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  • With ebay making major changes in fees, charging more from the sellers and putting a restriction on the minimum resolutions required to upload the product's photo.. I believe the best would be to look for an alternative which is best in the competition and which allows you to keep all your earning to yourself and not share it. Where sellers can:
    1. Create Free listings
    2. No Transaction Fees
    3. Auto sync with ebay..carry all your listings from ebay along with the ratings and feedbacks in just a click.
    4. Free integration with Google products (which auto populates the product description form for you, saving your precious time) and Google Shopping (which tells anyone who search on google to buy a product that it is available on our website, which by the way we pay for and provide you the service absolutely free)
    5. Payment option like Paypal and Amazon for the most secure transactions
    6. which does not allow you to leave a feedback for a cancelled transaction
    7. a platform that not only list your products but also organise your customers and market your product in your network
    8. a platform where you are just not dependent on ratings but also can leverage your social and professional profiles using log in through facebook, linkedin or google accounts
    9. A platform that allows you to know the counterparty and build trust on the basis of work profile, school, college and other such dimensions.
    10.Unlike ebay it has just one website (not different website for every country) so you can sell products worldwide and buy awesome products from across the globe as well
    11. Unlike Ebay you can upload any resolution image and do not need only high resolution images to upload
    12. Last but not the least it is absolutely free

    And so the website that gives you all this is www.truegether.com

    We have released our beta version and the new website with all these points said above will be launched soon in June, 2013.

    We request all the sellers to list their product and leave us a feedback to help us improve more and give you a splendid experience of selling online.
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    ebay-case.doc ebay-case.doc Document Transcript

    • eBay KML Strategic November 14, 2007 BUSA 499 Professor Lee 1
    • Executive Summary EBay is an Internet auction company that was founded in 1995. It provides a safe place where buyers and sellers from around the world can come together to engage in commerce. There are two main issues faced by eBay that it is trying to address. The first and most obvious of which is competition. Just like practically every industry, there are other players that want a slice of that market. These competitors include Yahoo! Auctions and Overstock.com. The second issue has to do with the perception of risk in purchasing from online auctions. Because, for the most part, all the sellers are unknown to the buyers, they cannot be completely sure that the seller is legitimate. In order to combat these problems, you have to analyze both the external and internal environment. This is an Internet driven service industry, which does not provide for many barriers to entry. Although it is easy for competitors to enter the industry, because of eBay’s great brand recognition, it makes it difficult for these new entrants to be successful. Because there are not many barriers to entry, the threat of rivalry is high. There are few competitors that have grown large enough to rival eBay but they do pose a threat. The threat from suppliers and buyers is minimal because of the business model that eBay uses. There are so many suppliers and buyers that each one individually does not possess much power unless it is a higher-end item. The threat of substitutes is evident but is not a huge factor in this industry. Because eBay has the first mover advantage in this market, they have developed the greatest brand recognition and hence the largest user base. Internally, eBay has several core competencies that contribute to their organization. These attributes include their business model, brand identity, product offering, and customer service. In the case of the business model and the brand identity each creates a temporary competitive advantage that is exploited by the organization. The product offering because of its widespread and diverse nature helps to create a sustained competitive advantage for the company. The only downfall internally for the company is its customer service. While it does create value it provides a competitive disadvantage for the organization. The option we chose to solve their problems is to buy out the most successful Drop-Off sites. This will help them increase their user base as well as better control the emerging Drop- Off industry. Although vertically integrating into the Drop-Off industry will be high cost, we feel that the competitive advantages achieved through increased control will outweigh the cost. In addition, if they buy them out while they are still relatively small, they can acquire them far cheaper than after they really take off. Finally, even a company as strong and well known as eBay needs to continue to find ways to expand and increase its market share to fend off competitors. A company must always be aware of industries related to its industry because a Drop-Off company can have a direct effect on the success of eBay. Expanding internationally is not always the best or safest route to go, which is why a company must take into consideration the political and economic stability of a country. If a company has vast amounts of cash on hand, they should invest it to generate a return on their profits. 2
