Business Model: Amazon versus eBay
A company’s business model is the activities it uses to create and capture value through its offerings to the market. Modelling helps firms develop business visions and strategies, redesign and align business operations, share knowledge about the business and its vision and ensure the acceptance of business decisions through committing stakeholders to the decisions made (Persson & Stirna , 2001). Amazon and eBay both share space in the retail industry of e-retail and e-commerce services. The two companies have found success by conducting business using the internet by providing products, services, and information to consumers. Although, B2C (business to customer) strategies have helped both companies to achieve success they have sustained and dominated the market through evolving business models that capitalize on value creation to the consumer. eBay’s business model is based on creating an online trading community where the company provides an auctioning platform that brings sellers and buyers together. Thousands of items are listed in catalog form according to topic and category. eBay at no time takes possession of any item which leaves shipping costs details between the buyer and seller. However, it does offer secure payment methods free of charge. On the other hand, Amazon incorporates a long tail retail business model which assumes that products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, but only if the store or distribution channel is large enough (Investopedia, 2014). By offering a large variety of products on its sites for sell inventory is kept in what the company terms as fulfilment centers. Whereas when merchandise is selected and paid for through Amazon’s e-commerce site it is shipped free or at little cost to the buyer. The value creation does not end once the...
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