Contents of this Report:
Abstract
Acknowledgement
3.1 Introduction
3.2 Company Overview
3.3 eBay Mission
3.4 eBay Objectives
3.5 Corporate strategy
3.6 Virtual Value Chain
3.7 eBay Revenue model
3.8 eBay Competition
3.9 Challenges
3.10 Conclusion
Bibliography
3.1 Introduction
eBay establishes itself as the "The world's Online Marketplace". Coincidently, it is also the positioning statement of eBay, which itself means many things about the company's identity, it enables trade on local, national and international basis with customized sites in markets around the world. It's hard to believe that one of the most celebrated dot-coms has now celebrated its tenth birthday. Pierre Omidyar, a 28 year old French-born software engineer living in California coded the site while working for another company, eventually launching the site for business on Monday, 4 September, 1995 in the San Francisco Bay area with the more direct name 'Auction Web'.
eBay created a online powerful platform for the sale of goods and services with a diverse and passionate community of individuals and small businesses, where millions of items are traded each day. On any given day, there are millions of items across thousands of categories for sale on eBay, as well as on Half.com, eBay's site dedicated to fixed price trading.
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3.2 Company Overview
eBay is an ecommerce system where a user can browse to the website eBay .com and search for anything they want to buy, in auction or right away from the buyer, or items can be purchased at fixed price through a feature called Buy-It –Now or to post some item for sale which other users can search for as prospective buyers. eBay offers a wide variety of features and services that enable members to buy and sell on the site quickly and conveniently. In eBay marketplace, user can buy and sell items across multiple categories, including antiques and art, books, business and industrial, cars and other vehicles, clothing and accessories, coins, collectibles, crafts, dolls and bears, electronics and computers, home furnishings, jewelry and watches, movies and DVDs, music, musical instruments, pottery and glass, real estate, sporting goods and memorabilia, stamps, tickets, toys and hobbies and travel. The users then arrange for payments online (using eBay's PayPal system which is a separate system designed solely for that purpose and recently integrated onto the eBay platform) and receive the item by mail. Currently, eBay has local sites that serve Australia, Austria, Belgium, Canada, France, Germany, Ireland, Italy, Korea, the Netherlands, New Zealand, Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom. In addition eBay has a presence in Latin America and China through its investments in MercadoLibre.com and Each Net, respectively. The marketplace of eBay include services: online payments by Pay Pal; wide array of Buyer and Seller tools; and Preferred solution Provider programs.
Like most internet-enabled business systems, eBay is constructed using distributed object technology. It requires scalability, high performance, high availability, and security. It needs to be able to handle large volumes of requests generated by the internet community and must be able to respond to these requests in a timely fashion.
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3.4 eBay Objectives
eBay's success in the U.S. "inspired eBay to define its mission as providing a global trading platform where practically anyone anywhere can trade practically anything anytime". The overall eBay aims are to increase the gross merchandise volume and net revenues from the eBay Marketplace. More detailed objectives are defined to achieve these aims, with strategies focusing on:
- Acquisition — increasing the number of newly registered users on the eBay Marketplace.
- Activation — increasing the number of registered users that become active bidders, buyers or sellers on the eBay Marketplace.
- Activity — increasing the volume and value of transactions that are conducted by each active user on our eBay Marketplace. eBay had approximately 83 million active users at the end of 2007, compared to approximately 82 million at the end of 2006. An active user is defined as any user who bid on, bought, or listed an item during the most recent 12-month period.
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3.5 Corporate strategy
The whole foundation of eBay, lies on the idea that practically anything that can be bought and sold can be facilitated through this Internet retailer, and this auction platform provider was implementing the concept of e-commerce even more forcefully.
"We help people trade practically anything on earth and conduct commerce through the Internet on a global basis" is certainly eBay's business model .This model was so effective and efficient in conducting transactions that more and more people preferred to trade online, so that they can enjoy the comfort at home or work-places and still buy things online just by the click of the mouse.
