Strategy and Porter’s Five Forces Model of eBay:
eBay is considered globally as one of the major players in the e-commerce industry, specified in online auctioning of products from different sellers, and a platform for buyers to bid and purchase the products they desire. The Diverse analysis had shown that eBay is facing headwinds in the industry, but it still maintains its dominance in its sector. Therefore, maintaining its growth on its strong market position and business expansion at an impressive pace. (“Forbes, 2014”)
The Five Force Analysis of the Nature and Strenght of the Various Competitive Pressures Faced by eBay:
The five forces model analysis has been able to reveal that eBay’s got competitive rivalry within the industry. There are many other e-commerce websites competing massively against eBay, and they are gearing towards taking over the supremacy it had earned over the years. Some of these organizations include Yahoo auction, Google, Amazon, Alibaba, Apple, overstock, ubid, CQout, bidville, etc. (Phillips et al., 2005) A large number of online auction firms reflects a very intense competition in the industry. However, in spite of all these competitions, the five forces analysis had been able shows that customer demands are not just with the low prices offered, but the availability of the products they desire to own, which is provided by eBay.
Also, the analysis shows that due to the evasion of more online auction websites, many sellers/buyers may locate other e-commerce websites, and a reduction in the use of eBay may occur. But it concludes that eBay is selling at a very fast pace, with a very large range of items on its website, therefore, leading to no real threat obtained from the five force model. Finally, eBay is moving with the trends of change, hence innovating strategic items of different types to maintain the vogue and trend in the industry. (“Forbes, 2014”)
The competitive pressures facing eBay and other online auction companies do not affect the profits they make. Every organization will always have its own customers and still make their expected profits no matter how high the competition may be. The only major issue that could be faced is that there would be a decrease in margin profit amongst the players involved. (Phillips et al., 2015)
Problems and Issues eBays’s Top Management Need to Address
There are many problems eBay’s top management needs to address. But based on the analysis, eBay is faced with problems relating to legal challenges to PayPal, new entrants of players.
The legal challenges to PayPal are linked to how established players such as Amazon, Alibaba, and Apple have the power to make a strong effect on PayPal’s strong market position. Additionally, newly established players can have an effect on PayPal’s strong market share. Therefore, the priority problems are the challenges with PayPal.
Key Success Factors for Online Auction Firms
- For any online auction business to succeed, they must bear in mind some critical factors to keep them successful. This includes the following:
- The layout of the website: The design layout of the website is the major attention of an online auction, it must be clear, easy to use, simple to understand, with a good font and the use of color, white spaces and typography.
- Personalized Features: The advanced features must be clearly developed to enable user convenience of the online auctions, this include, the auction notifying and monitoring features.
- Information Architecture: There must be well-organized auction listings to ease users when browsing and/or searching specific auction items. (Orson & Donald, 2004)
- Establishing good reputation and credibility: A secure auctioning website will give customers a clear symbol of security which is a feature of credibility. There must also be states of commitment to guarantee satisfaction for online shoppers.
- Rapid and responsive customer care service: No platform is perfect, therefore there must be a rapid response customer service, for complaints and inquiries to build long-term relationships.
- Definite value proposition: To achieve success, it is important to understand every basic study of businesses geared towards delivering a very good value proposition. There must be adequate knowledge of the targeted customers, an efficient delivery or distribution system, a unique product or service delivering, cost control and revenue optimization, as well as Web maintenance.