Ebay Value Chain Model Information Technology Information Technology Essay

The following assignment is based on the Topic known as Value chain analysis which is present in every organization. It is an important part of the firm as it takes care of the over functional activities of an organization. There are different topics recovered in the following report. In the beginning of the report, there is a detailed explanation of the value chain analysis. Next is how value chain model looks like and who has developed it. There are many advantages after analyzing value chain of any given organization. I have undertaken the case study of EBay plc to study how it operates its functional activities and being successful in implementing its online retail business.

The Value Chain – Detailed Overview

To gain competitive advantage in the market and to increase the value of their shareholders, it is utmost necessary that they create such type of system in their business that would divide different activities which are generating a type of value for them and due to which a company is able to make profit. So this type of value generating activity is known as Value Chain.

As per (Mandorf, 2008) there are different but sequence of the activity that is very much common in very organization. Porter has actually identified Support and Primary activities which can be shown in the following figure.

(Source: www.watsonwyatt.com) [1] 

The main goal of all these activity would be to offer their valued customer a level of value that would actually exceed their cost, as that would ultimately result in the profit margin. After all every organization is to maximize their profit in one or the other way for their shareholders and also sp that they can achieve their common organizational goals.

Following would be their two main activities: Primary and Support Activities.

Primary Activities:

Inbound Logistic:

The main activity regarding the inbound logistics would include warehousing and to receive the raw material, and also it include the distribution and also manufacturing as and when it is required. So it means they need to store the raw materials and as and when it is required they need to distribute or manufacture it as per the business requirement.

Operations:

The other main activity would actually include the operations that means, process of converting raw materials or inputs to finished product an also they include other services.

Outbound Logistic:

It mainly include that they have to first warehouse the finished product and once they start getting the order from other retailers or from their customers they have to correctly distribute it.

Sales and its marketing:

They need to identify the needs of the customers as what they want and in what quantity and accordingly plan for their sales activity. Sales and marketing is very important activity as business targets can be achieved only when the product are marketing in correct fashion and by generating more and more sales.

Their Services:

It is also known as after sales services. It means that once the product is being sold to the customer, there might be a possibility that the product has some defect or is not as per the need of the customer so they need to give excellent customer service as and when it is required.

Support Activities:

Company Infrastructure:

Most of the business activities can be run successfully and that is possible only when infrastructure of the firm is quite strong compare to other things. It normally include structure of their organization, their information technology, the culture of the company and few more things together combine and form structure of their business which are supportive to all of the activities.

Human Resource Management:

HR is one of the most important aspects to every business and that is because business is successful only when people involved in it are skilled and they have enough resources in place. (Rieple, 2008)

Development in technology:

Technology is the important part of every business. It links every functional activity together. They need to have proper technologies in place so that they can communicate and cooperate effectively.

Procurement:

It mainly involves purchasing of suppliers, raw materials and other types of parts and equipments for running the business and it supports manufacturing activity to a great extent and it is involved in more and more operations type of work. There needs to be right quantity being purchased and supplier to avoid shortages at the time of manufacturing and also they need to see to it that cost is reduced to a great extent.

General Introduction of an Organization – EBay

(Source: www.latimesblogs.latimes.com) [2] 

As per (Prince, 2007) eBay Inc, is an American based organization. Its main business is to auction online and also as a website for shopping in which, customers or their clients can either buy or sell number of goods and their services all round the globe. It was basically founded in 1995, and within a span of few years, it has actually become one of the best online retail business organization.

Cost Advantage & Value chain Analysis for eBay: General Perspective

Every organization has two options and the fit is to reduce the price of the individual value of their activity or they can also go for reconfiguring their value chain option. So the best strategy that eBay used is to go online so that it would be easy for the customer to purchase and it created a good amount of competitive advantage in the current market place. They made major changes in their business strategy consequently in terms of changes in the structure of their business, improved sales and marketing effort, better utilization of human resources, different type of improved distribution channels, and what is their sales approach.

They understood and used the porter five forces to make their virtual value chain stronger and so it is not only competitive in the current market but also customers felt satisfied after using their services.

VALUE CHAIN ANALYSIS: VALUE CHAIN MODEL FOR EBAY

From the above analysis it has being cleared that value chain is the various activities of an organisation having its operations in a particular industry or business. The following concept is generalised in clear with the help of an online retail giant “E-BAY”. The value chain for e bay is analysed below.

(Source: [3] www.ecommercecenter.net)

Value chain for EBay:

Most of the model of value chain for eBay are virtual value chain where in the company does not participate in actually buying or selling of goods. The company is just a medium for buying and selling of goods and services. In true sense the company never handles the transactions or products which are being sold on the website. The main use or objective of the business is to make sure that the tangible goods which are sold on the website can be traded in a safe and a secure manner without inconvenience to the consumers. The most important role for eBay in this entire process is to simulate and maintain the strength of the various virtual ties of the organisation which can lead to safe and secure transaction of the goods.

