google, Yahoo and

r
MSN. In 2007, ChannelAdvisor managed over $2.1 billion in gross merchandise value (GMV)

o
on behalf of its customers.

q u
Two days later, on May 3rd, eBay acquired Gittigidiyor.com, which in Turkish means

i
L
going, going, gone. Gittigidiyor is a Turkish online marketplace similar to eBay that offers

auctions, stores and fixed price listings. Gittigidiyor is Turkey’s leading online marketplace

a s
company. It was founded in 2000 by local entrepreneurs in Turkey and is headquartered in

Istanbul. Auctions began at 5 February 2001. Gittigidiyor has over 1.5 million registered users

m
and more than 500,000 daily visitors. Since 2001, 3.5 million sales have been successfully

h o
completed. Finally, for the month of May, eBay acquired Gumtree.com on May 19th.

T
Gumtree.com was started in March 2000 as a local London classified ads and community site,

designed to connect people who were either planning to move, or had just arrived in the city, and

needed help getting started with accommodation, employment and meeting new people.

Gumtree.com now covers 60 cities across 6 countries - the UK, Ireland, Poland, Australia, New

Zealand and South Africa - and are the UK’s biggest website for local community classifieds

including flat share, flat rentals and jobs. More than 25,000 new rooms are advertised a month,

which means at least 10,000 rooms are rented a month through Gumtree.

BUS451 Page 22


On October 4th 2007, eBay acquired Via Online. Via-Online GmbH is an auction

management software company. The company operates web-portal, Afterbuy.com, which helps

users manage various aspects of the selling process, with features like inventory management

and item listing. The company is based in Krefeld, Germany. On January 1st 2008, eBay acquired

e
Fraud Sciences for $169 Million USD. Israel and Palo Alto based Fraud Sciences offers

m
automated anti-fraud systems including SpotLight VFX and SpotLight T2T, merchant solutions

i .
they provide are transaction verification with fraud prevention. Fraud Sciences has been

r
integrated into eBay’s PayPal product to help fight against fraud prevention. On May 2nd 2008,

o
eBay acquired Vuvox. Vuvox makes technology for presenting rich media in slideshows.

q u
On September 25th 2008, eBay acquired Gmarket.com. Gmarket.com is a financial

i
L
information company specializing in the delivery of global fixed income and capital markets

data. The flagship product PILOT is a real-time desktop workstation for financial professionals

a s
delivered via the Internet. Pilot’s customizable desktop aggregates the world’s leading sources of

capital markets content onto one singular platform for ease of access. It also includes a real-time

m
direct interface to MS-Excel. They pride themselves on delivering quality content in one easy to

h o
use, flexible, and affordable package.]

T
In October 2008, eBay acquired Den Bla Avis for $380 Million USD. Den Bla Avis and

BilBasen are leading classifieds businesses in Denmark and operate dba.dk, an online classifieds

site that generates more than 120 million page views per month, and bilbasen.dk, an online

vehicle classifieds site that generates 66 million page views per month. Founded as printed

classified advertising circulars, Den Bla Avis and BilBasen have successfully made the transition

to fast-growing, profitable online businesses while maintaining the publication of its circulars.

Den Bla Avis and BilBasen have offices in Aarhus and Copenhagen, Denmark.

BUS451 Page 23


During the same month and year of 2008, eBay acquired Billmelater.com for $945

Million USD. Bill Me Later, Inc. provides payment and marketing technology solutions to

multichannel retailers. It offers PayCapture, a set of credit tools; and Bill Me Later that enables

customers to pay for purchases without providing credit card information. The company supports

e
and delivers a suite of web-engineered payment solutions; and offers consulting services in the

m
areas of payments, risk management, marketing, and technology. Bill Me Later, Inc. was

i .
formerly known as I4 Commerce, Inc. and changed its name to Bill Me Later, Inc. in August,

r
2007. The company was founded in 2000 and is based in Timonium, Maryland. As of November

o
7, 2008, Bill Me Later, Inc. operates as a subsidiary of eBay Inc.

q u
EBay has certainly taken their growth strategy process to new levels, buying every

i
L
company that will give eBay a threat in the future. It is a very good strategic move on the internet

giant to invest and acquire numerous companies around the globe. This strategy will only

a s
strengthen eBay as a company and brand name for years to come. EBay is in a league of their

own and at that moment it seems like no competition can stop them or even compare to the

m
market share that eBay possess.

