Ebay

An online auction business model has many strengths in comparison to other companies’ business models. A traditional auction house has many disadvantages which comprises and describes the strengths of an online auction business such as eBay. The strategic advantages of eBay’s business model include the following:

a) There are no time barriers for accessing the business. Customers can bid and list their products at any time, any day during the year. This feature increases the convenience offered to customers and popularity rises.

b) Users can access eBay from any place with internet connection as there are no geographical constraints for access. This leads to increasing buyers and sellers daily and it reduces the costs of attending an auction house.

c) The large number of bidders and sellers increases the benefits for both parts. As bidders have a wider variety of items available by a large number of sellers, they can choose those who are suitable for them and affordable. The more buyers existing in the site, the more chance sellers have to sell their products.

d) The large number of buyers existing attracts more sellers, making the business model more valuable through network economies.

e) eBay is considered to be an online community of users interested in buying and selling their products with the auction method. The social interactions involved in the bidding process are similar to those of gambling constituting the advantage of the intensity of users’ social interaction. This strength is very similar to gambling addiction where users choose just to take part in this ‘game’ rather than being interested in buying a particular product.

EBay’s Strategic Statement The activities of eBay are described through the following strategic statement: ‘eBay allows customers to create individual auctions and online stores in order to sell used and new products. This process is facilitated by the ability to create communities of interest, providing secure transaction services, and a peer review process in a global environment’.

EBay has always been a community of interest, allowing users to exchange knowledge and expertise regarding the site. In 2006, eBay announces the creation of eBay Wiki an online place hosted by Jotspot where people can exchange their knowledge over eBay, as well as in eBay blogs on the web.

As shown in this case study, eBay’s business model was its strongest weapon against its competitors. Its business model’s strengths helped eBay gain a competitive advantage over other online market places such as Amazon.com and Yahoo auctions. As a net enabled e-business that anyone can access anytime, eBay bring a new idea in the business world, filling a market’s open gap, as no one could offer before what eBay offers since 1995.

Strategic choices of eBay’s management team after its foundation and the strategic capabilities of its business model, helped the organisation gain the largest market share from its competitors and acquire the strangest reputation in the market as shown in figure 3 above. Many organisations online tried to imitate its business model and rational, some of the followed by success, but none of them in the extend of what eBay have achieved over the years.

The benefit eBay provides to buyers and sellers is to eliminate price and information inefficiencies in global e-commerce. eBay has become a proprietary marketing, distribution, and payment system for sellers of rare vintage items.  For buyers bay has become a one stop shopping site.  The auction platform allows buyers to obtain critical information about the pricing and origin of various goods.

Operations at bay are highly profitable in that the company bears no expense related to marketing, storage, or shipment of products.  The basic business strategies and business model have not changed from those that the company was originally founded upon.

These strategies have been augmented with the addition of Skype to add access from a different and growing web platform.  eBay’s globalization strategy makes sense not only from a market penetration standpoint, but also based on it’s niche of rare and vintage goods.  These items are in the possession of whomever wherever and willingness to buy and sell these items is not limited by regional or national borders.  This presents the company with several challenges and opportunities.

Language and culture was a major challenge as eBay began it’s growth process.  As the company penetrates new markets with regional dialects and slang, translation will become a more important part of the value chain and will depend on VoIP capabilities from Skype.  Government regulations are constantly changing and requiring adjustment in operations in certain markets.  eBay will have to adjust it’s platform to facilitate markets where certain items are contraband or illegal.

eBay has taken steps to close the digital divide by expanding alternative internet access through Skype.  Finally, globalization and it’s effects is an ongoing debate which eBay will find itself in the center of.  As a good corporate and global citizen the company will constantly have to answer to questions and criticisms about it’s impact on  economies and competition in the locations that bay reaches.

eBay and and it’s other flagship sites represent the largest global e-commerce business in the world.  eBay incorporates multi domestic, global, and transnational strategies into it’s core international business strategy.  The company’s core competencies can be summarized as a broad technical platform that combines elements of marketing, payment, and communication facilitating international auction based trade in vintage goods.

eBay has leveraged it’s operating units to function together and to provide alternate access opportunities in developing markets.  The challenges that the company faces have not changed over the years nor has it’s basic operating strategies.  Focusing on enhancements to a basic business model will allow eBay to maintain it’s market positioning far into the future.

