Category: Ebay

Abstract

Since the advent of the internet, our world has become a global village. Distances have been eliminated in a virtual sense. Anybody can buy or send anything around the world within no time. Buyers and sellers are now very close to each other like never before. This opportunity has been cashed by many buyers, sellers, and other stakeholders. eBay provides a platform to sellers and buyers, where they meet and trade without going anywhere and in spite of living thousands of miles away from each other. In this article, we will study how the internet affected the lives of consumers from the perspective of eBay – the giant platform.

Introduction

The websites that allocate consumers to carry out “one-click” price assessments for product proposals from multiple retailers are termed as “Internet Shopbots’. As price is a key determinant factor of preference of the consumer, I discover that yet in the midst of shopbot consumers, branded retailers, and retailers a consumer stayed until that time cling to considerable cost benefits in head-to-head price assessments. Moreover, consumers are very responsive to how the summation cost is assigned between the product costs, the logistics charges, delivery tax, and additionally they are pretty responsive to the ordinal position of retailer proposals with regard to the product costs. The topical investigation has revealed that consumers utilize brand name as an alternative for the reliability of the retailer in connection with the non-contractible features of the goods’ stock, for instance one of the feature is the logistics time and duration.

Main body

In the present day unrelenting cutbacks in e-commerce outlay and the go up in marketable applications of the Internet predicts a analogous rebellion in the transaction and its consumer scrutiny (Kamakura and Russell 124). What is more, the hi-tech potentialities of the vacuity shrink consumer’s effort and toggle expenditures to help eradicate some cutthroat leads that retailers would benefit from a corporeal souk. Thus Internet shopbots are symbolic of its competence and the enhanced proficiency.

From the time when the Internet shopbots were born in 1995, auctions on the Internet have nurtured with a remarkable tempo. In such shopbots, one of the biggest consumer-oriented shopbot is eBay, where individual sellers catalog their products for auction, and individual consumers bid for those products. Subsequent to their three dealing annuls, eBay by now accomplished over 1 billion US$ in transactions in 1998, and by 2004 their revenue mounted to $34.2 billion (NASDAQ 5). Overall, 56.1 million users either bid or listed an item on eBay during 2004, and as per the July 2005 survey conducted for eBay by ACNielsen International Research, a probable 724,000 populace of Americans account eBay as a primary or secondary resource of their earnings and it makes eBay one of the biggest Internet marketplaces on the planet (Reiley, Bryan, Prasad & Reeves, pp. 2-4).

Take the example of an Oklahoman consumer, Sam Alexis. Intended for a long period, Sam managed a store in Boulder, Colorado, selling first-edition books. Except with an on paper mail-order record, she established that most of her customers resided by a two-hour drive from her store. Commencing in the fall of 1997, Sam embarked on listing her more costly books on eBay auction site. She astounded when volumes that would usually stay behind for months in her store vended swiftly even at profitable rates. At a standstill, her confined business got on worldwide magnitude. She was shortly auctioning with consumers over and done with the USA, Germany, UK, Australia, Russia and consumers all around. So she fell in love with eBay.

If the amount of Internet-connected consumers is mounting very rapidly, hence the scale of business carried out by the average consumer should also grow up even sooner. Likewise, there is merely added auction over the internet each year, performed by both consumers and entrepreneur. hardly four years before, e-tailer websites were little, and consumer who would characteristically offer a credit-card number over the touchtone phone to a index sales representative that were petrified about employing plastic to purchase a flannel shirt over the internet from a shopbot. Evidently the rush of internet shopbots like eBay has smoothed way for individual consumers to purchase and vend online very handily. In contrast to customary shopbots, online auctions offer a lot of benefits such as lesser seek and catalog prices for both purchasers and vendors besides, applicants in online auctions do not require to actually focus an auction site nor do they require to entrust around the clock throughout the auction stage.

These days, Internet consumers have gone astray with fear, and they currently purchase the whole lot, from a needle to a luxurious car and from foodstuff to gardening tools. The ecommerce is getting brawnier. As of fewer than $8 billion in 1998, Forrester Research calculated that internet transactions will achieve $108 billion by the year 2003 and it makes about 6 percent of the entire estimated retail auction of the United States of America. (Ledbetter 42-65)

The Retail auction on the internet dig up the most of the buzz, save for the business-to-business (B2B) segment of e-commerce, the largest single day of online consumer business on or after this script happened December 14 of 1999 once, BizRate.com announced that consumers put 2.5 million online goods bids valued over US$240 million.

EBay involves itself in the demand-based or active cost fragment of ecommerce. At hand, business deals are evaluated exclusively by the consumers. It is primarily dissimilar from what the majority of us are familiarized with. Typically, vendors build the cost pronouncements, and the consumer either agrees to the prices or explores somewhere else for a cost effective transaction. While in demand-based cost fragment, consumers make their mind up for these important resolutions. As getting the auction online is a significant modernization, and is one of the supreme applications of the Internet technology ceaselessly; though the internet has smoothed the progress of a range of business and commerce doings. A lot of these are picked up openly from offline forms and supplied no better charge or expediency for its consumers.

The outcome of the marketplace traits fairly portrayed that if the consumer is not expected to be twisted when he vacate to purchase an automobile because there are plainly too lots of vendors and a good deal with no trouble accessible information. If the consumer is taken to the cleaners, he has no one to censure but himself only. Contrarily, the prospect to twist the automobile vendor is similarly restricted, given that the copiousness of other potential consumers is there, and vendors have countless information. The thing is termed as the market efficiency. Market efficiency has the favorable consequence of carrying auctioning and bidding prices nearer collectively and closer to factual rates (Wolverton). For instance in the Middle Eastern bazaar, eBay has magnetized a sundry society of dynamic dealers. Most of these dealers and vendors who go into the spot on the odd occasion to drop off a piece of not in use goods or, equally to get hold alike at the same time expectantly at a negotiable rate. While others are sternly collectors and traders of books, antiques, coins, automobiles, and other items for which internet auctions have greatly inflated the band of obtainable products and dealing associates (Green, p. 15). From a severely commerce stance, the most appealing affiliates of eBay’s online community are people like Sam, the dealers and other small-business operators who are spending to make use of the website as an innovative and money-making strait of allocation. Consequently eBay has enlarged their geographic contact to extra fabulous profundity to their bands of prospective consumers. However, data from a shopbot permits its consumers to inspect more intimately how the endearing cost of an auction is resolute. In addition, one more attractive object on eBay is that inexpert bidders are inclined to tender more futile bids to their point.

The customary person-to-person markets, on the contrary are extremely ineffective. As they are geographically disjointed, creating a big problem for consumers and traders to meet up and carry out a transaction. Added to the hitch, transaction prices are quite sky-scraping. Cost scales are tricky and unfeasible to discover. For instance, if the consumer is finding a variety of Big Bopper albums, his barely opportunity of striking reimbursement is to rake through the old evidence stores in an extensive geographic region and an erroneously prolonged procedure. The chance of stumbling on the precise values the consumer wants through flea markets or classified ads is yet more far-flung. If luckily the consumer discovers someone vending a Big Bopper album, he will have no orientation tip for its cost. The vendor will be uniformly confronted; exploring and linking with the buyer would be complicated and pricey, particularly if he has to way out classified ads (Dougherty76-77). EBay had a first-rate vanguard in the competition to get hold of auction consumers. However with up-to-the-minute players in the market jumping into the fixture every month, its executives are acquainted with that they would endure defections and incapable to detain new market zone if they did not create their site ever more larger, recovered, and more wide-ranging. Their rejoinder was a two-sided approach that brings in new higher-priced product groupings and pulls out the overhaul worldwide.

