ITP 800 : Technology Commercialization Case Study Chapter 14 : EBay Group 4 : Riri, Tint, Erdenebold  Case Study Questions :  

1. eBay is one of the only major Internet­based firms to consistently make a profit                           from its inception. What is eBay’s business model? Why has it been so                         successful?   Connecting the individual buyers and sellers online and taking a cut of the transaction is  eBay business model. Ebay receives its income from charging sellers a small fee to                           display items and then also taking a small percentage of the winning bid. Also it receives                               a small cut of the money from the buyers who use Paypal. Although making money for                               every single item and transaction is very small, millions of transactions can bring multi                           million dollar income to ebay. Additionally they innovated their business model by                       providing new services such as fixed price and half price sales.  

2. Other major websites, like Amazon.com and Yahoo, have entered the auction                     marketplace with far less success than eBay. How has eBay been able to maintain                           its dominant position?  

 eBay was one of the first auction online markets and it bought up many others around                               the world. Ebay focused to try to maintain the spirit of the traditional community of                             traders and it is the community of traders that has driven the new service development.                             eBay does not need to spend large sums of money trying to understand what the                             customers want because the customers constantly request and suggest changes.  The purchase of Paypal was a significant investment and successful move because it                         receives a small cut of the money from the buyers who use Paypal. The purchase of                               Skype has to deliver communications among the seller and buyers without any extra                         cost.    

3. Why did eBay ban the leaving of negative feedback on buyers? What has been the impact of this change?   It is customers right to say what  they felt negative about the items they bought to sellers. But sellers who did not like any form of criticism shouldn’t give back any retaliation to the                                 buyers. That’s why eBay ban the leaving of negative feedback on buyers from May                           2008. Trading volume was declining at this time. ebay felt the buyer has the power that should                               be appreciated and the business could have collapsed if they left. ebay put in additional                             tools to protect sellers and promote a fair marketplace as well. 

The impact of this changes led to build fair marketplace where buyers can give negative                             feedback and also sellers can report problems with buyers and even block them. By doing so ,ebay can maintain royalty buyers satisfactions and this could partially                         contribute to the continued growth of ebay. 

 4. Ebay makes every effort for conceptualise its users as a community (as opposed                         

to, say, ‘customers’ or ‘clients’). What is the purpose of this conceptual difference                         and does ebay gain something by doing it?  Constant modification of services is one of the key success of eBay. Customers are                           flocked in a community making them feels like eBay is also part of their life. Instead of                                 pondering research to know what customers need, eBay take benefits from community                       suggestions for future development and changes.  

5. Ebay has long been a marketplace for used goods and collectibles. Today, it is                           increasingly a place where major businesses come to auction their wares. Why                       would a brand name vendor set up shop on ebay?  It’s estimated that there are more than 100 millions active users of eBay (statista 2016).                             This huge amount of users are also potential buyers which can generate profit to                           business owner. eBay also erases geographical boundary as any potential buyers in                       southern part of the earth can connect and make trade with those sellers in northern                             part. These benefits will help any vendor regardless their brand name strength to get                           more buyer which will later bring profit. 

 As for brand name vendor, eBay can serve as cheap marketing platform which helps                           generating revenue in the long run. 

 6. Many analysts have argued that by moving to fixed­price sales eBay is risking                         

alienating its traditional community of garage/ carboot traders. How can eBay stop                       becoming just another site for selling?   Managing Ebay Meg Whiteman after transformed eBay from a purely domestic group                       that held 300 categories into a global enterprise, operating in 18 countries and offering                           16,000 categories, also she expanded the range of goods sold from mainly collectibles                         including used cars, motor­cycles, computers, time­share holiday homes and even golf                     tee­off times.   However ebay risks alienating its customers and the whole ebay community by                       introducing fixed­price sales. And this move away from auction and into mainstream                       sales goes against the principles which ebay established. Ebay has community which                       has millions of members around the world and they are defining the business models. If                             

this community control and change, then they could influence eBay stop becoming just                         another site for selling. 

 7. Given the growth opportunities available to eBay, which ones and in which order 

should it develop?  As defined in the case study, VOIP, the online payment system (Paypal) and the eBay                             community should create new experiences and encourage new developer solutions at                     the intersection of the three businesses. How open the enlarged business is to the                           innovation in the developer community could well determine its success.   There is a shared opportunity for the company and independent developers. eBay will                         undoubtedly find ways to achieve a return on the huge investment it has made in Skype,                               but the rewards could be all the richer if it opens the platform to outside influences. It is                                   worthy of note that what was a weakness for eBay – its technology – has now become a                                   strength. 

 Discussion Questions:  

1. Discuss the differences between product innovation and service innovation.  

Traditionally, the literature has viewed services as different from products. This is                       because innovation theory has been developed around science and technological                   development.  The intangibility of services clearly makes it difficult for the traditional view to embrace or                             understand innovation within services.  Characteristics of services are identified as intangibility, heterogeneity and simultaneity,                   i.e. the three key characteristics that distinguish services from products, with interaction                       with the consumer the key distinguishing characteristic in service development.  Also additionally, according to Manchester business school presentation figure 1,                   products innovation are manufactured by factory as final good to consumer, while                       service is planned in back­office and directly delivered through front office of company to                           consumer as service which included action and transformation. 

