Ebay fixing an online marketing pioneer case study

Server and other hardware suppliers are operating in an oligopolistic market with undifferentiated products and therefore switching costs are low. To establish the network and web pages IT specialists can be hired or outsourcing partners such as site hosting companies can provide services.


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Highly qualified personnel are rare thus bargaining power can be exercised by high salary demands. The threat of forward integration is low as entry barriers into online-auctioning are relatively high. Apart from selective cases of high salary demanding IT specialists, the overall bargaining power of suppliers is low. Adds in newspapers, flea markets, garage sales, traditional auction houses, liquidators, companies offering catalogue selling.

Each of these services can substitute only parts of the services provided by online auctioning, depending on the customer segment and the product demanded. The more diversified the customer base of an online-auctioneer the more difficult it becomes to find substitutes with an equal product range and competitive transaction costs.


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  • Threat of substitutes poses a low risk to the online auction industry, especially to dominant industry players like eBay. The industry is highly concentrated, the largest five companies occupy approx.

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    Industry growth has been extremely high in the past years and is expected to go on as the Internet will spread further and its use will become more common. Due to the big differences between the online-auction providers, like varying amount of consumers and different communities, the switching costs in the industry are high. Therefore, the rivalry between the various providers is not that strong. There are no high exit barriers in the online-auction industry, because there are no specialized assets and no fix costs of exit.

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    The low rivalry is enhanced by the growth opportunities typical for unsaturated markets. The competitive situation of the online-auction industry consists of the following main elements:. EBay was found in by Pierre Omidyar. The idea seems to be so simple, and brilliant on the other side: offer a marketplace for a community in order to facilitate C2C trade. Ever since eBay is the market leader in the online auction industry and explored international markets within the last years. The customer base increased rapidly over time and the largest online trading forum was established.

    The trading platform is easy to navigate, accessible from various countries and generally facilitates transactions. The customer needs only a computer and Internet access for the transaction.

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    EBay is a relatively neutral partner, whose job it is to initiate and overview the business, not to control or influence the transaction. The bidding procedure follows certain rules. Offences against these rules can be punished by eBay resp. Thus enhances trust, improves customer loyalty and fosters the sense of community. Through constant improvements in customer services, like additional product groups and special sites, as well as through strategic alliances with partners along the value chain, eBay provides additional service to its customers.

    Good communication with its community through forums and face-to-face discussion facilitates feedback from customers. The reliability of the system was increased by investment in new servers as well as in Maynard Webb, a premier software engineer. Capital requirements were relatively low in the start-up-period and even now fixed cost required to run the business are low, seen relative to earnings.

    Later eBay raised capital through a public offering of common stock in and an additional offering in The strengths listed above fostered the built up of a brand provide a secure starting point for the future development and challenges. The size of the community and the variety of customers, which comes along with the size, results in different expectations towards the aim and participants in auctions. As a current problem one can name the growing presence of companies.

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    It can be seen as a weakness that, C2C being the core competence of eBay, it is only in narrow ranges possible to exploit the potential of B2C trading. Turning towards businesses likely will result in loosing customers as well as a loss of potential revenues. With the growing worldwide diffusion of the Internet and the increase of e-commerce, countries like China offer a large market of potential customers. Other areas like South America or Eastern Europe, which are characterized by a high population, could also be attractive for eBay.

    So the geographical expansion represents a great opportunity to compensate for the saturating market in the US and to continue its growth. Secondly the alliances of eBay e. Another growth opportunity is the expansion of its current product line. One possibility is to increase the number of existing specialty sites.

    In the past eBay successfully introduced trading categories e. As the variety of goods traded is almost infinite, there is enough space for more categories of this kind. Another possibility is the broadening of its pre- and post trade services e. The increase in trust is extremely important for acquiring new customers, who until now were reluctant to join eBay because of their concerns about security issues in e-business in general.

    In this task eBay again could capitalize on its alliances with the leading companies in the various services. A third possibility to broaden its product line is the expansion in other segments of the online auction industry. The initial idea behind eBay was to provide a platform where consumers can trade with others consumers.

    But lately it has entered also the B2C business by attracting corporate customers like IBM for its services. For the corporate customers eBay with its huge customer base represents an ideal additional distribution channel for products e. This segment of large ticket items is certainly attractive for eBay, because of the vast amount and the value of products traded in it.

    A fourth possibility is to diversify into a new industry like the online retailer industry. With the acquisition of Half. This second business segment would be another source of revenue and would decrease its strong dependence on the auction business. One further opportunity for eBay could be the accelerating development of the technological innovations, especially in the mobile business.

    As the online auction model, especially in the C2C segment, is easy to imitate, there is a permanent threat of new competitors. Online retailers e. Amazon and other Internet companies are diversifying into the auction market. If new entrants, who have enough financial recourses or who are ready to sacrifice profits, start a price war by lowering the fees or by offering services for free in order to win customers then eBay would face substantial losses in this competition.

    Furthermore, traditional auction houses begin to set up websites and brick-and-mortar retailers try to sell their products over the Internet. On the one hand, this segment is very profitable and it is necessary to serve it in order to support future growth. On the other hand smaller customers, especially the sellers are threatened by the presence of corporatism, who intensify the competition in the auction. These smaller sellers are afraid of being overlooked among the mass of products offered by corporate sellers. Competitors who are aware of this problem can steal the frustrated customers away from eBay or offer auction sites, which focus on the specific needs of different customer segments.

    There is still a problem concerning the security issue. Even though eBay has installed features like SafeHarbor and the feedback forum to avoid frauds and other illegal activities, the security at online auctions is still not sufficient. Moreover, eBay is still exposed to system outages and attacks by hackers. These problems are not expected to be completely solved in near future. However, if our company grows in the future then we may need to assess our facilities and land. If we expand in the future we will either need to update and improve the land and facilities we currently own or lease or purchase more land and facilities Ebay Annual Report.

    This area of Utah has been becoming more popular as a home for data centers.

    Ebay fixing an online marketing pioneer case study

    Another reason our company constructed the data center in South Jordan is because of incentives from the local government. This data center finally came online May4, Layoffs can be a serious problem for a company and attempting to meet the security needs of employees. At eBay, we work hard to avoid layoffs for many different reasons. These layoffs affected our business in many different ways. The layoffs effect the perception of everyone in the community and perception is extremely important to the survival of any business "EBay Layoffs What Effect Will It Have on You?

    Marketing The auction and marketplace portions of our company provide a community where practically anyone can sell practically anything Who We Are. With our online auction and marketplace options, the number and option of products that our users can find is almost endless. The price that users pay to sell items on our ebay auction site is the total from the listing fee and the selling fee. The listing fee for items varies by the initial bidding price that the user sets. This fee starts as low as 10 cents and can go as high as 2 dollars.

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    The selling fee is calculated as 9. The maximum that this fee can go up to is dollars. There are also fees charged for selling with our Buy It Now feature. These fees range from 5 cents for an item listed under 10 dollars to 25 cents for items that are listed for 50 dollars or more Fees for Selling on eBay.