Strategies & Web Technologies
The purpose of Chapter 2, the Literature Review, is to construct a thorough picture of all the research that has been done on the topic thus far. Because the research topic is on “the impact of web technology on online customers as in helping to remove some barriers using E-bay as a case study”, the Literature Review pulls together research in these areas. In this chapter, literature review of certain strategic business tools such as SWOT Analysis, PEST Analysis, and Porter's Five Forces techniques will be analysed.
Development and Implementation of Different Strategies & Web Technologies:
E-bay's strategies are focused on three key strategic levels. From the corporate level strategic point of view, the company focuses on diversity focusing on their customers, range of products, business and market. It also has different strategic business alliances with different organization. From the perspective of business level strategy, E-bay focuses on expanding their differentiation strategy with vast products selection for offers focusing on the eBay Community, eBay website improvement, using the brand image and reputation of eBay, and most importantly, the process of reaching out globally.
One of the most important strategies of eBay is global expansion, and the company is doing its best possible in order to cope with it by focusing on different strategic business analysis. E-bay made an announcement of a strategic alliance with Microsoft in order for both large establishments to jointly boost their online presence globally, and simultaneously improve e-commerce experience of the customers. Both establishments worked together for the purpose of enabling the internet buyers and sellers to interact freely across the several websites and use different applications worldwide. E-bay also support Microsoft.NET technologies and it is the first website to offer the Microsoft community-based commerce engine to Web developers as an XML-based web services; the web properties of Microsoft has integrated the eBay marketplace, and different Microsoft technologies such as Windows Server and Passport are being used by eBay. This action came up between a strategic a strategic alliance between eBay and Zoovy Inc, one of the leading right-size of e-commerce solutions providers. Through E-bay's Developers Program, Zoovy was able to integrate its propriety e-commerce web storefront, processing of internet payment, management of auction and inventory, processing of sale order and customer relationship management tools, and this gave Zoovy access to eBay's Application Programming Interface tools.
E-bay also has an alliance with PFSweb Inc., a leading business process outsourcing solutions provider. This it does in order to widen the company's offering by adding the service of Business-to-Consumer.
Additionally, in 2006, a strategic alliance was formed between eBay and Yahoo! Inc., the largest online media company. In this alliance, Yahoo exclusively provides banners online together with graphic advertisement at eBay's website. Yahoo! Also promotes eBay's online payment service, Paypal, as the preferred payment provider for online purchases.
Apart from the afore-mentioned, it is crucial that eBay is employing its strength in order to maintain their competitive advantage with the implementation of different strategies. Since the company manages Paypal, it is being employed as the billing method in several transactions between customers and between company and customers, enabling them to achieve great billing accuracy strength. As part of eBay's plan in growing business to 27 sites outside the United States in a space of five years, a playbook was created by eBay allowing managers to reference the right conditions for their scopes which comprised of development of the web, management of the products, and marketing on the internet. E-bay achieved a competitive edge in the marketplace through information sharing of different scopes and countries in the playbook.
Many e-business models, both business to business (B2B) and business to consumer (B2C) are presently being constructed for the purpose of assessing and verifying their real effectiveness (Kalakota & Whinston, 1996). Contemporary organizations are aligning IS and business strategies to improve organizational performance (Kearns & Lederer, 2000).
Strategy can be defined as a “quest to match a firm's resources and capabilities to the opportunities and risks created by its external environment” (Grant, 1991). During the 1980s the dominant Porterian competitive forces approach (Porter, 1980) emphasized the relation of a company to its environment, while more recently the resource-based view (RBV) highlighted the need to consider the firm's internal resources and capabilities. Barney (1991) adds that for resources to create sustained competitive advantage, they must be valuable, rare, imperfectly imitable, and not strategically substitutable.
E-commerce is usually analysed from a technical point of view and not from a marketing or strategic perspective. Its convenience for the buyer and seller eliminating the face-to-face interaction has made it so popular. Moreso, web-based stores are in operation on a round-the-clock basis.
For the last number of years the internet and e-commerce have been offering exciting new competitive opportunities for small to medium size enterprises to extend their customer base into global marketplace, and broaden their involvement into new markets (Lewis & Cockrill, 2002).