Today eBay users can bid anything from office equipments to real estate to cars. It is surprisingly true that "eBay has prevailed, but others have failed". The company's consistent focus on two long-term goals that is "becoming the world's largest consumer to consumer online auction house and building out each of the five core strategies" lead to the success of eBay. An analysis into these strategies reveal that eBay has applied sound strategic management as adopted from Porter and other Management experts .Its whole business revolves around creating an environment where everyone can come and transact without any second thought of being cheated or misguided in any form.
The first strategy is creating an insurmountable customer base, that is
(1) Establishing a larger user base
To attract new users, eBay established relationships with more than 60 websites, including America online which gave eBay the largest access to the largest user base on the internet and prevented AOL from entering the auction arena, bay also added dealer to person trading and addresses the fast growing and fragmented small business market by creating a feature called business exchange, where businesses could buy or sell new, used or refurbished business merchandise and professional tools in their local market.
The second strategy is:
(2) eBay concentrated on local and international trading
EBay has local sites in 53 U.S markets they deliver distinct regional flavors and give users the convenience of shopping locally for difficult –to ship items such as automobiles or antique furniture. The company also built a truly global presence with users in more than 150 nations.
The third strategy is:
(3) Creating a strong brand
For eBay's first few years it did not spend a single penny on marketing, relying instead on viral marketing and its ability to piggyback on competitors ceaseless (and expensive) efforts to retain market recognition. The company's brand building shifted though with the arrival of new top professionals.
The fourth strategy is:
(4) Broadening the trading platform
By 1999, eBay's fourth year, a host of competitors had entered the online auction market, while eBay had the first entry advantage, not all of its competitors were small start ups, some including yahoo and Amazon were internet significant players with extensive, established user bases.
eBay's response was to extend its core business into other attractive niches, the company introduced higher priced product categories, a move that would increase its profit margin dramatically while requiring minimal infrastructure and operating expenditures. The only caveat was that the company needed to develop a new skill set-to overcome this obstacle eBay made several acquisitions, starting with auction house Butterfield and Butterfield, the marriage of offline and online auction houses revolutionized the way that fine antiques and collectibles were bought and sold, allowing users to place real-time bids for items on offline auction house floors.
The fifth strategy is:
(5) Maintaining a strong community affinity
The company believes that fostering direct interaction between buyers and sellers with similar interest had enabled it to create loyal, active community of users, as noted earlier this emphasis on community building has been present since eBay's founding.
(6) Continually enhancing site features and functionality
Because eBay's strategy is to be as hands-off as possible when it comes to transactions, the company has to provide a reliable and straight forward way for users to manage the process on their own, buying and selling on eBay are made easy for users to manage the process on their own. Sellers need do little more than write a compelling description of the item up for auction, provide a suitable photograph, and decide how many days the auction will last. To enhance the payment component of the customer experience, an admitted difficulty for mast buyers and sellers, bay acquired a company called Billpoint, whose online bill payment service facilitates credit card payment between buyers and sellers.
Today, the eBay community includes more than a hundred million registered members from around the world. People spend more time on eBay than any other online site, making it the most popular shopping destination on the Internet
3.6 Virtual Value Chain
eBay increases its value proposition with a differentiation strategy, acquiring entities that facilitate of transactions for its users, i.e. acting as the "middleware". For example, eBay acquired PayPal in 2002 to "create a proprietary system that seamlessly linked buyers and sellers.
eBay's virtual value chain creates value via five activities: "gathering, organizing, selecting, synthesizing, and distributing information" . Within its core competency, eBay gathers and organizes information about what is being sold by sellers into a database that can be queried by buyers which can then select what to bid on. In addition, based on the query, eBay synthesizes the requested information, ensuring that it distributes to buyer the data he or she is requesting even if the query is imprecise. For example, if you search for "shoes" in eBay, it will ask you if you meant "shoes". eBay also gathers, organizes, synthesizes and distributes information about its users, called a peer review. For example, if a seller is not providing exactly the product as advertised, the buyer can provide a bad rating and a written complaint, which stays with that seller forever. It provides the same capability for sellers to complain about its buyers. This provides value to users because it quantifies the trustworthiness of users and facilitates transactions between total strangers.
