The paper discusses the commendable business and strategic management of eBay Inc. under the leadership of Meg Whitman, president and CEO that made the organization the leading online auction and shopping website in the world.
The company was initially started by Pierre Omidyar in 1995 under the name Auction Web; but the real success story started with the association of Meg Whitman with the company. Omidyar decided to build an acquisition of a joint venture firm Kruse International to build a strong position in the auction market. Meg best matched the criteria; she had adequate experience of brand building and joined the company as the CEO in 1997.
The very first task she undertook at the company was to set priorities. She believed in defining short term priorities that would eventually decide the fate in the long run. These priorities included defining the capacity intake for investment purpose, paying consideration towards the IPO sector, marketing strategy of the company etc. An important point of consideration that Meg realized was increasing the technical capacity of the company’s website: eBay is an online business firm and so the system capacity and technical aspects including emergency operations and back-up plans are indispensable.
Another key aspect was building community relationships. EBay deals with a wide variety of products and user friendly applications and services are most important. Interest specific communities and subcommunities not only helped in the business expansion but also provided its users a sense of comfort and trust in the organization. The next important consideration was to target the heavy users of the website. It started the Power Sellers Program, which aimed at providing additional benefits to its heavy users. She also ensured the company has a pool of learned and experienced executives who can benefit the company by their experiences and suggestions. She was herself an experienced manager ad realized the importance of experience in making business strategies, and so even ensued the presence of an experienced legal consultant in the organization. A healthy internal culture was always her priority and she instilled the company’s vision and mission in the mind of every working individual of eBay. Community safety issues were also given high priority as adequate planning and care was taken for cyber security, illegal products, identity issues etc.
By March 1998, there were several potential competitors for eBay in the Internet auction market, the greatest being Amazon.com. So the prime strategy implemented by eBay was to introduce novel services and facilities that keep the users loyal and contented.
Joint ventures, collaborations and partnerships were tactfully done for business expansion. The biggest venture worth mention is the acquisition of Kruse International. There were several positive outcomes of this venture; with a dramatic increase in the Gross Merchandise Sales and number of internet users of eBay.
There were several changes introduced in the human resource alignment/ organizational chart as well. The company was headed by the founder and chairman, followed by the President and CEO. This was followed by several individual divisions or communities. The paper also mentions the list of eBay’s Executive Officers and Directors in chronological orders. EBay’s Stock Price also showed an ascending pattern in the 1997 to 1999 span.
Many modifications in the user access and controls were also made and they were collectively presents as the user agreement. Some key points mentioned in this agreement included eligibility criteria, fees, information about the company, norms on buying and bidding and listing and selling, anticipated action against breach and illegal work, liability etc.
The decision of Meg Whitman to join eBay as CEO was in itself, an explicit example of her vision and far sightedness. Initially she was reluctant to join the company, but one her first visit she realized the novelty in Pierre’s venture and rightly estimated the future of the company. As in the words of Whitman: “It was clear to me that eBay had the makings of a really great brand. Finally, I really liked Pierre, Jeff, and Bob. I liked the values they were trying to embed in the company, and I thought their intuition was great” (pp 4).
The true spirit of leadership is in giving respect to the organization, the cultures and the workforce. Meg did exactly the same. Another great quality of a true leader is team building; Meg was an ardent believer of the fact that the more time the team members spend together, the more they become familiar with each other personally and professionally. She thus initiated long meeting sessions that lasted 2-3 hours each.
The outcomes from the past experiences should always be taken into account when a key decision is taken. Whitman used her past experience at P&G and Bain and took an off-site analysis. A team of experienced executives as formed by her ensured the company gets the right guidance in times of need.
The most requisite condition is effective decision making in any management operation. The greatest challenge before Meg was her decision on the acquisition of Kruse International. She was of the firm opinion that since the company is receiving a percentage of the sale price of goods sold online; high priced products would result in higher benefits. And that was the reason why she supported the acquisition of Kruse since it was auctioneer of collector automobiles.
Meg showed all signs of a true leader: she had a vision and communicated that vision to the organization workforce also, an effective leader who knew the importance of team building and healthy community growths. She was far sighted and realized the value of experience in business management.
Business challenges and their resolutions
Since eBay is an online working organization, there were a number of technical issues that were to be taken care of. A very common example is when in the very first week of her joining, Whitman realized how system capacity was limiting the business working. She examined how the overall benefits of having limited capacity was negligible compared to the expected business profits with increased capacity. She thus planned to increase the system capacity by 10 folds. The technical structure of the company had no specialization and Meg ensured she made significant changes in the structure of engineering.
An important topic of concern was the addressing of safety norms. Seldom there were reports of selling of illegal games on the website, or a fraud etc. Though it accounted for a mere 0.003% of the total business transactions on the website, yet it could have serious repercussions on the branding of eBay where buyers and sellers are communicating only through website communication. The strategy solution was implemented in January 1999 which provided new optional protection services for users, including identity verification by Equifax Inc. and special norms for the sale of firearms.
With the rapid growth of online systems and communication, Internet auction services became a hot preference of both buyers and sellers. There emerged several potent competitors of eBay in the market. EBay, under the leadership of Meg Whitman, involved a series of strategic changes and new ventures to make their position unscathed in the market. User friendly steps for online ventures were introduced, including a 24/7 customer support helpline.
The strategic management theory supports the development of healthy partnerships and collaborations to help the business expand. Some key ventures in this direction were joint partnership agreement of eBay and AOL in 1999 and acquiring Butterfield & Butterfield. The greatest and key decision taken in this context was the acquisition of Kruse International. Pierre on this had said: “On the organizational side, we have to be sure we are hiring quality employees who fit with the culture; we can’t afford to let that slip. On the external side, at the rate we are growing, we have more new people using the service in a quarter than the total number of people who had been using the service in the previous quarter” (pp 17).
Several questions emerged with this acquisition that was to be pondered over. Firstly, the appropriate integration of Kruse with eBay: to what extent should the Kruse be allowed to conduct their every day operations etc. The acquisition lead to significant increase in eBay’s Gross Merchandise Sales by each Quarter from 1997 to 1999 ($604 million in 1997-Q1 and $34010 in 1999-Q4, pp 19). The number of registered users also showed an unprecedented growth (88,000 in 1997-Q1 to 3,825,000 in 1999-Q4, pp 19).
Thus the study of Meg Whitman at eBay Inc. (A) is a classic example of efficient management and effective decision making. The statistics of the period 1997 to 1999 reveal enough about how the company that initially started as a small auction house became the leading online functioning company of the world.