Assignment E-Commerce.doc

8/19/2019 Assignment E-Commerce.doc

1/37

1

ASSIGNMENT E-COMMERCE SEPTEMBER 2015

BACHELOR OF BUSINESS ADMINISTRATION WITH HONOURS

SEMESTER SEPTEMBER 2015

BBED4103

E- COMMERCE

MATRICULATION NO : 791016145081001

IDENTIT CARD NO! : 791016-14-5081

TELEPHONE NO! : 019-6641264

E-MAIL : "#$"%&'""()*"+,,!,$

LEARNIN. CENTRE : SHAH ALAM

BBED4103 (E-COMMERCE)


2/37

1


TABLE OF CONTENTS PAGE

Introduction of eBay.com 3-8

The key elements of a business model 9-14

Reference of the key elements of a

Business model 15

nalysis of the eBay.com based on the

!ey elements of a business model

1. "alue #ro$osition 1%-19

&. Re'enue (odel &)-&3

3. *om$etiti'e +n'ironment &3-&,

4. *om$etiti'e d'antae &8-&9

Recommendation

1. tratey 1 &9-3)

&. tratey & 31-3&

3. tratey 3 33-34

ummary 35

References 3%



3/37

1


INTRODUCTION OF EBAY.COM

eBay Inc. is an American multinational internet consumer-to-consumer corporation,

headquartered in San Jose ,California . It was founded in 199, and !ecame a nota!le success

story of the dot-com !u!!le" it is now a multi-!illion dollar !usiness with operations locali#edin o$er thirty countries. %he company mana&es eBay.com, an online auction and shoppin&

we!site in which people and !usinesses !uy and sell a !road $ariety of &oods and ser$ices

worldwide. In addition to its auction-style sellin&'s, the we!site has since e(panded to include

)Buy It *ow) standard shoppin&" shoppin& !y +C, ISB*, or other ind of S+

/$ia 0alf.com" online classified ad$ertisements /$ia i2i2i or eBay Classifieds " online e$ent

ticet tradin& /$ia Stu!0u! " online money transfers /$ia ayal and other ser$ices. /eBay,

Inc., San Jose, CA %he ma2or auction ser$ice on the 3e!. eBay populari#ed the concept of

!uyin& and sellin& online, and !oth indi$iduals and commercial enterprises list items for sale.

%here is no char&e to !rowse the site or mae !ids and purchases, !ut there is a fee to list

items. If an item is purchased, the seller pays eBay an additional fee. 4illions of items are

offered, and !illions of dollars' worth of merchandise is sold e$ery year throu&h this ser$ice.

5aunched in 199, eBay has made numerous acquisitions o$er the years, includin& the ayal

payment ser$ice in 6776 and the Sype $oice o$er I /8oI ser$ice in 677 . %he company

recorded re$enues of :,;:6.< million durin& the financial year ended =ecem!er 677: />?7:,

an increase of 6@. o$er >?7;. %he operatin& profit of the company was ;1?677:, a decrease of ;.9 compared to >?7;. %he net profit was ?7:, a

decrease of ;9.1 o$er >?7;.



4/37

1


Key Fact

0ead ffice eBay Inc.

eBay

61 0amilton A$enue

San Jose

California 916

+SA

hone 1 7@ a( 1 7@ inancial ?ear Gnd =ecem!er

Gmployees 1,77

*AS=AH %icer GBA?

EBAY – MISSION

%o !uild the world's most efficient and a!undant maretplace in which anyone, anywhere, can

!uy or sell practically anythin&

EBAY – VISSION

eBay inc. pioneers communities !uilt on commerce, sustained !y trust, and inspired !y

opportunity. eBay !rin&s to&ether millions of people e$ery day on a local, national and

international !asis throu&h an array of we!sites that focus on commerce, payments and

communities.

THE HISTORY OF EBAY

1995 %he online auction we!site was founded as Auction3e! in San Jose, California, on

Septem!er rench-!orn Iranian computer pro&rammer ierre midyar.

1996 eBay hires its first employee. In *o$em!er 199;, eBay entered into its first third-party

licensin& deal, with a company called Glectronic %ra$el Auction to use Smart4aret %echnolo&y

to sell plane ticets and other tra$el products.

1997 January 199: the site hosted 6,777,777 auctions, compared with 67,777 durin& the

whole of the pre$ious year. %he company officially chan&ed the name of its ser$ice from



5/37

1


Auction3e! to eBay in Septem!er 199: when it recei$ed ;.:m from $enture capital firm

Benchmar Capital.

199 4arch 199@ the company has


6/37

1


• >red =. Anderson, former mana&in& director of Gle$ation artners, director of eBay

since July 677<

• Gdward 3. !arnholt, former president and CG of A&ilent %echnolo&ies, director of

eBay since April 677

• Scott Coo, founder of Intuit, director of eBay since June 199@

• John =onahoe, e!ay's former president and CG since 4arch 677@, former director

of eBay since 677@

• =a$id =orman, non-e(ecuti$e chairman of 4otorola, director of eBay since June

671

• 3illiam Clay >ord, Jr, e(ecuti$e chairman of >ord 4otor Company, director od eBay

since July 677

• athleen C. 4itic, founder and CG of Sithch Inc, director of e!ay since Septem!er

6711

• =a$id 4. 4offett, former CG of >reddie 4ac, director of eBay since 2uly 677:.

• ierre midyar, director and chairman of eBay, since its incorporation in 4ay 199;

• Fichard %.Schlos!er&, former president and CG of the =a$id and 5ucile acard

>oundation, director of eBay since 4arch 677

• %homas J.%ierney, co-founder of the Brid&espan Lroup, director of eBay since 4arch

677<



7/37

1


LOGO

In Septem!er 6716, eBay introduced their new lo&o set in +ni$ers. %his new lo&o was installed

onto the main we!site on cto!er 17, 6716.