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3.7 eBay Revenue model
The vast majority of eBay's revenue is for the listing and commission on completed sales. For PayPal purchases an additional commission fee is charged. Margin on each transaction is phenomenal since once the infrastructure is built, incremental costs on each transactions are tiny – all eBay is doing is transmitting bits and bytes between buyers and sellers.
Advertising and other non-transaction net revenues represent a relatively small proportion of total net revenues and the strategy is that this should remain the case Advertising and other net revenues totaled $94.3 million in 2004 (just 3% of net revenue).
3.8 eBay Competition
Although there are now few direct competitors of online auction services in many countries, there are many indirect competitors. eBay (2005) describes competing channels as including, online and offline retailers, distributors, liquidators, import and export companies, auctioneers, catalog and mail-order companies, classifieds, directories, search engines, products of search engines, virtually all online and offline commerce participants (consumer-to-consumer, business-to-consumer and business-to-business) and online and offline shopping channels and networks.
BBC (2005) reports that eBay are not complacent about competition. It has already pulled out of Japan due to competition from Yahoo! and within Asia and China is also facing tough competition by Yahoo! which has a portal with a broader range of services is more likely to attract subscribers.
Before the advent of online auctions, competitors in the collectibles space include antiques shops, car boot sales and charity shops. Anecdotal evidence suggests that all of these are now suffering at the hand of eBay. Some have taken the attitude of 'if you can't beat 'me, join 'me. Many smaller traders who have previously run antique or car boot sales are now eBayers. Even charities such as Oxfam now have an eBay service where they sell high-value items contributed by donors online. Other retailers such as Vodafone have used eBay as a means to distribute certain products within their range.
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3.9 Challenges
Challenges that eBay must deal with are: language barriers, government regulations, internet access, and cultural differences. eBay is attempting to deal with the challenge of conducting transactions in multiple languages, where the seller interfaces in one language and potential buyers in another. According to Daniels et al. (2007), by 2004 "progress was evident as eBay could apply increasingly sophisticated software that made it easier to post auctions in more and more foreign markets automating the translation and localization of content" Furthermore, in March 2009, "sellers on eBay's Japanese site, Sekaimon, who want to offer their items on English-language eBay sites will be able type descriptions of up to 200 Japanese characters and get them translated within a day for about $12.34". Thus, eBay turned a challenge to its global growth curve into a new revenue stream, increasing its value proposition.
Government trade regulations are another challenge to eBay's globalization goals. eBay deals with international trade regulations by posting the international trade regulations on its website and making users responsible for conformation. When this is not enough, eBay manages government trade regulations issues by working closely with governments and political groups to come up with viable solution.
eBay has dealt with the problem of limited internet access in some markets by embracing mobile access to its centralized servers. Ultimately, eBay believes that limited access, i.e. a "foot in the door", will provide it a competitive advantage in emerging and third country markets as technological barriers dissolve.
eBay has a significant challenge in dealing with cultural differences, such as high uncertainty-avoidance cultures. eBay is dealing with this by structuring strategic partnerships with trusted entities, such as was the case in Japan, where it struck a deal with Yahoo, after attempting and failing to penetrate independently. eBay also pursues a strategy of localization, whereby it only replicates smaller, culturally sensitive portions of its content in specific markets, having the added benefit of ensuring ease of use in new, or low tech markets.
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3.10 Conclusion
eBay came out of nowhere to become a behemoth in e-Commerce. With an attractive and differentiated business model that eliminates the need for a sales force and inventory, eBay focused its efforts on its Acquisition, Activation, and Activity strategy, striving to reach its global vision of becoming a global trading platform where practically anyone anywhere can trade practically anything anytime. Whether it can do so depends on whether it can conquer language barriers, government regulations, internet access, and cultural differences. It already has its foot in the global door.
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Bibliography
-- This report contains only general information about the thamel dot com, the whole document will be published later.--
Group Members;
Lasang Jimba Tamang
Rojina Maharjan
Subash Poudyal
Ujjwal Panthi
VK Pandey
VK Pandey
(07 BSc CSIT batch)
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