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With the creation of the internet tradition businesses have taken on a new form and has allowed new channels for conducting business. Since the birth of the internet e-commerce and e-business have developed into a relatively new way of developing a business model. One such successful on-line auction enterprise, known as eBay, is the world's largest and most popular person-to-person trading community on the internet. Within the next few pages, this paper will examine the use of e-commerce and the effect it's had on eBay, eBay's strategies and business model and eBay's internal analysis of their strengths and weaknesses and an external analysis of their opportunities and threats.
EBay is a company that could not exist without the internet and has succeeded in creating a new way to do business. Having an online auction site where millions of buyers and sellers can exchange almost any item, eBay has survived and even thrived in this new electronic market evolving and growing its business making eBay the go-to place on the internet.
EBay has been able to maintain its dominating position in the e-marketplace for several reasons. For one, they are a very diverse company. They provide a very appealing service not only to individual customers, but large corporate business as well which differentiates them from the competition. From collectors to casual sellers, eBay's customer base is as diverse as the products that are offered on the eBay website. In addition to diversifying their customers and their products, eBay has expanded their business globally by branching out into over 30 countries and an estimated 181 million users. (Gottlieb, 2006)
Financially, eBay has zero debt and cash flow generation rate of $3 billion annually with $3.7 billion cash in hand. (Moritz,2008)
The way eBay stays on top of its industry is by using a broad differentiation strategy. They have created value that appeals to their customers through several ways. The first is with offering a variety of products that customers can search the site and find virtually anything.
EBay has done a good job to close the gap between business and customers by allowing them to feel like they are a part of a community. With the ability to view feedback, opinions, and feelings of other users has become a powerful tool that builds customer relationships.
A third strategy is the creation of a unique and user friendly website that sets them apart from other sites. Along with the website comes the creation of the catchy eBay brand name thats evolved into the common household name when talking about online buying which gives eBay a distinct advantage over other online auctions.
Lastly, eBay's global expanding and large multinational client base is certainly unmatched by its rivals.
EBay has also played out three main from the implementation their business model. They started out by building strategic partnerships and then looked for customer feedback to constantly make changes and improvements. Lastly, they monitored its internal and external environments for possible opportunities.
In viewing these internal and external analyses of eBay, a measure of how all factors, both positive and negative, are provided to give a clear picture of the current state of this business.
The strengths of eBay would include that they are the largest online auction and customer-to-customer trading in the world with a highly recognizable brand name. They offer a sense of community while having a global reach with over 250 alliances with some of the largest companies in the world. This then creates more opportunities to advertise and reach many more customers.
EBay does use a very good search engine that helps customers find exactly what they are looking for with a very entertaining site with well over 27,000 different categories for customers to shop from. Even with all the different categories, eBay has zero inventories and does not use a tradition sales force.
EBay, just like any other business, has weaknesses. The most prominent weakness would be eBay's inability to monitor all illegal activity. EBay has tried to take as many precautions to prevent illegal activity on their site, but this is no perfect solution to this problem.
With operating an e-business there is always technology bugs or possible program problems and hackers that dissuade customers from using it. EBay needs to take measures to enhance their system and technology to prevent problems and also work with more internet security agencies to build a safer wall of protection against customer's private data.
The last weakness would include eBay's inability to have in depth descriptions for products. Even though this process does fall on to the seller, there tends to be factor in counterfeit and poorly identified products sold to customers.
Moving into opportunities, eBay has to continue its growth throughout the globe and enter desirable international markets. The U.S. market has the largest eBay registered users and it's critical for eBay to reach international customers.
EBay has a great potential to expand by the acquisitions of other companies. EBay purchased Skype Technologies for $2.6 billion in 2007. EBay has been buying up firms - including online payment company PayPal - in an effort to increase the number of services it offers to help expand its market share and to help keep its profits growing.(Bloor, 2008)
As new technology expands and broadens the use of the internet not only provides new opportunities, but also many threats. There are more and more competitors entering the e-business world that offer similar products and services such as Amazon.com, uBid, and ePier.
Going global does have its consequences with international competitors competing in their own markets may have the cultural experience that could give them a competitive advantage over eBay.
There will always be the threat of fraud and illegal actions in online shopping. Computer hackers and thieves will always find new ways to trick honest shoppers no matter how many precautions eBay takes.
In evaluating eBay's business, it could be observed that using information technology has enabled eBay to be one a leader in this new e-business world. EBay's has become a diversified business, but not only the products they offers but also their customer base and global extent. By eBay using differentiation strategy eBay offers a customer a one stop shop for anything you are looking for. EBay has become a very successful e-business and is on the right track for convenience, variety of goods and services, security of transactions and accessibility in all forms, while meeting its customer's needs better than any competing service.
Gottlieb, Mark (2006). EBay: An Industry Study. Retrieved July 26, 2009, from MGS Accountants, Consultants & Business Valuators Web site: http://www.msgcpa.com/general.php?category=Industry+Library&headline=Ebay
Moritz, Scott (2008, October, 2nd). Market bidding isn't going EBay's way.
Retrieved July 26, 2009, from CNN Money Web site: http://techland.blogs.fortune.cnn.com/2008/10/02/market-bidding-isnt-going-ebays-way/
Bloor, Chris (2008, March 4th). SWOT Analysis eBay By Chris Bloor.
Retrieved July 25, 2009, from Business Momentum Secrets Web site: http://www.businessmomentumsecrets.com/2008/03/04/swot-analysis-ebay-by-chris-bloor