Ebay Vs Amazon Case Study
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TABLE OF CONTENT
Part A, Question 1) summary
eBay: overview and mission
eBays value chain analysis
Primary activities
Inbound logistic
Operation
Outbound logistic
Marketing & sales
Customer service
Supporting activities
Procurement
Technology
Human resources management
Firm infrastructure
Amazon: overview and mission
Amazons value chain analysis
Primary activities
Inbound logistic
Operation
Outbound logistic
Marketing & sales
Customer service
Supporting activities
Procurement
Technology
Human resources management
Firm infrastructure
Amazon vs eBay business models interaction and comparison
Part B, Question 1) reasons for Amazons success
Part B, Question 2) Recommendation to eBay and conclusion
Part A, Question 1) summary
Basing on our analysis, key drivers of profitability in eBays business model can be summarized as:
Brand Equity: well recognized brand name
Users sense of community
Zero inventory
Payment systems (Paypal)
The largest market of the world (auction and third parties shops). Differentiation as a KSF
Brand building (not just selling) possibility to early stage of development third parties
EBay: overview and mission
EBay has been founded during the dawn of the internet and the “new economy” with the aim “to provide a global trading platform where practically anyone can trade practically anything”. In eBay, users can list items for sale, bid in auctions, and make immediate purchases. To simplify: subscribing, browsing and bidding on auctions is free of charge, but sellers are charged an insertion fee based on the starting price of the auction and a final value fee. Sellers can also pay an additional fee for many extra options to promote the item. In the end eBay (until GSI acquisition, further details herein) has no inventory, no warehouses, and no sales force: its own customers do much of the companys work, bringing it new products and marketing techniques, picking up shipping costs, and handling customer service. To maximize this starting model eBay grew also through M&A: Alando in Germany has been a clear example. Furthermore M&A strategy has not contribute to eBay growth only as an enhancement of its first auction business model: the acquisition of Billpoint first and Paypal next, let eBay become the market leader in person-to-person payments. In addition, the fixed price revenues stream has been set up and supported either through the acquisition of Half.com in 2000 and with the addition to Buy-It-Now feature to the auction service. This allowed the company to provide “virtual stores” to those sellers who wanted to offer goods to fixed price to customers. Last year, eBay paid $2.4B to acquire GSI Commerce and a smaller one: Magento. You can think of GSI as the leading commerce platform for the “fat head” of retailers, and Magento as the leader for the long tail.
eBays value chain analysis: primary activities
Inbound Logistic
The key “raw materials or input factors” that are critical for eBay inbound logistic (and for the eCommerce industry from a general view point) are their networking related equipments, software used on the websites, and electricity. From a very basic stand point, doing business online requires servers for outside users to access services and products. These servers also require huge electricity to operate, and back up generators to tackle potential emergency situation, so the companies have to cope with local electricity providers, to create contracts with network providers to connect all there servers to the WWW basing on the expected traffic, and so on. In order to remain successful and competitive within the industry, companies need to obtain the most technological advanced software to build their websites (hence: to run their operations). Users are expecting secure, reliable and fast access when they use the websites. Therefore the collection of these activities into a single integrated logistic process provides a backbone for the operations that will be completed in the “final product” that is the platform provided to the users.
Operations
Continuing on with the development of inbound logistics, eBay is able to offer their final product to customers through a sort of big “catalogue”. The products offered by suppliers (either professional or not) in the eBay marketplace are brought together in an online type of catalog organized by categories for buyers to view and purchase. This marketplace platform is developed and enhanced through the use of a number of different features and tools that constitute a distinctive advantage of eBay on the market. The reported following features (list not exhaustive but has the aim to be an educated example) are an example of the value it offers its customers (and also buyers to some extent):
Picture Services, which enables sellers to include pictures in their listings
Shipping Calculator to estimate costs, shipping labels, to print specific postage and labels for specific logistics and tracking tools
eBay Sales Reports and Marketplace research, to provide sales and fee