In order to achieve a sustainable competitive advantage, eBay had to assess its ability to contend with other online auctioneers. The question of how to compete in a given business to attain competitive advantage requires an assessment of the types of competitive strategies, including the three generic strategies that are used to overcome the five forces and achieve a competitive advantage:
- Overall cost leadership
- Low-cost-position relative to a firm’s peers
- Manage relationships throughout the entire value chain
- Create products and/or services that are unique and valued
- Non-price attributes for which customers will pay a premium
- Focus strategy
- Narrow product lines, buyer segments, or targeted geographic markets
- Attain advantages either through differentiation or cost leadership
Ask the students which strategy they think eBay pursued, and why. Their answers may include some of the following points:
eBay competed by creating customer options that were uniquely different from those of its competitors. It also targeted distinct market niches. Because of its reputation and longevity in providing value to its customer segments, eBay was in a unique position to continue to capture a significant share of the growing online market. Therefore, eBay pursued a combination strategy of focused differentiation.
Regarding its competitive strategy in Asia, in order to maintain control over costs, eBay had kept central management control in the U.S. Although this centralized decision structure allowed eBay to keep to a consistent global platform, it made it more difficult to be responsive to local needs. Therefore, the value of eBay’s service in Asia did not yet convince users to either seek out the service or pay a premium.