What does Porters Five Forces analysis reveal about the competitive pressures facing eBay?


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Business Strategy and the Five Forces Model
Students Name
Unit 2 Assignment
Assignment: Examining Business Strategy and the Five Forces Model: The Challenges
Facing eBay; Time for Changes in Strategy? This week we look at strategic thinking in the
business environment.
Your assignment this week is to:
1. First, research, and create, a Porters Five Forces Model of eBay in either Visio, Excel, of
PowerPoint format. Use external sources to assist in populating your model.
Next, report and analyze your findings, touching on the following questions;
1. What does your five forces analysis reveal about the nature and strength of the various
competitive pressures eBay faces? Are the competitive pressures facing eBay and other online
auction companys conducive to earning good profits? Why or why not?
2. Based on your analysis of the industry and eBays situation, what problems and issues does
eBays top management need to address? Which ones are top priorities?
3. What do you see as the key success factors for firms in the online auction industry?
You are to use, and cite, no less than 3 outside sources for your report portion. This will be in
APA format and a minimum of 2 pages. That is, the BODY of your paper is to be a minimum
of 2 pages. Title pages, Abstract and resource pages do not count to the total.
Business Strategy and the Five Forces Model
Competitive Rivalry
EBay strategies and helping the company to identify the critical issues has five ways of
coping with complexity and change of potential entrants, competitors, buyers, substitutes, and
suppliers. This vigor describes the intensity of competition between existing players in the
industry. Several companies present options that are alike to eBay; such has Amazon, Buy.com,
or Craigslist, that all provide a similar platform. Other organizations are beginning to design
their online selling fact using EBay as an excellent tool, making eBay a group likely to remain
a leader in online auction sales. However, these companies have not created brand recognition
that eBay has, they still offer the same products, at a similar price, with the appeal of many
Power of Supplier
Always using eBay has a significant number of casual sellers and collectors. At present,
there are hardly any competitive pressures from suppliers, whose only other alternative would
be to deal with their e-commerce site that would be potentially perilous for them to compete
with other sellers on known site like eBay. EBay set again on the original total price, and those
are the terms that suppliers have to agree to demeanor their online sales.
Power of the Buyer
The power of the majorities of eBay’s customers tends to look for collector item or is
bargain hunting. If eBay’s prices begin to match that of prices at local stores, eBay will lose a
significant amount of market share. The power of buyer has a direct impact on the eBay
strategies. The sale attribute brings eBay more repayment by enduring focused on connecting
consumers; maintain financial discipline and capitalizing new opportunities for growth.
Potential Entrants
With industries as innovative as eBay, companies have to be able to retain new
customers, which, judging by the decreasing numbers of active eBay users. The potential risk
to eBay could serve as a platform that easily be created and would require a limited amount of
resources to become successful.
The Threat of Substitute Products
The easier it is for an entrant to join the marketplace, the greater the risk of a business’s
market share being exhausted. . EBay sells a lot of products. Therefore, it is extremely
uncovered with substitutes. What reduces the demand is the substitute factor for a particular set
of products as customers switched to other alternatives.
Problems and Issues Ebay’s Top Management Need To Address
Under director John Donahue Ebay’s top management face several issues in need to
address. They include; Looking for acquisitions that are pertinent to the company’s business
and those that fit with the preferred strategy can aid the business in achieving its financial goals.
Secondly, the eBay need to improve and pay more attention to all its subsidiaries in thus linking
all of them create a powerful synergy that can develop eBay business.
Also, the feedback debate is helpful in many ways, re-evaluating and making certain it
is organized should be one of eBay’s best moves. EBay should work on the further globalization
of its business and expand into emerging markets. To eventually contribute to overall success
increased traffic can help in maintaining a large customer and seller base.
Key Success Factors for Firms In The Online Auction Industry
At present, eBay does not come into view to have a far adequate advantage to be able
to uphold themselves as leaders in the online auction industry. EBay will have to distinguish
themselves from their competitors and reconsider the primary strategies to be as profitable and
show continued growth in the future. In accordance to the binding firm hold estimating, eBay
