Information Management for eBay - Coursework Example

?Running Head: report Information Management @ Ebay of the of the of the Word Count: 2057 Executive summary There have been very less organizations which can be cited for their innovative practices and sustained business model in e-commerce and internet based business model. One such exception in the above discussion is that of Ebay who through its constant research and responsiveness to changing market patterns has carved a niche for itself. Primarily, Ebay has leveraged IT as its major competitive tool and implemented such information systems, components and practices that still give nightmares to its rivals (Chen 2005). This paper analyzes the unique e-business model perpetuated by Ebay with respect to conceptual frameworks like Porter’s five forces model and value chain analysis. The findings reveal both the competencies of Ebay and the surrounding factors which favored the growth of EBay’s business model, owing to the need of speed, access and frequency of information managed in the industry. Recommendations follow at last to highlight few of the threats and means to overcome them. Introduction The selection of the topic is very relevant and significant in relation to the increased popularity of electronic means of transactions and trading platforms being devised. Company chosen also reflects careful consideration in this regard because Ebay holds the recognition of being the first ever organization to use information systems as its competitive weapon after the dismal performance of Dot.com. While selecting the frameworks to analyze, both external and internal environment have been taken care of. Porter’s five forces model helped develop better insights about market forces which shaped up the creation of such a business model and value chain analysis helped understand the techniques and strategies implemented by Ebay in turning the industry attractiveness factors to its advantage. Use of journal articles from Harvard business review made the work more interesting and valuable as deep level understanding came from expert’s opinions and observations. Overview of organization- Ebay Ebay holds the accredition of being the first online marketplace for buyers and sellers to trade online. Transcending from traditional business practices, the core philosophy and positioning statement of Ebay lies in providing a common platform for diverse buyer and seller communities worldwide to transact and achieving a breakthrough by automating the brick and mortar presence of trading. The essence of e-commerce has been realized and absorbed more seriously by Ebay than any other online retailer. It presents an example of deploying and using information systems to its competitive advantage because of the primary components of managing information systems in place. From developing technological tools and components to providing for customer support and care, technology stands at the heart of EBay’s corporate strategy. Even regulatory compliances and IT policies are standardized and adhered to which demonstrates the pure professional attitude of Ebay in adopting information technology as the driver to its Numero Uno status. External environment analysis To establish the uniqueness of e-business model of Ebay through the use of information systems, it is first essential to look at the surrounding factors and their impact on the general industry practices where Ebay has placed itself differently. Porter’s Five Forces Power of suppliers- The field in which Ebay operates is crowded by limitless number of suppliers because online auctioning and internet based buying and selling business has thrived leaps and bounds in the recent years. All the major competitors of Ebay namely Amazon, Yahoo and even Dell has forayed into internet world to offer and sell their products. However, distinguishing factor in this industry is the availability of own warehouses which saves a lot of expenditure and offers cost effectiveness. While Ebay has developed the market of transactions between sellers and buyers, Amazon strategically distributes its products from its own warehouses and inventory systems. The only thing which can hit the customers in this business is uniqueness and distinctive factor of price, quality and brand reliability. Power of buyers- is also high in this industry due to the freedom they get in exercising their choice regarding the seller, items, price range, quality and other variants. While companies can present their items to a million of customers in a very short span of time, consumers are also favorably placed to cross-check the background of the seller, compare prices of variants, study the items and even contact the sellers to rate them. Threat of entrants- Entry barriers in online auctioning, mail order and catalog business are low because of the minimal amount of inventory needed to hold. E-commerce has already revolutionized the traditional set up of transactions by improved means of communication and information technologies. However, the specific industry section which Ebay fits in, entrants need to have proper access and funding for infrastructure, plant and supplies to sustain its business model. Threat of substitutes- is generally lower in this case because it is technological intensive. As long as the customer is presented