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The evolution of Internet made eBay possible. Companies can do business with everybody in any country of the world using Internet. It has become pervasive in each aspect of our life and allows companies to provide its customers with benefits that traditional companies cannot offer. Among those benefits are improved content, increased richness of information and high accessibility. Before eBay appeared there were no large scale internet auctions. If people wanted to buy specific or antique items they had to spend a lot of time looking for a supplier. Overall, the process of looking for needed goods took a lot of time and was very annoying.eBay is one of the pioneers in the electronic commerce marketplace industry. Its expertise is in business-to business (B2B) buying and selling online to corporate, group, or individuals. “ebay is a highly visible company that has been immensely successful in their implementation of a business strategy that incorporates their information strategy. It is a shining example of an Internet era company that actually turns a profit, and managed to outlast the ‘dotcom crash’. (Chen, 2005)” eBay redefined buying and selling and all its components whether reselling, auction, bidding, trading or getting price quotations by enabling and empowering the online community with its host of options in electronic buying and selling. eBay is now known as “The World’s Online Marketplace, where customers can trade on a local, national and international basis. With a diverse and passionate community of individuals and small businesses, eBay offers an online platform where millions of items are traded each day. “The eBay Community is made up of more than 100 million people around the world who buy and sell in the eBay marketplace. (About eBay, 2007)” Individual buyers and sellers, small businesses, and even large corporations help to make this a strong internet community. eBay members help one other be successful on the site, causing a strong spirit of camaraderie to thrive. Meaningful relationships are formed with one another via discussion boards, chat rooms, Online Workshops, eBay Groups, and the Answer Center for member-to-member interactions. “Every day, members use forums to get help from other experienced users, share their best practices with others who are just starting out, or just socialize (About eBay, 2007)”
It should be stressed, that even though eBay does its business over the Internet, the need for creating a competitive advantage is not eliminated. Competitive advantage is a product or service that an organization’s customers place a greater value on than similar offering from a competitor. It is hard to imitate a competitive advantage and received benefits exceed costs of providing it. By offering people to buy and sell goods on the Internet, eBay gives them access to wider choice of items, lower prices and allows its customers to save a lot of time. With the quick expansion of Internet, all users became concerned with the quality and reliability of provided information. The costs of providing low quality information are huge for an Internet-based company. To ensure reliability of offers posted on the website the company introduced a feedback system, which allows people to rate each other and notify others about a possible fraud. Hence, trust is being built among eBay users what overcomes the main Internet issue of 21st century – loss of trust. In these ways the company created its competitive advantage. As long as eBay was first with the idea of large scale online auction, it hit the market with the first-mover advantage and changed the entire sector of industry. First-mover advantage occurs when an organization can significantly impact its market share by being first to market with a competitive advantage.
The main benefit of conducting buying and selling online is the convenience it gives. Aside from convenience, eBay serves as a “department store” for the Web providing customers with a variety of choices and options in the goods and services they can receive. Along with offering choices and the convenience of online shopping, they provide secure online transaction facilities gaining the trust and confidence of the buying community. “eBay’s Trust and Safety team is responsible for keeping the marketplace a safe, well-lit place for people around the world to trade with one another. (About eBay, 2007)” Working with its members eBay creates a sense of trust through the development and enforcement of rules and policies, creating reputation building programs and the prevention of fraud. They work to prevent fraud and, should a fraud occur they work with law enforcement and government agencies to enforce its policies. eBay’s policies are intended to create an environments that encourages open, honest, and accountable transactions, thereby creating opportunities for everyone.