    • Table of Contents EXECUTIVE SUMMARY...........................................................................................................................................2 TABLE OF CONTENTS .............................................................................................................................................3 MISSION STATEMENT AND OBJECTIVES.........................................................................................................4 KEY PROBLEMS.........................................................................................................................................................4 CUSTOMER/MARKETPLACE TRENDS AND ENVIRONMENTAL FORECAST..........................................5 FIVE FORCES ANALYSIS.........................................................................................................................................6 THREAT OF ENTRY..........................................................................................................................................................6 THREAT OF RIVALRY.......................................................................................................................................................7 THREAT OF SUPPLIERS.....................................................................................................................................................8 THREAT OF BUYERS........................................................................................................................................................8 THREAT OF SUBSTITUTES.................................................................................................................................................9 INDUSTRY POSITIONING......................................................................................................................................10 VRIO ANALYSIS.......................................................................................................................................................10 BUSINESS MODEL...................................................................................................................................................11 BRAND IDENTITY....................................................................................................................................................12 PRODUCT OFFERING.............................................................................................................................................12 CUSTOMER SERVICE.............................................................................................................................................13 PROBLEM STATEMENT........................................................................................................................................13 OPTION 1....................................................................................................................................................................13 ADVANTAGES...............................................................................................................................................................14 DISADVANTAGES...........................................................................................................................................................14 OPTION 2....................................................................................................................................................................14 ADVANTAGES...............................................................................................................................................................15 DISADVANTAGES...........................................................................................................................................................15 RECOMMENDATION..............................................................................................................................................15 IMPLEMENTATION PLAN.....................................................................................................................................16 COMPETITIVE ADVANTAGES.............................................................................................................................16 MANAGERIAL IMPLICATIONS/LESSONS LEARNED....................................................................................17 3
    • Mission Statement and Objectives EBay is an Internet auction site, which was founded in 1995. The mission of eBay “is to provide a global trading platform where practically anyone can trade practically anything.”1 Millions of people buy and sell items on eBay every day, and because eBay is a for profit company, it gets a cut of the profit from each sale for itself. There are several objectives that eBay strives to meet on a daily basis. First is to be a place where people can buy and sell things. It does this through a website where sellers can list their items and with either a simple search or navigation through categories, buyers can find those items. EBay wants to be a place where people can find almost any type of item imaginable, and it achieves this through the ease of use and global availability. It wants the service to be free for buyers and cheap for sellers. By only charging the sellers, it makes sure that buyers don’t have to worry about accidental charges from shopping there and sellers learn not to over-list and abuse the system. EBay is also good for the environment in that many things that would have otherwise ended up in landfills instead end up in a new home. It lowers the barriers of trade due its to ease of use. It also does not feel very artificial in that a lot of the things you need to worry about in real world transactions also apply to eBay such as the integrity of the sellers/buyers. Key Problems There are two main issues faced by eBay that it is trying to address. The first and most obvious of which is competition. Just like practically every industry, there are other players that want a slice of that market. These competitors include Yahoo! Auctions and Overstock.com. EBay wants to have the largest user base to try to fend off this competition, so in this market, it has to try to lure those customers over from its competitors. Also with competition, it wants to 1 What is Ebay? Accessed November 10th, 2007 from: http://ebay.about.com/od/gettingstarted/a/gs_whatisebay.htm 4
    • limit the power of Drop-Off sites while they are still relatively small so that they don’t pose more of a threat in the future. While eBay may be ahead in the US market, Yahoo! Auctions is more popular in Asia. EBay must consider its competition in each different market because, as was just mentioned, in some they may have the lead whereas in others they may not. The second issue has to do with the perception of risk in purchasing from online auctions. Because, for the most part, all the sellers are unknown to the buyers, they cannot be completely sure that the seller is legitimate. While the option of feedback does help to ease that fear to an extent, the feedback can also be faked relatively easily. While most people feel relatively comfortable buying smaller to midsized items online, they tend to not be as comfortable when buying big-ticket items. For example, an average customer would feel perfectly fine when buying a book or a movie, but they would be far more hesitant when buying a car or a house on eBay. While you generally don’t have