How Can eBay Position for Changes in the E-Marketplace - Case Study Example

How can eBay position for changes in the e-marketplace?

Executive Summary

Innovation is one of the key to organisational success and long term sustenance. The objective of this study is to discuss about how eBay can position itself in the changing e-commerce sector or e-market place. The study has revealed that the e-commerce sector has become highly competitive in nature, which as a result has made it quite difficult for the company to establish a strong position in the market. It has been further studied the eBay has taken significant innovative approaches to add more values for the customers and the stakeholders. However, it has faced significant challenges in terms of revenue growth. It has been recommended for the company that it should use new disruptive innovation such as integration of three dimensional pictorial presentations of products and using VR as a new platform to create a virtual market place. It has been finally concluded that these strategies will help the company to stay ahead of the competition by gaining a first mover advantage, thereby fostering growth and long term sustainability.

Table of Contents

Introduction4

Background Information4

Innovation Theory5

Innovation Organization7

Innovation Strategy9

Recommendation10

Conclusion11

Reference List13

• Introduction

The global business environment has shown gradual changes over the past decades. The industries have become highly competitive in nature as an increasing number of firms have come to operate in the markets. Moreover, the demands and preferences of the customers have also changed over time. They are constantly looking for new product and service experiences (Liao, Kickul and Ma, 2009). In order to meet the customers’ demands the firms are constantly seeking out for innovative ways to design their value propositions. In this context, the existing firms have also realised that they need to adapt to the changing macroeconomic factors and consumption trends to make sure that they can maintain their position in the industry in terms of market share. The e-commerce sector has shown promising prospects in terms of growth and popularity (Hong and Zhu, 2006). Large number of companies has opened their own e-commerce wing to reach out to large number of customers. Companies like Amazon and eBay have adopted e-commerce as their mainstream business strategy which has proved to be quite lucrative for them. This paper is focused on the discussion of how eBay can position for the changes in the e-marketplace. It covers innovation theories, based on which the proposed strategies have been designed for the company.

• Background Information

The e-commerce sector has shown significant growth owing to the rising popularity of the internet and development of secured online transaction processes (Statista, 2016c). The increase in the number of internet users has made it easier for the e-commerce companies to increase their customer base. The reports of Statista (2016a) have shown that the number of e-commerce users have increased significantly over the past years, which have resulted in the growth of this sector and have increased its attractiveness for the firms. The companies have started to use the e-commerce platform to attract the customers and increase their volume. This as a result has increased the competitive threats for the mainstream e-commerce retail companies like eBay.

EBay is one of the biggest e-commerce retail companies in the world and currently holds the third position after Amazon and Alibaba. These two companies are the primary competitors of eBay and have posed a significant threat to the company which is clearly reflected in the y-o-y revenue growth. According to the reports of Statista (2016b), the revenue growth of eBay has fallen quite significantly over the past few years, which is mostly due to the rise of other e-commerce firms and potential new entrants in the industry. Moreover, owing to the highly lucrative proposition of online selling, other retail companies have also established their own e-commerce wing apart from their traditional brick and mortar stores.

These changes in the e-commerce industry have proved to be quite menacing for eBay as their sales volume has shown a downward trend. Moreover, eBay has also failed to generate new value propositions or provide a better experience for the customers (Forbes, 2015). Therefore the customers who were once loyal to eBay have started to shift to other companies, thereby resulting in the fall in revenue growth. In this context it is imperative for eBay that it should be able form new innovative strategies to strengthen its position in the changing e-commerce market place or e-marketplace. Thus, the success of the company is largely dependent on the way in which the company is able to maintain a consistency in terms of innovation and constantly offering new experience for the customers. In order to regain the brand image and develop a differentiation among the customers, eBay needs to come up with unique value propositions that are not found in any other rival firms.

• Innovation Theory

This section discusses about the theories and models from the literatures based on organisational innovation. According to Wu and Lin (2011), the innovation can be defined by the inception of a new idea, product, services or process that is unique in nature and can be marketed to the customers or has the potential to drastically improve the profitability of a company. Ashraf and Khan (2013) have mentioned that the innovation is different from invention, even though both of them are associated to developing new and unique products or processes. In case of innovation the potential of the newly developed idea to generate value for an organisation is assessed in terms of its ability to improve the financial condition. However, in case of an invention, the concept of commercialisation of the idea is not present.

Gallego, Rubalcaba, and Hipp (2013) have mentioned that the organisational innovation often comes from the need to create a strong and unique differentiation that can eventually change the market trends and ensure long term growth of the firm. It has been further mentioned by King and Baatartogtokh (2015) that organisational innovation can be broadly segmented in to two types which are incremental innovation and disruptive innovation. This segmentation has been done for establishing the potential of the innovative idea or product to impact the macro-environment (Polder et al, 2009). The incremental innovation of a company allows it to make gradual changes in its value proposition or operational processes that eventually improved the overall performance of the organisation. This process is usually slower and helps to foster gradual improvement of a firm (Wu and Lin, 2011). On the other hand, in case of disruptive innovation, the company is able to develop new products or services that can be considered a breakthrough in the industry and can eventually change the trend of customer demands and can have significant impact on the macro-environment.

