06 Jul Question Description Follow the instruction to write 5pages case study
Question Description
Follow the instruction to write 5pages case study
Please go through the case very carefully
All the work must be original
Turnitin report is required
Tags: Information security Offshore outsourcing Recruitment Process Ebay Outsourcing Strategy Production Economics
Ebay Outsourcing Strategy Case Study Paper
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case_2_e_bay.pdf
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P A R T Case 3-1: e-B a y ‘s O u t s o u r c i n g Strategy* _”If we are to continue outsourcing, and even consider expanding it, why should we keep paying someone else to !fo what we can do for ourselves?” Kathy Dalton leaned forward in her chair. She read the message on her computer screen and let the words sink in. Why haci she not anticipated that? After all, she was ‘~dept at asking insightful questions. She felt her heart rate uicken. She would have stared out her office window and pondered thls question, but she didn’t have an office. In keeping with a well,est~blished Silicon Valley tradition, everyone at eBay, incl;_.ding CEO Meg Whitman, occupied a, cubicle: Dalton, an attrac~ve, 38-year-old executive, had joined eBay in late 2002 after years of. call center experi- ~ce _for major long distance carriers. Now, nearly two .ears later, she couldn’! think of doing business any other ,vay. She liked being in the center gf the action. Sitting in ~ transparent cube, surrounded by hundreds of service · preseniatives, added to her already high level of energy d kept her in touch with eBay’s internal and external ____ustomers. D.alton reflected on the e-mail she had just received m her boss, }\’.endy Moss, vice president of Global Support. She knew she would pick. up the phone. ‘ ustomer . . . lessors Scott Newman, Gary Grikscheit, and Rohit Verma and Assisiant Vivek Malapati prepared this case sclely as the · for class discussion. The information presented in this case is on publicly available information and insights gained through us interaq:ions between University of. Utah MBA_students, .. ‘ faculty advisors, and local eBay managers during a field study ·roject (sponscred by the University of Utah and approved by e eBay Salt Lake Gty Service Center). The case contains writerompiled, disguised information and is not intended to endorse and/ r :illustrate effective or ineffective service management practices. er:tain sections pf the case study have been fabricated based on curt, service mapagement and customer service literature- to provide ,realistic and stimulating classroom experience. The numbers in e ‘case are available from public information or estimates or are ctitious. 1his case was the winner of the 2006 CIBER-Production and erations Management Society futemational Case Competition. soon, call Moss, and ask her clarifying questions about her e-mail. Her mind raced through the details of the proposed outsourcing strategy she had submitted to Moss last week. She quizzed herself: • • • • • • “Did my team and I make a strong enough case for proposing almost a 100 percent increase in the amount of volume to be outsourced?” “Will eBay management concur with our recommendation to begin outsourcing potentially sensitive riskrelated inquires for the first time?” “How will senior management react to the addition of a second outsourcing vendor?” “Did we cover adequately the types of proposed volumes targeted and how these would be transitioned to the outsourcing vendors?” “In the event of a major vendor problem, systems issue, or natural disaster, how executable is our back-out plan?” “Will the data in our ‘proposal allay the growing concerns among executives about offshore outsourcing altogether?” She wondered, “How would eBay senior managers react to our proposal to reorganize and, expand outsourcing in a new three-tiered approach? And would they even consider expansion in light of recent headlines about companies reducing the amount of work outsourced to India · becau~e of qu;ility issues?” Titis last question had perplexed her for several months. Not only was it a personal issue for Dalton-she felt her job security at eBay depended largely on the company’s continuing commitment to offshore outsourcingbut one she recognized as a business practice whose ti.me perhaps had come and gone. Several leading consultants were claiming that offshoring had lost much of its cachet in recent years as companies were coming to grips with the real costs, logistics, management commitment, and service quality associated with third-party partners in India, the Philippines, and elsewhere. In her proposal, Dalton had PC 3-2 Corporate Strategies reinforced the benefits to eBay of continuing to outsource outside the United States and had woven into her new strategy more “nearshoring” alternatives as well. Dalton was scheduled to fly to San Jose in just two weeks to present her outsourcing strategy to Whitman and her executive staff. Now, here was Moss’s e-.inail, question- ing why she