199 - 6716

>orm 6716 - present

FINANCIAL

eBay currently has set itself into a position of stron& financial success and &rowth in the ey

areas of its !usiness. Sales ha$e increased due to the stren&ths of past acquisitions and low costs

ha$e returned hi&h profits !ac into free cash flow. Cash is !ein& held and used to ad$ance

success in fast-&rowin& !usinesses in order to recei$e quic returns for stocholders. Cash is

currently listed at


8/37

1


!ein& raised throu&h the sale of its own stoc eBay has !uilt two stron& forces to finance their

&rowth, de!t and equity.

PHYSICAL

eBay wors out of facilities throu&hout the +.S. and also located in 6 different countries. %hese

are used for e(ecuti$e and administrati$e offices, data centers, product de$elopment offices and

customer ser$ice offices. %he de$elopment of new properties is important to acquire in the eBay

strate&y. ne of the property acquisitions included a new data center in South Jordan, +tah to !e

opened which will create a!out 7 2o!s. %he employees in this location are proposed to recei$e

7 more than the county median wa&e. %he de$elopment of facilities in locations such as this

one, which will impro$e its community, has made ta( credits a$aila!le from the &o$ernment,

includin& 6:.


9/37

1


T$E KEY ELEMENTS OF A BUSINESS MODEL

A !usiness model descri!es the rationale of how an or&ani#ation captures, creates and deli$ers

$alue. Such a model has to !e intuiti$e and co$er all matters of interest, i.e. encompass the

necessary and sufficient conditions of company operation. %he concept should !e simple,

complete and rele$ant, without o$ersimplifyin& the comple(ities of how enterprises actually

function. A !usiness model is e(tremely important to ensure a !usiness is set up properly and has

the a!ility to run smoothly. %he !usiness model is the main component of a !usiness plan and

this is necessary when looin& for in$estors from !oth indi$iduals and !ans. A !usiness model

is a set of planned acti$ities /sometimes referred to as !usiness processes desi&ned to result in a

profit in a maretplace. %he !usiness model is at the center of the !usiness plan. A !usiness plan

is a document that descri!es a firm's !usiness model. An e-commerce !usiness model aims to use

and le$era&e the unique qualities of the Internet and the 3orld 3ide 3e!

%here are @ components which mae up Business 4odel !ut will !e e(plain ; of themD

1% &a'(e P)*+*,-t-*

8alue proposition is at the $ery heart of its !usiness model. A $alue proposition defines

how a company's product or ser$ice fulfills the needs of customers. %o de$elop andEor

analy#e a $alue proposition, you need to answer the followin& ey questionsD 3hy will

customers choose to do !usiness with your firm instead of another companyN 3hat will

your firm pro$ide that other firms do not and cannotN >rom the consumer point of $iew,

successful ecommerce $alue propositions includeD personali#ation and customi#ation of

product offerin&s, reduction of product search costs, reduction of price disco$ery costs,

and facilitation of transactions !y mana&in& product deli$ery.

>resh=irect, for instance, primarily is offerin& customers the freshest perisha!le food in

*ew ?or, direct from the &rowers and manufacturers, at the lowest prices, deli$ered to

their homes at ni&ht. Althou&h local supermarets can offer fresh food also, customers

need to spend an hour or two shoppin& at those stores e$ery wee. Con$enience and time

sa$in& are $ery important elements in >resh=irect's $alue proposition to customers.

Before Ama#on.com e(isted, most customers personally tra$eled to !oo retailers to

place an order. In some cases, the desired !oo mi&ht not !e a$aila!le and the customer



10/37

1


would ha$e to wait se$eral days or wees, and then return to the !oostore to pic it up.

Ama#on maes it possi!le for !oo lo$ers to shop for $irtually any !oo in print from the

comfort of their home or office, 6 hours a day, and to now immediately whether a !oo

is in stoc. Ama#on's primary $alue propositions are unparalleled selection and

con$enience. In many cases, companies de$elop their $alue proposition !ased on current

maret conditions or trends. Consumers' increasin& emphasis on fresh perisha!le foodsO

as opposed to fro#en or canned &oodsOis a trend >resh=irect's founders too note of,

2ust as Star!ucs' founders saw the &rowin& interest in and demand for coffee !ars

nationwide. Both companies watched the maret and then de$eloped their $alue

proposition to meet what they percei$ed to !e consumers' demand for certain products

and ser$ices.

!% Re/e(e M*0e'

A firm's re$enue model descri!es how the firm will earn re$enue, &enerate profits, and

produce a superior return on in$ested capital. 3e use the terms re$enue model and

financial model interchan&ea!ly. %he function of !usiness or&ani#ations is !oth to

&enerate profits and to produce returns on in$ested capital that e(ceed alternati$e

in$estments. rofits alone are not sufficient to mae a company PsuccessfulQ. In order to

!e considered successful, a firm must produce returns &reater than alternati$ein$estments. >irms that fail this test &o out of e(istence. Fetailers, for e(ample, sell a

product, such as a personal computer, to a customer who pays for the computer usin&

cash or a credit card. %his produces re$enue. %he merchant typically char&es more for the

computer than it pays out in operatin& e(penses, producin& a profit. But in order to &o

into !usiness, the computer merchant had to in$est capitalOeither !y !orrowin& or !y

dippin& into personal sa$in&s. %he profits from the !usiness constitute the return on

in$ested capital, and these returns must !e &reater than the merchant could o!tain

elsewhere, say, !y in$estin& in real estate or 2ust puttin& the money into a sa$in&s

account.

