| Running head: VALUE CHAIN AND COMPETITIVE | | | | |
| ANALYSIS | | | | Crafting the right vision statement that fosters |
| Value Chain and Competitive Analysis | | | | innovation may help maximize shareholder value and |
| By Troy Johnson | | | | ensure the longevity of the firm. For instance, EBay is |
| Argosy University | | | | well known for connecting people that want unique |
| MSM program | | | | items, so to compete with craigslist they have added a |
| Date: 07/14/10 | | | | free geo targeted classified system. This system will |
| | | | | bring millions in additional traffic and may lead to more |
| The auction juggernaut EBay is continuing to make the | | | | sellers exchanging items leading to higher revenues. |
| world smaller with its unique communication portal. | | | | |
| The system takes advantage of social computing | | | | Board members of EBay usually paint a rosy picture |
| technologies which helps EBay display the most | | | | for their earnings forecasts. The reality is that |
| relevant information. Their business model allows a | | | | competitors are multiplying and those that use free as |
| 1% to 5% fee for each item sold. Over the past | | | | a business model may legitimately capture market |
| decade they have connected millions of buyers and | | | | share. In order for EBay to remain on top of the |
| sellers, but the company is not without threats. During | | | | internet auction industry they need to reduce the price |
| the first quarter of 2002 they noticed a drop in | | | | to exchange items on their system thereby increasing |
| revenues due to an apparent loss of confidence | | | | the value of there value chain. The direct result of |
| between buyers and sellers. To remedy this EBay | | | | this action will be much higher traffic and brand |
| created a system that enables customers to rate their | | | | loyalty. Traffic can be monetized using highly |
| sellers. This step helped to improve consumer | | | | targeted advertisements through Google adsense or |
| comfort, which is a key factor in e-procurement | | | | an internal advertising program. Although EBay is a |
| strategies. Although more recently EBay has had to | | | | successful virtual pure play company they need to ask |
| compete with free alternatives and merchant seller | | | | themselves what would Google do. Google made a |
| backlash they still have the most recognized name in | | | | reported $4 billion in net income during the 2008 fiscal |
| internet auctions. Additionally they continue to have | | | | year simply by leveraging its search traffic |
| an advantage over the standard brick and mortar | | | | domination. EBay needs to increase the value of its |
| firms. "In the real world, retailers have to deal with | | | | core competencies by lowering prices and then |
| thieves, rent payments and regulations. The virtual | | | | capitalize on the additional traffic with targeted |
| world has fewer obstacles to doing business." (Lorek, | | | | advertising. |
| 2002) | | | | |
| | | | | To further strengthen its position they should add |
| EBay dominates the auction market because of the | | | | strategic alliances as part of their diversification |
| experiential curve and significant cost of market | | | | strategy. Acquiring companies that have similar |
| entry. However, each year the cost to create such | | | | product lines will broaden product lines and it will take |
| advanced internet technologies drops due to Moore's | | | | advantage of existing marketing channels. EBay may |
| law. That law states that approximately every 18 | | | | find opportunities in B2B as well. "Most sales today |
| months computing storage and speed doubles. How | | | | are in used, outdated or overstocked merchandise that |
| can increased computing power damage EBay? In | | | | can be discounted. The site has become a big outlet |
| short the answer is As computing power increases | | | | for large corporations like Sun Microsystems and Dell |
| the cost to store data falls, which opens up the | | | | that look to sell refurbished or used computer |
| doorway for competition. Competition is not what | | | | equipment." (Lorek, 2002) forging partnerships will |
| scares EBay it is the paradigm shift to free that | | | | ensure repeat business as long as no cheaper |
| scares them. Since operating costs keep falling new | | | | alternative enters the market. |
| web entrepreneurs have started using free as a | | | | |
| business model looking for income through | | | | Another strategy EBay may use is to tap the minds |
| non-traditional side door sources. | | | | and creative powers of their members. People like to |
| | | | | talk and there are an infinite number of focus groups |
| for example is a free online classified service that | | | | on EBay, so they could create a productpedia tool that |
| connects millions of people. Their strategy is to let | | | | enables users to post product reviews and |
| people communicate free and earn money by | | | | descriptions. Similar to Wikipedia this resource would |
| advertising to the millions of people that visit each | | | | be free and would improve over time because web |
| day. This strategy has earned craigslist nearly 100 | | | | 2.0 technologies would allow editing and article |
| million dollars in 2008. Craigslist is a market disruptor | | | | improvement. EBay would benefit from this because |
| because it provided a free alternative to expensive | | | | they can automatically show ads that link to related |
| newspaper classifieds effectively wiping out billions of | | | | products on eBay's site leading to more sales. |
| dollars worth of newspaper advertising. Similarly | | | | Additionally this tactic would be rewarded with higher |
| Snowbirdseeker.com, a seasonal rentals by owner | | | | page rank on Google because of the increase in |
| website, uses a hybrid business model blending free | | | | website quality content. Higher page rank on Google |
| services with paid rental advertising. While EBay | | | | means more traffic and more conversions. |
| continues to be a viable internet auction service, they | | | | |
| are vulnerable because they still charge as much as | | | | References: |
| the market will bear rather than looking for revenue | | | | L.A. Lorek L.A. Lorek Cyber-commerce ; More than |
| from side door sources. EBay is versatile, but | | | | just an online garage sale ; Internet eBay auctions are |
| remains vulnerable like the waning newspaper | | | | creating a new venue for formerly traditional retailers. |
| classified industry. | | | | |