T h o
BUS451 Page 24


ALIBABA.COM INTRODUCTION
Alibaba is a B2B e-commerce company founded in 1999 by Ma Yun. Alibaba is also the

flagship company of the Alibaba Group. With more than 40 million users and 5 million virtual

e
storefronts, Alibaba has been able to climb to the top as one of the most useful online e-

m
commerce businesses. Alibaba’s primary business is to serve as a directory of Chinese

.
manufacturers connecting them to other companies around the world looking for suppliers. It

ri
connects companies with suppliers and manufacturers throughout the world. By creating the

o
connection for business, Alibaba specializes in trade between buyers and sellers. Its primary

u
business is to serve the Chinese market with a directory of the Chinese manufacturers. Alibaba

i q
also offers business management software solutions to small businesses across China using the

L
"Alisoft" brand. Alibaba was founded in Hangzhou, China. Alibaba.com has offices in more

s
than 50 cities across Greater China, Japan, Korea, Europe and the United States.

a
The mission/vision statement of the company can be defined as; Alibaba Group (Alibaba

m
for short) is a global e-commerce leader basing in China. Alibaba has 7 subsidiary companies,

o
which are involved in the business of B2B, C2C, online payments, software service, search

T h
engine, online advertising, local living, and consumption community, etc. Alibaba is committed

to building the world's leading e-commerce infrastructure and high quality online living

platform. CSR should be born from business model. Only by this, corporation’s can realize

sustainable development. CSR isn’t a burden. Every corporation can find a point to combine

itself with CSR. Everyone should assume social responsibility and can assume social

responsibility in the convenient network environment.

BUS451 Page 25


While holding the Chinese market as its first customer base, Alibaba also works

internationally throughout the world. Alibaba operates in two different marketplaces; the first is

an international marketplace in English personalized to global importers and exporters in China;

the second is a Chinese marketplace that focuses on suppliers and buyers trading domestically in

e
China. It also reaches buyers and sellers in more than 240 countries around the world. Since

m
September 2009, Alibaba.com had gained 45.276 million registered users, which add up to be an

i .
increase of 27% since the previous year. Of these users, 10.48 million were from the

r
international trade market and 35.8 million were from the Chinese trade market. Although

o
Alibaba started out as an independent company, Yahoo currently holds a 40% share holder in the

q u
parent Alibaba Group. Alibaba plans to raise $1.5 billion in the next year, making it the second-

i
biggest Internet IPO ever, after Google’s $1.9 billion offering in 2004. The IPO will value

L
Alibaba.com at up to $7.8 billion. The company recorded revenues of CNY 3,001.2 million

s
(approximately $432.6 million) in the fiscal year ended December 2008, an increase of 38.8%

a
over 2007. The company's operating profit was CNY 1,192.4 million (approximately $171.9

m
million) in fiscal 2008, an increase of 48.2% over 2007. Its net profit was CNY 1,205.2 million

o
(approximately $173.7 million) in fiscal 2008, an increase of 24.5% over 2007.

T h
By the end of 2008, Alibaba launched business to business sites in six foreign language

versions, in order to make trading easier for foreigners. The International sites for Alibaba

consist of: Spanish.alibaba.com, german.alibaba.com, Italian.alibaba.com, Russian.alibaba.com,

Portugese.alibaba.com, and german.alibaba.com.

BUS451 Page 26


HISTORY OF ALIBABA.COM
1999 Alibaba Group was established

2000 Launched the Gold Supplier membership to serve exporters in China.

e
2001 Launched the International TrustPass membership to serve exporters outside China.

m
2002 Launched the TrustPass membership to serve SMEs engaging in domestic China trade.

i .
Launched keyword ranking services in the international marketplace.

r
2003 Launched TradeManager Instant Messenger software for easy communication.

o
Established Ali-Institute to offer customer training and higher-education e-commerce

u
2004
certification in China.

i q
2005 Launched keyword ranking services on the China marketplace.

L
2007 Launched branded advertisements in the Chinese marketplace.

s
Introduced the Gold Supplier membership to Hong Kong.

a
2007 Launched premium placement display in the Chinese marketplace.

m
Launched an SME financing scheme in collaboration with leading banks in China.

o
Successfully listed on the Hong Kong Stock Exchange.

h
Re-launched our upgraded Alibaba Japan marketplace.

2008

T Became a constituent stock of Hang Seng Composite Index Series and Hang Seng
Freefloat Index Series.

Launched Winport to help SMEs build their own presence in the China marketplace.

Formed an associated company, Alibaba Japan, with Softbank to take over the
operation of the Japanese marketplace.

Launched the China TrustPass for Individuals membership to serve entrepreneurs
engaging in domestic China trade.