had not addressed the option of cutting out the middleman and building eBay-owned outsourcing locations in other countries. would be critical in building infrastructure and attra? top-tier management to the company. ‘·/! In early 1998, Omidyar and Skoll realized ;ij needed.an experienced CEO to lead and develop an e'” tive management team as well as to solidify the compai( · financial position with an !PO: In March of that>{~ Whitman accepted the position of president and ‘ A graduate of the Harvard Business School, Whitmaif:)l’ learned the importance of branding at companies suchf Hasbro and Walt Disney. She hired senior staff from cfF panies like Pepsico and Disney. She built a managenf A Little History team with an average of 20 years of business expenefi per executive and _developed a strong vision for the ~(]~ eBay called itself “The World’s Online Marketplace.” For the sale of goods and services by a diverse community of pany. Whitman immediately understood that the eB individuals and small businesses no venue was more appropriate. eBay’s mission was to provide a robust trading busin¢ss model: A central tenant of eBay’s culture w ‘ captured in the phrase “The community was not built f eBay, but eBay was built by and for the community.” Itw·’ not about just selling things on the Internet; it was aboJ bonding people through the Web site. platform where practically anyone could trade practically anything. Sellers included individual collectors of the rare and eclectic, as well as major corporations like Microsoft community of users was the foundation of the cOmpait~”‘ and IBM. Items sold on eBay ranged from collectibles like trading cards, antiques, dolls, and housewares to everyday items like used cars, clothing, books, CDs, and electronics. With 11 million or more items available on eBay at any one time, it was the largest and most popular person-to-person trading community on the Internet. eBay came a long way from being a pet project for founder Pierre Omidyar and holding its first auction on Labor Day in September 1995. Omidyar developed a program and launched it on a Web site called Auction Web. According to eBay legend, he was trying to help his wife find other people with whom she could trade Pez dispensers. Omidyar found he was continually adding storage space to handle the amount of e-mail generated, reflecting the pent-up demand for an online meeting place for sellers and buyers. The site soon began to outgrow his personal Internet account. Realizing the potential this Web service could have, he quit his job as a services development engineer at General Magic, a San Jose-based software company, and devoted full-time attention to managing Auction Web. As traffic increased, he also began charging a fee of $0.25 per listing to compensate for the cost involved in maintaining a business Internet account. In 1996, Jeff Skoll, a Stanford Business School graduate and friend of Omidyar’s, joined him to further develop Auction Web. They changed the name to eBay, short for East Bay Technologies. In mid-1997, a Menlo Park-based venture capital firm invested $5 million for a 22 percent stake in eBay. Omidyar knew that the venture capital Business Model and Market Share Unlike many companies that were born before the Interne and then had to scramble to get online, eBay was born wi the Net. Its transaction-based business model was per fectly suited for the Internet. Sellers “listed” items for sal on the Web site. Interested buyers could either bid high than the previous bid in an auction format or use the “BU It Now” feature and pay a predetermined price. The selle and buyer worked out the shipping method. Payment wa usually made through PayPal, the world’s leading onlin payment company, which eBay acquired in 2002. Becaus eBay never handled the items being sold, it did not inc warehousing expense and, of course, did not hold any in ventory. For a company with almost $8 billion in assets, no. a single dollar was invested in inventory (Exhibit 1). In 2004, eBay reported revenue of nearly $3.3 billion. Revenue was mainly generated from two categories. The first, called the Listing Fee, involved a nominal fee incurred by the seller in posting an item for sale. This fee range from $025 to $2.00. The second, the Fmal Value Fee, was charged to the seller as a percentage of the final price when· a sale was made. This amounted to between 1.25 percent and 5 percent of the selling price, depending on the price of the item. The Final Value Fee on a $4.00 Beanie Baby would be $020, representing a 5 percent fee. The same fee on a mainframe computer selling for $400,000.00 would be 1.25 percent, or $5,000.00. Case 3-1: e-Bay’s Outsourcing Strategy eBay’s Income Statement (In OOOs Dollars) U/3V2004 U/3V2D03 U/3V2002 $ 3,271,309 $2,165,1)96 416,058 1,749,038 567,565 159,315 302,703 29,965 9,590 50,659 1,119,797 629,241 37,803 4,314 -1,230 $1,214,100 213,876 1,000,224 349,650 104,636 171,785 441,m 0.335 441,m 5,413 249,891 0213 249,891 46,049 25,455 36,401 159,003 5,492 7,832 76,576 5,953 130,638 1,230 