Analysis of External Forces in eBay: A Porter's Five Forces Review

This report provides an analysis of the external competitive forces affecting eBay, a major player in the e-commerce and online auction industry. Using Porter's Five Forces model, the report examines the competitive environment, including rivalry among competitors like Amazon and Alibaba, the threat of new entrants, the bargaining power of customers and suppliers, and the threat of substitute products. The analysis highlights the competitive pressures eBay faces and suggests strategies for innovation, brand image enhancement, and customer service improvement to maintain its success. The report concludes with key factors for success in the e-commerce industry, such as high-quality customer service, a wide range of products, competitive pricing, and an interactive user interface. The study emphasizes the importance of adapting to competitive forces and leveraging opportunities to drive profitability and growth.

Running head: ANALYSIS OF EXTERNAL FORCES IN EBAY
ANALYSIS OF EXTERNAL FORCES IN EBAY
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1ANALYSIS OF EXTERNAL FORCES IN EBAY
Introduction
Porter’s model of five forces provides a framework for the analysis of the competitive
environment of rivals, new entrants, suppliers, customers and substitutes that can influence
the organizational activities and thereby its profitability. E-commerce is a booming industry
in the world with one of its major players being eBay (Ebayinc.com 2019). The external
factors affecting the business activities in eBay shall be discussed further in this study using
the framework of Porter’s five forces.
Discussion
Figure 1: Porter’s Five Forces analysis of eBay
(Source: Author)
The analysis of the five competitive forces faced by eBay shows the nature and
strength of its influence on the business activities of the Company. The rapid growth of the e-
commerce and online auction industry entails that eBay faces strong competition from
CompetitiveRivalry:HighThreatofnewentrants:HighBargainingpowerofcustomers:ModerateBargainingpowerofsuppliers:LowThreatofsubstitutes:Low

2ANALYSIS OF EXTERNAL FORCES IN EBAY
various organizations like Amazon and Alibaba (Haucap & Heimeshoff, 2014). The constant
advancements in technology has enabled organizations to easily enter the e-retail segment,
thereby making eBay face moderately high threat of new entrants in the market. The
customers have the power to choose from the increasingly available of companies in the
online retail segment (Kasana & Chaudhary, 2014). This factor makes eBay face a high threat
from the bargaining power of the customers. The presence of a large number of sellers in the
market makes eBay face a comparatively low threat from the bargaining power of the sellers.
EBay is involved in constant expansion through the selling and auctioning of a wide range of
products. Therefore, it faces a low threat arising from substitute products. The analysis of the
5 forces shows that eBay has opportunities in the field of the bargaining power of suppliers
and availability of substitute products. The other aspects pose a competitive pressure on the
organization thereby allowing it to earn profits through efficient tackling of the challenges
posed by such competition.
Based on the analysis of Porter’s five forces the issues of the competitive pressures
faced by eBay must be addressed by the management of the organization out of which the top
priority is that of competitive rivalry among the major players in the market. To tackle this
issue the organization may involve in a process of innovation to gain a competitive
advantage. Such innovation may include the development and improvement of products and
user interface.
The key success factors that can be identified in the business activities of eBay
include the ability to attract sellers and buyers through the power of its brand image in the
market (Gregg & Parthasarathy, 2017). The Company’s success can also be measured
through its volume of transactions, selection of goods available and their competitive prices.
The customer service and brand recognition also contributes to eBay’s success.

3ANALYSIS OF EXTERNAL FORCES IN EBAY
Conclusion
From the above analysis of the external competitive forces affecting eBay, it can be
deduced that there are certain factors that can ensure success in the e-commerce and online
auction industry. Such factors may include high quality of customer services, availability of
wide range of products, competitive pricing and interactive web site design and user
interface. The utilization of these factors can help the organization tackle the challenges of
competitive forces.

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References
Ebayinc.com. (2019). Who We Are - eBay Inc. Retrieved 7 September 2019, from
https://www.ebayinc.com/company/who-we-are/
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.
Kasana, J., & Chaudhary, M. N. (2014). A Comparative study of eBay and Amazon in Online
Shopping. International Research Journal of Commerce Arts and Science, 5(2), 263.