BUS451 Page 27


Introduced the Gold Supplier membership to Taiwan.

Launched the Export-to-China service to help SMEs sell direct to China.

Launched the Gold Supplier Starter Pack, on the international marketplace.

e
2009 Launched Ali-Advance, a pay-for-performance based keyword bidding system

m
Launched Gold Supplier International Edition

.
Upgraded Ali-Institute to be a new business unit to better cultivate e-commerce talent for

i
SMEs.

r
Acquired the Business Management Software division of Alisoft to further the goal of

o
transforming from "Meet at Alibaba" to "Work at Alibaba."

u
Acquired controlling stake in HiChina to enhance our ability to provide additional Internet

q
infrastructure services to Chinese small businesses

Li
a s
h o m
T
BUS451 Page 28


ALIBABA.COM PRODUCTS, SERVICES, AND KEY BRANDS

m e
ri .
o
Alibaba like eBay does not carry specific products, but a very different mix of items and brands.

u
Some of the products the offer include everything from Agriculture to Transportation items.

•

•
Agriculture

Apparel

Li q
s
• Automotive

a
• Chemicals

m
• Energy

o
• Environment

T h
• Lights and lighting

• Luggage

• Printing and Publishing

• Rubber and Plastic

• Security and Protection

• Service Equipment

• Textiles and Leather Products

BUS451 Page 29


ALIBABA.COM LAST THREE YEAR FINANCIAL GRAPHS

2008 Year Income 2007 Year Income

¥4,000.00
Revenue
¥2,500.00
¥2,162.80

m e
Revenue

.
¥3,000.00 ¥3,001.20 (Millions of ¥2,000.00 (Millions of
¥1,882.60

i
¥2,613.80 CNY Yuan) ¥1,500.00 CNY Yuan)
¥967.80

r
¥2,000.00
¥1,205.20 Gross Profit ¥1,000.00 Gross Profit

o
¥1,000.00 (Millions of ¥500.00
(Millions of
CNY Yuan) CNY Yuan)

u
¥- ¥-
Net Income Net Income

q
Rev. USD: $432.6M
Fiscal Year (Millions of Fiscal Year (Millions of

i
Gross: USD: $171.9M Ending CNY Yuan) Ending CNY Yuan)

L
Net: USD: $173.7M 2008 2008

2006 Year Income
a s Stock price as of 12/15: $18.12

¥1,500.00

h o
¥1,363.90

m Revenue

T
¥1,126.20
(Millions of
¥1,000.00 CNY Yuan)
Gross Profit
¥500.00 ¥219.90 (Millions of
CNY Yuan)
¥-
Net Income
Fiscal Year (Millions of
Ending CNY Yuan)
2008

BUS451 Page 30


ALIBABA.COM CORE STRATEGIES
Alibaba Group is formerly the world’s leading business-to-business e-commerce

company. It was started only 9 years ago, and so growth strategies are expected to be a main

e
strategy of the company so that it can continue to effectively compete with world leaders in the

m
industry. Despite the present economic crisis in the world’s economy, Alibaba has positioned

.
itself to overcome that obstacle and move forward to declare an even bigger market share. An

ri
aggressive expansion is underway to keep the company ahead. The company believes that given

o
the weak state of the economic environment that Allibaba.com will increase its revenue by 13 %

u
billion Yuan this year. Alibaba.com CEO David Wei Zhe said the global economic crisis

i q
provided “a great opportunity to help more small and medium-sized enterprises move online, and

L
expand our market leadership and investment for growth”. This

s
strategy included spending on a global marketing drive worth at

a
least $30US million, the hiring of 30,000 employees and the

launching of a new service center in northern China. China is

o m
one of the few areas that survived the crisis remaining as one of

h
the largest consumer markets after the economic turn. This is

T
why the company maintains major operations in China because

of its economic safeguards. It’s backed by 8 of China’s largest

banks because it really is developing the economy of china by

reviving entrepreneurial spirit. . It aims to help small and medium –sized companies conduct

trade. The recent focus has been to increase the growth of B2B and B2C business.

