MercadoLibre Case Study Management Report - Essay Example

Introduction MercadolLibre is a Portuguese website company which is dedicated to online auctions and to e-commerce. It is basically eBay’s Latin American Partner. In Latin America it is the number one e-commerce site. It has its headquarters located in Ciudad de Buenos Aires, Argentina. The literal market of MercadoLibre is free market in Spanish. Anyone can register in this site and use it to do online auction. The organisational culture in MercadoLibre is an open one. It serves as their backbone.

Their IT infrastructure is also an open source one. It uses Varnish cache to enhance the web experience of their user. Such infrastructure gives a better performance as compared to their competing products. Basically varnish stores the web pages in the memory and hence they get loaded faster. Discussion This part of the study will discuss about the business environment and strategy of the organization. In addition to this, the strategy of MercadoLibre has been critically evaluated in this part of the study.

Business Environment Analysis Porter’s five force model and PESTLE analysis has been implemented in this study to determine the effect of environmental factors on the business process of MercadoLibre. Porter’s Five Force Analysis This analytical tool will help the organization to determine the industry opportunities and threats that can help the organization to develop future strategies. Buyers’ bargaining power Each and every Latin American country is achieving significant economic growth rate due to the globalization, technological advancement and growth of several domestic organizations.

MercadoLibre is one of the emerging online trading and payment platforms in Latin America. This internet auction site has gain huge popularity due to its effective business operation strategies. Recent financial crisis and economic downturn affected the purchasing power of the people (Belz and Peattie, 2010, p. 224). Therefore, the online selling and purchasing activities in these countries have reduced. Although the organizations offers huge ranges of differentiated products for buying and selling, but affected purchasing power of people increased the threat of high bargaining power of customers or buyers for organizations within this particular industry.

Suppliers’ bargaining power Suppliers’ bargaining power is quite low as the industry has reached to the growth stage of the industry life cycle recently. The business operation of this organization highly depends on the effectiveness of the supply chain network (Blenkhorn and Fleisher, 2005, p. 115). Huge availability of the suppliers can give cost effective supply chain options for the organizations. Therefore, it can be stated that the threat of suppliers’ bargaining power is not high.

Threat of Substitutes Threat of substitute for MercadoLibre is quite low as the market demand for online purchasing and selling or internet auction is significantly increasing among the target customers. This virtual market place gained huge popularity in recent past due to technological advancement. The demand for traditional purchasing and selling process is reducing. Therefore, it can be stated that the threat of substitute is low for the suppliers (Etzel, Stanton and Walker, 1997, p. 74).

Threat of New Entrants Threat of