Althou&h there are many different e-commerce re$enue models that ha$e !een

de$eloped, most companies rely on one, or some com!ination, of the followin& ma2or



11/37

1


re$enue modelsD the ad$ertisin& model, the su!scription model, the transaction fee model,

the sales model, and the affiliate model.

ℵ Ad$ertisin& Fe$enue 4odel

a 3e! site that offers its users content, ser$ices, andEor products also

pro$ides a forum for ad$ertisements and recei$es fees from ad$ertisers.

%hose 3e! sites that are a!le to attract the &reatest $iewership or that ha$e

a hi&hly speciali#ed, differentiated $iewership and are a!le to retain user

attention /PsticinessQ are a!le to char&e hi&her ad$ertisin& rates.

?ahoo.com, for instance, deri$es a si&nificant amount of its re$enue from

sellin& ad$ertisin& such as !anner ads. %his model, ori&inally one of the

primary re$enue models for the 3e!, has fallen somewhat into disfa$or,

althou&h ad$ertisin& remains a primary source for 3e!-!ased re$enue.

ℵ Su!scription Fe$enue 4odel

3e! site that offers its users content or ser$ices char&es a su!scription fee

for access to some or all of its offerin&s. >or instance, Consumer Feports

nline pro$ides access to its content only to su!scri!ers, who ha$e a

choice of payin& a .9 monthly su!scription fee or a 6.77 annual fee.

G(perience with the su!scription re$enue model indicates that to

successfully o$ercome the disinclination of users to pay for content on the

3e!, the content offered must !e percei$ed as a hi&h-$alue-added,

premium offerin& that is not readily a$aila!le elsewhere nor easily

replicated. ?ahoo, for instance, has !roadened its !usiness model to

include a monthly 9.9 su!scription to ?ahoo latinum, which &i$es

$iewer's access to C**, *ASCAF racin&, ABC *ews, and other $ideo

feeds.



12/37

1


ℵ %ransaction >ee Fe$enue 4odel

A company recei$es a fee for ena!lin& or e(ecutin& a transaction. >or

e(ample, eBay.com created an online auction maretplace and recei$es a

small transaction fee from a seller if the seller is successful in sellin& the

item. G-%rade.com, an online stoc!roer, recei$es transaction fees each

time it e(ecutes a stoc transaction on !ehalf of a customer.

ℵ Sales Fe$enue 4odel

Companies deri$e re$enue !y sellin& &oods, information, or ser$ices to

customers. Companies such as Ama#on.com /which sells !oos, music,

and other products, 55Bean.com, and Lap.com, all ha$e sales re$enue

models.

ℵ Affiliate Fe$enue 4odel

Sites that steer !usiness to an PaffiliateQ recei$e a referral fee or

percenta&e of the re$enue from any resultin& sales. >or e(ample,

4yoints.com maes money !y connectin& companies with potential

customers !y offerin& special deals to its mem!ers. 3hen they tae

ad$anta&e of an offer and mae a purchase, mem!ers earn PpointsQ they

can redeem for free!ies, and 4yoints.com recei$es a fee. Community

feed!ac sites such as Gpinions.com recei$e much of their re$enue from

steerin& potential customers to 3e! sites where they mae a purchase.



13/37

1


% Ma)2et O++*)t(-ty

4aret opportunity refers to the company's intended maretspace /i.e., an area of actual or

potential commercial $alue and the o$erall potential financial opportunities a$aila!le to the firmin that maretspace. %he maret opportunity is usually di$ided into smaller maret niches. %he

realistic maret opportunity is defined !y the re$enue potential in each of the maret niches

where you hope to compete. >or instance, let's assume you are analy#in& a software trainin&

company that creates software-learnin& systems for sale to corporations o$er the Internet. %he

o$erall si#e of the software trainin& maret for all maret se&ments is appro(imately :7 !illion.

%he o$erall maret can !e !roen down, howe$er, into two ma2or maret se&mentsD instructor-

led trainin& products, which comprise a!out :7 of the maret /9 !illion in re$enue, and

computer-!ased trainin&, which accounts for ortune 77 computer-!ased

trainin& maret, and the small !usiness computer!ased trainin& maret. Because the firm is a

startup firm, it cannot compete effecti$ely in the lar&e !usiness, computer-!ased trainin& maret

/a!out 1 !illion. 5ar&e !randname trainin& firms dominate this niche. %he startup firm's real

maret opportunity is to sell to the thousands of small !usiness firms who spend a!out ; !illion

on computer-!ased software trainin& and who desperately need a cost-effecti$e trainin& solution.

%his is the si#e of the firm's realistic maret opportunity

#% Ma)2et St)ate3y

4aret strate&y is the plan you put to&ether that details e(actly how you intend to enter a new

maret and attract new customers. art of >resh=irect's strate&y, for instance, was to de$elop

close supply chain partnerships with &rowers and manufacturers so it purchases &oods at lower

prices directly from the source. %his helps >resh=irect lower its prices for consumers. By

partnerin& with suppliers that could !enefit from >resh=irect's access to consumers, >resh=irect

is attemptin& to e(tend its competiti$e ad$anta&es. ther companies, such as ?ahoo.com, ha$e

used a different maretin& strate&y. %hey in$est hea$ily in ad$ertisin& to &et the word out a!out

their site. Simply introducin& someone to a new site can !e all that is needed to encoura&e them

to use it. A5, in contrast, uses samplin& of millions of free C= F4s to attract new users.



