In order to understand why and how eBay has been successful, it is important to understand Porter’s five forces model.
The model includes threat of potential new entrants, threat of rivalry in the industry, threat of suppliers, threat of suppliers, threat of buyers and threat of product substitution. [pic]
Rivalry in the industry
Because of low entry barriers, the market is full of competitors.
Yahoo! Auctions is one of the example competitors for eBay
eBay continues to appeal to their customers and provide the best possible service at the lowest price.
They are also continuing to expand horizontally into new markets.
Brand identity is the key to attracting customers.
Yahoo and Google are the biggest threat to eBay.
With good brand identity and recognition comes safety and security, which is vital in this industry.
There are also low exit barriers in this industry.
eBay needs to keep up with consumers needs and wants along with keeping an eye on its competitors in order to be successful.
This is an internet driven service industry, which does not provide for many barriers to entry.
The main barriers come from government regulation.
The government will not permit some products to be sold in certain states or countries and so any online auction site needs to make sure they don’t violate those laws.
eBay has established blocks that prevent someone from buying an item that would violate their local government.
Even though eBay does not directly buy or sell items, they facilitate the transaction, which could make them liable.
It is also hard to enter a market where safety and brand recognition are this important.
People will not purchase items or sell them if they do not think their transaction will be protected.
There are many things a company can do to build their brand recognition and eBay has excelled at this.