Conclusion

At the onset, eBay had been austerely a person-to-person maneuver. In excess of instants, this lengthened to encompass small-dealer-to-person buy and sell; a assemblage that now the volume selling regulator. EBay has established an innate feedback circle where generating a decisive accumulation of bidders boosts the fee gained by traders, which raises the number of consumers, and attracts more consumers. Every single one markers, conversely, spots the business-to-business trading seeing that the superior setting in the upcoming race.

Works Cited

Barberis, Thaler. 2002 “A survey of Behavioral Finance”, Handbook of the Economics of Finance: n.p.

David Lucking-Reiley, Doug Bryan, Naghi Prasad, Daniel Reeves. “Pennies from eBay: the Determinants of Price in Online Auctions”, 2006: 2-4.

Heather Green, “The E.Biz 25”. BusinessWeek Online, 1999.

James Ledbetter, “The Internet Economy Gets Real”. The Standard, 1999.

Kamakura, Wagner A., Gary J. Russell. 1989. “A Probabilistic Choice Model for Market Segmentation and Elasticity Structure”. Journal of Marketing Research. 1989:124.

Han Lee and Ulrike Malmendier. 2005. “Do Consumers Know Their Willingness to Pay? Evidence from eBay Auctions”. Stanford University Press. 2005: 2. Web.

Nasqad. eBay INC. “Announces Fourth Quarter and Full year 2004 Financial Results”. Company Reports Record. 2005.

Steffano Korper and Juanita Ellis. “The E-Commerce Book: Building the E-Empire”. Morgan Kaufmann. 2001.

Terri Dougherty, “Oregon Goes Online”. eBay Magazine, 2000, pp. 76–77.

Troy Wolverton, “eBay Latest to Tout Its E-business Ways”. CNET News.com, 1999.

Companies that experience rapid expansion and growth usually focus on retaining the traditional customer base while at the same time implementing other strategies to attract new clients. New marketing tactics aim at promoting profitability and enabling the company to stay ahead of the competition.

With increasing technology, marketing strategies focus on expansion of its productivity, increasing its product range and expanding into new markets.

In the case study, e-Bay’s new marketing strategy of diversifying its product offerings and services to suit new customers produced unintended results as the traditional customers were not receptive of the new changes. The company, after 15 years of successful business, introduced a new strategy to expand its customer base and increase its profits.

However, the new strategy failed to take into account the needs of its traditional customers. While it is important for a company to implement new marketing strategies, implementing the strategies within the existing systems is more useful to retain the traditional customers and enhance profitability.

The idea of creating an online open auction market by a software developer, Pierre Omidyar led to e-Bay’s establishment in 1995 with an aim of providing fair and open marketplace for sellers and buyers of treasured items. e-Bay’s rapid growth over a short time is attributed to the novel nature of the idea, which attracted many potential buyers in search of treasures and sellers wishing to dispose off old items.

In addition, the company also focused on generating profits by charging a fee from sellers of items. Other strategies that contributed to e-Bay’s rapid expansion include expansion of its product offerings to cover many categories of items. e-Bay also expanded to include international markets in different countries.

The company also acquired new sub-sites such as shopping.com, Skype, and Paypal, which helped to e-bay to diversify its products to suit consumer needs.

Another strategy that contributed to e-Bay’s early success is the introduction of fixed selling option whereby, sellers put a designated retail price for their products. This trend was different from the earlier auction method whereby the highest bidder purchased the item. The idea was revolutionary in the sense that it allowed sellers to sell their items more quickly and in large volumes.

The new CEO, John Donahoe, introduced a new strategy that focused on selling new products at a fixed price to suit the changing consumer needs, a strategy that produced successful results for the other competitor e-commerce companies like Amazon.com.

However, the new strategy was not welcome by the traditional sellers who formed the bulk of the e-bay customers thus affecting e-bay’s growth.

Donahoe’s new strategy entailed promoting fixed price options for items as opposed to auctions. The strategy reviewed the cost of listing an item, which shifted to effecting charges after the item has been sold.

The strategy also aimed at rewarding the sellers who sold a large volume of items by reducing the charges. Additionally, the new strategy aimed at promoting sales of highly rated items and products in high demand besides providing other after sale services like free shipping.

The new fixed pricing option favored large merchants as the traditional items listed lacked standard pricing, which forced small merchants to seek alternative means of selling their wares affecting e-bay’s growth in profits and expansion to new markets.

The marketplace is dynamic and is affected by many forces requiring new strategies for a business to remain competitive. In the case study, the marketing environment is defined by technology. e-bay pioneered the online marketplace, which allowed buyers and potential buyers to transact business.

Donahoe’s new strategy also focuses on developing a new technology that gives billing to items based on customer satisfaction rating and their prices.

Globalization also is evident in this case study as e-Bay and its competitors including Amazon.com offer a wide range of products and aim to expand into new international markets. Competition also shapes the marketing environment in this case study. The new strategy proposed by Donahoe aims at providing better services than what e-Bays competitors like Amazon.com provide.

The introduction of a fixed price listing of the items sold through e-Bay provided greater customer value than the traditional auction method. The new strategy introduced favored sellers dealing in new products and in large quantities as opposed to traditional sellers who listed old merchandise.

The customers could buy new products at a specified price rather than auctioning. In addition, the new strategy provided for the free delivery of the item sold by the seller, which was an added advantage to the seller. The new approach also allowed customers to search items that are highly rated and in high demand by customers.

Despite the noble nature of the new strategy of diversifying the products and attracting new customers, I disagree with CEO Donahoe’s assertion that all sellers will benefit from the strategy. The strategy aims at promoting transactions involving new products, therefore, traditional sellers dealing with use products are likely to lose.

In addition, small-scale sellers are likely to lose as they get poor ratings thus affecting their businesses. e-Bay’s strategy will fail to realize the intended goals if it is not corrected at least in part. I would recommend that the rating of sellers be removed to favor small-scale and traditional sellers.

Reasons why eBay have succeeded as an online auction market place

Kotler and Keller assert that the success of eBay was as result of their capability to create new pricing strategies that enabled the bidders or buyers to establish the values of the products they need 411. The ability of the consumers to predetermine the prices created a feeling of control among the consumers. Consumers also had the capability of bargaining the best prices. Moreover, the website enabled the consumers to reach a wide variety of sellers as well as the products to choose (Kotler and Keller 411).

On the other hand, the eBay platform enabled sellers to meet a variety of customers at reduced costs. In fact, eBay established a distinctive online business that attracted both the customers and the auctioning firms. The uniqueness of eBay attracted customers from the competitors resulting in most of the competing firms merging or shutting down (Stevens 141).

The online firm has been successful on the online business because of the knowledge of the needs of the customers. Moreover, eBay had a proper knowledge of its customers and targeted their needs that the competitors did not give much attention (Kotler and Keller 411). In fact, the firm was fast to identify the requirement of the people, do business in second-hand quality goods, and earn cost-effective proceeds.

The company became conscious of the fact that there is need for a platform where auctioneers for second-hand products could meet the buyers (Kotler and Keller 411). The company applied its technological competence to create the required platform that enabled free trade between the auctioneers and the buyers.

The firm has been able to build its credibility among the customers. The credibility the firm established during the first years of operation enabled many potential customers build trust on the firm (Stevens 141). Creditability is critical in the cyberspace where sellers meet potential customers virtually and exchange takes place.