14/37

1


A5 encloses C=s with free trial offers in ma&a#ines and newspapers across the country. By

distri!utin& a hu&e $olume of samples, A5 hoped that at least a small percenta&e would opt to

try the software and decide to !ecome new su!scri!ers. %his strate&y has pro$en to !e $ery

successful for A5, and today they ha$e o$er or instance, at the outset, a !usiness may ha$e one

maretin& mana&er. But after two or three years of steady &rowth, that one maretin& position

may !e !roen down into se$en separate 2o!s done !y se$en indi$iduals. >or instance, eBay.com

founder ierre midyar started an online auction site to help his &irlfriend trade e# dispensers

with other collectors, !ut within a few months the $olume of !usiness had far e(ceeded what he

alone could handle. So he !e&an hirin& people with more !usiness e(perience to help out. Soon

the company had many employees, departments, and mana&ers who were responsi!le for

o$erseein& the $arious aspects of the or&ani#ation.

6% Maa3eet Tea

%he mana&ement team responsi!le for main& the model wor. A stron& mana&ement team &i$es

a model instant credi!ility to outside in$estors, immediate maret-specific nowled&e, and

e(perience in implementin& !usiness plans. A stron& mana&ement team may not !e a!le to

sal$a&e a wea !usiness model, !ut they should !e a!le to chan&e the model and redefine the

!usiness as it !ecomes necessary. G$entually, most companies &et to the point of ha$in& se$eral

senior e(ecuti$es or mana&ers. 0ow silled mana&ers are, howe$er, can !e a source of

competiti$e ad$anta&e or disad$anta&e. %he challen&e is to find people who ha$e !oth the

e(perience and the a!ility to apply that e(perience to new situations. %o !e a!le to identify &ood



15/37

1


mana&ers for a !usiness startup, first consider the inds of e(periences that would !e helpful to a

mana&er 2oinin& your company.

Ree)ece,

1 Afuah, A. 677. Business Models: A Strategic Management Approach. *ew ?orD

4cLraw-0illEIrwin, pp. ;:-;9

6 3a&ner, G. 671. 6779. Buildin& a platform of Business 4odel 6.7 to creatin& real !usiness

$alue with 3e! 6.7 for we! information ser$ices industry. International Journal of

Glectronic Business 4ana&ement : /


16/37

1


ANALYSIS OF T$E EBAY.COM BASED ON T$E KEY ELEMENTS OF A

BUSINESS MODEL

• !AL"E PR#P#S$%$#N

eBay has !een a!le to &row and thri$e !y offerin& a lot of $alue to !oth !uyers and

sellers. Some of the $alues !oth parties tae ad$anta&e of, while others appeal to one side

more than the other.

B!er

Buyers ha$e nown for a lon& time that eBay is an esta!lished name in the online

maretplace. %hey ha$e &rown to trust the maretplace system that eBay has created.

eBay has also sou&ht to eep customer satisfaction hi&h !y creatin& and offerin& a ran&e

of community features such as customer support !oards. Additionally, throu&h the )=aily

=eal) and )>ashion 8ault) pro&rams most !uyers ha$e come to appreciate the $alue that

they can find on eBay. Shoppin& online is, for many people, much more con$enient than

traditional forms of shoppin&. 3ith the a!ility to compare many different products

!etween many different sellers all without &ettin& out of a chair the con$enience and

selection factors of eBay are $ery hard for a sin&le we!site or !ric-and-mortar store to

match.

Se""er

Sellers now that !y listin& with eBay they will reach a $ast and &lo!al online audience.

>or e(ample at the end of 6717, eBay had appro(imately 9. million acti$e user

accounts. A user is considered acti$e if they ha$e !id on, !ou&ht, or listed an item in the

last 16 months. It is also possi!le for sellers to reach audiences that are interested in out-

of-season, end-of-life, used, or $inta&e items throu&h the maretplace. In fact the fastest

&rowth rates in &rowth merchandise and sold items ha$e !een in the fi(ed-price format

for items that are not in-season. eBay also prides itself on its a!ility to process !uyer

payments efficiently and economically. Buyers mi&ht tae this feature for &ranted !ut any

sellers that ha$e attempted to run their own online stores see this as a stron& $alue.



17/37

1


>or success in the $alue proposition, eBay need to !e considerin& for important factorsD

&actor ': Mar(etplaces !alue Proposition

eBay creates a &lo!al platform that pro$ides indi$iduals and !usinesses of all types and si#es

with access to !road maret. eBay has a&&re&ated a si&nificant num!er of !uyers, sellers and

items listed for sale, which in turn has resulted in a $i!rant online commerce en$ironment. %he

!uyers en2oy an e(tensi$e selection of &oods and ser$ices. ey components of our community

philosophy are maintainin& honest and open maretplaces and treatin& indi$idual users with

respect. eBay maintain the satisfaction and loyalty of our !uyers and sellers !y offerin& a $ariety

of community and support features, such as announcement and !ulletin !oards, customer support

!oards and personal pa&es, as well as other topical and cate&ory-specific information e(chan&es.

Lenerally, eBay !elie$e 4aretplaces platforms are more effecti$e, relati$e to most a$aila!le

alternati$es, at addressin& marets of scarce new &oods, new items that are no lon&er in-season,

end-of-life products and used and $inta&e items. 0i&hest &rowth rates in &ross merchandise

$olume /L48 and sold items in recent periods ha$e !een in our fi(ed-price listin& format,

primarily for new items that are no lon&er in-season. eBay define L48 as the total $alue of all

successfully closed items !etween users on eBay 4aretplaces tradin& platforms durin& the

period, re&ardless of whether the !uyer and seller actually consummated the transaction

/e(cludin& Fent.com, Shoppin&.com and eBay's classified we!sites. By offer our !uyers

additional ways to &et access to reduced-price products, includin& throu&h our P=aily =ealQ

pro&ram where we offer multiple hi&hly discounted deals from sellers e$ery day.