References

Datamonitor. (November 12, 2008). bay Inc. Company Profile. Retrieved April 14, 2009, Business Source Premier database.

eBay 2008 Annual Report. Retrieved April 14, 2009, from http://files.shareholder.com/downloads /ebay/613006665x0x281367/1b773a7c-8c14- 45b8-915a-1716ca37dda0/eBay_2008AR.pdf

eBay is positioned well to successfully compete with its top three competitors, Amazon, Google and Overstock. Table 1 provides a financial comparison of eBay with its top three competitors. eBay is a distant third from Google with a market capitalization of $64 billion but is first or second in key ratio comparisons (eBay Direct Competitor, 2012). Specifically, eBay is first or second in several key ratios such as Gross Margin, Operating Margin, Earnings Per Share and Price/Earnings.

The Operating Margin of 21% for the trailing twelve months as compared to its competitors and the industry is a strong indicator that eBay is positioned well in the catalog and online sales sector. Its steady operating margin increase indicates it is earning more per dollar of sales and is operating a more efficient business as compared to competitors and its own performance in past years. eBay has grown from an online auction service to the premier global commerce platform and payments leader through a focused acquisition strategy to enable merchants to more easily integrate online and offline commerce efforts.

By covering the wide array of e-commerce opportunities and driving more efficient merchant and consumer interactions, eBay is positioned well to compete with Google, Amazon and Overstock. The eBay subsidiary PayPal enables individuals and businesses to securely, easily and quickly send and receive online payments and is a cash cow for eBay. PayPal is the industry leading payment service and is utilized by eBay competitors Amazon, Google and Overstock. Finally, the X. ommerce platform brings together the technology assets and developer communities of eBay, PayPal and Magento as an ecommerce storefront platform enabling open source commerce from local to global markets. diffrentaition eBay will continue to be a market leader if they are able to continue differentiating themselves by focusing on their brand image, continuing to offer innovative features, and supplying a delivery service with proprietary technology. This uniqueness should translate into higher profit margins and keep them above the competition.

Service companies are able to differentiate their image through symbols and branding. A recognizable brand name is extremely important to the continued success of eBay. eBay was the first mover in the online person-to-person auction industry and because of it they have a competitive advantage which will help differentiate themselves from their competitors. By focusing on their brand image eBay will be able to attain brand recognition, brand preference and brand loyalty. With a strong brand image consumers are able to recognize the eBay name and instantly know what it stands for and the service they provide.

Amazon with an already strong brand name has used advertising in an attempt to make their brand more recognizable. eBay should continue to use television and internet advertising to differentiate their product and add value. Proper branding creates loyalty. In order to achieve brand loyalty, eBay must continue to focus on their main strength, online auctions. The image that needs to come to mind when consumers think of online auction needs to be eBay. Consumer perception is a result of branding strategy and eBay needs to remain focused on making sure their brand is instantly recognizable.