at present has significance in the area of product variation and brand name. For a extended
period, EBay has been the first runner in the online auction industry, giving them an excellent
competition significant when it comes to branding and reputation of the company.
Porter’s Five Force
Porter’s Five Forces Model is a critical instrument to break down an outer aggressive
environment of the business. The model incorporates threat of entry, threat of rivalry, threat of
suppliers, threat of purchasers and threat of substitutes.
Threat of Entry
This business is an Internet driven administration industry, where there is a low hindrances to
entry. The primary hindrance may that a few items are not allowed to be sold in specific states
and nation. Along these lines, the fundamental obstructions might originate from government
regulation subsequently any online closeout ought not abuse those laws. EBay has built up
obstructs that deal with enactment side of the law. EBay has made its image name among
clients of its administrations and it is truly difficult to enter a business sector where security
and brand acknowledgment are this critical in the business. It is found that the boundaries to
entry others are low, be that as it may it is difficult to be fruitful in the business where the
security and brand acknowledgment is vital to the clients of the administrations.
Threat of Rivalry
Yippee! Barters, Google and Overstock.com have been the most imperative contenders of
eBay. They have been battling eBay for a bit of the business sector in the business.
Additionally, one of greatest contender of eBay is the drop off industry, however numerous
drop off organizations likewise utilize eBay administrations. There is an enormous rivalry as a
result of low entry boundaries. EBay keeps on providing so as to pull in its clients most ideal
administrations at the least cost (Porter’s bland procedure: cost initiative system requiring
little to no effort ability in wide market) . They are additionally keeping on extending on a
level plane into new markets. With great brand personality and acknowledgment comes
wellbeing and security, which is fundamental in this industry. There are likewise low leave
boundaries in this industry. EBay possesses 35.14 % of the business sector starting 21st of
February, 2012, which leaves space for them to grow. EBay requirements to stay aware of
purchasers needs and needs alongside watching out for its rivals keeping in mind the end goal
to be fruitful.
Threat of Suppliers
Each and every client of web administrations may be a “player” of eBay. Along these lines,
there are an endless number of suppliers and everybody can offer something as a potential
supplier for eBay. EBay plan of action gives an administration that brings the purchasers and
venders together. The suppliers don’t have much power aside from on account of exchange of
the top of the line things at the end of the day costly products: land or autos or types of gear. It
is clear that both the purchasers and merchants need insurance for their things. EBay utilizes
PayPal as a part of request to accommodate smooth and brisk installment of things where the
venders need to get their cash rapidly. Be that as it may, it is entangled to offer costly where
the suppliers have more power. Keeping in mind the end goal to encourage the offering costly
things, eBay acquired Skype where to side can without much of a stretch impart and trade
information . The suppliers all in all don’t have much power unless they are managing top of
the line things.
Threat of Buyers
There is boundless number of purchasers and that what makes eBay effective and profitable.
Anybody around the globe can see and purchase the any thing recorded on eBay which
implies that the purchasers don’t have any genuine force in impacting eBay. In any case, eBay
listens to their clients, which is the reason they established the client criticism program. This
has removed the terrible dealers and purchasers. By and large, eBay’s purchasers don’t have
much impact unless they are managing costly things.
Threat of Substitutes
There are few substitutes to exchanging on the web. One them is to do a reversal to
exchanging at a bartering house. Another choice is to offer the things straightforwardly as
opposed to setting them on a bartering. Setting the little things on a customary closeout is not
financially savvy approach and there would be a set number of purchasers. This is won’t not
be a sensible alternative to dealers in light of the fact that the Internet and eBay opens up a
huge number of purchaser and merchants worldwide through Internet. The Internet has
particularly opened up the business sector for claim to fame things, for example, first version
cookbooks or customary lunchboxes with superheroes on them. This is impractical without an
administration, for example, eBay. In a word, the threat of substitutes is found as low the
length of eBay keeps up its positive picture and advance.
Thompson, A, Strickland, A, & Gamble, A. (2010). Crafting and executing strategy. New York,
NY: McGraw-Hill.


