Ebay Case Analysis

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eBay: King of the Online Auction Industry

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Overview and Issue

In 1995, Pierre Omidyar, founded the online auction company eBay. eBay was a Person-to-Person trading community brought together in one centralized market. To be a part of the eBay community one would have to first register their information and then create a eBay username. This username becomes the identity of the buyers and sellers and allows eBay to easily track all the information needed for their customers. For instance every username has a ranking on what type of eBay user they are; they will either have positive, neutral, or negative feedback. This feedback system helped generate trust in the newly developed online purchasing industry.

eBay quickly became a very successful company, and having the first mover advantage in the online auction industry gave them the dominant market share when the new auction websites began to appear. With this first mover advantage they have been able to develop a very strong brand name that has led eBay to being able to partner with other companies. These partnerships led to great expansion, but it also came with some problems. eBay was getting to big for their servers to handle and this was causing the website to crash. With all the crashes and downtime eBay was beginning to lose some of the trust of their customers.

Although eBay is still the market leader, recently they have been on the decline going from 80% to 60% of the online auction market share. This is mainly due to companies like Yahoo! and Amazon.com, who already had a large customer base, joining the online auction industry. To combat this decline, eBay is going to have to develop un underlying strategic factor that must focus on customer loyalty.

Current Conditions and Strategies

Pierre Omidyar founded eBay with a mission to "help people trade practically anything on earth, by creating a place where people could do business just like the old days - when everyone got to...