As You Reflect on What You Have Read and Your Knowledge of the Impact of New Technology on the Competitive Landscape, Why Would Amazon and Ebay Act So Differently?

Q.1 As you reflect on what you have read and your knowledge of the impact of new technology on the competitive landscape, why would Amazon and eBay act so differently?

        It is clear from the case study that Amazon and e-Bay has a different strategy for their respective growth models. eBay’s strategy is high profit, rapid growth whereas Amazon’s strategy is lower profit but more sustainable growth. For some reason both companies act completely differently. Amazon is set on cutting prices and brings home a measly 4% bottom-line profit. E-Bay on other hand finished with 22% bottom line profit. My assumption is that Amazon realizes that they want to remain in the growth phase for as long as possible and to keep expanding their market share. They are willing to receive lower profits for the sake of growth. It appears that eBay is moving away from growth phase to perhaps maturity or possible expansion phase. eBay’s leadership seem to feel that their business has now firmly established its presence within the industry. They may have started to think about capitalizing on this certain level of stability by broadening their horizons with expanded offerings and a possible entry into new geographies or ventures. eBay’s acquisition of Kijiji, Paypal, StubHub etc are evidence of their strategy to expand in other ventures.  

Though it is not an exact comparison, but I think Apple and Samsung business model seem to match eBay and Amazon’s competitive landscape. As an example, Apply controls about 18% of smart phone market where Samsung controls about 32%. Even though, Samsung hold higher market share its operating profit margin is just about 10% compare to Apple’s profit margin of 85%.

        As evident from eBay/Amazon or Apple/Samsung examples, I don’t believe that any one method is better than the other. However, accordingly to article eBay was beginning to reach the peak of its financial achievements and growth. Therefore, eBay risks left behind technologically on a long run. Also, it appears that Amazon is better positioned to adapt with changing technology.

Q.2 What would you say are the key lessons you should draw from the eBay versus Amazon experience?

        Some of the key lessons I learned is that different management styles will take different approaches, and one is not better than the other, but there’s definite pros and cons to both.  As we can learn from the article, eBay took the opportunity to reap as many rewards as it could from its position in the marketplace. On the other hand, Amazon maintained that slow, sustainable growth better fit its business plan.

Ultimately it draws down to what different business models and pricing strategies a company associates itself with for its success. Like eBay’s success strategy is to facilitate the sale of goods between third-party buyers and sellers while Amazon is a direct provider of goods by keeping majority of its products in-house. It also depends on how each company works to facilitate sales. eBay needs sellers to list products on its site to generate revenue and it actively invites sellers to participate in its auction marketplace, and the company provides platforms for sellers to offer products to buyers within an eBay store or through the auction site's classified section. Amazon is more buyer-oriented, actively inviting buyers to visit the site and browse through and subsequently purchase its own inventory.