A Report on Innovation: Challengers Disrupting Incumbent Markets

This report examines the dynamics of market competition, focusing on how challengers, such as Amazon, disrupt and replace incumbents, like eBay. The introduction establishes the roles of incumbents and challengers, emphasizing how challengers offer improved services to capture market share. The literature review delves into the case study of Amazon versus eBay, highlighting Amazon's customer-centric strategies, including offering competitive pricing, enhancing customer trust, and innovating services like Amazon Prime. The report analyzes how eBay's shortcomings, such as outdated technology and a lack of innovation, led to Amazon's dominance. The conclusion summarizes the key factors that enable challengers to succeed, emphasizing the importance of innovation, customer satisfaction, and adapting to market changes. The report cites various academic sources to support its analysis, providing a comprehensive overview of the strategies and outcomes of market disruption.

Innovation of new technology

1
Table of Contents
Introduction...........................................................................................................................................2
Literature Review..................................................................................................................................2
Conclusion.............................................................................................................................................2
References.............................................................................................................................................3

2
Introduction
Incumbents in a business are the individual that looks on the surrounding and offer
better services to the customers. It is answerable to all the changes in the market and is
primary leading the market place. Until, challenger comes in the market offering the same
services as incumbents but with better benefits. For example considering eBay as an
incumbent and challenger of eBay is Amazon. Incumbents are holding a place in the market
and is been used by the customers but whenever some new company overtakes the market of
old company it is called as challenger. Challenger beats the market of incumbent by
providing the same services but by offering better options. When challenger overtakes the
market incumbents are often overlooked. Challengers create an environment which is better
in terms of performance (Scientific Reseach, 2018). In this report we will discuss how
challenger replaces the incumbents from the market. As challengers interchanges the
customer market by setting a target price and rise new opportunity in the market. Disruptive
technology is useful for small businesses to make the changes in the way a business is
operating so that it grows as a large organisation (Karthikeyan & Jonsson, 2016). Incumbents
are often beaten by the challengers, who capture the market focus in a short duration of time.
Incumbents also try to come up in the market again but due to unavailability of new
innovation they lack. Incumbents are already in the market so their name is well known
among customers but knowing their drawbacks, challengers overtake the market by serving
better products and services (Anthony, 2017).
Literature Review
In this report considering the example for two well-known companies like Amazon
and eBay, where Amazon is treated as a challenger and eBay is an incumbent. Amazon is one

3
of the largest retail companies. It started its business by just selling online books which future
got expanded to selling off video, movies, audios, software’s, clothes, accessories, toys and
so on (Johnson, 2013). Amazon has successfully beaten eBay as it focuses on customer’s
behaviours by providing them with additional bonus and benefits; because of this the value of
market is hiked. Wherein, eBay is an online auction site, who sells its product via showcasing
the products online. It is true that challengers can beat incumbent’s like Amazon crushed the
market of eBay. It happens because challengers start their planning at initial stage and work
on the area in which incumbents are lacking. They first analysis what services are provided
by incumbents in the market so that strategy could be planned accordingly to improve the
selling budget. Research is the first and foremost step undertaken by challenger as they
understand the market, the advantages and disadvantages of the on-going company. So, that
better policies could be designed. In case of Amazon, it analysed the market and offered
customers to seller their products directly on Amazon without deciding an auction price.
In the perception of (Ansari & Krop, 2012), eBay lacked the market trust due to some quality
issues and scandal act of the products. Amazon worked on this drawback by building trust
among customers and selling good quality of products because of this reason market traffic
drove towards Amazon. It also enhanced the system by reaching out to customers rather than
waiting for the customers to reach out to them. Amazon formed a user friendly platform by
providing a good shopping experience to customers as there is ease to access the services as
Amazon promises to serve trustworthy products.
It was researched in the opinion of (Frankenberger, Weiblen,& Gassmann, 2014), it is fact
that incumbents are beaten by the challenger like market of eBay has been crushed by
Amazon. In today’s time Amazon is one of the topmost retail companies and has made a
good place in the market by capturing the customers from all sectors. The reason of this
success is that it got motivated towards the way to offer services to client at low price in