BUS451 Page 31


Alibaba.com Growth Strategy

One of its recent strategic moves was the acquisition of Yahoo China. This was expected

to have a large impact and allow the companies to integrate and join forces with their combined

e
resources that will with time lead to growth. A restructuring strategy of Yahoo China began after

Yahoo failed to generate profits. In December 2007, Yahoo China removed the three original

. m
departments: new media, network search and communications departments. In turn two new

ri
departments: website operating and mailbox departments. Merging of network search and e-

o
business and digging into the potential of network search will be the future direction for

u
development within Yahoo! China. E-business search technology will also be a main focus

i q
because the company believes that developing this technology will lead to greater profits. This

L
strategy is extremely focused because Alibaba realizes that the acquisition of Yahoo represents

s
an overwhelming opportunity to grow and gain a larger market share because Yahoo is such a

a
recognized company. The company realizes that for optimal results changes within the company

has to take place. Restructuring of Yahoo is a step in the right direction.

o m
Alibaba is very focused on expanding overseas Mr. Wei, chief executive at the company,

h
T
continued to explain that his strategic move is to attract more clients in markets including India

and Japan, because according to Wei “more suppliers outside China will look for new markets

like China.” At present, about 4% of its 400,000 users Alibaba have chosen to look more

outwardly to Chinese markets. To show how committed the company was to broaden its

boarders, it announced a joint venture with Japan’s Softbank Corp. This together with other

international alliances has helped to elevate this company into the Global marketplace.

BUS451 Page 32


Another of Alibaba’s main strategies involves capitalizing on its international consumer

base and driving a large successful marketplace between businesses. The company’s leaders

have shown that they know how to seize market opportunities and to expand its strategy to the

small and medium sized enterprises (SME) economic growth throughout Asia, USA, Europe and

e
South America. In order to achieve this, the company uses its strengths. The combination of

m
Eastern wisdom, western operational techniques and international capital invested in the global

i .
market reflect the power that this company manages to maintain in the industry. This strategy

r
allows the company to be more flexible and efficient. Alibaba understands change and the ever

o
evolving of the external environment in which it competes and thanks to environmental studies

q u
and expectation studies the company is well aware of these changes. Today, the company can

i
fairly be referred to as a giant global trade market because the company is one of the most active

L
in B2B marketplaces. Its main goal is to make conducting business easier for small businesses

s
around the world which makes sure that each business capitalizes on all the advantages of having

a
an international business. Furthermore, Alibaba operating as an Asian company wants to still be

m
known as an inter-cultural organization that has an inter-cultural management team and thus

o
focus.

T h
Alibaba is constantly working on ways to make business easier for its members. It

recently unveiled a new pricing model to draw more members. They launched a starter package

for Gold Suppliers which offers fewer services for a 60% discount. Alibaba.com David Wei says

that the program is interested in increasing website’s customers even at a risk of set backing its

profit margins. He stated in an interview, “We believe if we increase our customers, we will

increase our revenue later and the process will take care of itself.” This strategy is more of a

long-term one that illustrates that the company understands that creating a loyal

BUS451 Page 33


customer/supplier base is what’s most important because loyal suppliers will eventually raise

profits from the raised sales revenue. When this first strategy was introduced, signs pointed to a

positive result in the first period under the new pricing model, total sales were higher than what

the company usually receives in a month. Analysts seem to like the new pricing model. Citigroup

e
says it expects the company to decline in 2009, but 2010 should be a rebounding year because” it

m
should benefit from a more sustainable model, delivering a faster growth and higher margins.”

Alibaba.com Differentiation Strategy

ri .
o
It has already been noted that Alibaba.com is presently the world leader in business to

q u
business e-commerce. This is something that the company has capitalized on in the most unique

i
way. Alibaba.com targets small to medium sized businesses. It focuses on buying and selling

L
among small and midsized organizations, and it has more than five million suppliers.

s
Alibaba.com has successfully recognized that it could fill a gaping market need that China has.

a
The country has virtually no printed directories or electronic databases that allow companies to

m
describe their products and help buyers and sellers find one another while still providing a

o
certain level of comfort that these companies are on the up and up. Alibaba.com focuses on small

T h
family type businesses in China of which are many in number.

According to Yuxin Chen, a marketing professor at New York University’s stern school

of Business, “Alibaba’s major advantage is that it is located in a country that has emerged as the

manufacturing base of the world.” Most companies in China are these small businesses and

Alibaba has put itself in the position to take advantage of this. Most companies exporting in

China are not big companies, so for these companies Alibaba provides a platform. To continue to

provide for this market of small businesses, access to Alibaba’s portals is mostly free of charge.

BUS451 Page 34


Membership fees are charged ranging from $300-$8000 and various membership programs is

offered which provide different membership opportunities.

