Question

Examining Business Strategy and the Five Forces Model: The Challenges Facing eBay; Time for Changes in Strategy?

1. First, research and create a Porter’s Five Forces Model of eBay in Word, Excel, or PowerPoint format. Use external sources to assist in populating your model.

Next, report and analyze your findings, touching on the following questions:

1. What does your five forces analysis reveal about the nature and strength of the various competitive pressures eBay faces? Are the competitive pressures facing eBay and other online auction companies conducive to earning good profits? Why or why not?

2. Based on your analysis of the industry and eBay’s situation, what problems and issues does eBay’s top management need to address? Which ones are top priorities?

3. What do you see as the key success factors for organizations in the online auction industry?

Research and cite at least 2 credible sources

Answer 1

Porter 5forces

Competitive Rivalry :

1. Large population of firms( strong force)
2. Low switching cost (strong force  
3. Low differentiation in quality (strong force)

Bargaining power of Buyers

1. Low switching cost(strong force)
2. High price sensitivity (strong force)
3. High quality of information (strong force)

Bargaining power of suppliers

1. Suppliers have moderate information of buyers(moderate force)
2. Suppliers low forward integration (weak force)
3. Very small population of delivery services provider (weak force)

Threat of substitution

1. Large population of bricknortar mom and pop stores( Strong force)
2. Moderate cost of substitution (Moderate force)

Threat of new entrants

1. Lowf entry bareiers (strong force)
2. Low switching cost (strong force)
3. High economies of scale (weak force)

Ebay faces threat from mom and pop stores and brick mortar stores which offer better accessibility as well as cheap credit terms. Competitive markets get intense with Amazon and Walmart at pace giving big threat. However the auctioning model is the USP and gives maximum profitability albeit moderate sales volumes. Auctioning drives good interest and helps them achieve higher than expected prices of products which drive profitability immensely  

Ebay top management need to address issues related to pricing algorithms becaise many naive and untapped customers cannot participate in such complex model and hence sales get driven down. Secondly low entry barriers pave way for perfect competition market in long run which can drive down profitability  

Key success factors in auctioning industry includes quality management and ethical standards being preserved. The second best competency includes the algorithms designed to achieve higher consumer attraction and marketing campaign which drives customers curiosity to bid more and get best deals.

References :

EBay Inc- Form 10K

Ebay Inc- Carrier Options

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