EBay Business Model - Essay Example

eBay Business Model Introduction eBay Inc. is an international internet corporation based in San Jose, California, that provides for consumer-to-consumer platform on which individuals and enterprises buy and sell an extensive array of products and services globally. The brains behind the organization is Pierre Omidyar who took up a revolutionary effort to transform the buying and selling of goods and services with the utilization of the internet. The company is not anything it used to be in its initial years as massive strides forward have been achieved, and the online market scene has also changed drastically. This work is intended to delve into the details of the company, with particular interest in its business model (Loeb). Strategic Issues As with most other multinational corporations, eBay faces various strategic challenges that is it has to deal with. In the specific case of eBay, the issues of mobile services, payment methods, and collection of sales tax are some of the challenges that have been predominant for some time. The initial selling platform was not conceived with the use of mobile phones in mind. As times have changed, it may be time for the organization to adopt one of the most effective modes of accessing the internet to facilitate buying and selling. After acquiring PayPal, there have been accusations that eBay has monopolized the payments through the services which may inconvenience some of the users of its services. The issue of sales tax is one that is eBay has contested for long, yet still remains one that garners a lot of attention (Loeb). Internal Analysis Although eBay has grown considerably over the years since its establishment, other similar corporations such as Amazon have achieved more in the market. An internal analysis can tell a lot regarding the performance of the company itself, and possibly indicate massive growth, but still lack to show the failures of the corporation when pitted against Amazon. The profit margin that the company attained in the initial years. At the end of 2001, its shares has risen by 749% since the IPO had been listed in august of 1998. All other trends were also similar although the growth slightly slowed after a few years. From 2001 to 2010, the company only achieved an increase on net income by 21%. This has marked the slow growth the company has realized, and the dominance of the market by Amazon (Masanell 95-97). After just four years of operation, the annual gross merchandise volume (GMV) sold on eBay was expected to top approximately $3 billion in 1999. The earnings of the company came from fees charged to those who placed items for sale on the site, and extra fees once the item was sold. The number of registered users can be linked to the assets of the company in that they would indicate more income and profit if they increased. In the initial four years when its GMV was expected to reach $3 billion, the company had already reached approximately 4 million registered users in 1999-which was a 75% increase from the previous year. Although the “company’s assets” did not grow with this drastic trend afterwards, the millions that currently make up the users are adequate to ensure a going concern attitude within the cooperation. The leverage that eBay had in its initial years in the market has gradually declined although not entirely. eBay still remains as one of the most influential corporation in the international internet sale of items particularly because it was one of the organizations that started the new form of buying and selling. Amazon has nonetheless achieved to overtake eBay in becoming the most influential player in the market but only in terms of GMV. eBay was able to purchase PayPal, which most people use to make most online transactions. Therefore, although Amazon may be moving more products, a significant amount of the earnings finds its way back to eBay. The notable advantage of the corporation is that it keeps it running costs at a minimum. Its main costs are incurred in the processes if website operations, customer support and the processing of payments. Keeping the expenses on a minimum provides room for a larger net income. On the flip side, its overreliance on the users to provide the items for sale has made it incomprehensive when it comes to provision of a wide variety of goods for sale. This means that people are less likely to search for products on the site as compared to other sites such as Amazon. Recommendations Amazon succeeded by finding gaps with the business model adopted by eBay. In fact, Amazon was struggling to keep up with eBay in the market. Even when eBay was making big strides forward in the last few years of the 20th century, Amazon was struggling to keep up. The best move that eBay can take is to fill up the spaces that are present in its strategy and this will offer a new platform to compete with Amazon. The gap that is most notable is that of offering a product to a buyer upfront, instead of them having to bid for it. The Buy-it-Now feature is an indication that the corporation is aware of this. Using this approach to avail a wider array of items for sale, and easier way for users to search for such items is one of the best ways the corporation can remain competitive. These recommendations are very realistic as they do not require a lot to be invested. The core reason for the selection of these recommendations is that they are easy to perform on the part of the corporation and are also areas where the company seems to be losing business to competitors. Effecting these changes may be intricate considering the fact that they will affect millions of users. It is important to communicate the changes to the users in advance before executing them. In a corporation that affects millions, communicating the changes may need to be done months before they are actually completed (Loeb). Amazon is the key competitor in this case, but the changes completed are already effective at Amazon so there is likely to be little response from them. Making searching of products easier and availing more items for sale on the site meets most of the problems that hinder eBay from the prosperity it deserves. Effecting the changes is bound to make few problems but more desirable outcomes. Work Cited Loeb, Walter. eBay Must Evolve and Adapt to Changes and Challenges. 08 July 2012. Online. 14 February 2014. . Masanell, Ramon. "eBay, Inc and Amazon.com (A)." Thaker, Anant. Strategic Management Case Book. Boston: Harvard Business School Publishing, 2012. 95-112. Print. Read More