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Strengths of eBay’s Business Model

An online auction business model has many strengths in comparison to other companies’ business models. A traditional auction house has many disadvantages which comprises and describes the strengths of an online auction business such as eBay. The strategic advantages of eBay’s business model include the following: a) There are no time barriers for accessing the business. Customers can bid and list their products at any time, any day during the year. This feature increases the convenience offered to customers and popularity rises.

b) Users can access eBay from any place with internet connection as there are no geographical constraints for access. This leads to increasing buyers and sellers daily and it reduces the costs of attending an auction house. c) The large number of bidders and sellers increases the benefits for both parts. As bidders have a wider variety of items available by a large number of sellers, they can choose those who are suitable for them and affordable. The more buyers existing in the site, the more chance sellers have to sell their products.

d) The large number of buyers existing attracts more sellers, making the business model more valuable through network economies. e) eBay is considered to be an online community of users interested

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in buying and selling their products with the auction method. The social interactions involved in the bidding process are similar to those of gambling constituting the advantage of the intensity of users’ social interaction. This strength is very similar to gambling addiction where users choose just to take part in this ‘game’ rather than being interested in buying a particular product (www.wikipedia.org / Online auction business model).

EBay’s Strategic Statement The activities of eBay are described through the following strategic statement: ‘eBay allows customers to create individual auctions and online stores in order to sell used and new products. This process is facilitated by the ability to create communities of interest, providing secure transaction services, and a peer review process in a global environment’ (Online eBay Case study from http://www.slideshare.net/lars.schmidl/strategic-evaluation-of-ebay/ page 23).

EBay has always been a community of interest, allowing users to exchange knowledge and expertise regarding the site. In 2006, eBay announces the creation of eBay Wiki (www.ebaywiki.com) an online place hosted by Jotspot where people can exchange their knowledge over eBay, as well as in eBay blogs on the web (www.eBay.com). Figure 3: Strategic group mapping: eBay Online source:  The above graph demonstrates the strongest reputation and brand awareness of eBay in comparison to its competitors, as well as its high number, variety of auctions and product categories. Some of eBay’s competitors are Amazon.com. Amazon auctions, Live auctions and Yahoo auctions. However, eBay possess the largest market share, and strongest reputation and brand awareness.

Conclusion

As shown in this case study, eBay’s business model was its strongest weapon against its competitors. Its business model’s strengths helped eBay gain a competitive advantage over other online market places such as Amazon.com and Yahoo auctions. As a net enabled e-business that anyone can access anytime, eBay bring a new idea in the business world, filling a market’s open gap, as no one could offer before what eBay offers since 1995.

Strategic choices of eBay’s management team after its foundation and the strategic capabilities of its business model, helped the organisation gain the largest market share from its competitors and acquire the strangest reputation in the market as shown in figure 3 above. Many organisations online tried to imitate its business model and rational, some of the followed by success, but none of them in the extend of what eBay have achieved over the years.

References

Alt, R.; and Zimmermann, H.-D. 2001. Preface: Introduction to Special Section – Business Models. Electronic Markets 11(1):3-9. Chaffey 2002 quoted in Lowson R.H, & Burgess N.J, ‘The building blocks of an operations strategy for e-business’, 2003.

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