Evaluate eBay’s competition structure
1. Supplier power
Due to the fact that eBay’s income is generated by the sellers on the site, the bargaining power of suppliers is high. Services were free to buyers, but sellers were charged a fee. However, because of high competition in the industry, eBay needed to incentivize sellers to sell on the site. As a result, eBay offered different selling options, including the Buy-It-Now option or eBay Express in order to attract buyers to the site. Additionally, efficient processes, including efficient exchange of information among buyers and sellers, also attracted sellers to the site. eBay also used alliances to build up trust in their brand. Integrating with trusted Chinese brands, Sina, Sohu, and NetEase, increased the Chinese’s trust in eBay. The company also expanded into the communication sector on a joint venture with Tom Online.
2. Buyer power
Competition in the market made the buying power high. Because buyers could go to various sites, and eBay’s income relied on attracting sellers to the site, customers dictated low prices. In addition to low prices, customers dictate product variety as well, which makes buyer power high.
3. Competitive rivalry
During the time of the case study, eBay’s major competition was Yahoo! and their affiliates, and competition was increasing at an alarming rate. Prior to eBay’s entrance into the Chinese market, Japan already was dominated by Yahoo! eBay infiltrated China, and eBay EachNet was the largest online advertiser in China. As more companies infiltrated the fast growing online auction market, competition increased. Alibaba’s strategic partnership with Yahoo! in 2005 propelled the company into leadership. Because of brand recognition, better customer service, and a more diverse product offering, eBay’s market share slid significantly.
4. Threat of substitution
EachNet was a threat to eBay because the company was sensitive to cultural differences and altered their company accordingly. This threat was diminished when eBay acquired EachNet in March 2002. By 2003, the acquisition proved to be a success with over 85% of the market share. With the diverse product offerings on eBay, the threat of substitution was low.
5. Threat of new entry
Because of the ease of entry into the online retail industry, the threat of new entry was relatively high for eBay; however, gaining brand recognition in foreign markets made it difficult for new entry. Because EachNet was already established as China’s first online auction website, the logical move