Gazelle in 2010

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Strategic Management
Gazelle in 2010
Jorge Tarzijan

Questions for Gazelle in 2010

• •

1. How does Gazelle create value for and extract value from its customers? What are its key sources of competitive advantage?

2. How should Gazelle use its resources in order to grow? Choose among:

• • • •

a. Focus primarily on driving and executing retail partnerships b. Focus primarily on its own consumer-facing initiatives (e.g. build its own brand, launch a buyer-facing website, develop proprietary pricing technology) c. Split resources equally among these two avenues for growth

3. Should Gazelle move towards a marketplace (two-sided platform) model? If yes, how would the two-sided platform model work exactly and what would be the advantages relatively to the current model? If not, why not?

1. How does Gazelle create value for and extract value from its customers? What are its key sources of competitive advantage?



1. “We have always made money on the buy side” (quote from former CarMax CEO).



This is because there is very little scope for differentiation on the sell side; lots of scope for value creation, differentiation and value extraction on the buy side:

• •

Today, individual sellers of used electronics have few alternatives. But that may change...

What about the sell side?



Much more price transparency and competition on the sell side: just another car dealer or just another power seller on eBay. Note similarity of Gazelle to CarMax

1. How does Gazelle create value for and extract value from its customers? What are its key sources of competitive advantage?



What are the key sources of competitive advantage for Gazelle?



Economies of scale, scope and learning: e.g. as power seller on eBay – they translate into significant benefits (convenience and immediacy) that can be offered to sellers. Examples of advantages relative to individual sellers.

• • • •

Listing process (on eBay and other platforms) is an acquired skill

Shipping logistics Dealing with pre- and post-sale customer inquiries Pricing research and/or re-pricing consideration



Pricing arbitrage: Gazelle has significant information advantages over buyers and sellers. Thus, it can command high margins between selling and buying prices.

2. How should Gazelle use its resources in order to grow? Choose among:




a. Focus primarily on driving and executing retail partnerships

Can get important leverage – difficult to achieve big scale of operation on its own

• •

Check if retailers are uninterested in or are incapable of vertically integrating into trade-in business (how is their power in this relationship?)

Retailers are the only channel in which it is possible to combine the buy side and sell side in the same place (trade-in)...



This cannot be done on Gazelle.com (get cash.... go somewhere else to get new product).

2. How should Gazelle use its resources in order to grow? Choose among:




b. Focus primarily on its own consumer-facing initiatives (e.g. build its own brand, launch a buyer-facing website, develop proprietary pricing technology)

Risk of hold-up by retailers (price hold-up, vertical integration, being overly dependent , etc.)

• • •

Cannot control product quality and mix that comes from retailers Create more brand name -> extract more value Limited economies of scale/scope in dealing with multiple retailers

2. How should Gazelle use its resources in order to grow? Choose among:




c. Split resources equally among these two avenues for growth

Option value?

3. Should Gazelle move towards a marketplace (two-sided platform) model? If yes, how would the two-sided platform model work exactly and what would be the advantages relatively to the current model? If not, why not?

Stay with merchant model

Moves towards TSP model

Higher margins through price arbitrage

Opportunities for pricing arbitrage will...
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