Carry out Porter's Five forces framework study for eBay.
The Porter's Five forces framework analyze the environment of a company in order to have a global image of the threats which faces the company or its attractiveness. In other word, this analysis focus on three horizontal competencies: • Competitive rivalry in the same industry • Threat of substitute products • Threat of new entrants and two vertical competencies: • Bargaining power of customers • Bargaining power of suppliers The aim is to determine the threat and the opportunities for the company in each competency.
Industry Competition: this analysis will permit to determinate the competitiveness of eBay, how does it react to competition? Threats: • There is a low entry barriers, so anyone can enter the market and be a competitor of eBay • Yahoo! And Google are direct competitors of eBay. There are the biggest threat for eBay because even if their auctions business is new, they already have a strong brand image in their respective main activity. • There is many competitors in online auctions business but they are specialized in niche market. • There is an indirect competition for the online auctions market, it's the traditional auctions market but the online one is more popular because it permits to vanish the distant barrier for instance. Opportunities: • even there is a low entry barriers, there is just a few competitors like Yahoo !, Google • eBay is the first one in the auctions online market. They proposed a significant differentiated service. Competitors just copy the idea • but eBay benefits from a really strong brand image because it was the first on the market. This strong identity gives to eBay kind of security to the company. • Thanks to the fact that eBay was the first one in this market, it has also a very strong consumer loyalty which is hard to acquirer for the newly companies. • Also, even in the worst case, there is no high cost exit for eBay because it's online service. • There is no inventory cost for eBay
Conclusion: In terms of industry competition, eBay doesn't face a lot of threats because there are the number one in the auctions online market. eBay was the first to propose this kind of service highly differentiated and competitors have difficulties to differentiate their service. Although eBay needs to keep in eye their consumer's needs and wants and progress with them to keep its first place in the Market. Yahoo! and Google are very strong companies which can take a part of the market share. eBay tries to personalized to each consumer with a section “about me” for example.
Potential entrants: this analysis permit to see if eBay is threaten by new entrant in online auctions market or not. Threats • the switching cost are very low. There is no cost for a buyers to go on store and buy something. • The barrier of entry is very low cost start up cost because this is e-service. • The main barriers come from government regulation, because in certain country some products are not allowed, so auctions website has to make sure to don't violate laws. • But the market is dominated by eBay, Amazon and Yahoo • eBay is the first one on the auctions online market and it has the largest market share Opportunities: • • • • • • • the service of eBay is highly differentiated. eBay is the first auctions online website. it's hard for a small company or a newly opened company to have a strong brand image also the customer loyalty is hard to gain for a new company which has to show its ability moreover, eBay has showed its ability and has a strong loyalty from its consumers. Indeed, we can see that if you use eBay one time, we are more likely to use it again. eBay tries to struggle against the violation of government laws by establishing blocks which prevent people from buying some product online which are forbidden in their country. Even if eBay doesn't sell directly product, there are the facilitators to those transactions so there liable if...
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