with high-end user interface technological platform, value for purchase and trust factor intact, chances are less that the customer switches to another seller. However, switching might happen at financial level of relationship and even at the emotional level if a competitor presents a differentiated product in terms of lower value, upgraded technology and after sales benefits. Rivalry- is an all time high phenomenon in this industry due to the e-commerce boom and increased internet usage by consumers in seeking valued products at low prices. Comparatively lesser capital involved also attracts a number of medium and small businesses turn their way to internet based business models. In this regard, only service attributes and customer oriented practices can help businesses carve a niche for themselves. Like Ebay developed a customer satisfaction system and introduced an online community for buyer-seller interaction. Analysis Source: Porter & Millar 1985 Because of information technology changing the landscape of industries, businesses have been able to garner competitive edge on the basis of either low costs or differentiating their product propositions (Porter & Millar 1985). Ebay has made use of both these value added components of industry attractiveness and competitive weapon over rivals (Refer to appendix 1 and 2). Because of technological infrastructure, Ebay no longer needs to rely on manual and physical modes of processing or handling operations. This has made the premise of lower costs realizable for Ebay. Secondly, differentiation has also been achieved by Ebay through internet and information enabled customization and automation. With the use of information and communication technologies, Ebay has developed more number of interaction streams with that of the customer which provides greater visibility and transparency to its operations. Third and the most important, information systems have led Ebay to the creation of many new businesses because of the excess of skills and increased scale of operations. This is what makes it tie up hands with even offsite retailers and using other CRM and financial services as its secondary businesses. EBay’s Value chain analysis Value chain model, proposed by Michael Porter, establishes a link between the primary and support activities of a business that help add value to the product offering at each level of progression through the chain. The total value which is added to the product at the end comes back to the organization in the form of ‘margin’ and this is what culminates into competitive advantage for a business as to how it can add value for the customer in minimum number of processes to save on costs and yet rank high on ‘margins’. Figure above depicts the value chain model applicable to the industry which Ebay operates in. Underlying analysis of various primary and support activities by Ebay in this regard are: Primary activities Raw materials- for Ebay, raw materials include systems, codes, power and software to support its buyer-seller transaction requirements. Inbound logistics- EBay’s business is based on technology and as such it requires enhanced computer systems, servers, back-ups and data management tools to handle the vast amount of customer information. It is also tied up with Sun Microsystems for its database software which provides complete logistics solution to it. Operations- EBay constantly updates its product listings because it never has to think upon the limit of products offered. By means of auction listings and fixed price listings, Ebay presents an online platform to its customers to buy and sell almost any kind or variety of products. The entire operations are administered through the use of IT and applications like picture services, shipment labels and tracking, PayPal, Skype and other market space businesses like half.com, shopping.com, et cetera. Outbound logistics- being an online operating business, the only task for Ebay to handle is to provide for two-way communication between the buyer and the seller regarding the purchase details and final payments. Transactional processes of Ebay are facilitated by use of PayPal and Bill Me Later tools. Marketing and sales- marketing and sales function assume great significance in the value chain of Ebay because of the indefinite number of customers engaged in its buying and selling process. Establishment of trustworthiness and reliability in EBay’s internet business model has been achieved primarily through marketing tools. As for example, developing feedback system, community communication channels, and provision of insurance for online purchases and creating “voices” for off-site transactions which make full use of marketing and promotion techniques. Service- because of uncountable number of customers, servicing and retention remains an uphill task in EBay’s business model. However, defying all the traditional mindsets, Ebay used its information systems in getting the loyalty of its customers. Its feedback system stores the information of users and assigns them star ratings according to the frequency and nature of their transactions. Loyalty programs like Power Seller are in place to reward the top buyers and other service attributes of safety and trust have been provided by incorporating tools like Safe Harbor Program, Verified Rights Owner Program, etc. Support