to worry about the smaller items, with the large items, most people like to inspect the items before the purchase. Unfortunately, because of the nature of the eBay ecosystem, that item could be on the other side of the planet, which makes it very unlikely that you will be able to inspect it beforehand to make sure that it comes as advertised. Therefore, the fears are easily justified and difficult to overcome. Customer/Marketplace Trends and Environmental Forecast For trends, one of the most obvious is an increase in costs.2 Either eBay can increase what it charges for listings, or the postal companies can increase rates as well. It happens all the time so it should be no surprise to see it happen again. Through eBay Giving Works, people can contribute a portion of their profit to charity. Many sellers have noticed that by participating in programs like these, they can increase the number of bids and the final sale price. It also helps 2 EBay Trends for 2007 Accessed November 10th, 2007 from: http://www.entrepreneur.com/ebusiness/ebaycenter/ebaycolumnist/article171212.html 5
    • the seller to create a better image for himself so it could become more popular with time. Many people are also trying to sell their products outside of their home country to expand their potential customer base. More people might try this over time considering how connected our world is today. Many people are also trying to connect their normal websites to eBay to expand their business and attract a larger audience. As more countries increase their online shopping usage, there will be an even greater audience for selling items. People need to expect some of the smaller, lesser-known countries to start contributing more to online sales in the future. While they may be small now, they might be prime targets for some more exotic or cheaper goods and bring more new products to the international marketplace. People are becoming more comfortable buying products online so that should increase online sales and make the need for web offerings almost a necessity in the few remaining places where it is not already. The Drop- Off market is also expected to explode soon. Many people have tons of useless items they want to get rid of and it would not be worth it for them to take the time to individually list them on eBay. This provides an easy alternative for getting rid of items that people don’t want and making a profit at the same time instead of trashing the items, which does nobody any good. Five Forces Analysis In order to understand why and how eBay has been successful, it is important to understand Porter’s Five Forces Model. The model includes threat of entry, threat of rivalry, threat of suppliers, threat of buyers and threat of substitutes. Threat of Entry This is an Internet driven service industry, which does not provide for many barriers to entry. The main barriers come from government regulation. The government will not permit some products to be sold in certain states or countries and so any online auction site needs to 6
    • make sure they don’t violate those laws. EBay has established blocks that prevent someone from buying an item that would violate their local government. Even though eBay does not directly buy or sell items, they facilitate the transactions, which could make them liable. It is also hard to enter a market where safety and brand recognition are this important. People will not purchase items or sell them if they do not think their transaction will be protected. There are many things a company can do to build their brand recognition and eBay has excelled at this. The barriers to entry are low, but this means that it is hard to be successful in the industry. Threat of Rivalry The drop off industry is currently viewed as the biggest competitor of eBay, however many drop off companies also use eBay. As long as eBay continues to appeal to the drop of companies, they will not have a problem with competition. Because of low entry barriers, the market is full of competitors. Yahoo! Auctions is one of the many up and coming competitors that are fighting eBay for a piece of the market. EBay continues to appeal to their customers and provide the best possible service at the lowest price. They are also continuing to expand horizontally into new markets. Brand identity is the key to attracting customers. People recognize the name of Yahoo and Google, which is why their online auction sites provide the biggest threat to eBay. With good brand identity and recognition comes safety and security, which is vital in this industry. There are also low exit barriers in this industry. EBay owns sixty- seven percent of the market, which leaves room for them to grow, but also appeals to competitors because they do not own a seventy-five percent share like iTunes. EBay needs to keep up with consumers needs and wants along with keeping an eye on its competitors in order to be successful. 7
    • Threat of Suppliers There are a limitless number of suppliers for eBay. Every person who has something they want to sell is a potential supplier for eBay. EBay does not have a traditional method of selling, but instead provides a service that brings the buyers and sellers together. The suppliers do not have much power except in regard to the high-end items. Both the buyers and sellers want protection for their items. The sellers want to get their money quickly, which is why eBay uses PayPal to provide for smooth and quick payment of items. It is harder and riskier to sell high-end items, which is why the suppliers have more power. The purchase of Skype is the perfect example of something that eBay acquired to help facilitate the selling of high-end items. However, the suppliers did not like Skype because they could barely keep up with the current e-mails, let along phone calls and text messages. The suppliers as a whole do not have much power unless they are dealing with high-end items. Threat of Buyers One of the main reasons that eBay is so powerful is because there is a limitless number of buyers. Each item listed on eBay can be seen by customers all around the world. This means that the buyers don’t have any real power in influencing eBay. However, eBay does listen to their customers, which is why they instituted the customer feedback program. This has helped to weed out the bad sellers and buyers. Buyers do have power with high-end items such as real estate, boats and cars. With high-end items, there is more risk and uncertainty. It is much harder to purchase a car online without ever seeing it. EBay took measures to increase its insurance policy because buyers were worried about getting a lemon. High-end items provide larger profit for eBay, which is 8