3e see to attract !uyers and sellers to our community !y offerin&D

B(ye), Se''e),

• %rust 1 Access to !road &lo!al maret

• 8alue 6 Gfficient maretin& and distri!ution

• Selection


18/37

1


&actor ): Customer !alue Proposition

A customer $alue proposition is a !usiness or maretin& statement that descri!es why

a customer should !uy a product or use a ser$ice. It is specifically tar&eted towards

potential customers rather than other constituent &roups such as employees, partners or suppliers.

A stron& customer $alue proposition eBay need to consider factors as !elowD

1. >ree shippin& /flat rate couriers

- >ree shippin& can help set apart from competitors. %ry addin& it into product prices

and see if it increases con$ersions" it mi&ht !e surprised from the lift e$en if product

prices stay static.

6. Fe$iews

- eBay pro$ides num!er of positi$e re$iews, no. of ne&ati$e re$iews and no. of neutral

re$iews alon& with this the one can also $iew the comments.

eed

- Customi#ed feed for indi$idual customer. Some ey features of eBay feed includeD



19/37

1


3hat you want is what you see D +sers can create their own home pa&e on

eBay, !ased on interests, trends and !rands, which matches and fuels their

passion.

=isco$er ossi!ilitiesD eBay >eed is intuiti$e. +sers &et a practically

infinite ran&e of products in cate&ories, which matter to them the most

Feflectin& ersonalityD G$eryone has a distinct personality and eBay >eed

populates products which define them, inspire them and hence &i$e them

an opportunity to disco$er themsel$es.

Its socialD %he eBay >eed &i$es an opportunity to e(pose your inspirations

and showcase who you are on social platforms.

%ime Sa$ersD %he eBay >eed sa$es your time as it showcases each user's

unique requirement on one customi#ed home pa&e.

;. >ast =eli$ery

- Consumer appreciates for the product to !e deli$ered promptly" it maes them come

!ac for another purchase. 4any wouldn't mind payin& a little e(tra for this ser$ice.

:. Huality Assurance and %rust

- Since the customer is orderin& online they cannot touch and feel the product, it is

important that they &et quality assurance and trust factor in terms of $alue for money

and ser$ice.

.



20/37

1




21/37

1


• RE!EN"E M#*EL

eBay is the worlds lar&est auction online maretplace - where practically anyone can sell

and !it for practically anythin& at any time. 4illions of collecti!les, appliances,

computers, furniture, equipment, $ehicles, and other miscellaneous items are listed,

!ou&ht, and sold daily. eBay does not actually sell &oods that it owns itself. It merely

facilitates the process of listin& and displayin& &oods, !iddin& on items, and payin& for

them. It acts as a maretplace for indi$iduals and !usinesses that use the site to auction

off &oods and ser$ices. eBay &enerates re$enue from a num!er of fees such asD

Insertion fees - char&ed for any item that is listed on eBay, the fees is

nonrefunda!le

romotional fees char&ed for e(tra listed option that attract attention for an item

>inal $alue fees a commission at the end of the auction that is char&ed to seller.

%ransaction fees from aypal an online payin& ser$ices system for users to !uy

items online more con$eniently as well as

ad$ertisin& fees.



22/37

1


So how does eBay mae all of this re$enue e(actlyN

#$ E%ter&rise

%he final re$enue stream was eBay Gnterprise, which is eBays company that

speciali#es in helpin& !ric and mortar retailers create online shoppin& sites for their

!rands. It also pro$ides its clients with ser$ices that include help with maretin&

solutions, as well as consumer en&a&ement, customer care, payment processin&,

fulfillment, fraud detection, and technolo&y inte&ration ser$ices.

%his sector !rou&ht in 6


23/37

1


dependin& on what the item is. >or fi(ed price Boos, =8=s T 4o$ies, 4usic, and

8ideo Lames listin&s, it is cents. >or auction-style and fi(ed price listin&s in all

other cate&ories, it is or e(ample, they can spend an e(tra


24/37

1


Considerin& that eBay purchased ayal for the price of 1. !illion, and it made more than in

2ust the last quarter alone, its looin& lie a pretty wise acquisition ri&ht a!out now.

• C4G%I%I8G G*8IF*4G*%

A. D*-at Ec**-c T)a-t,

1. 4aret Si#e %he maret for Internet-!ased !usinesses is fairly lar&e and

&rowin&. In 677urthermore, it is estimated that a!out ;7 of +.S. households

owned a C and nearly :7 of the +.S. population had access to the

Internet /throu&h wor or home computers. >uture &rowth of this

maret is e(pected to !e stren&thened, and possi!ly accelerated, !y the

a$aila!ility of cheaper personal computers, as well as the hopeful

dere&ulation of telecommunications throu&hout Gurope and Asia /this

should lower the a$era&e cost of Internet access in those areas.

6. Scope of Competiti$e Fi$alry Because of the international e(istence of theInternet, online retailers and online auction sites can compete

internationally" howe$er, there are certain considerations /currencies,

deli$ery channels, lan&ua&es that force ri$als to compete at the national

le$el.


25/37

1


&oodsEser$ices and occasionally a commission from all

transactions. %hese sites can also &enerate re$enue from sellin& their

own merchandise /or other sellers directly to !uyers. %he num!er of

customers worldwide with the potential to access online auction

we!sites is estimated to reach nearly @77 million !y the end of 677.

. 8ertical Inte&ration Some Internet-!ased companies do $ertically inte&rate

certain aspects of the $alue chain. Some companies, such as eBay and

riceline.com, are acti$e in de$elopin& their own software to mana&e the

operations and transactions of their respecti$e we!sites. eBay's recent

acquisition of ayal, Inc. presents an e(ample of inte&ratin& a method

of payment with its core auctioneerin& ser$ices. ?ahoo pro$ides the

ser$ices of an IS to connect customers to the Internet, a search en&ine

to na$i&ate the Internet, and content pa&es to act as destinations for

consumers /to shop, communicate, !e informed, or !e entertained.

