Five Force of Ebay Essay

635 Words Jun 24th, 2012 3 Pages
eBay’s five forces Model of competition analysis

In order to understand why and how eBay has been successful, it is important to understand Porter’s five forces model.

The model includes threat of potential new entrants, threat of rivalry in the industry, threat of suppliers, threat of suppliers, threat of buyers and threat of product substitution.
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Rivalry in the industry
Because of low entry barriers, the market is full of competitors.

Yahoo! Auctions is one of the example competitors for eBay

eBay continues to appeal to their customers and provide the best possible service at the lowest price.

They are also continuing to expand horizontally into new markets.

Brand identity is the key to attracting customers.
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At an auction, the item goes for the highest price, which can be higher than the seller originally thought they could get for the item.

The other option would be to sell the item online. There are many places to sell an item online

Seller must set a price. If there is a set price, then the seller does not receive a higher price.

Neither of these substitutes poses a real challenge as long as eBay keeps up its positive image and appeal.

Suppliers

There are a limitless number of suppliers for eBay.
A potential supplier for eBay is a person who has something they want to sell.

Both the buyers and sellers want protection for their items.

It is harder and riskier to sell high-end items, which is why the suppliers have more power.

The suppliers as a whole do not have much power unless they are dealing with high-end items.

Buyers
One of the main reasons that eBay is so powerful is because there is a limitless number of buyers.

Each item listed on eBay can be seen by customers all around the world.

This means that the buyers don’t have any real power in influencing eBay.

However, eBay does listen to their customers, which is why they instituted the customer feedback program.

This has helped to weed out the bad sellers and buyers.

Buyers do have power with high-end items such as real estate, boats and cars.

With high-end items, there is more risk and uncertainty. eBay took measures to increase its

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