King and Baatartogtokh (2015) have further stated that the disruptive innovations often have the potential to create product categories and dangerously threaten the value proposition of the rival firms. The company chooses to leapfrog in the competitive race, thereby eliminating all the threats and challenges posed by other rivals. However, certain companies have integrated innovation in their daily activities, so as to gradually and constantly improve their value generation abilities for the stakeholders.

According to Kim and Pae (2014), the process of innovation consists of the following stages: identifying the needs of the stakeholders, highlight the problems that are to be solved, analysing problems to find possible solutions, evaluating and underpinned the best solution, and forming value proposition. Thus it can be stated that almost every innovation has its source in certain problems that have been recognised by the organisation. Thus, the innovative approach is taken to ensure that the company can operate seamlessly and can foster rapid growth in the near future. However, it has been stated that in order to sustain organisational success, the process of innovation has be adopted as a continuous process, so that the company can keep on generating unique values for the stakeholders and increase it competitive advantage (Fruhling and Siau, 2007). Moreover, the rival firms often tend to replicate the innovative ideas adopted by others, which in turn reduces the uniqueness of the differentiating factor gained from innovation. Thus, it makes it more vital for the firms to constantly seek out for new ways to generate values for the customers and stakeholders.

The theory of innovation diffusion as mentioned by Sakari and Johnston (2014), have suggested that an innovative idea is often adopted by the peers of a firm, as an effort to attract the customers. Based on the speed and rate of adoption of an innovative idea the adopters can be segregated as follows: innovators, early adopters, early majority, late majority and laggards. The majority of the firms fall under the segment of early majority and late majority. The diffusion of innovative ideas allows other companies to create a differentiation for them so that they can further strengthen their competitive advantage.

• Innovation Organization

This section discusses about the internal factors that are related to the innovation management of eBay.

As mentioned by Baer (2013), eBay has adopted incremental innovation process to develop the organisational performance. The internal factors such as the availability of resources and their development over time have been one of the primary focuses of the company. It has been further stated that eBay has fostered innovation by making several acquisitions. Over the period of three years, the company has made around 20 acquisitions, which have allowed the firm to again new technological expertise and process design. Each of the acquisitions made by the company has not only offered it with new resources but has also provided with efficient employees and managers. For example, the companies like Zong and Hunch that has been acquired by eBay has also allowed it to hire their respective CEOs so as to help the company to generate new and innovative ideas.

Schory (2014) have explained how eBay has made internal developments in small and incremental steps to gradually improve the online shopping experience offered to the customers. One of the key innovative features developed by the company is the idea of online auction that can be conducted seamlessly. The strategy of the company is to add value for the customers and also for itself, on the grounds of value generation. In order to develop a seamless internal operation al process the company has developed three business units, which are: eBay (mainstream online market place), PayPal (for secure transactions across borders) and eBay Enterprise (offering digital marketing services for global enterprises). The company seeks to develop its business from all directions by conducting vertical integrations and developing services required for it to improve its mainstream e-commerce business. In this context the example of RedLaser can be cited, which has been developed by the company to help the users to scan product bar codes and look for best available deals in eBay. Thus, the company’s mission clearly reflects that it seeks to enlarge its business by adopting new small and innovative companies and developing services that can be implemented in its business.

The process of innovation for eBay involves several external stakeholders, which indicates that the company seeks to expand its peer support in order to strengthen its competitive advantage. The increase in the competitiveness in the global business environment have further made it imperative for eBay to seek out for innovative ways to create its own differentiation factor. In this effort the firm has involved other start-up companies to launch a Start-Up Incubation program. The central idea behind this initiative is to make sure that the firms are capable of sourcing idea from third parties and implement them in its own operations. The company has taken the initiative to attract modern entrepreneurs and use their innovative ideas. EBay has offered them the required tools and resources to help them generate new ideas that can be implemented to develop eBay’s process flow and operational efficiency.

As mentioned by Mac (2014), eBay’s innovation has not only been focused on gain value for the firm, but also for other stakeholders. It has spent heavily on its research and development of innovative technologies to create products and services that can improve the shopping experience of the customers even in the brick and mortar stores. The company has collaborated with other retail companies and have installed interactive touch screen user interface that can help them to navigate through stores and find the desired products. Thus, the innovation of the company allows it to develop products and services that are catered to third party business houses.

