Different Approaches to Strategy Development - Ebay - Case Study Example

DIFFERENT APPROACHES TO STRATEGY DEVELOPMENT Introduction Devising an effective strategy depends upon the approach to the three most important players – the corporation, its customers, and the competition. This is jointly known as the Strategic Triangle. In terms of this approach, strategy can be described as the method the company distinguishes itself confidently from its competitors, utilizing its own relative strengths and weaknesses to convince better the consumer requirements/needs. It is regrettable that a lot of companies do not devise or have any strategy. And apart from this, there is no long term plan either (David J. Collis, n.d.). An instant sale is what they are always worried about. The long term or the bigger picture is gone astray sight of. In the next couple of paragraphs we are going to discuss the three important approaches to strategy; Market based strategy- Market-based strategy usually captures and brings into line aspiration, status, opportunity and capability. It is pertinent to the entire business and offers a reference point for everything that is said and done in the name of the establishment. It usually includes long-term aims and goals, strategic and business planning, serviceable / business unit plans, execution, measurement and reporting; and it does so with a practical and easily-managed procedure. The secret of higher profits is to build the company`s merchandises or products stand out in the customer`s mind. What is important that either the product have got to be most cost-effectively, or be the unsurpassed in terms of value. But any of the above preposition is effortless to put into practice in today`s competitive marketplace. Competitors can without difficulty duplicate the quality and also put up for sale at a lesser price. But the corporation must have a `distinction` or an USP (unique selling preposition) to conquer competition. Resource based strategy: Resource-based view of strategy lays emphasis on strategy formation constructed around the advance utilization of existing core competencies and strategic capabilities. One of the most incorporating and almost ever-present threads of current management thinking highlights the significance of a resource-based strategy of the company while competitors can duplicate an innovative product, they may perhaps not have the ability to imitate the resources within the corporation. (Johnson, Scholes and Wittington & quot, 2008). That is why it is significant to look at company`s in-house strengths as a second approach to strategy. It’s very difficult and tricky to forecast the market conditions, but if a corporation is very well aware of its strengths; it can plan to handle risks and to become accustomed to whatever alteration comes in the way. And that’s the sole reason why company mostly try to follow this kind of approach for their businesses (Johnson, Scholes and Wittington & quot, 2008). Customer based strategy: The Next approach is `customer based`. Customer-based strategies commence by finding out the companys target customers. With the help of market research, business would be able to find the customers most probable to buy the companys present or intended products, then creates an outline mentioning how to achieve and connect those customers. The companys marketing mix, together with the characteristics of the product itself, is customized keeping in mind the customer segments selected. These segments may be extensive or as constricted as one individual consumer. This type of strategy usually considers customers as their biggest assets that offer returns over time on the marketing investment needed to catch their attention. A corporation have got to make relationships with its customers. A corporation can always try to feedback of the customers on the product it are planning to develop; or enquire them what they require and based on this information it can build up a product from scratch. Some big businesses viz. Tesco uses what it learn from the most important asset, that is, customers; to make a decision what products and services to create everything from DVD rentals, home banking and insurance. The focus of strategy is not about thrashing the competitor but about developing value for the customer. If I say that by offering value for the customer, business would be able to produce then this is quite apparent and recognizable as this may sound, the art and science of understanding markets and customers and using that understanding for forming the future business direction is hardly ever practised. The majority companies still develop business strategy by signifying their markets as a collection of existing and upcoming products/technologies/competitors and not as groups of customers with distinguishing needs. That type of strategy is improbable to be de-risked next to market shifts and companies may in fact miss the big opportunities provided by the market. Strategy Development of online fashion retailer- Ebay The entire basis of eBay lies on the idea that almost anything that can be bought and sold can be facilitated through this Internet retailer and this auction platform supplier was executing the idea of e-commerce even more vehemently. They assist people trade virtually anything on earth and conduct commerce through the Internet on a global basis” is surely eBay’s business model .This model was so efficient and competent in conducting transactions that more and more individuals preferred to trade online, so that they can take pleasure in the comfort at home or place of work and still purchase things online just by the click of the mouse. Nowadays eBay users can bid whatever thing from office accessories to real estate to cars. It is astonishingly correct but confusing that “Why has eBay triumphed, but others have been unsuccessful? It’s important to note that much of its successes came from its adaptive approach; eBay’s achievements can also be clarified by the company’s constant focus on two long-term goals that is “turning out be the world’s biggest consumer to consumer online auction house and structuring out each of the five core strategies” (J.Gopalkrishnan, V.K Gupta). According to a study into these strategies shows that eBay has applied sound strategic management as adopted from Porter and other Management experts .Its entire business revolves around developing an environment where everybody can come and do business without any second thought of being cheated or ill-advised in any type. The first strategy is creating an undefeatable customer base; (1) Creating a big user base -To catch the fancy of new users, eBay