    • why they are trying to work with the high-end sellers and buyers. Overall, eBay’s buyers do not have much influence unless they are dealing with high-end items. Threat of Substitutes There are not many substitutes to trading online. Another option would be to go back to trading at an auction house. The other option would be to sell the items directly instead of placing them on an auction. This would limit the profit a person could make and placing small items on a traditional auction is not cost effective. At an auction, the item goes for the highest price, which can be higher than the seller originally thought they could get for the item. This is not a realistic option because the Internet and eBay opens up millions of buyer and sellers worldwide that would not be possible without the Internet. The Internet has especially opened up the market for specialty items such as first edition cookbooks or traditional lunchboxes with superheroes on them. This is not possible without a service such as eBay. The other option would be to sell the item online. There are many places to sell an item online; however this means that the seller must set a price. If there is a set price, then the seller does not have the opportunity to receive a higher price. Neither of these substitutes poses a real challenge as long as eBay keeps up its positive image and appeal. 9
    • Industry Positioning Figure 1 Industry Positioning Chart EBay is well known for its brand recognition as an online site. Yahoo! Auctions and Overstock.com are not as well known by customers looking for auction or selling sites. This is partly why eBay is positioned so well in the industry. The large user base is a key part to be successful in this industry, which is why eBay has worked hard to build up a strong user base. Its competitors do not have the large user base that eBay does, which is why they are placed lower on Figure 1. In order to maintain its great position according to Figure 1, eBay must work to continue its strong brand recognition and large user base. VRIO Analysis After analyzing the external environment of eBay using Porter’s five forces model, the next step is to focus internally at eBay’s core competencies in order to determine whether those strengths provide them with competitive advantages. In order to define these core competencies as competitive advantages or disadvantages, a VRIO analysis must be used. This technique 10
    • measures each capability against whether it creates value for the company, it is rare in the industry, it is costly to imitate and if it is exploited by the organization. Each core competency identified for eBay is listed in Figure 2 and will be discussed more deeply. Figure 2 VRIO Chart Value Rare Costly to Exploited Advantage or Imitate Disadvantage Business Model Yes No No Yes Temporary Competitive Advantage Brand Identity Yes No Yes Yes Temporary Competitive Advantage Product Offering Yes Yes Yes Yes Sustained Competitive Advantage Customer service Yes No No No Disadvantage Business Model The first key attribute for eBay is its business model. This model is very valuable to the organization because it is what developed the industry they are in. EBay was the first successful player in the online auction industry and it was because of the model they created. Their model includes not only their modes of payment, but also the community in which they do business. Both the buyers and sellers on eBay have open communication with each other and this creates value. Because this model was and is successful, it is no longer rare and not costly to imitate. Competing firms now help the sellers deal directly with the buyers and as a result of the business being online software, it does not cost a lot of money to create. Although several companies have adopted similar business models and could create this model with little cost, eBay still exploits their business model because it has made them successful. This leads to a temporary competitive advantage. 11
    • Brand Identity As a result of the business model being so successful, it has helped create eBay as a widespread brand. The brand identity of eBay to consumers is the second core competency to be examined. It is obvious with the 67 percent market share that the brand identity of eBay creates value within their organization. However, within business today, there are numerous companies that can boast extreme brand identities, which illustrates that a powerful brand identity is not rare. Brand identity may not be rare in the business world, but it is certainly costly to imitate. Building a successful brand takes substantial funding, time and success. Both monetary success and consumer satisfaction play a role in creating a profound brand, and that can take a long time. This is something that eBay has done very well; thus, creating a brand identity that their organization exploits. EBay’s brand identity creates a temporary competitive advantage for their company. Product Offering The next attribute that is going to be examined within the VRIO is eBay’s product offering. Currently, eBay lists more products and more differentiated products than any other online auction site. This creates value within the company because it gives value and options to the consumer. Also, this diverse product offering and immense quantity of products is rare. There are other organizations that offer a large amount of products, but eBay outshines them with an incomparable amount of differentiated products. Furthermore, to be able to support and recruit this amount of products would cost a great deal time and money. EBay exploits their unique product offerings to benefit their organization. The company uses this attribute to set themselves apart from the competition and create a sustained competitive advantage. 12
    • Customer Service Finally, customer service is the last core competency within the VRIO analysis. As is true with any company, a dedicated customer service program does create value for the organization. However, customer service is not rare within business today and in eBay’s situation, it is not costly to imitate. Everyone has customer service because it is inevitable that it is going to be needed. Also, the cost issue is not immense because all that is required is employees ready to assist consumers in need. This merely requires new hires, which do not carry a substantial cost. Lastly, eBay does not exploit their customer service program. This is not something that they push or utilize with the resources they have at hand. Customer service in the case of eBay only creates value but does not provide much else making it a competitive disadvantage for the company. Problem Statement How is eBay going to increase the number of users to fend off competition along with limiting the power of Drop-Off sites? Along with this, eBay must continue to provide consumers with a secure environment to carry out their transactions. Option 1 EBay should use a vertical integration strategy and acquire the most successful Drop-Off sites. These can include AuctionDrop, QuikDrop and Trading Circuit. The Drop-Off stores are growing in their popularity because the average consumer is too busy to spend their time posting on eBay. The person would rather drop off their item to be sold by another company even if this means they take a lower profit. 13