91,237 3,781 7,784 1,324 -21,378 –54,583 -11,819 10,716 -1,195 8,134 Net revenues Cost of net revenues 614,415 2,656,894 857,874 240,647 415,725 Gross profit (loss) Sales and marketing expenses Product development expenses General and administrative expenses Patent litigation expense Payroll expense on employee stock options Amortization of acquired Intangible assets 17,479 65,927 1,597,652 1,059,242 77,867 8,879 Total operating expenses Income (loss) from operations Interest and other income, net Interest expense Impairment of certain equity investments Income before Income tax-United States 820,892 307,338 778,223 Income before Income tax-international Net Income (loss) Net income (loss) per share-diluted Net income (loss) Cumulative effect of accounting change Provision for doubtful accounts and auth cred Provision for transaction losses Depredation and amortization Stock-based compeosation Amortization of unearned stock-based compens Tax benefit on the exer of ~lay stock opts Impairment of certain equity Investments Minority interests Minority .interest and other net income adj Gain (loss) on sale of assets Accounts receivable Funds receivable from customers Q57 778,223 90,942 50,459 253,690 5,832 261,983 4,015 15,941 646,027 354,197 49,209 1,492 -3,781 6,122 -105,540 –44,751 -312,756 Other current assets -308 Other non-current assets Deferred tax assets, net Deferred tax liabilities, net Accounts payable Net cash flo~ .f!9I!l ~v_esting activities Proceeds from 1ssuance of common stock, net Proceeda (principal pmtB) on long-term obllga Parinerahlp distributions Net cash flows from financing activities Eff of exch rate change on cash and cash equiva ,Net incr (deer) In cash and cash equivalents Cash and cash equivalents, beginning of year Caah and CBBh equivalents, end of year Cash paid for Interest Soun:t: Cosewrltera’ estimate!l”)compilations, l!lld PC 3-3 28,652 -33,975 -2,013,220 650,638 -2,%9 647,669 28,768 –51,468 1,381,513 1,330,045 ~,234 -153,373 -38,879 -13,133 -4,111 69,770 17,348 ,-1,319,542 700,817 -11,951 14,631 -157,759 252,181 688,866 252,067 11,133 585,344 523,969 1,109,313 1,492 28,757 272,200 1,109,313 1,381,513 3,237 –64 –so public records.. ‘ Being first to market in the e-commerce world was frequently an insurmountable competitive edge. eBay capitalized on being the first online auction house. Early competition came from companies like OnSa!e, Auction Universe, Amazon, Yahoo!, and Classified2000. These companies battled eBay on a number of fronts, mainly pricing, advertising . ‘ online, and attempting to Jure key eBay employees away to join their ranks. eBay’s biggest and most formidable competitive threat came from Amazon.com when it spent more than $U million launchlng”‘ils’person-to-person auction service in 1999. eBay withstood all of these challenge;,. Amazon’s efforts ultimately failed because it could not PC }-4 Corporate Strategies eBay Yahoo! Amazon Overstock uBid All others 20~ 2003 2002 2001 U.S. Inf! U.S. . Inf! U.S• 83% 7% 6% N/A 1% 3% 41% 28% 10% N/A 1% 20% 87% 6% 4% 1% 1% 1% 50% 25% 6% 1% 1% 15% Inf! U.S. 90o/o… 65% 92’Yo 4% 2% 2o/o 16% 5% 2o/q 3% 1% 2o/o 1% lo/o N/A 12% 1% lo/a 2%,,,t 2%\,t 11%’3I1 N/A,,_.•.• _.·.·. ~ So~ Case writers’ estir:nates, compilations, and public I’KOI’ds. if-!ii generate enough site traffic. Auction buyers went where the most items were available for sale, and sellers went where the most buyers were found for their products. eBay had more buyers, more sellers, and more items-more than 1.4 billion items were listed on the site In 20041 These numbers dwarfed the nearest competitor by a factor of more than 50. eBay enjoyed a dominant 92 percent market· share of the domestic onllne auction business and a 74 percent share of the international market (Exhibit 2). Exhibit 3 eBay Organization Chart SoUIU! Case writers’ compilations and public records. eBay’s Customer Support Organization 1 J In December 2004, Dalton was an operations directq In eBay’s Customer Support organization. She had sev era! major responsibilities; the most critical one was tomer support outsourcing. both domestic and offshoo (Exhibit 3). This role occupied approximately 80 percen “1 Case 3-1 : e-Bay’s Outsourcing Strategy of her time. Upon joining the company, she had relocated to Salt Lake City, Utah, the site of eBay’s largest customer service,center. Utah’s four seasons and mountainous terrain suited her. She loved to ski knee-deep powder in the winter- and navigate forest trails on her mountain bike in summer. While thoughts of early season skiing had entered her mind, she had in fact spent the past three weekends in her cube and in conference rooms with her managers hammering out the strategy she had passed on to Mos.s for review. Worldwide, eBay’s Custo’\’er Support staff consisted of an estimated 3,000 FIE, comprising roughly two-thirds of the corporate w?rkfo’:”e. eBay operated major service centers in Salt Lake Oty, Omaha, Vancouver, Berlin,’ and Dublin. Smaller company-owned Customer Support groups were located in Sydney, Hong Kong, London, and Seoul. The majority of these employees spent their workdays responding to customer e-mails. In 2004, eBay answered more than 30 million customer inquiries, covering everything from questions about selling, bidding, product categories, billing, and pricing to thornier issues involving illegal or prohibited listings and auction secµrity (Exhibit 4). The Customer Support organization was made up of two major units: (1) General Support and (2) Trust and Safety. Historically, most of the customer contacts were handled by the General Support unit. The communications consisted of questions regarding bidding on ·2001.