The company builds this credibility through having high quality website that increases the capability of customers and sellers to interact (Stevens 141). Moreover, the company also embraced a well-established payment system including the WorldPay as well as PayPal that increased the customers’ confidence on the business. In fact, the reputable money transfer firms turned many non-believing customers to the business (Stevens 141).

Essentially, the success of the online auction was attributed to the simplicity of the user interactivity, the ability to offer wide variety of products, increased degree of trust among the customers, enhanced level of development and adaptability, augmented connection capabilities, improved levels of commitment and the ability to adopt the reputable and reliable payment options (Stevens 141).

The ability of the company to attract large volume of traffic also boosted the customers’ confidence and enabled increased frequency in buying. Moreover, the company developed an easily to use website that enabled increased interactivity. In addition, the company’s website has advanced features that allow easy navigation, increased availability, high-usage interaction and clutter-free (Kotler and Keller 411). All these features contributed to the success of the company.

The company has also been able to acquire similar firms that would have offered competition hampering its growth and development. Through these acquisitions, the company has grown from a simple online firm to a large international online firm operating in many countries.

Evaluating the eBay fee structure

The company attains its financial gains through fees it charges on the auctions. According to the company pricing policy, there is a fee charged for each listing while there is a final value charged on the fixed price. In fact, the seller meets all the charges. Taking an example in the case, there is a percentage charged on the $25 of each action. The percentage reduces depending on the amount sold.

A particular percentage is also charged on the remaining amount. For instance, the company will earn $5.69 in an auction that costs $100 dollars to the buyer. In other words, the seller will be charged 8.75% on the first $25 and 3.5% on the remaining $75. Numerically, (2.19 + 3.5) this equals to $5.69.

The fee structure could be improved by lowering the percentage on the fixed charge and increasing the percentage on the remaining amount. In other words, the pricing structure should be flexible to enable the company remain competitive.

Flexibility in the pricing structure should be made in such a way that it still deter the low-priced items auctioneers while at the same time increases the company competitiveness. The online business is currently becoming more competitive. Therefore, online businesses must ensure flexibility in all their operations to gain the competitive advantage. The pricing structure of eBay should not only be flexible but also enhance efficiency.

The future of eBay

The successes that the company has achieved will enable its growth and expansion as well as remain competitive in the market. There are high possibilities that many competing online firms will emerge. However, the company will use its capabilities in terms of technology, finance and market share to remain at the top (Kotler and Keller 411). Moreover, the company is still capable of acquiring the competing firms that will add value to its customers. The future of the company also lies on the way it addresses the challenges it is facing.

The way the company addresses the challenges coming from the sectors such as the real estate markets as well as expensive collectibles will determine its future growth and development (Kotler and Keller 411). In addition, the company is facing challenges arising from regulations, honesty in the part of sellers as well as in the internet security. Besides, tackling these challenges, the company has to offer quality services to the sellers and the buyers. The quality services will enhance the confidence of the users of its site.

Forming partnerships with other online businesses such as Wiki together with social networking sites including Facebook and twitter is another opportunity the company can exploit for its future growth and development (Kotler and Keller 411). Partnership with these online companies will ensure increased market share and be found within the market niche of these online firms.

Moreover, the social sites will ensure continuous popularization of the company. The company must also come with innovative and unique ways of doing business in order to remain relevant in the market.

In addition, the company should make considerable investments to expand in new markets found in various developing and developed countries that lack the eBay presence. Further, the fixed-price options should also be a focus of the company. The fixed price options should provide superior prospects and enable the firm to advance into new markets (Kotler and Keller 411).

Works Cited

Kotler, Philip and K. Keller. Marketing Management. Upper Saddle River, NJ: Pearson Education, 2012. Print.

Stevens, Robert. Marketing Management: Text and Cases. London, UK: Routledge, 2012. Print.

The firm offers an automated, well organized website that gives the customers easy time when transacting businesses online. Those selling items are able to display their goods and every detail including prices on the site. Auctioneers have found it easier to use e-Bay since it helps them perform every step involved during auction as well as providing completed transaction to both the seller and the bidder.

The company offer buyers free browsing time, this provides cheap channel for buyers to access high quality goods while on the other hand sellers are able to access large market with rich customer base (Tang 371- 376; Feng et al 467-503).

The company has protected its customers from fraudulent activities that may occur in the process business transactions. It provides its clients with insurance for the first $200 of every transaction performed through its site. They give the customers opportunity to socialize freely using their site. They offer clients the opportunity to choose one station where to list their inventories (Tang 371- 374)

Connected Activities

The e-Bay company entered into partnership with several other companies which formed the basis of its expansion (Tang 371). The company is currently involved with products that have ready market. There is also involvement in vertical channels that sees the company sell automobiles and other industrial goods boosting the company’s revenue. The company partners with outside vendors to offer to clients additional assistance services.

The firm offers education to its users and this help in improving the customer’s proficiency in online activities. The company has created several sub sites that helps in the sale of some goods like used cars, Kelley Blue Books helps the firm in advertising prices and information regarding commodities on sale (Tang 376-377).

The firm has adopted the use of non-auction methods to sell off products. It also created the program that enables buyers to win auctions as fast as possible. The firm uses a strong brand name which has been one of the driving forces behind their success.

They use the brand name to attract new customers through partnership and advertisement in the internet. It partnered with American Online which led to co-branding of the auction sites; this gave eBay a good base to market its products. It also incorporated its activities in MSN through partnership with Microsoft Corporation.

The firm has further partnered with several service providers to offer enough space and good inventory management for the big businesses to channel their products (Tang 377). The company acquired PayPal to help in improving the level of the non-auction services. This offers the clients maximum security and efficiency on their transactions.

Scope

The firm uses public relations effectively and uses it to provide stories to its customers. It offers its services to United States where it operates local sites in the regional markets. The local sites enable the users to locate products that are sold within their reach; this is more eminent in Los Angeles, Honolulu, Oklahoma and Miami all in the United States. The American Online digital City enables the customers of e-Bay to access city guide services and Newspapers all over the region (Tang 376).

The firm has expanded its services to twenty seven countries, these include; United States, Brazil, Canada, Argentina, Chile, Columbia, Ecuador, Mexico, Uruguay, Venezuela, Austria, European countries, Australia and some countries from the far East. In some countries like Germany it offers services on acquisition of online auction houses.

It offers customers wholesale markets, developed retail options and structural efficiencies (Tang 388). The firm offers sellers free listing services and heavy sales promotion in Japan. The firm’s stores have been used by big companies as preferred channel to sell their products. The state governments also find it convenient to auction their vehicles through e-Bay (Tang 376-377).

Works Cited

Feng, Froud, Johal, Haslam and Williams. “A New Business Model? The Capital Market and the New Economy”. Economy and Society, Vol. 30, No. 4, 2001: 467-503

Tang, Scott, e-Bay: growing the World’s largest online Trading Community. United States. 2003: 371-383

Meg Whitman collaborated with other employees in E-Bay which enabled the firm to achieve positive performance in the market. She hired new employees and made them aware of corporate changes she intended to introduce in the firm. Whitman employed older and more experienced employees with multiple skills, who did not have any background in Information Technology. The group of employees assembled was competent and had the necessary qualities needed to initiate positive change in the organization.

She also hired another team of employees whose were given the responsibility to assure customers that E-Bay’s financial systems were not susceptible to fraud. This restored consumer confidence in the firm which had been severely eroded. She updated the firm’s systems by installing advanced programs which helped to protect E-Bay from online fraud. These two instances show that Whitman was willing to improve the internal capacity of E-Bay to make its operations more competitive.