activities Procurement- procurement function does not apply to EBay’s value chain in the sense that it only serves as a medium to provide a selling platform to the buyers and sellers. There is no storing or inventory of goods under Ebay which ultimately eliminates the storage, warehousing and inventory costs from its value chain. Technological- technological expertise is actually the cornerstone of EBay’s competitive edge. From advanced customer relationship management tools to up-to-date marketing activities, Ebay has made the maximum use of information systems to its advantage. Human resource management- from internal customers’ point of view also, EBay stands at an advantageous position because of its concerns for its employees and company culture which makes it one of the best companies to work with. Its endeavors to sustain relationships with customers cannot be realized without a competent and large human workforce who Ebay takes pride of. Firm infrastructure- because of online operations, there is no physical infrastructure needed for Ebay but it has developed advanced Management Information Systems (MIS) and differentiated departments based on accounting, marketing and other activities. Analysis Because of paramount prevalence and significance of information being shared between different entities involved in Ebay business model, its value chain becomes more of virtual than real one. It has achieved visibility in its value chain because of large scale use of information systems in almost all its processes. Technology is the driver behind Ebay operations which are in turn assisted by e-commerce tools. The basic motto of value chain of Ebay is to serve as a technological and online platform for transactions without any middlemen. As such, there exist no actual materials or humans in its value chain. Rather, its value chain is built around the competencies of reliability, speed, customization, accessibility, convenience and creation of customer value through differentiation in terms of maximizing the intangible component of product and service assortments (Rayport & Sviokla 2000). Recommendations Technology and widespread use of information and communication technologies stand at the heart of EBay’s success and competitive position. However, it suffers from the threats of imitability, durability and the relevance of its competitive superiority in fast changing technological world (Gopalkrishnan & Gupta 2000). Its stark rivals namely Yahoo, Amazon and even other industry giants like Dell are constantly devising new formats of transactions which places major threats to EBay’s existence. Because of new entrants in the field, chances of imitability are also high and Ebay faces huge pressure to continuously upgrade its resources to keep up with the technology evolution. Failing to do so, serious repercussions in terms of substitutability and resources getting depleted can jeopardize the current leadership position of Ebay. Appendices Appendix 1: Core Competencies of Ebay Appendix 2: PEST analysis Political- the political scenario for online auctioning, catalog and mail order business seems to be liberal because of lesser government interference and regulations. Also, taxes are minimal in internet business models which offer splendid opportunity to grow online. Operating through internet has also been found to have lesser carbon dioxide emissions and an overall eco-friendly impact which favors the model in terms of legal repercussions and flurry of NGOs and environmentalists (Clark 2009). Economic- economically, this industry has been very strong in its revenues and growth factors. This exceptional occurrence is due to the increased adoption rates of internet across the globe. The industry is further expected to register mammoth revenues and double digit growth which makes it one of the most lucrative industries to enter into. Social- socially, this form of business is the most viable as it caters to a large and diverse number of consumers and helps companies gather collective opinions, tastes and preferences which can later be used to observe patterns of loyalty and chalk out strategies. It favors establishment of virtual communities whereby companies can extract valuable information from online communication and analyze consumer behavior. Technological- technologically too, the industry is quite intensive because differentiation depends only on two factors- user friendly technological platform and value provided. From product information to purchase processing and even to the ultimate delivery process, technology binds the operations in this industry and hence assumes pivotal importance. References Chen, E.T (2005). Leveraging IT for a competitive advantage: the case of Ebay. Issues in Information Systems, Vol VI, no.2. Clark, S. (2009.) Buying online is the most environmentally friendly way to shop, say top researchers [online] available from [accessed February 14, 2011] Gopalkrishnan, J & Gupta, V.K (2000). eBay: The World’s Largest Online Market Place- A Case Study [online] available from [accessed February 14, 2011] Porter, M.E & Millar, V.E. (1985). How information gives you competitive advantage. Harvard Business Review, July-August. Rayport, J.E & Sviokla, J.J. (2000). Exploiting the virtual value chain. 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