Services are also able to differentiate themselves by what they are able to offer consumers. Internet businesses require more than a storefront to be successful. One major concern that prevents consumers from using online purchasing sites are concerns about data privacy, protection of personal information, and a confidence that they will receive goods purchased. eBay should focus on continuing to provide innovative features in order to separate themselves from their competitors. The biggest concern for online consumers is trust and safety. Bay has introduced a number of trust and safety initiatives, such as a verified user program, insurance for items and enhanced feedback forums (Bradley, 2001, p. 6). eBay has been able to stiffen anti-fraud measures and has instituted some of the most innovative and consumer friendly programs in the industry to protect its users from fraud, deception and misuse. Yahoo! failed to make a dent in the online market because of trust and safety issues (Bradley, p. 10). Amazon has followed in eBay’s insurance footsteps and borrowed and improved upon a number of features on eBay’s site. Bay must continue to address consumer protection challenges through innovative programs. Consumers will recognize their continued effort in providing innovative features and will be rewarded with brand loyalty. eBay has also used the innovative feedback forum as a way for customers to evaluate one another in order to ensure customer confidence. As a service company, eBay needs to continually seek innovative ways to improve the customer experience. eBay needs to continue to focus on making its shopping place as safe and secure as possible, otherwise consumers with turn to other competitors. Bay must continue to meet the challenge by developing creative programs that respond directly to consumer concerns. They also need to continuously review their capabilities, approach and structure in order to ensure that they meet and exceed customer needs and expectations. Finally, services are able to differentiate themselves by designing a superior delivery process. A service firm may win by delivering consistently higher quality service than competitors and exceeding customers’ expectations.

If the perceived service meets or exceeds their expectations, they are apt to use the provider again (Kotler, 2001, p. 428). One of eBay’s biggest strengths and should remain superior service. They have been able to achieve superior service because of the variety of products offered and the strength of the eBay community. Consumers are able to search eBay for almost any product and eBay has a category variety that is unmatched by any of its competitors. Also, eBay has been able to create a sense of community. Bay provided more than a venue for selling items, they created an online community which gave buyers and sellers a place to socialize, discuss topics and provide feedback. These seem to be designed in order to foster a large community which would ensure repeat customers. eBay should remain focused on the needs of consumers and make sure they remain the main priority. eBay should continually come up with new ways to reach out to their customers. They need to be an active listener and learn and responds to customer needs. Companies that listen to their customers turn casual customers into loyal customers.

By continuing to offer a wide variety of products, expanding globally to ensure a bigger trading marketplace, and fostering a sense of community eBay will be able to have a distinctive value advantage over its competitors, including Amazon. eBay’s main competitors, including Amazon, have tried to use cost leadership as a means to differentiate themselves from eBay. Despite the increased role of non price factors, price does remain an important element and is challenging in markets such as the internet where other companies are able to offer similar products at no cost. Bay however, has used listing and special placement fees to generate revenue. Before eBay considers initiating a price change, they must consider customers’ needs. They are already having success in their current pricing model and should continue with their pricing strategy. Companies that own the largest market share will enjoy the highest profit. eBay should remain focused as a product quality leader rather than a price leader. Higher prices are justified by quality improvements and if a company can offer a better product. Consumers today have a vast array of brand choices and consumers today are focused more on value than on price. Bay should remain focused on their differentiation strategy rather than cutting costs. eBay has become a leader of the online person-to-person auction industry. In order to retain their market leadership they need to focus on differentiating their company. To accomplish this, they must remain focused on their strong brand image, continue to offer new improvements, and supply a superior service. Through their unique service they will continue to appeal to large corporations, independent entrepreneurs, and individual buyers and sellers.

1) EBay pursue international growth through acquisitions and partnership in related and unrelated business. eBay goal was to expand its international presence in an effort to create an on line global marketplace. In many of this international website, eBay had to adapt and provide local language and currency options to gain popularity. The best approach that eBay had was by forming partnership with local companies.

This strategy helps them to understand local cultures and ensure that the company was meeting local need. eBay has had tremendous success in Latin America and Europe. But in Asia has been a failure, in Japan they had to pull out of the market due to the poor market share that they were able to get. In china they still struggling to gain market share so they decided to due joint venture to learn a little bit more about the local needs.

2) eBay biggest competitive advantage was said by the founder of the company “ we have specialize in e-commerce, payments and voice communication. Google stands for search, Yahoo largely stands for content” this clearly defines the completive advantage of specializing at what they do the best. In order to support this eBay has done a lot of acquisition, this offered distinct services and target specific market niches, which allowed eBay to broaden its customer base.

When it comes eBay in Asia , the company run into a lot of trouble due to an inability to build a community effect in the country that focuses in customer service. But this was difficult for Ebay because changes at global level had to be approving in United States. This made it more difficult for rapid changes in the local market.