    • Advantages This will provide eBay with more control over these services that are using its site. This will add to the feeling of security because if consumers see the name eBay, they are more likely to feel secure about their transaction. This can also benefit the supplier because a buyer is more willing to purchase from a store where there is strong name recognition. The Drop-Off market is forecasted to explode in the near future and this provides eBay with a “foot in the door” to this market. EBay would also be able to collect a greater profit because they could charge a commission fee along with making an extra profit because they would not have to pay a listing fee. This could also fend off the potential for all of the Drop-Off companies to join forces and create their own auction site. The possibility of new entrants to the Drop-Off market along with the online auction site market would be reduced because eBay would have a greater share of both markets. Disadvantages This choice would be very capital intensive. EBay would have to purchase the companies, which would cost a substantial amount of money. The next step would be to introduce the company culture of eBay to the Drop-Off sites and make sure that they can adapt. This could present problems because if the company culture of the Drop-Off sites is not taken into consideration, then the acquisition could be fatal. Option 2 EBay could pursue new markets in other countries. For example, there are untapped markets in Mexico, South America, South Africa and other developed counties. This strategy would not necessarily have overnight results, but has the potential for long-term gains. 14
    • Advantages This would provide eBay with new users in new markets. EBay is constantly looking for new users, which increases its appeal. This could all be a very good public relations move because eBay could help facilitate the Fair Trade market and increase the awareness and profitability of the Fair Trade market. This would increase the good image of eBay by showing that they are a socially responsible company. If no other online auction sites are in these countries, moving into the untapped market would give eBay the first mover advantage. If eBay increases the number of users by tapping into underserved markets, this will help to limit the power of the Drop-Off companies. This will further dilute the power of the Drop-Off companies by increasing the number of suppliers. Disadvantages Some of the potential countries are not necessarily politically stable, which could compromise the successfulness of eBay in those locations. There are also challenges with shipping items within a country that does not have a well-developed and secure postal system. This might help facilitate the distribution of illegal items. In a country such as Bolivia, their prime export is cocaine. EBay could help facilitate the distribution in a country that does not crack down as heavily on what is considered in America to be an illegal substance. This is not limited to just illegal substances, but also other illegal items such as a stolen bracelet. Recommendation Option one is a more realistic, less risky and more profitable option. This option is easily adaptable to the company’s current structure. EBay currently facilitates online auctions, and this is just another way to help extend their influence and control. This option increases their market share, which gives them an upper hand against their competitors. They are reaching out to 15
    • consumers who are too busy or are hesitant about selling items online, which further separates eBay from its competitors. Implementation Plan Locate the companies that are the most successful in the Drop-Off industry and then acquire them. While eBay is acquiring the Drop-Off companies, they need to continually keep an eye on the other Drop-Off sites. If another site becomes too powerful, they will need to acquire them. By doing this, they can ensure that none of them grow large enough to become a potential threat, while increasing its own Drop-Off network and some extra profit as well. EBay has plenty of capital to acquire these companies. After purchasing the identified companies, eBay needs to integrate its company culture into the Drop-Off sites. They need to hire a manager to oversee all of the Drop-Off companies to maintain their successfulness. A good marketing plan is important to educate the consumer that this new service is available through eBay. Finally, eBay needs to keep an eye on the newly acquired companies and measure their success. Competitive Advantages EBay will retain its current competitive advantages as shown in figure 2. This will help increase their brand identity by providing more security for its users. This will increase their user base because more people will use the Drop-Off stores because they are affiliated directly with EBay. When a company has control over its products, it increases the company’s competitive advantage over its competitors. It is able to do this because it has increased control over the supply chain, which adds value to the product and increases its purchase price. Because of the expansion and increased control, eBay will be creating a stronger barrier to entry by increasing its market share. 16
    • Managerial Implications/Lessons Learned Even a company as strong and well known as eBay needs to continue to find ways to expand and increase its market share to fend off competitors. A company must always be aware of industries related to its industry because a Drop-Off company can have a direct effect on the success of eBay. Expanding internationally is not always the best or safest route to go, which is why a company must take into consideration the political and economic stability of a country. If a company has vast amounts of cash on hand, they should invest it to generate a return on their profits. 17