· General Support E-mail Phone Chat · •Total Trust and Safety E-mail Phone Chat Total Comblned<;;S andT&S E-mail Phone' Chat Total 2002 2003 2004 12.1 0.3 14.6 NA NA 8.2 12.4 0.4 15.4 16.1 0.8 0.4 17.3 4 9.8 0 0.1 9.9 12.6 0 0.6 13.2 24.4 0.4 0.5 25.3 28.7 8.1 11.1 0 6.8 0 NA NA 4 6.8 12.1 0.1 18.9 0.3 NA NA . 12.2 19.2 0.4 S0111'1Z Case writers' estimlltes, compilations, and public recorda. 0.8 1 30.5 PC 3-5 auctions, listing and selling items, and account adjustments. By mid-2004, however, nearly 45 percent of inquiries were directed toward the Trust and Safety function. Here hundreds of employees were responsible for ensuring that the items listed on eBay were legitimate and legal, did not infringe on copyrighted, patented, or original material, and fell within the company's policies (i.e., no firearms, tobacco, alcohol, human body parts, and so on). It also enforced eBay's guidelines for proper member behavior by policing activities such as shill bidding, merchandise misrepresentation, and outright fraud. PowerSellers Approximately 94 percent of eBay's customer service volume was e-mail-based. However, live chat and phone inquiries were growing as the company opened up these channels to more customers, based on their profitability. Live chat volume was predicted to increase to 1.5 million communications in 2005, up 50 percent over 2004. Phone calls handled in 2005 were anticipated to reach 1.4 million, almost double the number in the previous year. This phone volume was expected to come primarily from "PowerSellers," who represented less than 7 percent of eBay users but, due to the volume of merchandise they traded on the site, accounted for nearly 90 percent of the company's profit. Phone and live chat access to Customer Support was designed to enlarge the pool of PowerSellers. Dedicated service representatives received additional training in upsell, cross-sell, and auction display techniques to share with sellers to increase the number of items they sold and qualify thein for higher PowerSeller monthly sales volume thresholds (Bronze, Silver, Gold, Platinum, Titanium). Once attained, these thresholds qualified sellers for dedicated --phone and chat support as well as for the coveted PowerSeller logo (Exhiliit 5). Trust and Safety No other ,company was able to hafness the ubiquity of the Web and marry it to the auction concept as success, fully as eBay. At the same time, eBay had to confront challenges.never faced before, particularly in the arena of auction security and fraud prevention. Caveat emptor, "let the buyer beware,r had been a rule in the auction 'World since the middle ages. With the advent of eBay, buyers had to deal with unknown sellers over the Intemet,sight unseen, often in a totally different country, without the PC ~ Corporate Strategies To qualify, members must: • • • • • • • • Uphold the eBay community values, including honesty, timeliness, and mutual respect Average a minimum of $1,(X)(l in sales per tllonth for three consecutive months Achieve an overall Feedback rating-of 100, of which 98 percent or more is positive Have been an active member for 90 days Have an account in good financial standing Not violate any severe policies in a 60-day period Not violate three or more of any eBay policies in a 60--day period Maintain a minimum of four average monthly listings for the past three months ! ·I PowerSeller program eligibility is reviewed every month. To remain PowerSellers, members mtist: • • • • • Uphold eBay community values, Including honesty, timeliness, and mutual respect Maintain the minimum average monthly sales amount for your Power5eller level Maintain a 98 percent positive total feedback rating Maintain an acconnt in good financial standing Comply with all eBay listing and marketplace policies-Not violate any severe policies in a 60--day period and not violate three or m of any eBay policies in a 60-day period PowerSeller Levels There are five tiers that distinguish PowerSellers, based on their gross monthly sales. Some benefits and services vary with each tier. eE automatically calculates eligibility each month and notifies qualified sellers via e-mail. Gross Sales Criteria for Each PowerSeller Tier Bronze Silver Gold Platinum Titaniam $1,000 $3,000 $10,000 $25,000 $150,000 SCJtU'US: eBay Web site; case writErs' estimates, compilations, and public records. ability to personally examine th ...
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