4
comparison to other incumbents. It focussed on improving the services by reducing the
delivery time and resolving the quality issues. Amazon has beaten eBay in terms of customer
satisfaction. To overtake eBay market amazon researched on all the plans and redefined it in
their own way to beat eBay. It has beaten eBay in terms of customers rating, products
available or number of choices available. Like Amazon is chosen by 79% of people as there
are wider numbers of options available in terms of products, also 62% of customers choose
Amazon because of the customer satisfaction received (Whelan, 2018). EBay is just opted by
9% of customers as number of choices are less and there are issues of fake products.
Additionally eBay lack in the market due customer experience as there are no extra benefits
provided to them in terms of offers or price. Using these drawbacks challenger (Amazon)
redefined the services by planning a new agenda to beat incumbents.
According to (Gregg & Parthasarathy, 2017), eBay still have the chance to come up again in
the market and be stable but it took a wrong direction and was crushed by Amazon. As it stop
innovating new products and didn’t worked on the customers demand. Amazon worked on
this and sold the products at a very nominal price and kept on innovating new products
according to the demand of customers (Blade, 2017). EBay stopped working on new ideas
and thus failed to adapt to market changes. It only sold the products to retailers who make
sure that they will future sell the products in the market and this was the limitation because of
which customers lost their interest. As amazon exceled in the market that promises to sell the
products in all the sectors which helped to get more target customers. It also made the work
from sellers flexible as it assures to write creative the description of the product to be sold,
rather than asking seller to write the description. EBay is vanished from the market by
Amazon; one of the reason is it stopped manufacturing new goods and kept on selling old
products without innovating new products. On the other side as challenger comes new in the
market with the motive to make a significant place, creates innovative products and provide

5
offers to customers to grasp their attention. In this case Amazon offered highly automated
services to user so customers were required to spend very less amount of time to perform
basic functions (Wood, et. al, 2016). EBay still had many un-automated function because of
which customers switched from eBay to Amazon. Also the platform was hard to use like it
was very difficult to track an item through eBay whereas Amazon updated to users
automatically (Nicoli, et. al, 2017).
According to (Miguel & Casado, 2016),E bay lost the place in the market as it reacted slowly
to the changes which were taking place, before amazon customers were comfortable using
eBay as there were no other better options available. Emergence of Amazon crushed the
market of eBay. One of the major reasons of the failure is, as eBay was a platform for selling
goods but they charged on monthly basis from the seller whereas amazon asked seller to pay
only when their goods are sold to customers. This increased customers towards Amazon, thus
it can be said to beat incumbents challengers often provide better services to customer.
Amazon discovered new services for customers like Amazon Prime rollout; it helped in
getting more customers to the business. Innovating new ideas is the key success for
company’s growth (Haucap & Heimeshoff, 2014). eBay was limited to offer a marketplace to
the customers but it was not flexible for retailers, as retailer need to look for other selling
platform. Amazon identified the need and offered a platform from retailer as well as
marketplace. It overtook the customers from eBay by offering additional services needed for
fulfilment of business and handling their fulfilment. Innovation is the sole reason that
incumbents are beaten by challengers, in this case Amazon kept on launching new services
for customers like it stated with selling products via publishing audio, books, videos, movie-
streams using digital division that is AWS (Pattie, Hartman, & Johnston, 2017).
In the view of (Pepper & Alves, 2017), eBay is an auction site so the quality of product
depends on the seller which cannot be trusted by customers for this case Amazon takes the

6
responsibility about the products sold to the customers so that trust issue is resolved. In case
of eBay quality of products were degraded that lost the interest among clients. Amazon
resolved the issue of products being scammed thus gathered more customers. Challengers
often give the reason to customers why they should choose them instead of incumbents.
Similarly, Amazon provided many reasons to customers like offering easier shopping
platform, user friendly interface and less time consuming interface. As the products on eBay
was sold by fixing an auction price which is a time consuming process thus it cannot be used
on a regular basis. Amazon on the other hand offered fast services to users so that user can
make the purchase frequently.
In the opinion of (McGrath, 2018), old innovators are often beaten by new innovators. This
was the reason eBay failed in the market due to the occurrence of Amazon. It lost interest of
customers as the feedback from customers was not taken into consideration. Amazon adopted
a method to facilitate customers by offering good experience so that they rely on the service
for a longer run. When Amazon arrived in the market eBay was somewhere diminished from
the market as the competitor offered better services to the customer. New innovative products
were launched by Amazon wherein same old products were offered by eBay. The price of
product was also a factor that attracted customers. Thus challengers can beat incumbents by
offering same services but with better quality or by selling it at lower price (ReseachGate,
2018). EBay being auction site in the market failed as it kept old products on the auction that
too with a poor description. Also eBay is operated by third party who connects seller and
buyer. All the products are sold using third party and they don’t have their own inventory
section thus the issue of quality occurs. Amazon looks at this issue clearly as it makes every
kind of product ensuring the quality is up to mark (Galloway, 2017).