 Figure 1. 

 2. What are the factors that have led to the increase in services? 

 Outsourcing has become very widespread in the last decade and has moved on from                           limited applications where peripheral business functions are outsourced to much more                     vital business functions being outsourced today, such as IT support.  Expected gains (factors) derived from outsourcing (from literature)   . The reduction of operational costs (Lacity, 1993)   . The ability to transform fixed costs to variable costs (Alexander5 and Young, 1996)   . The ability to focus on core competencies (Qinn, 1994) . Access to the industry­leading external competencies and expertise (Kakabadse,                     

2002)  There seems little doubt that the growth in services is linked to this enormous growth in                               outsourcing, with many firms now buying in services that were previously undertaken                       in­house. 

 3. How has new technology contributed to the growth in services? 

 The growth in information communication technologies during the 1980s and the                     development of the internet in the 1990s and into the twenty­first century has led to                             enormous sums of money being spent by firms in order to ensure that they are equipped                               to compete. 

In addition, the introduction of some of these business systems, such as enterprise                         resource planning system, have led to significant reductions in costs and improvements                       in efficiency.  The development of internet­based firms, such as eBay's, is clear evidence of innovation                         outputs within services­even if technology is a key antecedent.  If one then adds to the Knowledge­Intensive Business Services (KIBS) the huge growth                         in entertainment industries including the gaming industry (Xbox, Nintendo, PlayStation,                   PC games, etc.), the new online gambling industry (Party­Gaming, Gaming Corporation)                     and the more recent social networking industry (Myspace, Bebo and Facebook etc.), one                         begins to recognize just how much change and growth there has been to economies                           over the past 10 years. 

 4. Discuss how some new services have created new business models. 

 New services were taught to create new business models mainly because there were                         technologies behind them. Technologies, for example : internet, is able to transform                       conventional way of doing something into a new service innovation. Let’s take ebay for                           example. Most people already know the concept of auction, but eBay brings auction to a                             new level by implementing technology in it. That’s how we now know the concept of                             online auction. Business models that were created by the discovery of new services                         seek not only to augment existing models, but also to amplify new strength in the new                               models.  

5. Explain why manufacturing firms are increasingly involved in offering services. Discuss some examples . 

 The extension to which a manufacturing firms are moving toward services is also known                           as servitization (Crozet 2015). This strategy aims to either substitute or complement                       existing business models of current firms.  We argued that the reasons behind servitization is because of the need to strengthen a                             company’s value chain to customer along with the need to gain competitiveness in                         global economy. Servitization also can act as a backup plan if manufacturing industries                         is not showing good performance for the company. So if all fails, a company can still rely                                 on its service offerings.  A good example for this is Apple as a company which produce smartphone then later                             move towards service firm by offering online services through its appStore and iTunes.                         As we can see today, Apple is inseparable from appStore. This is the result of well                               planned integration of service and manufacturing side.  

Another example is in Automobile industry : Toyota. Toyota is well known for its                           capabilities in producing vehicles and later shift towards service by offering after­sales                       service for their customers.   

6. Explain the key roles played by the consumer in new service development.  The consumers play the key roles in new service development as the contributors,                         co­producer and co­creators by giving their request, feedback and suggestions. By                     allowing consumers to innovate on their own or by spending time with them and actually                             taking part in activities with them, deep insights and new ideas of service development                           can be emerged. Companies that engage in collaborative innovation with customers can                       expect improved customer satisfaction, customer loyalty, and profit margin as well.The                     new services have been developed by responding constantly to what the consumers                       have wanted.    In ebay case study, ebay focused to try to maintain the spirit of the traditional community                               of traders and it is the community of traders that has driven the new service                             development. eBay does not need to spend large sums of money trying to understand                           what the customers want because the customers constantly request and suggest                     changes.  The first intended business model was to make up of a community and this vision has                               helped shape the business later. Also It is clear that new technology is providing a                             driving force for new services.  

7. Explain how various groups of people in the organisation might use a service blueprint.  Service blueprint is the first and foremost customer­focused technique or tool, allowing                       firms to visualize the service processes, points of customer contact, and the physical                         evidence associated with their services from their customers’ perspective for service                     innovation. Various groups of people from the design, delivery, and support of the                         service in the organization should be involved in the blueprinting process for a particular                           service. This provides the greatest opportunity to capture diverse perspectives                   concerning how a  service currently is or a new service should be experienced by consumers and executed                           by the firm.  Various groups of people throughout the organization can use a service blueprint to look                           at any customer facing process ( internal or external ) from different points of views. To                               deliver new, high value service offerings, they can figure out what the customer                         experience will be and how to make that happen. Also, Blueprinting can help make the                             

necessary discussions among organizational groups and have a better understanding of                     their roles to deliver new better services.