The company has a very lead value chain which provides all the necessary tools to make the transactions possible and allows the users to perform the transactions effectively. EBay has a centralised use of its technologies where but i some cases the company has to ship goods in local distances which makes the company arise a need for performing a number of transactions in local currency as well list out the products in local languages. But in current scenario the company has decentralised its value chain by development of various subsidiaries in a number of locations. The company has a vision of unspoiled global business, but the fact is moreover of more remote particular country marketplaces.

VALUE CHAIN ANAYLSIS: ADVANTAGES & IMPORTANCE TO THE BUSINESS

The value chain for eBay is a virtual, in nature but us very much beneficial for the company and it’s explained below in brief.

Virtual in nature: The Company has a virtual chain and it gives the company an advantage to compete in the market virtually. The company does not have to actually come physically in nature of transactions of goods and delivery of goods.

Provides Competitiveness: The value chain analysis of the company gives the company an added advantage in the market. The company have a very less competition compared to the actual business scenario. The company have a very less number of competitors in the market but the kind of value chain of the company has set the company apart from its competitors

Cost-Factor: The virtual value chain of the company reduces the cost of the company as the company does not have to itself ship the goods to the buyers. The company just have to provide a safe and a secure way to sell goods to the buyer’s .This is a benefit that the company has grown very huge in size just within 15 years of its incorporation.

Eliminates the supply chain: Supply chain is a part of the value chain analysis but the biggest advantage a virtual value chain helps is to eliminate the supply chain of the company. The company does not have to worry about the shipping and delivery where in the transactions are concerned and this helps the company to establish a very innovative chain of management in the company.

Differentiation of the Business: The virtual value chain has evolved to be a great success story for the organisation. The company has grown very huge in size ever since in time it has started this kind of business. There are various other companies like Tesco, Asda which provides such services online but EBay differentiates with these companies due to its value chain management. “EBay dominates the auction market because of the experiential curve and significant cost of market entry” (www.articlesbase.coml) [4] 

EBAY VALUE CHAIN MODEL & INFORMATION TECHNOLOGY

The above described model of eBay is a virtual value chain model and is one of the most important aspects contributing to the information technology.

“EBay is a highly visible company that has been immensely successful in their implementation of a business strategy that incorporates their information strategy. It is a shining example of an Internet era company that actually turns a profit, and managed to outlast the “dotcom crash”. By remaining flexible and adaptable, the ever-changing eBay has developed a technology platform that differentiates them from their rivals”

(Source – LEVERAGING IT FOR A COMPETITIVE ADVANTAGE-CASE OF EBAY, 2005)

Value chain has a lot of importance in each and every business, which has evolved the development of information technology at all the levels. There is constant research and development on various models of information technology. New innovations have being evolved on generalising the value chain model with the technology.

Running a business without information technology is next to impossible and therefore it needs it development at all levels. Value chain includes all the necessary inputs of business and they are developed with the help of information technology and information systems.

According to (Lorek 2002) “Most sales today are in used, outdated or overstocked merchandise that can be discounted. The site has become a big outlet for large corporations like Sun Microsystems and Dell that looks to sell refurbished or used computer equipment”.

CONCLUSION

A value chain model is of a strategic importance to the organisation irrespective of the kind of business an organisation is in to. The following project helped to understand the various strategic models of value chain analysis of EBay and its working in the current market trends and patters. The success of any business lies in the working and structure of the value chain model. EBay is successful as of now just because of the kind of technology and support in its virtual value chain. Also the systems of value chain have evolved a number of innovations in the field of information and technology.

References:

Alison Rieple, (2008), “Strategic Management”, 1st Edition, Published by Oxford University Press, UK

Dipl.-Kff. Susanna Mandorf, (2008), “Processes in the Internet economy”, 1st edition, Published by Auflage, Germany.

http://www.watsonwyatt.com/europe/pubs/insurancefinancial/render2.asp?ID=13027, assessed on 03.12.2010

http://latimesblogs.latimes.com/technology/2009/01/ebay-earnings-f.html, assessed on 03.12.2010

Dennis L. Prince, (2007), “How to sell anything on eBay… and make a fortune”, Published by McGraw Hills, USA.

http://ecommercecenter.net/management/value-chain-analysis.html assessed on 1.12.10

http://www.articlesbase.com/management-articles/ebay-value-chain-competitive-analysis-3195768.html assessed on 2.12.10

Lorek L.A. Lorek Cyber-commerce. EXPRESS-NEWS BUSINESS WRITERS ANTONIO EXPRESS-NEWS .07-07-02 assessed on 4.12.10

Edward T. Chen,” LEVERAGING IT FOR A COMPETITIVE ADVANTAGE-CASE OF EBAY”, University of Massachusetts, Volume VI, No. 2, 2005 assessed on 1.12.10