7
Conclusion
It can be concluded that incumbents are often crushed by challengers in the market.
Challengers often find better ways to engage more customers by delivering better services to
user. In this report amazon has gained momentum in the market and have been eBay.
Challengers work on the drawbacks of incumbents and design a plan to provide those
services which are not offered by incumbents according to the customers need. Amazon
offered better trust among people, better trust means more customers this was the reason
customer’s was enhanced towards it. EBay lost the friction from the market due to many
reasons which on the other hand gave a boom to amazon as it offered better services among
customers. Thus the major shortcomings of incumbents are resolved by challengers; hence
they often crush incumbents from the market.

8
References
Ansari, S. S., & Krop, P. (2012). Incumbent performance in the face of a radical innovation:
Towards a framework for incumbent challenger dynamics. Research Policy, 41(8),
1357-1374.
Anthony, S. D. (2017). The Little Black Book of Innovation, With a New Preface: How It
Works, How to Do It. Harvard Business Review Press.
Blade, (2017), The difficulties of beating an incumbent. Retrived from
http://www.washingtonblade.com/2014/01/21/difficulties-beating-incumbent/.
Frankenberger, K., Weiblen, T., & Gassmann, O. (2014). The antecedents of open business
models: an exploratory study of incumbent firms. R&D Management, 44(2), 173-188.
Galloway, S. (2017). The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.
Random House.
Gregg, D., & Parthasarathy, M. (2017). Factors affecting the long-term survival of eBay
ventures: a longitudinal study. Small Business Economics, 49(2), 405-419.
Haucap, J., & Heimeshoff, U. (2014). Google, Facebook, Amazon, eBay: Is the Internet
driving competition or market monopolization?. International Economics and
Economic Policy, 11(1-2), 49-61.
Johnson, J. W. (2013). Campaign spending in proportional electoral systems: Incumbents
versus challengers revisited. Comparative Political Studies, 46(8), 968-993.

9
Karthikeyan, S., & Jonsson, S. (2016, January). Competitive Dynamics of Incumbents and
Challengers in British Electoral Competition, 1955-2005. In Academy of Management
Proceedings (Vol. 2016, No. 1, p. 17051). Academy of Management.
McGrath, (2018), The Top Five Reasons eBay Sellers Fail. Retrived from
http://www.skipmcgrath.com/articles/successful-ebay-business.shtml.
Miguel, J. C., & Casado, M. Á. (2016). GAFAnomy (Google, Amazon, Facebook and
Apple): The Big Four and the b-Ecosystem. In Dynamics of Big Internet Industry
Groups and Future Trends (pp. 127-148). Springer, Cham.
Nicoli, M., D’Aquino, S., Primavera, M., Grasso, A. M., & Fiorentino, G. (2017). Innovation:
turn something old into something new: Vicia faba var. major. In 23rd Annual
Meeting of the EAA-European Association of Archaeologists (pp. 54-54). Jos
Bazelmans and Klinkhamer Group.
Pattie, C., Hartman, T., & Johnston, R. (2017). Incumbent parties, incumbent MPs and the
effectiveness of constituency campaigns: evidence from the 2015 UK general
election. The British Journal of Politics and International Relations, 19(4), 824-841.
Pepper, L. G., & Alves, L. D. F. N. (2017). Small-scale Açaí in the global market: adding
value to ensure sustained income for forest farmers in the Amazon Estuary.
In Integrating Landscapes: Agroforestry for Biodiversity Conservation and Food
Sovereignty (pp. 211-234). Springer, Cham.
ReseachGate, (2018), Incumbents and Challengers: Conflicting Institutional Logics in SaaS
ERP Business Model .Retrived from
https://www.researchgate.net/publication/267825816_Incumbents_and_Challengers_
Conflicting_Institutional_Logics_in_SaaS_ERP_Business_Models.

10
Scientific Reseach, (2018), Incumbents and Challengers. Retrived from
http://file.scirp.org/Html/9-9201405_18232.html.
Whelan, G. (2018). Trust in Surveillance: A Reply to Etzioni. Journal of Business Ethics, 1-
5.
Wood, A., Griffin, T., Turner, D., Moore, M., Rogers, V., & Jefferson, T. (2016). Money
Making: Ultimate Guide to Learn How to Make Money Quickly and Easily By
Selling on, Amazon FBA, Etsy and eBay.