• Innovation Strategy

EBay has realised the global e-commerce sector or the e-marketplace has faced significant changes over the past years, especially due to the rise of the other well established rival firms such as Amazon and Alibaba, along with other firms who has also adopted the e-commerce strategies to reach out to a large number of customers and to increase their sales volume. In this effort the company has adopted an innovative approach as a continuous process of new idea, product and service development to keep the customers engaged and offer them with seamless, hassle free and secured online shopping experience.

The external factors like the constantly changing demands of the customers have compelled eBay to develop new ideas that can meet their demands and offer services based on their preferences. Furthermore, macro-economic factors like the rapid technological development has also enabled the company to leverage the existing technological availability to design redesign its values for the customers. Furthermore, other rival companies in the industry are also looking forward to develop services to attract the customers. Thus, the competitiveness in the industry can potentially make it challenging for eBay to maintain its growth in the markets.

According to Garner (2015), the rise of the mobile technology has successfully recognised by eBay as a potential platform to further improve its business propositions. A constantly growing number of customers are using smartphone that support applications. As a result have the company have focused on making shopping via mobile to be an attractive experience. Over the past years the company has developed several applications to be implemented in its mainstream mobile application to make the interface more secure and user friendly (Hasan and Harris, 2009). For example the company has developed an application for one-touch payments thereby making the process of purchase easier for the customers. The company have realised that the customers often face challenges while using their phone for making a purchase. In this context eBay has developed its applications in such a way so that the overall time and effort taken to make a particular product is easier and also that the product descriptions are not cluttered.

According to the reports of Wright (2015), eBay has also fostered innovation through creative collaboration with other firms that can help to improve the overall performance of the firms. The company has not only taken initiatives to improve its services for the customers, but has also ensured that its can strengthen its supply chain as well. In this context it has operated with other companies like Argos. The Argos stores have been used as storage and logistics hubs, in an effort to offer a more efficient drop-off service. This as a result makes product delivery effortless and less time consuming.

Thus, it can be stated that the external factors like the supply chain, macro economic factors like the technological availability and the customers’ demands and preferences in to consideration while designing its innovative products and services. The company has expanded its business operations in to several fronts and is not only restricted to the mainstream e-commerce business. EBay has developed its services for several business clients as well in an effort to increase its target customer base and generate new sources of revenue.

• Recommendation

The studies made in the above section have clearly described that eBay has constantly innovated its business strategies in terms of value proposition and developing new products and developing new services for the customers. However, the challenge faced by the company while facing the industrial competition still persists. In this context it is recommended that it should focus on the customers’ experience and take initiatives to augment that. Shopping through mobile devices has become quite popular as it takes less time for the users. However, in any form of e-commerce, the customers are only provided with still pictures and they can contact with the sellers via emails or phone calls. EBay should integrate a video calling feature right in to the application to make it easier for the buyers to interact with their respective sellers.

In order to make the purchase decisions easier, the company should also make a provision for viewing three dimensional pictures of the products, which can offer better perspective to the potential customers. EBay is known to be digital market place where the sellers and buyers meet to conduct business. This interaction should be more immersive and hassle free. In order to achieve that the company should integrate social media platforms in to their e-commerce portal, this will help the sellers to connect with more potential buyers. EBay also has significant potential to leverage to attract customers by adopting new technologies like virtual reality (VR). As mentioned by Chahal (2016) VR has attracted the attention of the users in terms of its versatility and wide range of usage. It can be used by the company to create an immersive experience for the customers. VR can be used by eBay to create a virtual market place where the customers can interact with the virtual environment and perceive the product more closely. Even though VR is currently at its infancy stage, but it can help eBay to gain the first mover advantage. Moreover, the company will be able to elevate its brand image as a company that is driven by advanced technology.

• Conclusion

The global e-commerce sector has become increasingly competitive and has made it quite challenging for the existing firms to maintain their brand image and differentiation in the market. Moreover, the demands and preferences of the customers are also changing, which as a result have made it imperative for the firms to take innovative approach to develop new and unique values for the customers. The studies have shown that eBay, which is one of biggest e-commerce companies that operate in a global scale has taken several innovative approaches to develop a strong value proposition. The company has acquired several small firms and have leveraged their technological expertise to its business operations and to make sure the customers are offered with a new experience of online shopping. It has been recommended for eBay that it should integrate social media with its e-commerce business so as to enable sellers to easily interact with the buyers. Moreover, the company should also implement features like three dimensional pictures of products in order to make it easier for the customers to make their purchase decisions. As a form of disruptive innovation, eBay has been proposed to develop a platform for VR that will allow the company to provide an immersive shopping experience and also to develop a strong first mover advantage. Thus, it can be stated that the innovation strategies proposed for eBay will help it to sustain in the competitive environment and to foster long term growth.

• Reference List

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