A Comparative Study of Mergers, Acquisitions and Strategic Alliances in E-Commerce: Amazon and eBay

A Comparative Study of Mergers, Acquisitions and Strategic Alliances in E-Commerce: Amazon and eBay

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Background

In the present day of globalized economy, the concepts of competitive advantage and competitiveness are popular in the business world. One of the ways that businesses are restructuring to achieve advantage and remain competitive is through mergers and acquisitions (M&As), and strategic alliances (Bairstow & Young 2012). The e-commerce sector has seen a dramatic rise in M&As and strategic alliances in the recent past. Amidst this trend in the e-commerce industry, the proposed study focuses on exploring key issues in M&As in the sector, with a focus on eBay and Amazon. M&As have been described an ideal strategy for gaining competitive advantage in both local and international markets. As a result, corporations are increasingly entering the strategic merger agreements and making acquisitions (Bairstow & Young 2012; Lau et al. 2012). Brueller, Carmeli and Drori (2014) show that M&As provide corporations with the benefits associated with economies of scale, as well as help them circumvent competition. From a strategic and commercial viewpoint, the consolidation of the e-commerce industry occurring through M&As has been described as an essential prerequisite for success in the sector.

Presently, the e-commerce industry is one of the fastest growing industries globally, which can be attributed to the fact that the business world is currently undergoing a transformation towards e-economy (Gomes et al. 2011). This transformation is facilitated by the increased availability of information, knowledgeable consumers, increasing complexity of products, and rapid innovations (Bairstow & Young 2012). Lau et al. (2012) explain that the growth of the global e-commerce industry is unprecedented, and is being accelerated through M&As. According to Bairstow and Young (2012), M&As are a reaction of top novel market conditions and technologies that compel corporations to change their strategic directions. The dramatic growth witnessed in the e-commerce sector is linked to the enhanced convenience and superior customer choice. Currently, global proliferation of the Internet is 40%, which translates to approximately 3 billion users (Brueller, Carmeli & Drori 2014).

Key companies in the e-commerce industry have embarked on an acquisition as a means of consolidating their market position and boosting their capabilities. In 2011, there were 67 M&A transactions in the e-commerce sector valued at $ 6 billion and $ 7.67 billion in 2013 (Barnes & Hunt (eds.) 2013). Amidst this trend, the proposed study seeks to explore the key issues in the M&As in the e-commerce industry using two case studies, namely eBay and Amazon.

Statement of the Problem

The trend of M&As in the e-commerce is still an emerging concept that is still requires vast exploration in the literature. Although M&As are common, even in other sectors, it has been reported that 50% of M&As fail, which can be attributed to numerous factors, such as cultural clash, power relations, issues with trust, and problems with integration after the M&A (Cartwright & Cooper 2012). Moreover, only 33% of M&As are value adding, with 53% resulting in divestments later (Cartwright & Cooper 2012). In the e-commerce sector, M&As are still new, which means that little research has been conducted to ascertain whether similar outcomes in other sectors can be replicated in the e-commerce sector.

Aims and Objectives

The primary aim of the proposed research is to explore the key features of M&As in the e-commerce industry using the case studies of eBay and Amazon. First, the proposed study seeks to investigate the nature and types of M&As in the e-commerce sector. In this respect, the proposed research will profile the M&As in terms of product extension, vertical, market extension, horizontal, or conglomerate merger (Barnes & Hunt (eds.) 2013). A vertical M&A is characterized by two or more organizations operating at various levels of the sector’s supply chain, merging their operations. Product extension M&A involves two or more organizations dealing with related products and operating the same market in order to group their products to facilitate greater access to customers (Cartwright & Cooper 2012). Market extension M&A involves two firms dealing in similar products albeit in different markets. Horizontal M&A involves corporations in the same sector and takes the form of consolidation. Conglomerate M&A occurs between companies engaging in unrelated activities (Cartwright & Cooper 2012). The second objective of the proposed study is to explore the motives behind the M&A in the e-commerce sector. Some of the reasons that will be explored include enhancing organizational performance, removing extra capacity, accelerating growth, acquisition of technology and skills, and enhancing competitiveness among others (Gomes et al. 2011). Third, the proposed research seeks to examine the level of success of M&A in the given sector. It will be evaluated based on whether the objectives of the M&A were met and the existing problems that the M&A is currently facing are solved.

Importance of the Study

With M&As gaining popularity in the e-commerce industry, companies are faced with the challenge of ensuring that their M&As are a success. Consequently, the findings presented in the current research will offerr crucial insights regarding the nature and motives of M&As in the e-commerce sector, which will be used for developing a framework that can help ensure success in M&As in the e-commerce industry. Additionally, the study contributes to the scanty literature covering the issue of M&As in the e-commerce sector.

Methodology

The proposed study will use the qualitative research method due to the exploratory aspect of the proposed research. The underlying aim is to ensure that a holistic investigation is performed. The quantitative approach is not suitable for the proposed research, since it is not descriptive. Instead, a critical analysis of the case studies can only be performed when qualitative methods are employed.

The proposed research will use the case study design, which has been reported to be effective in facilitating comprehensive analysis, if data in specific situations or contexts (Fisher 2007). The case study design is characterized by the selection of a few research objects in order to perform a detailed background examination. The case study design can take the form of either single-case or multiple-case study designs (Fisher 2007). Single-case studies are used when there is no need to replicate the findings of the research to other cases. It yields comprehensive finding albeit limited by the lack of generalizability. Multiple case study designs generally use at least two case studies for purposes of triangulation and generalization of findings. The proposed research will use the multiple-case study involving two case studies. Fisher (2007) shows that utilizing at least two cases facilitates the generalization of the research, and, at the same time, cautions that using more than four cases diminishes the benefits of the case study design. The selected case studies for the proposed research are Amazon and eBay. Amazon is an American e-commerce firm established in 1994 (Barnes & Hunt (eds.) 2013). It is largest e-commerce retailer in the US. Since its establishment, Amazon has made numerous acquisitions, which makes it an ideal case study for the e-commerce sector. eBay is an American multinational e-commerce firm established in 1995. Similar to Amazon, eBay has had numerous M&As since it was founded (Barnes & Hunt (eds.) 2013). As a result, these two case studies are ideal for the objectives of the proposed study.

Data for the proposed study will be collected from the diverse secondary sources gathered, including corporate press releases of the case companies, newspaper articles, and magazines dealing with the issue of M&As in the selected organizations, journal articles, and books. The secondary sources for analysis will be screened to ascertain their credibility and authenticity.

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