Examining Business Strategy and the Five Forces Model: The Challenges Facing eBa
ID: 396414 • Letter: E
Question
Examining Business Strategy and the Five Forces Model: The Challenges Facing eBay; Time for Changes in Strategy? This week we look at strategic thinking in the business environment. Your assignment this week is to: 1. First, research and create a Porter’s Five Forces Model of eBay in Word, Excel, or PowerPoint format. Use external sources to assist in populating your model. Next, report and analyze your findings, touching on the following questions: 1. What does your five forces analysis reveal about the nature and strength of the various competitive pressures eBay faces? Are the competitive pressures facing eBay and other online auction companies conducive to earning good profits? Why or why not? 2. Based on your analysis of the industry and eBay’s situation, what problems and issues does eBay’s top management need to address? Which ones are top priorities? 3. What do you see as the key success factors for organizations in the online auction industry? Here are the paper requirements:
Explanation / Answer
Five forces analysis for eBay is as follows.
Competitive rivalry
EBay is definitely facing use competition over the Global market as availability in local service providers in e-commerce and commerce Chinese have decreased the overall revenue generated from its operating structure. Increment in competition is directly affecting their sellers and the sellers are also moving to the competitive environment where profit margin is better than eBay. Amazon has implemented its seller based services which is directly affecting eBay in the competitive manner.
Supplier power
As eBay does not have their own warehousing system, their operating structure consists of a syllabus network which definitely have a great bargaining power towards the company. As the profit margins are highly increasing with other competitors, seller on the website are definitely asking for great and better profit margins from ebay to work or to provide services in their operating structure. Rise of the Chinese retail Giants has adversely affected the overall business done by the company in international markets as these Chinese retail e-commerce businesses have better availability of suppliers and bargaining power.
Buyer power
Power has also increased in terms of operating structure of eBay. Most of the buyers are having alternative for online shopping and having an alternative directly decreases the overall availability of opportunities for eBay. Does not self regulate its prices it is adversely affect by the specific condition and the power of buyers is relatively high.
Threat of substitution
This is the biggest factor which is influencing the eBay's operating structure as many of the new market service providers are available for substitution. Amazon has been very widely affecting eBay's business by implementing cellar based incentive program which is directly taking out the sellers from ebay to the Amazon. Alibaba and other Chinese retailers are also affecting the overall business capabilities of eBay and death rate of substitution is rising.
Threat of new entrants
EBay does not really have any threat of new entrants in the specific market segment, it has an Operating structure which is spanning worldwide which is not easily substituted by any other new entrant. As it has a unique structure of a total seller based operating environment, availability of new entrants does not harm the company's business that much earn this specific type of new entry by the competitors barely pose a threat.
Main problem with the eBay is the strategy. Whenever eBay enters a new Market it applies the traditional strategy. Best specific traditional strategy is applied without market research hence the direct effect of this specific strategies used by a large margin. Companies strategy of entering the credit card details as well as not having the cash on delivery option was one of the major drawbacks in Japan because it was not a part of their culture.
By analysing the current market in which eBay is entering can be very beneficial for eBay to create a specific market benefits. By having an understanding of the specific market we can easily increase its involvement towards the customer and can increase in level of communication with the customer which directly affect the company's sales.
Ebay could have research the market as well as looking at the competitors strategy would also have been helped in competing with them. By learning different studies from their competitors eBay should have implemented the messaging as well as some new system into it application and the website which would have helped eBay to generate more revenue from the same market.
EBay has a great opportunity for setting up a whole new structure of online auction as it already has experience in providing bidding for the products. As people are already familiar with such a specific environment of eBay it would be much easier to adopt by the customers if the company start a specific segment for auctioning. Creating a warehouse for the specific things as well as opening their own structure of warehouse would provide them extensive support for maintaining better customer support and improving the overall availability of options for the customers resulting in better revenues.
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