When firms manage to combine functional and emotional benefits in their services they compete better, since it is not easy for competitors to penetrate the emotional bond between a firm and its customers. Instead of producing a set of images that connect an organisation and its services with emotional values, it is better for a firm to focus on creating a business that delivers the brand as an experience embodying these values. (Haeckel et al., 2003)
The e-bay's internet auction site came into existence in San Jose, California by Pierre Omidyar as AuctionWeb. A broken laser pointer was the first item to be sold on the site and for $14.83. Initially, e-bay's first target centred on antiques collectors before it later changed into an international marketplace for all buyers and sellers.
E-bay is an Achilles of the internet auction industry, like Achilles, its heels are its weaknesses. It manages ebay.com which is an internet auction and shopping site where products are transacted worldwide. An establishment like E-bay must know its strength, weaknesses, opportunity and threats and in the process of revealing and evaluating this four variables, a SWOT analysis must be carried out.
E-bay's SWOT Analysis:
Whether or not change is needed in E-bay will depend on the (SWOT) analysis of its environment. The aim of employing SWOT is basically “to balance the organization's strengths (internal) with opportunities (external)” (Pearce and Robinson, 2005). Hence, for an organization to survive it must consistently scan its environment and adopt change were necessary.
- E-bay is the world's largest auction site. It is a big marketplace patronised by millions of people worldwide to transact all things one can possibly think of. A greater number of people with diverse needs are being attracted to e-bay.
- Through the power of customer relationship management, data of registered buyers and sellers are collected. This is good because reports and statistics can be generated from the collected data and this can make the company better and also address its threats and weaknesses.
- A new meaning is being given by e-bay to the world middle man business by encouraging the seller to target their goods to the buyers through the provision of extra-ordinary tools to sellers. Buyers are also provided with wonderful search tools, to get to the products they are searching for. A very powerful platform that is seamless and invisible has been established by e-bay for buyers and sellers. This has really encouraged customer-to-customer relationship.
- E-bay has maintained a diversification policy by not only diversifying its goods but also its market. It does this by branching and localizing in countries like India, China and United Kingdom.
- E-bay's focus has always been on staying ahead of the competition, for instance, it acquired PayPal to support its internet auction with a robust payment method. This has encouraged the start up of small businesses and facilitated large businesses.
- E-bay's business strategy is being supported by Customer Relationship Management and Information Technology
- It was an early exploiter of web technology for e-commerce making it one of the first online retailers
- A very bad job is being done by e-bay in the control of illegal or fake auctions. A lot of auctions are scam, such that scammers for instance, try to sell d packaging box of a product and claims it's the actual product.
- Sellers' enforcement of payment method of their choice. This favours scammers especially when sellers choose the money transfer method of payment which does not protect buyers. In this case, buyers tend to lose their money and don't bother returning back to e-bay.
- Another weakness is the issue of shipping. Sellers tend to lower their product cost and increase shipping cost leading to buyers fleeing away.
- E-bay is unable to control its auction items contents.
- It sells its expertise to big stores such as Toys-R-Us coming into joint venture with Amazon. This is a credential to Amazon
- It collaborated with British Library in 2004, hence, availing customers opportunity to search for rare books
- It bought Joyo.com, an online retailer in China in 2004.
- It has competitors like e-bay which pose a threat through price competition
- Intruders like international competitors pose a threat
- Threats may arise on some seasonal products sold by Amazon
Porter's five Forces Analysis in E-bay:
Michael Porter (Porter, M.E. (1985) describes forces that do affect the way a business operates. These factors are peculiar to individual industries and sometimes to individual firms. Thus, to some extent they are within the control of the organizations.
The action of competitors- e.g. their price action, market share e.t.c
Action of customers; their spending pattern, preference e.t.c
Action of suppliers; location of supplier, whether or not they do offer credit facility to the organisation e.t.c
Threats of substitutes: switching costs, buyer inclination to substitute products, trade-off of substitute's e.t.c.
Threats of new entrant: absolute cost advantages, government policy e.t.c.
E-bay applied the chance of suppressing brick and mortar stores since it operates an online store..
