3.Industry environmental Analysis
Industry environmental analysis is done to understand how industry structure creates and affects competition among the firms with similar type of products so that they can determine and forecast their future profitability. Based on the analysis, these firms then formulate a sound strategy to gain a competitive advantage. This report used Porter’s five forces model to analysis eBay’s industry environment. Within the model, Porter includes threat of potential new entrants, threat of buyers, threats of suppliers, threat of product substitute and threat of rivalry in the industry as the bases of the analysis.
3.1 Threat of new entrants
eBay ‘s increasing fame and growing user base made it difficult for other online auction sites to compete effectively against it. eBay’s auction system has given opportunities for its buyers and sellers to get what they want at the best prices resulted from a bigger auction. From this system, eBay successfully gained dominant market share of the online auction business. Well-known online companies such as Yahoo and AOL had attempted to enter the industry by offering buyers and sellers free-of-charge auction transaction, but they still found it hard to compete. In addition, the site has also obtained the advantage of being the first mover in the industry. There some other benefits that eBay enjoys from its position in the market, such as:
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