Whitman improved the company’s policies to make them responsive to new changes which she had introduced. She learnt new technological skills which demonstrated her willingness to learn and understand problems which the firm was facing at the time. This made it easy for her to understand the firm’s situation which enabled her to communicate key aspects of her vision to subordinates. She collaborated with technical staff to solve system problems which E-Bay was facing at the time.

Whitman also made E-Bay’s customers more loyal because they were receiving high quality services from the firm’s employees. All employees were aware of the importance of customer focus, which Whitman had introduced, as part of the firm’s market strategy. This encouraged them to interact with clients to understand their issues better. This was helped to elevate the company’s position in the market.

Whitman removed obstacles which existed between the firm and its customers. She allowed openness in the way the firm interacted with its clients which made them more loyal to the firm. The ‘Voice of the Customer’ allowed the firm to identify areas in operations which needed improvements to ensure customers were offered high quality services.

This strengthened E-Bay’s brand in the market because customers were more confident about the firm’s reliability and its willingness to satisfy their expectations. Under Whitman’s guidance, the firm transitioned from an auction website to a full e-commerce website. This expanded the firm’s customer segments and led to positive growth in revenues. The firm was in a better position to benefit from a larger revenue base because these approaches enabled it selling more products in the market.

Whitman made customer service a key part of the firm’s vision. This changed E-Bay’s corporate culture and the way it conducted its operations in the market. She also changed the mode of purchasing from auction to fixed price which reduced the time products were sold to different customers. This approach helped the firm expand its reach into new markets which helped it grow its revenues. Her guidance helped E-Bay acquire B&B and Kruse International, high profile firms which helped E-Bay change its market strategies.

Whitman encouraged major companies to sell their high priced products through E-Bay by giving them favorable terms. This expanded the amount of goods sold through the e-commerce website and improved its earnings. This helped the firm increase the number of high income clients who purchased products through its website. She improved the reputation of the firm in the market which improved its long term performance in key consumer segments.

Meg Whitman is CEO of eBay, Inc. The particular approaches to developing strategies and her leadership qualities made Whitman one of the most successful CEOs in the market world. Meg Whitman’s leadership depends on the effective combination of methods discussed by Kotter as the ways to create the major change within the company. Whitman contributed to the development of eBay, Inc. with references to using the efficient planning and marketing strategies.

Kotter developed the Eight Step Process for Creating Major Change, and Meg Whitman followed all the steps during her integrating process into the company’s culture.

Thus, the focus on changing the environment in relation to using the eight-step model can be discussed as more effective in comparison with the usage of the strategies to promote the company’s rapid growth. The strategy can be followed successfully when the guiding coalition is created. Whitman demonstrated her abilities as the effective leader and focused on the slow development of the working team.

For example, Meg Whitman used the pattern developed in the company in relation to team-building process previously and improved it basing on the ideas of unity of internal and external community cultures along with encouraging and empowering employees to provide their own opinions and recommendations. Furthermore, Whitman decided to integrate into the company’s culture conducting frequent meetings where the team could solve the issues and interact effectively.

To direct the change effort, Whitman proposed the radical vision as the main goal of the company. She stated that it is important to become the world’s largest person-to-person trading company which operates online. From this point, the long-term perspective became focused on the proclaimed vision. To achieve the vision, Whitman developed strategies to work on such issues as the market and brand positioning.

That is why, the frequent meetings helped communicate the new vision of the company’s development. Whitman focused on the effective communication between the participants of the team using senior managers as role models to demonstrate the elements of behaviors expected from the other employees.

Empowering broad-based action, Whitman changed the structure of the organization. Whitman started to work in the engineering-driven organization. To achieve the significant progress, it was necessary to change the structure of the organization with references to the increasing number of employees. Thus, the organization’s structure was later divided into units or departments.

To generate short-term wins and achieve visible improvements, Whitman concentrated on developing a strategy for the company’s investment, on defining the marketing strategy, and on preparing eBay Inc. for IPO during the first weeks of working in the company. The further wins of the company were associated with overcoming the controversial issue of selling firearms by eBay Inc. To respond to the community’s expectations, it was necessary to improve the working strategies.

The further consolidation of gains and production of more changes was based on supporting the principles of the community’s safety and on developing the partnership relations with many companies, including AOL and Butterfield & Butterfield. Thus, the company focused on the ethical principles of selling to contribute to the community’s safety.

Furthermore, the company’s promotion was based on the cooperation with AOL and developed advertising strategies. The increase in profits was connected with Butterfield & Butterfield’s strategy in relation to eBay Inc. Having hired experienced managers and legal councils, Whitman achieved not only short-term goals but also the main vision of the company.

How have the characteristics of digital media supported eBay’s growth?

Digital media has been behind the success of e-bay and this is based on various characteristics. Crucial innovations have made it easy for buyers and sellers to interact without any problem. The model that was developed by the company gave people a low cost opportunity to do whatever they liked on the internet.

An online person to person interaction in relation to trading has been a major characteristic of digital media that has made the growth of eBay easy. Through digital media and the internet, users can browse through a number of goods and commodities thereby enhancing eBay’s growth (Cohen, 2002, p. 12).

Through the company’s web interface, buyers can easily move around the site without any problem. This is mostly done after a few minutes of registering as far as sales are concerned. eBay continues to grow because the internet has brought together different buyers and sellers which is a major characteristic of digital media. An online auction has not existed before and this is a major development that revolves around digital media.

Through digital media, various activities have been easy to transact and this has been behind the growth of eBay. Computing power is a good characteristic of digital media that has made it possible for the company to grow without any problem.

It should be known that through digital media, the company has developed a transaction processing system that has been behind its growth. As a matter of fact, the system can handle any type of process and this is as far as transactions and interactions between buyers and sellers are concerned (Nissanoff, 2006, p.46).

Information infrastructure that can be enhanced through digital media has also helped the company to progress in a broad way. The internet economy and the company’s business design have fused well to give it the leverage that it needs in the marketplace thereby guaranteeing success.

How have strategic decisions supported growth?

eBay embarked on building a free market and this can be said to be a major strategic decision that has helped the company in a broad way. Users have been encouraged to interact in relation to what they want to sell and this has therefore enhanced growth.

Users are in charge of the site and this is a strategic decision that has helped the company to grow. By being educated, users have found it easy to use the site thereby encouraging others. In the process, eBay has grown tremendously because people do not have any problem as far as using the site is concerned (Nissanoff, 2006, p. 24).

The decision to allow the company to own a banking system has been a major strategy that has worked in its favor. All along, the company has focused its strategy on five key elements that have been behind its success and growth. Building brand recognition that was embarked on by the new CEO has also helped it to develop in a broad way.

Clarification on what the company stands for has been a good strategy because it has moved it closer to people. Market segmentation is another strategic decision that can be credited for helping the company move forward. As a matter of fact, this has set it apart from other competitors thereby giving it advantage in the market.

Product development that revolves around value addition has also been a key strategy that the company has used to gain the market and grow as time goes by (Cohen, 2002, p. 12). Whitman has been credited for most of the strategies that have propelled the company to great heights and this includes the ultimate goal of building infrastructure (Nissanoff, 2006, p. 76). This is because the company needed a large system infrastructure that could support excess capacity and this has paid off as time goes by.

Reference List

Cohen, A. (2002). The Perfect Store: Inside eBay. New York: Little, Brown & Company

Nissanoff, D. (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. New York: The Penguin Press.

Introduction

This case is about a company, namely eBay, which has made a niche in the e -business industry and gone on to become one of the most successful and profitable firms in online auctions. The company’s most important stakeholders include its owners, employees, customers, suppliers, the government and the community at large. eBay operates on the principles of e-commerce where the internet is the main channel.

