eBay Inc.’s generic strategy for competitive advantage focuses on economies of scale for the profitability of the online auction and retail platform business. In Michael E. Porter’s theory, generic competitive strategies determine competitive advantages in target markets. eBay’s economies of scale are a foundation on which the e-commerce business grows and expands globally. On the other hand, intensive growth strategies determine the growth of operations. In this case, eBay’s intensive strategies for growth mainly aim to increasingly penetrate target markets. With its generic competitive strategy, the company applies intensive growth strategies that capitalize on the economies of scale of the online trading platform business. These strategies and their corresponding strategic objectives support eBay’s mission statement and vision statement, which aim for industry leadership against competitors. Management practices based on eBay’s generic competitive strategy work toward attracting more buyers and sellers to the company’s services. These practices are applied in the operations of eBay’s marketplace and subsidiaries.
eBay’s generic competitive strategy and intensive growth strategies are among the most basic factors in managerial decisions for increasing the performance of the online trading platform business. Competitive advantages are developed with technological foundations, aimed at globally growing and expanding the business. With a suitable generic competitive strategy and relevant intensive growth strategies, eBay Inc.’s online marketplace thrives against competitors, like Amazon, Facebook Marketplace, and Walmart Marketplace. Competitive strategic objectives enable the company to attract and retain a growing population of online shoppers.
eBay’s Generic Competitive Strategy (Porter Model)
eBay’s generic competitive strategy is cost leadership. The company develops and maintains its competitive advantage based on cost minimization, which translates to low prices or high profit margins. eBay’s generic competitive strategy involves technologies that minimize fixed and variable costs in multinational e-commerce operations. Consumers and sellers/merchants are drawn to the online retail and auction-trading platform based on attractive pricing strategies, which are an element of eBay’s marketing mix or 4P. Also, being a cost leader leads to business strengths against competition, which is a strong force shown in the Five Forces analysis of eBay Inc. Thus, the company’s generic competitive strategy entails management practices, intensive growth strategies, and related strategic objectives that minimize costs and capitalize on low operating costs. The resulting competitive advantages make the firm’s marketplace influential on prevailing industry prices.
In light of eBay’s global e-commerce business nature, the cost leadership generic competitive strategy necessitates strategic objectives involving low prices. For example, a suitable strategic objective is to achieve low costs by integrating cutting-edge technologies for economies of scale. As a consequence, the company’s generic strategy requires online digital technologies for competitive advantage. Another strategic objective is to increase the number of users who trade through the company’s marketplace. This cost-leadership move further spreads fixed costs and, consequently, increases business potential to raise profit margins or offer competitive prices to consumers and sellers on the online retail platform. As a cost leader, eBay manages its generic competitive strategy implementation by balancing prices, profit targets, and attractiveness of online auction transactions. The cost targets of this generic competitive strategy influence budget allocation and other decisions in eBay’s operations management.
eBay’s Intensive Growth Strategies (Ansoff Matrix)
Market Penetration (Primary Strategy). eBay’s dominant intensive growth strategy is market penetration. Through this intensive strategy, the company maintains business growth by increasing the number of people who trade on its multinational e-commerce platform. For example, by increasing the number of consumers who purchase items on the online marketplace, the business grows in terms of higher revenues and scale of operations. Such growth contributes to the company’s economies of scale. As a result, the business strengthens its online auction services and related operations, adding to the strengths shown in the SWOT analysis of eBay Inc. Corresponding strategic objectives and management approaches are implemented in subsidiaries. As a cost leader, one of eBay’s strategic objectives based on market penetration is to meet competition with other online retail platforms or marketplaces by enhancing technological efficiency. The cost leadership generic strategy creates competitive advantages that empower the company in using the market penetration intensive strategy for growing the customer base of the online business.
Market Development. Market development is a secondary intensive growth strategy in eBay’s global marketplace and e-commerce business. Growth is achieved in this intensive strategy by establishing new operations in new markets or market segments. In this case, for example, creating a new website for narrowly focused classified listings, such as for sporting goods, establishes eBay’s presence in such a market segment. Thus, in market development, one of the strategic objectives is to create new trading websites to establish new online retail or auction operations in identifiable market segments. In using this intensive growth strategy, the company’s management applies the cost leadership generic competitive strategy to attract vendors and buyers in new markets or segments thereof.
Product Development. eBay is minimally dependent on product development, which is a minor intensive strategy for growing the online auction business internationally. With this intensive growth strategy, the company develops and introduces new products to buyers and sellers, who are the target users of the e-commerce platform. Growth is achieved by creating new revenue streams involving new products. New products may require changes in eBay’s organizational structure (corporate structure). For example, a new set of online retail services provided on the company’s marketplace website may require a new organizational division for effective management. The industry trends shown in the PESTEL/PESTLE analysis of eBay influence the application of this intensive growth strategy for business growth opportunities. For instance, trading through mobile devices is a trend that warrants the continual development of new products/services for mobile users. Thus, a strategic objective based on product development is to increase the company’s rate of technological innovation. New products/services must satisfy the cost minimization requirement under the generic competitive strategy of cost leadership to ensure eBay’s competitive advantages.
Diversification. Diversification is a minor intensive growth strategy in eBay’s marketplace business. To achieve growth with this intensive strategy, the e-commerce company needs to expand through new businesses or entry into new industries. For example, full ownership of PayPal diversified eBay’s business to include operations in the online financial services industry from 2002 to 2015. A strategic objective associated with this intensive growth strategy is to grow the online retail and auction business by acquiring related companies that operate in other industries, such as a smaller firm that operates a display-advertising network. In this case, to satisfy eBay’s cost leadership generic competitive strategy and for strategic management alignment, acquired firms must operate at low costs.
References
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