;. Gase of Gntry %he !arriers to entry for new entrants into the online retail

industry can !e fairly low. Since many of the traditional $alue chain

acti$ities required for !usiness can !e outsourced and necessary software

can !e easily purchased /as opposed to hi&h cost software FT=, the

initial capital in$estment of a new entrant can !e quite low. %he lar&est

!arrier for new entrants would !e the possi!le costs associated with

o$ercomin& e(istin& !rands with hi&h-traffic we!sites.

:. %echnolo&y and Inno$ation %he de$elopment of technolo&y, !oth

hardware and software, is fairly fast-paced in the online retail

industry. %oday, ad$ances in computer and Internet technolo&ies are

main& it easier and more afforda!le for !oth consumers and !usinesses

to shop and supply online retailers. %echnolo&y is also allowin&

companies to streamline their supply-chains and !etter protect the

$alua!le information accumulated from their we!sites.

@. roduct =ifferentiation nline retailers and auction sites are primarily

differentiated !y their clientele and product offerin&s. Some sites

concentrate on !usiness-to-!usiness transactions while others focus more



26/37

1


on !usiness-to-consumer or consumer-to-consumer transactions. Still

others wish to participate in all of these transactions. 3ith re&ard to

product offerin&s, a num!er of sites may speciali#e in a specific cate&ory

of items while others try and pro$ide a maretplace for $arious products.

9. Industry rofita!ility rofita!ility for online retail or online auctioneerin&

is moderate. It has the potential to !e a $ery lucrati$e enterprise since it

requires less capital in$estment and offers a more &lo!al reach than

traditional !ric-and-mortar equi$alents. Also, there is a Pnetwor

effectQ with re&ard to online auction sites, where a lar&e num!er of

!uyers of products will result in more sellers, who in turn attract more

!uyers. 0owe$er, profita!ility is limited !y its low !arriers of entry

/which result in more competition, as well as the need for companies to

focus many resources towards de$elopin& and maintainin& a

reco&ni#a!le !rand identity.

B. C*+et-t-/e F*)ce,

1. Fi$alry amon& Competitors 4oderate. Fi$als in the online retail and

online auctioneerin& se&ments of the Internet economy essentially

compete in attractin& the attention of potential customers. %his has

forced companies to compete !ased on in$entory mana&ement, e(tra

offered ser$ices and fees, quality of technical support, functionality of

the we!site, and a sense of community amon& customers /!oth !uyers

and sellers. Fi$alry amon& competitors is further stren&thened !y the

low costs for customers to switch !rands, as well as the direct

competition !etween ri$als with !roader product offerin&s /?ahoo

Auctions, eBay. Competition amon& companies has !een moderated !y

the rapid e(pandin& nature of the Internet economy /which causes ri$als

to compete for new customer demand rather than stealin& away

another's customers and differentiation amon& ri$als' concentrations

/many online retail and auction outlets are speciali#ed in certain product

cate&ories and tar&et a specific niche customer se&ment.



27/37

1


6. otential *ew Gntrants 4oderate. *ew entrants may !e attracted !y the

low capital and la!or requirements that e(ist for online retailers and

auctioneers. Also, little &o$ernment re&ulation and the wide-spread

a$aila!ility of necessary software and hardware !oth contri!ute to fairly

low !arriers of entry. 0owe$er, the importance of !rand reco&nition

does moderate this competiti$e factor. 3ell-esta!lished !rands can !e

si&nificant in &eneratin& online traffic, as well as attractin& and retainin&

customers. >or new entrants, the process of de$elopin& and esta!lishin&

a reco&ni#a!le !rand can !e slow and costly.

lea marets, &ara&e sales, classified

ad$ertisements, and collecti!les shows also offer some of the

characteristics of online auctionsD $aria!le pricin&, direct e(chan&e

!etween !uyers and sellers, and hard-to-find itemsEcollecti!les. Bric-

and-mortar retailers, importEe(port companies, and catalo&Email order

companies all pro$ide other non-Internet-!ased options for

customers. nline, lar&e retail sites /3al-4art and specialty retailers

/=ell, >ootlocer can pro$ide similar con$enience and !rand

reco&nition. %he lar&e num!er of su!stitute outlets &i$es customers

more options, thus stren&thenin& the impact of su!stitutes as a

competiti$e force.

. Supplier Bar&ainin& ower 3ea to 4oderate. %he suppliers to online

auction sites are, in effect, the clients who sell products throu&h those

sites. It is widely !elie$ed that more sellers to a site will attract more

!uyers. Casual sellers and ho!!yistEcollector sellers are considered to

mae up the ma2ority of suppliers to online auctions and are

characteri#ed as lar&e in num!er and unor&ani#ed. 0owe$er, it should

!e noted that these sellers are slowly or&ani#in& into &roups /e.&. the

nline Sellers Association and could !ecome more influential o$er



28/37

1


time. ower and corporate sellers are smaller in num!er" howe$er, their

participation is increasin& in !oth $olume and frequency.

. Buyer Bar&ainin& ower 3ea to 4oderate. %he !uyers of online auction

sites are, in effect, those users who !id on the sellers' products throu&h

the site. It is also widely !elie$ed that more !uyer traffic at a site will

attract more sellers to participate. Bar&ain !uyers and ho!!yistEcollector

!uyers are considered to mae up the ma2ority of !uyers to online

auctions and, lie their seller equi$alents, are characteri#ed as lar&e in

num!er and unor&ani#ed. rofessional !uyers, much lie

powerEcorporate sellers, are smaller in num!er !ut are increasin& in their

participation.