Suppliers can also offer their physical goods to customers for purchase. No movement by both parties is required. eBay has been able to cement its survival in the industry and ensure continued growth in sales and earnings. This is because of its strategies and its insistence on excellence, efficiency, differentiation of its goods. To a lesser extent, it is also because of effective measures put in place to deal with the challenges facing the business world.

This case explains the intricacies of the company’s internal and external environments. It gives the description of the company, its mission and objectives. It also looks into the challenges it faces in its quest for growth and expansion. It gives both quantitative and factual data in its analysis.

The ‘now’ of this case study is 2001. The international team has to come up with strategies that will increase the revenues coming from outside the United States from one hundred and fourteen million US dollars reported in 2001 to over eight hundred million US dollars projected in 2005.

Structuring an Internal Environment Analysis

eBay’s mission is to ‘make impossible commerce possible and to make inefficient commerce efficient. Its vision is to grow and expand its venture to cross border trade without incurring excessive costs in its expansion. Its objectives oscillate round its vision, which is, coming up with strategies that ensure growth without causing negative impacts on the company.

Excellence, efficiency, quality, customer and employee satisfaction and image form the pillar of the company’s values. It has a centralized leadership structure where only top management can make important decisions and there has to be consultations before any decision is implemented. It has a decentralized leadership structure also.

The case study shows that top managers normally appoint directors who are in charge of specific goods or product line, rather than there being only one manager overlooking all the transactions that are being made. Its beliefs are mainly customer satisfaction, efficiency, excellence and quality. eBay has its own distinct way of doing things in that, customers are given a lot of leeway. Customers choose what to list and the length of time the goods are to be listed.

They also have the liberty to upload photos and once the good is sold, they are the ones to pack, insure, and ship the goods to the buyers. eBay uses a hands-off philosophy and only seeks to ensure improved user experience, the process of listing items and uploading them is simple, feedback and rating are simple but valuable, and auction bidding and notification are interesting and efficient.

Analysis of Resources and Capabilities

Strategy Diamond

eBay’s arenas include its product categories (which are mainly collector items and items that are more suited for hobbies) and its distribution channel that is wholly the internet as all the transactions is made online. It also includes its market segment, which largely consists of collectors and hobbyists in terms of the type of goods offered, and its geographic areas.

This encompasses the United States and other countries outside United States for example Europe, its core technologies, which is mainly the internet, and its value creation strategies, which are mostly handled by the customers. Its vehicle was mainly the increased number of listings it experienced after it was founded. eBay differentiated its products in that it mainly dealt with collectors’ items rather than practical items.

The economic logic was that since it enabled people to enjoy their hobbies while still in the comfort of their homes, there would be increased listings and therefore increased earnings for the company. Its staging was that it continued to report growing profits annually. This company was launched in 1995 and in no time spread nationally in the United States. In 1999, it went international entering the UK, Australian and German markets. In 2000, it made a debut in Japan, France and Canada

eBay’s Resources and Capabilities (VRINE Analysis)

eBay possesses certain vital resources that ensure that it retains its competitive advantage amongst its competitors. Following, is a detailed explanation of how each of these resources contribute to eBay’s competitive advantage.

One of these resources is its reputation, eBay has created a good reputation for itself everywhere that it is available, this contributes to competitive advantage in that, it ensures customer loyalty and repeat purchases such that if there were to be a new entrant, the effects would be minimal. A large customer base is also another important resource.

This simply means that eBay enjoys the largest number of listings such that it takes advantage of the critical mass approach, such that even if there were to be new entrants in the market, it would not lose its customer. eBay also enjoys financial strength; this can be attributed to the growth in its earnings over the years. This capability gives it a competitive advantage in that it provides room for growth in the face of the ever-increasing competition. This is not a resource that many companies can enjoy.

eBay also enjoys network dominance with respect to online auction over other providers like Amazon and yahoo; this gives it the competitive advantage that works against its competitors. Another resource that eBay can boast of is its capacity to grow. This can largely be attributed to the way that it operates.

Due to its hands-off philosophy, where its customers are the ones who handled most of the value added services, eBay can be able to grow without any significant increases in its costs. All these resources are important, but the ones that slightly contribute more are its financial strength, network dominance, and the large customer base.

Value Chain Activities

The primary activities carried out by eBay include the listing of items by users and registration of users, which make up the input activities. It also includes uploading of pictures and bidding by buyers which make up the transformational activities and the completion of the sale leading to packaging, insuring and shipping of the goods to the buyers, which make up the output activities.

The support activities of eBay include complaints handling, training of employees, technological development and human resource management. Complaints handling can be done more effectively by creating a specific department that deals with customer complaints.

Performance Evaluation

The different stakeholders use different yards to measure the performance of the company. The owners use profitability of the company to gauge its performance, employees use the amount of wages that they earn, customers use the prices of the goods, the government considers the tax compliance of the company and suppliers look at whether the company makes timely payments.

Strategic Issues

The strategic issues here include; the uncertainty of customer loyalty, unsatisfactory user experience, shortcomings in the searches by buyers and inefficiencies in the listing and user registration process.

Conclusion of Internal Analysis

The internal environment of eBay can be said to be healthy. From the case, it is clear that clear and distinct measures have been put in place. The mission, objectives, values, beliefs, and the type of products have been clearly defined. Its leadership structure is also definite.

Structuring an External Environment Analysis

eBay is in the e-commerce industry and its geographical market was first made up of the United State but it later expanded to other countries outside the United states. Its major competitors are yahoo, Amazon and other e-commerce businesses that have adopted its model especially in countries where it has not yet ventured. In this section, we will use France as our case study.

Analysis of General/Macro-environment

There are various external forces that may have an effect on this industry. In the next 3-5 years, it is highly unlikely that political forces will have any effect on eBay, particularly because eBay largely depends on the internet, which is never affected by political crisis. Economic forces may have an effect in that if there is a boom, purchases are likely to increase therefore increasing eBay’s revenues, and on the other hand, a recession would mean decreased purchases and revenues.

Technological factors will most likely have an effect due to the rapid technological advancements. Social factors may lead to increased use of the internet due to peer pressure hence influencing the industry positively. Ecological factors cannot affect the industry as they cannot affect the internet. Legal factors, depending on the circumstances may have an effect on the industry as a new law could be introduced that affects the industry.

Conducting an Industry Analysis

Porters 5 Force Model

Porter’s model gives five forces that affect the industry structure. Using the France market, I will explain each of these forces. The first one was the degree of rivalry, which refers to aggressive competitors. France had the fourth largest earnings in terms of e-commerce in the world and so eBay had to try to venture into that market.

However, I bazar, which was a similar company, had developed a model similar to that of eBay. It offered it to the market before eBay. Therefore, eBay faced strong competition because ibazar had long gained market dominance. Degree of rivalry deals with how your competitor will respond to the strategies you implement. Ibazar therefore offered free listings, lower transaction fees and heavy TV advertising so as to deal with the competition from eBay.

The second force was the power of suppliers, who had the power to influence the industry for example by charging very high prices for their products. The third force was the power of the buyers who had the ability to control the industry for example by substituting the goods offered for other goods; they could also lose their confidence in their goods

The fourth force was the threat of substitute goods, for example in the France market, unlike eBay, Ibazar offered practical goods, that is, anything and everything, this posed a threat to eBay in that their customers could easily find substitute goods in Ibazar that were much cheaper as they only offered collector items.

