Perform an industry analysis using Porter's Five Forces Model.
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Case 13: eBay.com 1. Perform an industry analysis using Porter's Five Forces Model. Threat of Entrants There are lots of online auction companies in this industry. However the industry is dominated by only three companies, which are eBay, Amazon and Yahoo. With the availability of online auction software and the auction hosting, and low start up costs to setup an online auction business, the potential for new entrants will be really easy. On the other hand it is really hard to become a potential threat in this industry because of several reasons. It is hard for small companies or newly opened companies to create a brand name; it is also hard for companies to gain customer loyalty. Without brand recognition and a reputation for quality it would be difficult to enter the market and be successful. Hence, in the world of the Internet what counts most is brand identity. EBay uses a network externalities involved with being a member of one auction site. Any new company entering in this industry will face challenges of attracting new customers. EBay Company is first in the market and it has the largest market share among the other companies. It is a difficult task for new entrants to make their name in the Internet auction marketplace.
Is eBay successful? If so, why and if not why? The online auction industry is profitable and growing very fast. Industry leaders situated themselves and may not move when it comes to taking their sales. Removing them from their thrones is not impossible, but requires either a new market for sales or takes some of the current market. Some shifts are occurring with the recent development of the newer auction companies but to have a stabile market share companies must have a brand name in the auction industry, which leaders such as eBay, Amazon and Yahoo have already done. According to the text book eBay has a market share of %80. Their market share and financial results shows that eBay is very successful. EBay established a system where everyone had accessed to the same information and could compete on the same terms as everyone else. People from all over the world started to buy and sell things to each other with a reasonable price. Their revenues increased from month to month and they have a low debt. This enabled the company to create partnerships with other companies all around the world and compete in new markets. Giving customers more than they want and providing them a unique service with advanced features gained the company to be the market leader.
About Me allowed people to create their own home page free of charge and customize their eBay services. Finally the last one is to develop international markets by creating partnerships or acquiring companies that have strong powers on their local markets. EBay Company has built strategic partnerships in all stages of its value chain; they tried to seek customer feedback and made improvements based on the feedback information. They also actively monitored the external environment for developing opportunities. EBay trusted the users for suggestions to improve the site and by giving the customers what they wanted; they were improving both customer retention and loyalty. EBay paid attention to their customers' expectations and followed their values. As it is clear that, eBay's growth strategy is focused on the goal to be the world's largest P2P online auction company. To do this they must have access to the other markets of the world. After completing the steps that are mentioned above eBay moved to dominate the world markets. They built new user community along with acquiring companies that were in the market local companies and partnering with strong local companies. They entered Europe, Australia, and Japan and gained a significant market share. Their growth strategy of acquiring and partnering gave them the brand name in all over the world as they strongly increase their market share. Mehmet ICAGASIOGLU 1
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