A Study on Ecommerce : Gmarket

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table of contents

Executive Summary

1. Introduction1

2. Competitive environment Analysis1
2.1 Threat of new entrants1
2.2 Bargaining Power of Buyers2
2.3 Bargaining Power of Suppliers2
2.4 Threat of Substitutes3
2.5 rivalry among existing competitors3

3. Value-Chain Analysis4
3.1 Business Model4
3.2 Primary Activities – Creation of actual product/service5 I. Operation/Processes5
II. Services5
III. Outbound Logistics6
IV. Customers/Marketing & Sales6
3.3 Support ACTIVITIES - The Technology behind GMarket7
I. Gmarket’s Primary Technology (Web-Based Transactions)7 II. Gmarket’s Security Technology (Web-Based Transactions)8 III. A Complementary Platform: M-Commerce8
IV. Gaccount: Digital Payment System9
V. Gmarket Sales Manager - GSM9

4. Competitive Advantage9

5. Ethical & Social Issues10
5.1 Retention of Personal Information & Illegal goods10
5.2 Market Leader’s Price Fixing11

6. Recommendations11
6.1 Recommendation 1: Social Commerce11
6.2 Recommendation 2: Referral Program12

7. Conclusion12

II Endnotes13

Executive Summary

Gmarket is a prime example of E-commerce at its finest in Asia. An online marketplace from Korea, Gmarket entered the industry in 1999 with a unique business model focusing on the broadest market segment of SMEs. With Korea’s extensive Internet penetration profiled as one of the highest in the world, Gmarket eventually became a dominant player by anticipating consumer trends and responding to aggressive discount pricing strategies by competitors. This report was thus commissioned to study the success of Gmarket. The report first introduces the current competitive environment using Michael Porter’s Five-Forces model. Given the high threat of entrants, medium to high buyer and supplier power, and high intensity of rivalry, the E-commerce industry is seemingly unattractive to enter into even though the threat of substitutes is low. However, given the rapid growth of the industry, new players will still enter, and so Gmarket as an established incumbent in the online marketplace category will continue to face competition from both current and potential players. Next, Gmarket’s value chain and technology are analysed to determine its competitive advantage. By maintaining its leading technological edge and emphasizing convenience and efficiency for customers, focusing on customer relationship management and also forging close ties and support with vendors, Gmarket attempts to safeguard its position as a dominant player in the industry. However, as the industry reaches saturation and switching costs remain low between providers, Gmarket has to continue implementing timely strategic initiatives that will enhance its brand and expand its consumer base to markets beyond Korea. Thus, after a short discussion of possible ethical and social issues, recommendations are provided on how Gmarket can leverage on parallel phenomenons such as the rise of smartphones and social networking sites to evolve together with the E-commerce market and turn challenges into opportunities. 1. Introduction

Despite the bursting of the dot.com bubble, nearly every business today has a website. Electronic-commerce (E-commerce) has revolutionised how businesses are carried out, spawning new business models (E.g. ad-driven) and rendering past models obsolete. With the World-Wide Web providing a common platform for parties to interact and transact, E-commerce is ubiquitous today, with traditional businesses adopting new and ever-changing Internet-based technology to cut costs and sustain competitive advantages. Gmarket, a leading retail E-commerce marketplace that started in 1999 in Korea is one prime Asian example, being the first online shopping mall to achieve US$1 billion in sales within a half-year period. Today it has over 10 million registered users and provides over 4 million items for sale across 37 product categories.1 This...
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