29/37

1


• C4G%I%I8G A=8A*%ALG

eBay competes in the online auction industry usin& !road differentiation strate&y. By

choosin& this strate&y eBay determined that the !est way to achie$e a sustaina!le

competiti$e ad$anta&e o$er its ri$als was to differentiation their ser$ice. %he way in

which eBay has set their online auction site apart from its competitors has lead customers

to prefer their site o$er other online auctioneers and retailers.

eBay+s Broad *i,,erentiation Strategy

eBay has created a one-stop-shoppin& e(perience that is appealin& to lar&e corporations,

independent entrepreneurs, and indi$idual !uyers and sellers. %hey ha$e created $alue

throu&h many facets of their !usiness that appeal to their customer and differentiate them

from the competition. %he main ways that eBay differentiates themsel$es is throu&hD

1. 8ariety of products offered

3hen customers $isit eBay they can search for $irtually any product. eBay

!oasts a cate&ory $ariety not matched !y any competitor with o$er 6:,777.

6. %he eBay Community

eBay wants their customers to feel lie they are part of a community. %his

community feel &i$es customers the sense that they are !ranch of somethin& and

cared a!out. By showin& the customers that their feed!ac, opinions, and

feelin&s are important eBay has &ained tremendous &round with their customers.


30/37

1


. %he eBay Brand *ame

eBay was creator of the online auction industry. 3hen customers thin of online

!uyin& the immediately thin of eBay. %his has &i$en them a competiti$e

ad$anta&e that sets them apart from other online auctions.

. eBay's Llo!al Feach

%he &lo!al reach of eBay is not achie$ed !y any other online auction site. >or

lar&e corporation international sellin& and !uyin& is done e$ery day. G$en for an

indi$idual !uyer or seller, ha$in& the option of searchin& throu&hout 17

countries with a span of 9.9 million users is $ery appealin&.

RECOMMENDATION SUGGESTIONS% TO IMPRO&E T$E COMPETITI&E

AD&ANTAGES OF EBAY

S%RA%E$C REC#MMEN*A%$#N AN* $MPLEMEN%A%$#N - S%RA%E. '

St)ate3-c Rec*e0at-* *) eBay 8 P)e,e)/-3 Te-) C*)e B(,-e,,

:ea2e,,; >ocusin& on secondary maret of !usiness

Rec*e0at-*; >ollowin& their ori&inal success in the Auction industry

P)*


31/37

1


strate&y has failed to attract si&nificant num!ers of new shoppers to the site. By focusin&

so much on fi(ed-priced items sold !y lar&e sellers, eBay has !lurred the distinction

!etween it and the litany of shoppin& comparison sites and tools on the we! /such as

shoppin&.com which eBay also owns. In so doin&, eBay has traded away much of the

!rand equity that once set it apart from the rest of the online retailin& uni$erse. 3ith its

&reater emphasis on fi(ed-priced &oods, it's not surprisin& that eBay has seen a steady

increase in the num!er of shoppers main& PBuy-It-*owQ purchases o$er the past year.

In >e!ruary, 11 of eBay's $isitors, or :.@ million customers, made a Buy-it-*ow

purchase /up 67 from the pre$ious year. 0owe$er &ains in fi(ed-priced acti$ity ha$e

!een eclipsed !y declines in eBay's traditional auction !usiness. %he percenta&e of

eBay's traffic that made a !id on an auction-style listin& dropped from 1e!ruary

677@ to 16.6 last month. In total, 1. million fewer shoppers placed a !id on eBay last

month than did last >e!ruary.

S*'(t-*,

eBay's challen&es are multi-faceted and it remains to !e seen whether !y simply

returnin& to its roots as an auction site it can win !ac !uyers and sellers who ha$e lon&

since &i$en up on usin& the site. nline retailin& has e$ol$ed si&nificantly since eBay

was founded o$er a decade a&o. Sa$$y consumers ha$e learned how and where to find

deals online, !ut $alue intan&i!les !eyond price when main& their purchase decisions.

Consumers e(pect a le$el of ser$ice that in some respects is !eyond eBay's a!ility to

control in its role as middleman. Li$en that, eBay would !e !etter ser$ed looin& !eyond

product strate&y and focusin& instead on impro$in& the shoppin& e(perience for !uyers

and sellers as it's constant tinerin& seems to !e doin& more harm than &ood.



32/37

1


S%RA%E$C REC#MMEN*A%$#N AN* $MPLEMEN%A%$#N - S%RA%E. )

St)ate3-c Rec*e0at-* *) eBay 8 S2y+e

:ea2e,,; Acquirin& unrelated !usinesses which !ecome a distraction to the core

!usiness

Rec*e0at-*; =ecide a strate&y which will !est !enefit eBay's financials, while

also remo$in& Sype from the company's profile

P)*


33/37

1


$ery attracti$e for a strai&ht !uyout. %his is situation which could happen quicly as there

are some companies, especially in the technolo&y sector, which ha$e sta!le !usiness with

enou&h cash to handle a purchase of this si#e. Another reason for a company to choose a

tae o$er this !usiness would !e to set themsel$es up for hi&h &rowth, in faster pace than

the economy. %his will happen due to ha$in& additional fee cash flow from the sale which

would !e used in other areas of its !usiness. %his will !ecome a$aila!le more rapidly then

other strate&ies which could tae time waitin& to implement. Sype is currently a profit

main& !usiness and would need to maret its financial hi&hli&ht to suit a !uyer. %his

!usiness is nearin& ;77 million in re$enue and is still showin& si&n of &rowth in the

industry. 3ith the ri&ht !uyer, Sype has potential to reach new hei&hts !y partnerin&

with another successful product. %here are companies which ha$e shown interest in the

purchase of Sype and this includes the ori&inal founders. 3ith many suitors interested in

the company, eBay can !uild a sort of !iddin& war in order to recei$e a return their

in$estment. %he current $aluation of the Sype company has come to equal a!out 6

!illion, while the purchase price in 677 was 6.; !illion. It has also !een mentioned that

it could recei$e !etween -; !illion from a lar&er company interested in increasin& the

technolo&y in one of their pre$iously e(istin& products. %he recent success of the

company leads us to su&&est purchase of this company !y Apple, Loo&le or 8eri#on

3ireless. %here companies are the !i& three which should !e considered and contacted

for the sale of this company. %hey all ha$e free cash flow and other stron& financial

which could support this type of purchase and most importantly, pre-e(istin& products

which could adapt the new technolo&y they o!tain to !e more successful in their industry.