These are factors which are external to an organization and have pervasive effect throughout the entire industry in which the organization operates. It is key to note that E-bay has no influence whatsoever these factors. Hence they are left with no choice than to minimize the impact of these factors on them. This can achieve by constantly changing with the changes in the external environment.
Political factors; these includes tax policy, trade and tariff control, government policies e.t.c
Economic factors; e.g. current and projected economic growth, inflation and interest rates, job loss and labour supply, labour costs and impact of globalisation
Social factors; population growth rate and age profile, lifestyle e.t.c.
Technological factors; research and development activity, impact of emerging technologies and impact of technology transfer
“After a thorough examination of the PEST factors on the business, results obtained can be channelled towards strategic business plans by taking advantage of opportunities and to plan for threats”. (Byars, 1991, Cooper, 2000) According to Kotler (1998), “PEST is an important tool used to analyse growth or decline in the, position of business, direction and potential for operations”
E-bay has applied the PEST model in its analysis. This can be seen through massive reduction in prices to catch up with some of its competitors like Amazon.
The internet business is being hindered by security implications. There are web technologies in place jointly put together by banks, credit card companies, and software producers.
As a result of the rapid growth of internet and e-commerce, there has been a need by customers and businesses for transactions to be secured. Despite the advances in security technology, “password” still plays an important function in the security of systems. One difficult issue with password is that the mechanism of its security is easily defeated. The issue of security has been so paramount now, hence there are several computer software used in blocking intruders from stealing company information. The use of a so-called “firewall” act as protector to a network from bad influences coming from outside and also from the internet
The main challenge to personal information privacy is the monitoring of user behaviour without the user's consent and the misuse of the information already collected leading to financial and personal harm to the user. As a result of this, there is limited use of web technologies, up to the extent of limiting e-commerce success (Szewwezak, 2004). My focus is basically on web technology use in Amazon.
Amazon has expanded to sell nearly everything from shoes to blenders, diamond rings to dishwashers, e.t.c. It uses two different interactions in its Programming Interface which are:
REST (Representational State Transfer) and SOAP (Simple Object Access Protocol). With Amazon's Application Programming Interface (API), individuals and firms can advertise selected products through their own website by creating personal store.
Online criminals are being invited by e-commerce sites to schemes that are fraudulent and mimic the goods and services legitimately offered by e-commerce merchants. As the number of users rises, users usually go for the option of re-using the same simplistic password (Campbell, Calvert, and Boswell, 2003). Company files can be infiltrated and infected with a virus by hackers and criminals, and this can be sent to other computers to infect them. Such people can get useful details about the particular company if the network is unsecured.
Organizations are encouraged to adopt a holistic approach to e-commerce security, whereby individuals, businesses, vendors and government work in partnership to address this problem (EURIM, 2003, US-CERT, 2004).
For most computerized systems, “passwords are the first line of defense against hackers or intruders” (Horowitz, 2001). Several articles have been published as regards the creation of safer and better passwords with the listed recommendations:
1. Passwords should not be written down, instead, it should be memorized;
2. Passwords should consist of an eight or nine digit character word or phrase
3. Passwords should be made up of a mix of letters, numbers and punctuation marks
4. Passwords should not be dictionary words.
It is unfortunate that many of the deficiencies of password authentication systems arise from the limitations of human cognitive ability (Pond, Podd, Bunnell, & Henderson, 2000).
Individuals and e-commerce sites are feeling the wrath of hackers as more and more identify thefts is in existence. As a response step to the online fraud, many companies are employing different verification means together with passwords, such as two-factor authentication in which the consumer applies his or her password together with supplementary information. The use of personal Web certificate is another level of security. In this, an e-commerce site depends on these personal Web certificates and then authenticating the public/private keys in order to ascertain one's identity.
More Internet shoppers will be encouraged to become online shoppers if there is a secured web technology in place. Four key technology issues need to be resolved. These includes: Security, Authentication, Anonymity, and Divisibility.
To resolve security and authentication issues, such as sensitive information like credit card numbers and personal identification numbers (PINs), the data should be encrypted, thus enabling the user to be well identified.
To resolve anonymity issues, such that our privacy is not being affected, it is necessary to employ Blind signatures which let consumers scramble serial numbers.