Ebay: Facing The Global Challenge

Executive Summary:

The e-commerce industry has become a major player in the global retail environment. E-Bay's large operating history has allowed the company to build a social capital of internet buyers and sellers that has now become its competitive advantage. However, intense competition in e-commerce has lead major players to lead expansion efforts in foreign markets where growing economies exist and the number of internet users is abundant. As a facilitator of online buyer-seller transactions, the only obstacle the company needs to overcome is quickly introducing its presence in new foreign markets where growth opportunities have been identified.

Industry Analysis:

The online auction industry is currently in the growth stage of its life cycle. The low prices and convenience of an at-home search and buy environment offered will continue to drive high demand in international e-commerce even after 2009. International e-commerce will account for more than twice the amount of all internet transactions than the United States (See Exhibit A).

Aside from the opportunities that exist in international e-commerce, the low barriers to entry will continue to attract new competitors to launch online retail sites at minimal costs and in a short amount of time using commercially available software, and offline retailers to develop online sites as well. As the industry is relatively new, competitors will need to concentrate on many factors such as the ability to attract buyers, volume of transactions and selection of goods, sustainable trust, and ability to keep fees and commissions low. The power of suppliers in the online auction industry will force competitors to reduce selling costs in order to keep a large supplier base an...

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... eBay because of the inventory obligations that must be passed on to the customer. As a result, eBay transfers almost all of the value to its customers whereas online retailers have the liability of carrying products on their books that in turn is transferred to their customers.

Finally, eBay will be able to compete successfully against new, more diverse competitors such as paid search engines if it forms strategic alliances that will bring value to both firms. EBay can offer marketing and promotional opportunities to paid search engines and capitalize on attracting more customers to its online platform by partnering with search engines to be the premier result for online trading. The company will need to continue monitoring up and coming paid search engines to ensure it can exploit all the opportunities from a paid search engine partnership before its rivals can.