ebay’s business strategy is to “provide a global trading platform where practically anyone can trade practically anything. (About eBay, 2007)” is a clear part of their mission statement. They have always been known as an information technology driven company they must leverage the use of IT to improve. The company became clearly identified with its core Web site it has built up a very loyal following among its customers and merchants. But eBay executive believe future growth depends on evolving beyond a destination site and into a provider of tools and services that power e-commerce across the Web. (Holahan, 2007) eBay quickly became a leader of online trading, shopping, buying and selling, but with the growth of other means of accessing the Web, they should reengineer its business process to avail all of the new modes of accessing technology. Two main acquisitions of eBay are PayPal and Skype. PayPal is one of the world’s safest systems for transferring payments while Skype is the best provider of VOIP service. VOIP is an Internet protocol that transmits voice calls over long distances. These are two strategic acquisitions were done to facilitate communication between buyers and sellers and to provide high level of internet security. Overall, an Internet-based company cannot be successful without having solid security processes and procedures. As one can see, eBay successfully addresses this issue. Also, the company cooperates with US Postal Service to guarantee in-time deliveries of sold items. The organization started expanding by creating other divisions such as eBay Motors and eBay Real Estate By making its electronic commerce platform available in all means of internet access, eBay will be able to provide more convenient and accessible means for customers to do business. They have incorporated the “power of three strategy”, which refers to their shopping, payments, and Skype calling services. PayPal, is a leader in the online payments market, second only to credit card companies. eBay sees a future were PayPal is the standard payment processor for online transaction everywhere. Of the $11.4 billion in payments processed by PayPal in 2006, 40% are from non eBay sites. Skype is used to connect eBay sellers and buyers; however it is more of a global Web calling service. (Harahan, 2007)
Their business model was created with an eye on maintaining a person to person trading community. In this way they have been able to build partnerships, make innovative changes and improvements and monitor from within and external for possible future opportunities. Thus, helping them to become the world’s largest online auction company.
In evaluating eBay’s business implementation strategy, it could be observed that using information technology and marrying it with commerce became a tried and tested process that enabled eBay to become a leader in this type of venture. They wanted to expand not only the products they offered but also their customer base and global reach. By using the eBay service you can find virtually anything you are looking for. eBay competes in the online auction industry using a broad differentiation strategy. ebay offers a large variety of products that appeals to consumers that range from individual sellers to corporations from all over the world. This is achieved through their eBay community, which has a global reach not matched by any competitor. This characteristic of the eBay service is one factor that sets the company apart from the rest. “Customers see the value in using the eBay service. This is why eBay has become so successful. Customer service is the ultimate value proposition of eBay and by influencing the online marketplace, eBay customers can always have the convenience, variety of goods and services, security of transactions and accessibility in all forms of online media provided by eBay. Eventually, eBay is becoming the standard in electronic commerce and others have followed suit because of the variety of goods and services provided by them.
Buyers of the organization are its actual customers who place their items on auction and are charged transaction fees. eBay should extensively use and rely on customer relationship management analytical and operational software. It will allow the company to gain insights into behavior of customers, better market them, and keep segmenting market based on attributes of customers in order to avoid facing Innovator’s dilemma.
The threat of new entrants is insignificant because of high entry barriers. eBay is expanding through acquisitions and offering reliable and safe services what makes impossible for new companies to compete with the organization. Threat of substitutes is also insignificant as long as Internet stays the most convenient and cost efficient way for people to communicate and do business. It should be mentioned that eBay itself offered an alternative service, when companies that existed before did not consider threat of alternatives to their physical auctions, garage sales and so on. The company has created significant switching costs which a customer would incur if he or she decided to switch to another company.
eBay is building a sustainable business model and the current market position of the company is very strong. This implies that competitors do not represent extremely significant threat but eBay should be aware of new market signals and opportunities. As any other company, eBay has certain issues and some decisions of the company could be challenged. In some cases, issues eBay faces are typical only for Internet-based organizations.
Doing business over the Internet makes the company responsible for ethical and legal use of private information of its customers. eBay must make sure that its customers are protected and that security is at the high level so that customer information will not be stolen.
eBay should develop specific IT effectiveness and efficiency metrics and continuously benchmark themselves against competitors. Tools used in analysis of web traffic can make the company aware of arising issues, new competitors and better understand behavior of customers.
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