created relationships with more than 60 websites, together with America online which provide eBay the biggest access to the largest user base on the internet and prohibited AOL from entering the auction ground, bay also added dealer to person trading and addresses the rapid growing and fragmented small business market by developing a aspect known as business exchange, where businesses can purchase or sell fresh, used or renovated business products and professional tools in their domestic market (J.Gopalkrishnan, V.K Gupta. n.d.). The second strategy is: (2) EBay focused on domestic and worldwide trading -EBay has local sites in 53 United States markets they carry different regional flavours and offer users the handiness of shopping locally for hard –to ship items for example automobiles or antique furnishings. The company also built a really global occurrence with users in more than 150 countries. The third strategy is: (3) Creating a powerful brand -For eBay’s initial few years it did not pay out a single money on advertising, relying instead on viral marketing and its capability to piggyback on competitors ceaseless (and expensive) efforts to keep hold of market recognition. The company’s brand building strategies shifted with the new companies coming up in the business (Source; Ebay website, n.d.) The fourth strategy is: (4) Increasing the trading platform -When eBay’s reached its fourth year in the year 1999, there were many competitors had entered the online auction marketplace, although the eBay had the first mover advantage, not all of its competitors were small start ups, like yahoo and Amazon were internet important players with widespread, established user bases. EBay’s reaction was to expand its core business into other striking niches, the business initiated higher priced product categories, a move that would raise its profit margin radically while needing negligible infrastructure and operating expenditures. The only important thing was that the business required to build up a new skill set-to surmount this obstruction eBay made quite a few acquisitions, beginning with auction house Butterfield and Butterfield and moreover the marriage of offline and online auction houses transformed the way that fine antiques and collectibles were purchased and sold, allowing users to put real-time bids for things on offline auction house floors. The fifth strategy is: (5) Upholding a strong community affinity -The company considers that nurturing direct communication between buyers and sellers with similar interest had enabled it to produce loyal, active community of users, as noted before this stress on community building has been there from the time during eBay’s founding. (6) Constantly improving site features and functionality - For the reason that eBay’s strategy is to be as hands-off as feasible when it comes to transactions, the business has to offer a dependable and straight forward method for users to run the process on their own, purchasing and selling on eBay are made trouble-free for users to direct the process on their own (Source; Ebay website). Sellers are required do little more than write a compelling description of the item up for auction, give an appropriate photograph, and make a decision how many days the auction will go. To improve the payment part of the customer experience, an acknowledged complexity for mast buyers and sellers, Ebay bought a corporation with the name Billpoint, which has an online bill payment service that assists credit card payment between buyers and sellers. The five external market tests Ebay can be understood to a ordinary man who actually doesn’t know anything of online retailing and sites which offer such facilities, which could be a number of of the market test like; Inimitability: it can be defined as the resource that is almost impossible to copy, as far eBay’s resource are concerned , it can could easily be copied Durability: it means how fast does the resource decrease in value/ depreciation? EBay is immersed in a very vibrant environment, therefore the development and up gradation of its resources are very important. Appropriateness: it refers to the market segments like, who captures the value that the resource produces. EBay undoubtedly holds the most priceless resource for auction-like sites: critical mass, the business takes out profits from its community, which no doubt makes it one of the most successful and profitable Internet companies. Substitutability: can an exceptional resource be trumped by a different resource? A different format of seller/buyer transaction could weaken eBay’s flourishing model-if eBay is not able to become accustomed rapidly to the changing environment, which is not likely. Auction aggregators also create a considerable threat. Competitive superiority: whose resource is actually superior? EBay has enhanced substantially in terms of carrying out internal resources to recuperating customer experience. Other websites for example yahoo or Amazon, may still have superior services, but if we talk about eBay business , no doubt has the first mover advantage, and it has one important resource cannot be replaced by any other competitor in the market and that is: a large and trustworthy community. References: a) Johnson, Scholes and Wittington & quot (2008), Exploring Corporate Strategy" Text and Cases 8th Edition (2008). [Accessed on 25th January, 2014] b) Three Approaches to Strategy (Anonymous, n.d.), Available at http://classof1.com/homework_answers/corporate_strategy/three_approaches_to_strategy/. [Accessed on 25th January, 2014] c) Elliott Taylor (n.d.) What Are Product-Based Marketing Strategies & Customer-Based Marketing Strategies? Available at http://yourbusiness.azcentral.com/productbased-marketing-strategies-customerbased-marketing-strategies-7192.html [Accessed on 25th January, 2014] d) Resource- Based Strategy, (Anonymous, n.d.) , Available at http://www.kbmanage.com/concept/resource-based-strategy [Accessed on 25th January, 2014] e) Top 10 Growth Strategies (Anonymous, n.d.), Available at http://pages.ebay.com/sellerinformation/sellingresources/top10growth.html [Accessed on 25th January, 2014] f) David J. Collis (n.d.) corporate strategy, Available at http://www.hbs.edu/coursecatalog/1230.html. [Accessed on 25th January, 2014] g) Corporate strategy and structure (Anonymous, n.d.), Available at http://www.businessenglishonline.net/wp-content/uploads/2010/10/Business-English-Handbook-Unit-3-Corporate-Structure-and-Strategy.pdf. [Accessed on 25th January, 2014] h) J.Gopalkrishnan (n.d.) and V.K Gupta (n.d.), eBay: “The world’s largest online marketplace”- A Case Study. [Accessed on 25th January, 2014] Read More