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Businesses need to have a thorough understanding of their competitive environment to develop effective strategies that would enable them to stay ahead, earn good profits, and address the issues they may currently face. This week’s assignment revolves around the examination of business strategy and the Five Forces Model by using eBay as a case study. This Model employs five different factors – potential entrants, competitive rivalry, buyers, suppliers, and substitutes – to analyze the nature and strength of competitive pressures a company faces.


The article examines the Five Forces Model, one of the most important tools in strategic planning for businesses. The Model includes five strategic factors of competition that can help businesses understand their current competitive environment and the possible challenges they may face. Using eBay as a case study, a Five Forces Model has been developed, and the findings reveal that eBay faces intense competition from others who offer similar products and services. However, the company has a distinct brand recognition edge over its competitors. The bargaining power of suppliers is also lower, and most of eBay’s customers tend to look for products on its site. Additionally, the key success factors for firms operating in the online auction industry are discussed. The article concludes that for eBay to remain a leader in online auction sales, it needs to address its top priority issues and modify its strategies accordingly.

1. To create a Porters Five Forces Model of eBay
2. To analyze the competitive pressures faced by eBay and other online auction companies
3. To identify the key success factors for firms in the online auction industry
4. To identify the problems and issues that eBay’s top management needs to address
5. To utilize external sources to support the analysis

Learning Outcomes:
1. Students will be able to create a Porters Five Forces Model and use it to analyze the competitive pressures faced by a company
2. Students will be able to identify the key success factors for firms in a specific industry
3. Students will be able to analyze the challenges faced by a company and recommend relevant solutions
4. Students will learn to use external sources to support their analysis and findings
5. Students will learn to write a report in APA format, adhering to the requirements of the assignment.

Solution 1: Addressing the Competitive Pressures Facing eBay

eBay has faced tough competition from companies such as Amazon, Buy.com, and Craigslist, who have similar platforms. However, eBay’s brand recognition still keeps it as a leader in online auction sales. Top management at eBay should address the competitive pressures facing the company by focusing on brand differentiation. Enhancing the brand can help eBay stand out from competitors and improve customer loyalty. Moreover, the company can explore various technological innovations, such as virtual reality auctions, to give consumers a unique experience.

Solution 2: Addressing the Power of the Buyer

The power of the majority of eBay’s customers tends to look for cheaper deals and the convenience of online shopping. Top management needs to address this by implementing various strategies to enhance buyer power. The company can redesign its platform to be more user-friendly or provide a loyalty program for frequent customers. Additionally, eBay can set policies that protect buyers from fraudulent sellers. By doing so, eBay can attract more buyers and improve overall buyer satisfaction, which can translate to increased profits.

competitive deals and prices. Customers have the freedom to make an informed choice and go to different websites or retailers to make purchases. Therefore, eBay has a low-power position over buyers, and the bargaining power is high. The availability of online stores and auction websites has added to customer convenience, and this trend is likely to continue in the future.

Threat of Substitutes
EBay faces stiff competition from online auctioneers and retailers such as Amazon and Craigslist. These online auctioneers and retailers offer similar services to eBay, which creates a high threat of substitutes for eBay’s offerings. Additionally, traditional brick-and-mortar stores are also starting to offer online services, further increasing the threat of substitutes for eBay.

Threat of New Entrants
The online auction industry offers low barriers to entry, and it is relatively easy for new players to enter the market. Online auction retailers such as eBay have a first-mover advantage, but new entrants can quickly gain market share using innovative approaches and aggressive marketing strategies.

Suggested Resources/Books:
1. Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter.
2. The Five Competitive Forces That Shape Strategy by Michael E. Porter.
3. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton M. Christensen.

Similar asked questions:
1. What is the significance of the Five Forces Model in analyzing the competitive landscape of a business?
2. How can businesses use the Five Forces Model to identify key areas of focus for their strategic planning?
3. What are the key success factors for businesses in highly competitive industries like online auctions?
4. How do businesses manage the threat of new entrants in their industry?
5. How can businesses leverage their strengths to overcome the challenges posed by substitutes and competitive rivalry?

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