In the battle of e-commerce with Amazon, eBay has to determine whether it should maintain the existing business model or transform its model and expand into new areas.
By analyzing eBay with Porter’s Five Forces Model, I conclude that the most effective way for eBay would be to maintain the existing business model through strengthening its brand identity. The following analysis will provide reasons on why brand identity should be strengthened and how it can be used to improve eBay’s business.
Threat of Entry
This is an Internet driven service industry, which does not provide for many barriers to entry. The main barriers come from government regulation. The government will not permit some products to be sold in certain states or countries and so any online sites need to make sure they don’t violate those laws. It is also hard to enter a market where safety and brand recognition are this important. People will not purchase items or sell them if they do not think their transaction will be protected. For safety, eBay should ensure and establish sufficient blocks that can prevent someone from selling or buying an item that would violate his or her local government. Even though eBay does not directly buy or sell items, they facilitate the transactions, which could make them liable.
Threat of Rivalry
Because of low entry barriers, the market is full of competitors. Amazon is just one of the many up and coming competitors that are fighting eBay for a piece of the market. Brand identity is the key to attracting customers. People recognize the name of Amazon, which is why its online site provides the biggest threat to eBay. Ebay thus needs to keep up with consumers needs and wants along with keeping an eye on its competitors in order to be successful.
Threat of Suppliers
Suppliers as a whole have strong power since eBay won’t exist if there is no supplier. Every person