E-bay, king of online auction industry

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1. Using strategy safari, apply tools from the positioning school and the design school to establish the nature of e-bay's competitive advantage.

"Competitive Strategy aims to establish a profitable and sustainable position against the forces that determine industry competition" Porter (2004:1). Competitive advantage has to do with a company's ability to outdo competitors, either by improving upon what competitors are currently doing or by doing something completely different in a way that proves successful (Mintzberg et al, 2005). Being able to implement an e-commerce plan that improves sales or cuts costs might give one retailer a competitive advantage over another. At the same time, being the first to come up with a new e-commerce business model, or a unique twist on an existing model, might also allow an up-start to gain an early competitive advantage.
The strongest competitive advantage is a strategy that cannot be imitated by other companies. Competitive advantage can also be viewed as any activity that creates superior value above its rivals. (Porter, 2004)

A prime example of an upstart gaining an early competitive advantage by being first-to-market with a new business model is eBay.com, the world's largest online auction site, with more than 22 million registered users and roughly 8,000 product categories. Although rivals like Yahoo! and Amazon.com attempted to gain market share from eBay by launching their own auction sites, eBay's ability to gain critical mass gave it the competitive edge it needed to stave off its rivals. Despite Amazon's attempt to lure customers with guarantees of product quality and Yahoo!'s offering of commission-free auctions, eBay attracted more sellers than any other auction site simply because it had the most buyers. (Waggoner, 2000).

eBay has positioned itself as one of the world's premier brands. There are two basic types of competitive advantage i.e. Cost leadership and differentiation (Mintzberg et al, 2005). eBay competes in the online auction industry using a broad differentiation strategy. Although they may not be the most inexpensive online auction site, they have the largest variety of products offered. They also appeal to a larger group of consumers that include individual sellers, small entrepreneurs, and corporations all over the world. eBay achieves broad differentiation through their strong eBay community, a global reach not matched by any competitor, and a category span of 27,000. These aspects of the eBay service among others set their company apart from the rest. Customers see the value in using the eBay service. This is why eBay has become so successful. (Coghlan et al, 2005).

eBay's corporate level strategy was to become a diversified business. They wanted to diversify not only the products they offered but also their customer base and global reach. By using the eBay service you can find virtually anything you are looking for.

eBay's business model was based on creating and maintaining a person-to-person trading community (Coghlan et al, 2005). After implementing their model, eBay has been able to build strategic partnerships, continue to make innovative changes and improvements, and monitor its internal and external environments for possible future opportunities. This has given them the prestige ...