The fifth force was the threat of new entrants. Given the high earnings attributed to e-commerce in France, it was only natural that new entrants would be attracted to the market, leading to decreased profits in the industry and consequently to eBay.

In my opinion, in 2001, the industry was very attractive in France given that there were only two key players. However, it would be expected that in 3-5 years, that market would have become less attractive due to entry of new players, which would dilute the profits. Power of suppliers will decrease while power of buyers will increase. In addition, the threat of substitution will increase.

SWOT Analysis

Still using the French market, some of the strengths that eBay possessed were; financial strength, quality of their goods and the fact that the collectors and hobbyists did not like Ibazar and never made repeat purchases. Its weaknesses on the other hand were its lack of market dominance, listings and a large customer base.

Despite these, there were opportunities given the fact that as mentioned above France reported the fourth highest earnings in the industry. This then leads us to the threats that would naturally arise; since Ibazar offered practical goods, and did not really emphasize on quality, users would end up having poor experiences, which would put the industry in jeopardy. In addition, if users got used to listing without fees, the industry’s future would also be in danger.

New Business Strategies

Strengthening of its Mission and Vision

eBay’s mission being its most important resource, it should seek to strengthen it more and ensure that it is followed to the latter

Generic Strategies of the Company

eBay follows a strategy that mainly focuses on differentiation from other companies in the industry. This strategy is referred to as focused differentiation whereby unlike its competitors, it limits the types of products that can be sold preferring to deal with collectors’ items. In my opinion, since they have the capacity to expand without incurring excessive costs, they should diversify and offer practical goods while still ensuring that they observe the quality of the goods. This would serve to increase their customer base and even their earnings.

Market Position

Currently, eBay is a market leader despite the competition that it faces from the likes of yahoo, Amazon and the rest. It should therefore seek to pursue stabilization to ensure that it remains in the same position. Another key area that it should concentrate on is growth. This can be achieved through the expansion of the global trade plan so as to take advantage of the opportunities that new markets present.

Strategic Alternatives

Given the facts of the France market study, eBay had two options either to sit back and wait for I bazar’s downfall or to acquire I bazar. Each of these options had its disadvantages; in the first option, it was impossible to predict how long it would take before Ibazar collapsed and there was the risk that its downfall could affect the whole market.

The second option posed the threat of lack of funds or Ibazar asking for a very high price due to misguided reasons and also Ibazar was partly owned by yahoo and wanadoo. In my opinion, the company should acquire Ibazar, as that would be a full proof plan as long as the sale went through.

It would ensure that the competition was completely eliminated and it does not require a long period for if to be done. If this option were chosen the competitor would react by asking for a higher price due to misguided reasons, or they might refuse to sell under the impression that they would make it big soon.

New Strategies and their Implement-ability

Concerning the company’s strategic diamond, new strategies can be introduced in its arenas; increasing its geographical areas through the global trade plan and diversifying the products that it offers.

Its value added activities can remain the same but they could always be made more efficient. Its vehicle should remain the same, the only difference being that it should now incorporate more customers other than collectors and hobbyists. Its differentiators, staging and economic logic should remain the same. In my opinion, these new strategies can be implemented as long as there are stringent measures that are put in place to control their implementation.

Background

The eBay Company has been in existence for 18 years. The company provides an online marketing platform for used, refurbished and new products across the globe. Besides, the company offers the online money transfer service called the PayPal.

Due to stiff competition from other online marketing companies, the growth of eBay has been unsteady since 2007. At present, eBay wishes to reclaim its lost glory as the market leader. Specifically, the company’s C.E.O Mr. Donahoe is facing the dilemma of balancing expansion and sustainability as more competitors penetrate the online marketing industry.

Recommendations

The first recommendation is to adopt an operation efficiency strategy to reduce cost of running the company so as to increase the net profit. Secondly, the eBay company should adopt consumer centricity strategies to tailor its products to the preference of consumers.

Thirdly, the company should carry out content development and intense advertisement in the media to create awareness of its new products. Finally, the company should create a dynamic and functional team within its expansion structure to ensure sustainability of the gains made.

Basis for the recommendations

Operation efficiency

Operational efficiency and market niche provide an indication of how well the company manages its resources, that is, how well it employs its assets to generate sales and income. It also shows the level of activity of the corporation as indicated by the turnover ratios. The level of activity for the eBay has remained relatively stable despite the threat of competition, and constant change of taste and preference.

In order to stay afloat, the company should streamline its operational costs and introduce freelance marketers paid on a commission. These marketers will operate from their homes to save the company’s daily expenses of running its business from a central point (Aaker 31). Through implementing this proposal, the company will reduce its wage bill and seal cost loop holes.

Consumer Centricity

Properly designed online marketing and product distribution management facilitate the success and sustainability in online marketing. To increase credibility and maintain professionalism, the current channels of reaching the consumers at eBay should be tailored to encompass processes and features that flawlessly facilitate a healthy and a lifetime relationship between the business and its clients.

The new development elements that the eBay company should incorporate include trust, liability acceptance, distribution, fair retribution process, and passing accurate information to target audience to restore confidence within these networks. This strategy will ensure that the business is sustainable.

As opined by Kotler (2007), the desired awareness created in the online platform and different distribution packages is essential in sustaining online trade. For instance, the safety and security of the customer over the cyberspace trading platform have become such an important issue in determining consumer behavior (Kotler 29).

Thus, introduction of a Secure Online Shopping System (SOSS) is vital towards survival of the eBay business. Secure online shopping system is a platform where consumers are able to make orders on a particular product and make payments using their credit cards. Introducing the modified SOSS platform at the eBay company will ensure the safety and security of clients interested in the company’s product.

Functional team

Essentially, the success of e-marketing depends on proper alignment of a functional team that is responsible for the creation of flexible and quantifiable measurement tracking tools for reviewing results periodically.

Reflectively, the eBay company should introduce a functional team with the essential knowledge in social media and tools used in marketing via the Internet. Besides quality in service, delivery and customer satisfaction depend on the support team as indicated in the distribution channel of its competitors’ online marketing segment.

Therefore, customer retention is achievable through the creation of reliable, informed, and passionate support team at eBay (Kotler and Gary 12). In addition, the plan should include a monitoring matrix that maps out potential competitors and identifies online weaknesses and strengths of the eBay clients. Moreover, the reporting criteria for the eBay business should reflect the success of marketing calendar and set periodic targets (Koufaris 216).

Creation of content and advertisement

Creation of content is extremely essential when dealing with internet marketing communication within the industry that eBay operates in. It is necessary to determine the online behavior of the target market before selecting the best channel for internet marketing at the eBay to minimize the issue of changed consumer preference. The new content at the eBay should be given time to enhance its online presence by constantly updating information on current product trends (Kotler and Gary 9).

Essentially, success of brand and product management depends on a proper alignment of a functional idea into the creation of flexible, involuntary, and quantifiable measurement of perception among the target audience. The eBay company should realize that promotion of its products is not merely an advertising function. It should come up with both advertising campaigns and promotional strategy that is defined by the nature of the market, the size of the market, and the preferences of its customers (Koufaris 216).

Alternatives, risks, and assumptions

The main alternative was to adopt a highly structured and broad differentiation strategy in designing market segmentation policies.This alternative was not suggested since it aims at establishing the broadest possible mechanism for optimizing returns in the same way as the operation efficiency strategy. The risk may be the inability to dwell on specific features which make the eBay’s products unique and appealing to target clients since consumer preferences in this industry are unpredictable.

Works Cited

Aaker, Don. Building strong brands. New York: The Free Press, 2006. Print.