Alibaba.com Price strategy

e
Alibaba’s primary revenue is derived from charging customers for value-added services

m
and from subscription fees, listing fees and secondarily through advertising avenues. In terms of

i .
the price ( membership fees) paid by B2B clients , the business buyers and supplier who want to

r
find potential trading partners via e-commerce marketplaces have available to them certain

o
membership packages to appeal to the most varied amount of businesses. Fee-paying members

q u
can enjoy “priority placement of supplier storefront”, priority listings in the industry directory

i
and advanced search results at Alibaba.com marketplaces. Alibaba.com promises price savings

L
that can’t be found through more traditional forms of business. The marketplaces provide many

s
advantages to businesses; businesses can get access to the active global buyer community and

a
vice versa for buyers, businesses can launch marketing activities to potential buyers in a

m
economical way, buyers can get access to high quality and organizational information on

o
products, potential sellers, and additionally the convenience which is real time and 24 hours

T h
services for both the buyers and the sellers.

One specific pricing strategy that Alibaba has put in place is the Gold supplier premium

membership. This is a certification that the site offers to specific supplier companies which gives

them the opportunity to post an unlimited number of products online. Gold suppliers also have

more of an advantage with global trade because of the certification Alibaba has provided

showing that this organization is authenticated. This means much more access to customers than

the business man who doesn’t have a paid membership. Testimonials from gold suppliers speak

BUS451 Page 35


to the effectiveness of this pricing strategy. Customers believe that the price for the membership,

which varies, is a small cost to pay for the services that are available as a registered member. The

realm of possibility is great which makes global trade a possibility for small companies who

wouldn’t have this opportunity otherwise. Customers are jumping at the opportunity to sign up to

e
be a Gold supplier which gives Alibaba the upper hand and the opportunity to create revenue.

m
Many spin off’s of the gold supplier membership have provided other services and benefits at

i .
lower cost to the customer but with fewer benefits. The gold supplier tag is more prominent still.

u o r
Li q
a s
h o m
T
BUS451 Page 36


COMPETITIVE FORCES FOR ALIBABA.COM
Porter’s Five Force model of competition is a key tool for diagnosing the competitive

environment:

e
Alibaba.com Threats of new Entrants

. m
Alibaba has always welcomed the idea of competing companies entering the industry. A

ri
spokesperson of Alibaba stated this in reference to the news that Chinese search engine firm

o
Baidu.com is beginning beta testing for an ecommerce site. Christina Splinder continued to say

u
that “competition would help grow the entire ecommerce market in China.” The consumer

q
ecommerce penetration rate in China is 33% compared to over 90% in developed economies

Li
such as the US and Europe. Early competition from eBay is what Alibaba credits for growing the

s
ecommerce industry in China from several hundred million RMB back in 2003 to over 100

a
billion RMB this year. They are also hopeful that the new wave of companies to come will

further grow the company from then on.

o m
Evidently, this company is concentrated on limiting new entrants into the market because

h
of its goals as a company is build the consumer market in Asia and subsequently in the world. Of

T
course, new entrants could cause external difficulties for this company, but with competition

comes the success of being the people’s premier site to deal business. Alibaba has developed

quite the reputation for new innovation and its Global influence, and it credits fierce competition

for helping it to have developed this much.

BUS451 Page 37


Alibaba.com Rivalry

The auction ecommerce industry is quite the growing one. In recent years, it has become

very concentrated with equally large global companies which have been able to develop core

e
competencies in the industry. One of Alibaba’s rivals is eBay Eachnet. Both Alibaba and eBay

Eachnet operate in the Chinese e-commerce industry, so it is understandable that these are close

. m
competitors. Alibaba acquired Yahoo! China as well as other subsidiaries to help grow its

ri
company and develop it into the company it is today. EBay is a global giant in ecommerce and it

o
has the advantage of owning a recognizable brand that had global attention and had a loyal

u
customer base in the US.

i q
AliPay is the payment tool that Taobao, Alibaba’s subsidiary uses for business –to-

L
business e-commerce website. With this AliPay, buyers can deposit money into a bank account

s
designated by Alibaba Taobao. The sellers receive payment when the deal is verified by buyers.

a
EBay Eachnet the fierce competitor it is also announced that it would spend more than 100

m
million Yuan (Us$12 million) to launch a new online payment system as well. EBay plans to

o
invest heavily to make sure that it has available a secure system for payment on their site. EBay

T h
Eachnet launched a payment system called Escrow in October very similar to AliPay which was

set up to create a more secure online payment environment for members. EBay, just like Alibaba,

gained success in the Chinese market quite rapidly but, Alibaba has a larger hold on the Chinese

market because of its global reach and innovative systems.

BUS451 Page 38

Comparison of eBay.com and Alibaba.com

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