34/37

1


S%RA%E$C REC#MMEN*A%$#N AN* $MPLEMEN%A%$#N - S%RA%E. /

St)ate3-c Rec*e0at-* *) eBay 8 C-e,e E=+a,-*

:ea2e,,; 3ea e(pansion result in China

Rec*e0at-*; Boost efforts to !ecome a ey player in the Chinese 4aret

P)*or instance, Chinese +nionpay holds credit card monopoly in China, which

maes it hard for aypal to e(pand its ser$ice in China. ther concerns facin& eBay in

China is that people feel insecure with main& payments online. 0owe$er, in 677 ?ahoo

a&reed to !uy a 7 stae in eBay main competitor in that country, Ali!a!a.com, for 1

!illion. %he e(pertise of the two &iants can easily cause more trou!le for eBay and unless

eBay act quicly to counter this, eBay can once &ain !e out competed lie it did in a

similar way in Japan.

S*'(t-*,

&urther strengthen the partnership 0ith China pay: %he fact that many people in China

do not ha$e 8isa, 4asterCard or other western payment systems in a hu&e hinder for any

future success in China. By further stren&thenin& its partnerships with China ay, eBay

can mae payment from its customers easier, which in the lon& run leads to a !roader

maret share.

1ire a Country Manager: %oday, orea is eBay's third lar&est international maret. But

when Jay 5ee was installed as Country 4ana&er there in 4ay 6776, he inherited a

catastrophe. %he !usiness was !leedin& cash. A orean himself, 5ee understood that in

Asia there's a sti&ma a&ainst !uyin& used &oods. 0e mo$ed the !usiness from unrelated

areas lie real estate listin&s and insurance to auction off newer items lie di&ital

electronics, computers and fashion. %oday, eBay orea is on trac to produce 1!illion



35/37

1


in annual online sales. Because of his success in orea, eBay's head mana&ement put him

in char&e of its e(pansion in China as well, which !elie$e is wron& mo$e. eBay thins

this is a country-!y-country-race, and puttin& someone char&e who had success in orea

doesn't necessary mean he is &oin& to !e successful in China liewise. By hirin& a local

mana&er that has the e(perienced and reputation would !e the !est mo$e for any future

success in the re&ion. 5ee understood the orean maret, !ecause he's orean. eBay

need to find someone who similar to 5ee, !ut has the e(pertise in the Chinese maret

instead. %hat way eBay can &ain on all the ad$anta&es the Chinese maret has to offer.

Conduct Research: eBay need to put more effort into researchin& that maret. It needs to

conduct more maret researches and find out what the needs of those customers are. %his

can !e done throu&h sur$ey, inter$iews and tests. %his will &i$e eBay $alua!le

information on what is lacin& and what it needs to do. nce its result of the information

is clear it needs to implement those strate&y in areas they are wea. Chan&e a&ent

pro&rams that are worin& should !e ept and those which are not should !e a!ounded.

$ncrease Advertisement: After all the plans a!o$e ha$e !een implemented, eBay should

increase its effort to ad$ertise its ser$ice to its customers. 5ettin& people now the !enefit

of shoppin& on eBay and eliminatin& its customer's dou!t and insecurity of shoppin&

online. Lood and !eneficial ser$ices alon& with stron& maretin& are well nown

in&redients in any corporate success.



36/37

1


SUMMARY

eBay pro$ides online maret places for the sale of &oods and ser$ices as well as other

online commerce or ecommerce, platforms and online payment solutions to a di$erse

community of indi$iduals and !usinesses. %he company operates its !usiness throu&h

three se&mentsD 4aretplaces, ayments and Gnterprise. In June 671


37/37


REFERENCES

• )eBay Inc. >inancial Statement Fesults). "S Securities and E2change Commission.

Fetrie$ed>e!ruary 11, 671.

• Michael alpin3 4Eclipse at eBay Part ': %ailoring Eclipse to the eBay architecture4 3

$BM developers 0or(3 Archived ,rom the original on March /6 )6673 Retrieved March

'')6673

• 4E8ay3com Site $n,o4 3 Ale2a $nternet 3 RetrievedAugust '9 )6'53

• 4lo8al %rade: '3 &inding $nternational $tems #n eBay4 3 e8ay3com3 Retrieved April

)' )6''3 ith sites in over /6 countries eBay is the 8est place to ,ind interesting and

e2otic items at discount prices ,rom sellers around the orld

• Suciu, eter /April 1@, 677@. )Sype and ayal A =ifferent Set of Fules). All

Business. Fetrie$ed April 6e!ruary 1, 677@.

Fetrie$ed *o$em!er 1, 6711.

• )eBay >e!ruary 677@ announcement !oard posted on 6@ >e!ruary 677@ 76D9 pm L4%).

.e!ay.com. Fetrie$ed>e!ruary 6, 6717.

• )ACCC welcomes chan&es to eBay payment policies)/ress release. Australian

Competition and Consumer Commission. 4ay 1

Assignment E-Commerce.doc

Documents

Transcript of Assignment E-Commerce.doc