Kotler, Paul. Marketing management: Analysis, planning, implementation and control. New Jersey: Prentice-Hall, Englewood Cliffs, 2007. Print.

Kotler, Philip & A. Gary. Marketing: an introduction, New York, NY: Pearson, 2013. Print.

Koufaris, Michael. “Applying the technology acceptance model and flow theory to Online consumer behavior.” Information System ResearchJournal 3.2 (2002): 205-223. Print.

Consumer risk perception: the case of eBay

Executive summary

One of the major developments in business is the use of online marketing. Despite many of the advantages of online marketing, there are a lot of risks that consumers may face while trading online. This article analyses one of the online marketing places called eBay.

In the study, the paper explores the risks that eBay customers may face and the strategies which the organization has employed in order to minimize the risks. The article also suggests additional strategies that eBay may use to further reduce the risks.

Types of consumer risks

Among the types of risks that eBay customers incur while shopping online may include performance risk, financial risk, social risk, time-loss risk and privacy risk.

Strategies to reduce consumer risk perception

Some of the strategies which eBay has employed to reduce consumer risk include the Money-Back guarantee policy, improvement of the company’s image, building of customer loyalty, existence of the customer support service and free security advice for customers.

Additional suggestions

In addition to the strategies listed above, other suggestions that the company may use include brand endorsement, advertising or promotion, free trials, government testing and private testing.

Introduction

In service marketing, it is important for management team to center on the consumer. This is the reason that prompts the efforts to ensure that consumers are protected from any risk that they are likely to incur while conducting business. If consumers incur the risks and move out of the business, the business may then lose a great portion of its market.

EBay is one of the leading online marketing places, where consumers and merchants meet to trade their goods and services. Consumers and merchants make all the arrangements such as negotiation, payment and shipment online.

Like any other online marketing company, however, eBay faces the challenge of earning the trust of customers, because the customers have a negative perception towards online marketing. This perception results from the knowledge about a number of risks that the consumers may face while shopping online.

Types of consumer risks

There are many risks that eBay customers are likely to face, the first one being the performance risk. This is the loss which a consumer is likely to incur in case the product purchased through eBay does not meet the expectations of the consumer.

The risk may result from false advertising or lack of enough information about the commodity before making the purchase (Jahankhani 2009, p. 84).

The other type of risk that may be perceived by eBay consumers is the financial risk. This is the amount of money that a consumer is likely to lose in the transaction as a result of a delivery failure or damage of goods.

It may also be as a result of a price overcharge on a product after considering its performance. This may be the case in eBay since there is minimal face-to-face interaction.

Thirdly, the consumer may also incur a social risk. This is the loss that a consumer may incur in form of misjudgment from friends and family following a shopping choice made.

For example, due to lack of trust for online shopping, people may not embrace that idea, citing lack of a delivery guarantee. There is also a general belief that those who do shopping online are extravagant. The perceptions create a social fence between the consumer and other people.

The fourth risk that eBay customers may face is the time-loss risk. Hong-Youl (2002), explains time-loss risk as the value that a consumer loses when a service fails to meet a certain human want at the right time.

When purchasing via eBay, consumers may spend plenty of time to purchase, delivery and payment arrangements; and return the product in case it is defective (Jahankhani 2009).

Finally, consumers may face a security or privacy risk. It has become very challenging for many organizations to safeguard the privacy of their customers as well as defend themselves against internet attacks such as phishing, scams and hacking (Ozkan, Bindusara & Hackney 2009).

Insecurity can be witnessed in customers through their reluctance to shop online for the fear of falling victims. The other source of fear for consumers is the fact that online vendors may fail to make arranged delivery or to deliver the promised quality (Zhu, Lee & O’neal 2011, p. 8).

This makes eBay customers to be reluctant in providing personal information for fear that they may lose their anonymity over the internet.

Strategies to reduce consumer risk perception

One of the strategies that eBay is using to reduce consumer risk for their customers is the Money-Back Guarantee policy. EBay advises sellers to offer a 100% Money-Back guarantee and return of the product, in case it does not meet the expected quality. This policy increases the confidence of the consumers in the company, thus changing their perception about security and performance risk.

Another strategy that eBay uses to reduce consumer risk is enhancing their image over time. Customers can only gain confidence to shop through eBay by trusting the organization by considering its long-term reputation. It is for this reason that eBay has strived over the years to maintain its image of trust as an online shopping centre.

As a result of the long trustworthy image of eBay, many consumers have developed loyalty to the organization. This is another important strategy that eBay has used to increase the confidence of consumers in the organization’s operations.

The Customer Support Centre in eBay is also a major tool to maintain the customers’ trust. This centre helps buyers with pre-purchase information that they need in order to make correct choices. The Customer Support Centre has boosted the loyalty and trust of the eBay customers.

With regard to the security risk, the Security Centre in eBay also offers free and valuable advice to customers on how to ensure that their accounts are secure from phishing, hacking and other internet scams. In this way, customers can always trust the organization and can use the information offered to avoid cases of security attacks.

Additional strategies to reduce consumer risk perception

Apart from the above strategies, eBay may also need to adopt additional strategies to ensure that customers have minimal worry concerning the risk they may incur in their transaction through eBay. One of the additional ways of reducing the risk that consumers may face in online shopping is through brand endorsement.

Since consumers purely rely on information they get prior to the use of an online shopping service, the organization can ensure that there are other third parties that are endorsing its services. This will increase the confidence of the buyer to use the service without worrying about such risks as security and performance.

This strategy can work for eBay as well. For a third-party organization to endorse eBay, it is necessary for eBay to prove to the public that they deserve the endorsement. The organization can only achieve this over time through the experience of those who have already used the service.

For example, if a consumer shopped at eBay and the transaction was successful, the next customer who wants to use the service can develop confidence if he or she gets first-hand information from the previous buyer.

Most of the service organizations collapse due to over-reliance on the services they are offering at the expense of advertising. Consider the case of Starbuck, a one-time world-leading coffee service provider (Patterson, Scott & Uncles 2009, p. 46).

One of the reasons which made the company to collapse is negligence of the value of advertising. Instead of advertising, the company relied on the quality of coffee they offered in their efforts to attract customers. This is one of the factors that led to their collapse.

Advertising is therefore an important strategy which can be employed to reduce the risk perceived by a consumer. There is, therefore, a need for awareness to the public about the organization.

Other strategies that eBay can employ to reduce consumer risk include the use of free samples; where the organization can come up with a policy to offer a trial service to the consumer in order to create a sense of trust in the consumer.

The organization may also implement strict measures to test all the products that merchants sell via the eBay website. This can reduce the consumers’ fear of being victims of performance risk or financial risk. The Government or any other private organization can perform the test (Li & Chu 2008, p. 216).

Conclusion

In conclusion, eBay, just like any other online shopping service providers, may incur the risk of losing customers as a result of the perception of the consumers about consumer risks. This makes it essential for the organization to focus on the customers and how to earn their trust.

It may not be possible for the organization to eliminate the risks completely, but it can reduce them to a minimum level to increase the consumers’ confidence in online marketing. Once the consumers of a service are secure from consumer risks, the company can increase its sales and earn the loyalty of the consumers.

Capacity and demand alignment: the case of American Airlines

Executive summary

One of the most useful tools in a service organization is the ability to manage demand and capacity in such a way that neither of them is in surplus, this balance is paramount to retain the airline viability over a long duration.

Successful alignment of demand and capacity enables the company to utilize the available capacity maximally, while satisfying all of the organization’s customers without making losses. However, this may be hard to achieve in cases where capacity is fixed while demand is fluctuating.

This paper analyses the case of The American Airlines, focusing on the underlying demand patterns in the industry, the challenges that the incorporation faces as a result of different scenarios of demand-capacity imbalance and the strategies employed to achieve demand-capacity balance.

The paper also suggests additional strategies that the incorporation could employ to achieve the alignment of demand with capacity in the cases of fixed capacity and fluctuating demand, such as the American Airlines.

Underlying demand patterns

There are four scenarios that may represent the variation in demand with fixed capacity. The first one is excess demand. Others include a scenario in which demand exceeds the optimum capacity, a scenario where demand is in balance with the optimum capacity and a scenario in which demand is less than the available capacity.

The demand patterns may be predictable or random. Understanding these patterns is paramount to enable the organization design an appropriate measure to keep its operation functional and practical.

The concept of fixed capacity

Fixed capacity is a term that describes the situation in which an organization cannot change the sitting arrangement of a plane. The only alternative is to cancel the flight for some passengers so that they can travel with another one later.

This may give mixed signals to the clients loyal to these services, it is thus important to balance the equilibrium while retaining the clients hope in the services.

Challenges which the company faces due to fluctuating demand patterns

Some of the challenges resulting from fluctuation in demand patterns include dissatisfaction of passengers in case of excess demand, creation of discomfort as a result of exceeding the optimum carrying capacity and incurring losses in the scenario where capacity exceeds demand.

Strategies which the organization uses to align demand with capacity

The major strategy that the American Airlines employ is Yield Management. Others include price differentiation, overbooking and allocation of fare discounts.

Additional suggestions

Other strategies that the company can employ include promotion of off-peak demand and advertising the flight services especially during the off-peak demand.

Introduction

The American Airlines industry is one of the service sectors which are face with the problem of fixed capacity and demand fluctuation. In their daily operations, American Airlines experience variations in demand for their services while they cannot change their capacity in terms of sitting capacity.

Underlying demand patterns

There are four scenarios that describe the variation in demand. One of these is the Excess demand scenario. In this case the demand for the airline’s services may exceed the maximum available capacity (Unit 9: Managing Demand and Capacity n.d).

The second scenario is where the demand for the airline’s services exceeds the optimum capacity. This implies that the flight will neither be safe nor comfortable (Unit 9: Managing Demand and Capacity n.d).

The third scenario is the ideal one. This is where demand balances with the available capacity optimally (Unit 9: Managing Demand and Capacity n.d, p. 2).

Finally, there may be a scenario where demand may be lower than the available capacity. This translates to losses for the airline. All these are possibilities in the American Airline Industry. It is necessary for the organization to be aware of the demand patterns and the factors that cause them.

This will help formulate strategies to address the issues at hand. Although the patterns may have a random or predictable variation cycle (Unit 9: Managing Demand and Capacity n.d), arriving at a universal approach that ensures balance is essential to make both parties have a mutual business corporation.

Predictable demand patterns may result from weekly schedules of regular passengers. The Airline may decide to design a paradigm shift in which its regular passengers conforms to its regulations of flight.

This is the dominant cycle in American Airlines. A random pattern, on the other hand, may be as a result of accidents or the weather which may disrupt the regular demand pattern. Random demand patterns require preparedness (Unit 9: Managing Demand and Capacity n.d, p. 3).

The concept of fixed capacity

In airlines, capacity majorly refers to the number of seats available in a plane. This number is determined during the manufacture of the plane, as the requirement of a given Airline purchasing the plane. This means that the capacity of that plane is fixed.

In addition to that, each plane has a fixed timetable which cannot change; this is the aspects that most consumers would need to conform with. In case of excess demand, the only option is to reschedule a later flight for the passengers in waiting reception. This is the reason why capacity is said to be fixed.

Challenges that the company faces due to fluctuating demand patterns

Due to the problem of fixed capacity and fluctuating demand, the company may face different challenges under the different scenarios of demand fluctuation patterns. For example, if demand is in excess, the only choice is to reschedule the flight time of some of the passengers.

Since services are highly perishable, this choice may not benefit them, thus the airline risks losing customers who have tight schedules and cannot wait for the rescheduled time (Calvo & Thoumi 1984). This is the major challenge within the business segment especially during high seasons when clients demands overrides the firm’s capacity.

In case the plane decides to carry more passengers than the optimum capacity, the passengers may be uncomfortable and unsafe. Finally, if demand is lower than the available capacity, the plane risks flying with empty seats, which is an irreversible loss to the Airline Company (Calvo & Thoumi 1984).

Strategies which the company uses to align demand with capacity

Due to the fixed capacity, the only option for American Airlines is to manage demand. One of the major methods that the American Airlines have used for years to align demand with capacity is yield management (Unit 9: Managing Demand and Capacity n.d).

This strategy employs computer technology to study patterns of demand so that the airlines can use the information to charge different prices depending on the level of demand (Unit 9: Managing Demand and Capacity n.d, p. 6). In this case the Airline studies each segment of the consumers and charges different prices for different seats depending on urgency of the service to the consumer.

Customers would therefore, need to pay more for immediate scheduled flight than those who paid their dues some time before. This method enables the Airline to both satisfy every customer using the available capacity and make profits. An example of its successful use was in the case of Flight AA2015 (Unit 9: Managing Demand and Capacity n.d).

Other strategies that the American Airlines use include Overbooking with the expectation of demand rise and allocation of fare discount depending on the forecast demand (Smith, Leimkuhler & Darrow 1992, p. 11).

Additionally suggested strategies to align demand with capacity

In addition to the strategies that the company has already employed, it would be more beneficial to explore other options of balancing demand with capacity. One of the ways in which this article suggests is the promotion of off-peak demand (Unit 9: Managing Demand and Capacity n.d, p. 4).

If the demand pattern is clearly known, the airline company can make arrangements to creatively use the capacity when there is no regular demand by finding other sources of demand to cover for the expenses during the peak of demand (Fitzsimmons & Fitzsimmons 2012).

Another useful strategy is promotion of the flight services especially when demand is in the off-peak. At this period the airline may face unprecedented shift in its economy and would therefore, need to devise a method that ensures it retains its financial projections.

This may include offering lower prices during these periods in order to attract passengers; hence balancing demand (Unit 9: Managing Demand and Capacity n.d, p. 4).

Conclusion

In summary, it may not be easy to achieve demand or capacity alignment for a fixed-capacity situation. However, Yield Management becomes as a useful strategy in such a case. If an organization combines this strategy with the price differentiation technique, the organization can achieve optimum service without losses despite the ever changing demand patterns.

Alignment of demand with capacity is vital for any company to retain its customers without making any losses. This is also paramount to retain its loyal customers and attract the potential ones.

Reference List

Calvo, GA & Thoumi, FE 1984, ‘Demand Fluctuations, Inverntories and Capacity Utilization’, Southern Economic Journal, vol. 50, no. 3, pp. 743-754.

Fitzsimmons, JA & Fitzsimmons, MJ 2012, Chapter 13: Managing Capacity and Demand. Web.

Hong-Youl, H 2002, ‘The Effects of Consumer Risk Perception on Pre-purchase Information in Online Auctions: Brand, Word-of-Mouth, and Customized Information’, JCMC, vol. 8, no. 1. Web.

Jahankhani, H 2009, ‘The Behaviour and Perceptions of Online Consumers: Risk, Risk Perception and Trust’, International Journal of Information Science and Management, vol. 7, no. 1, pp. 79-90.

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Unit 9: Managing Demand and Capacity n.d., Managing Demand and Capacity. Web.

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