TMIA ASSIGNMENT

MBA SEMESTER 1 – OCT 2009

The Background

An industry is a group of organisations producing the

same principal product/service or more broadly the group of
organisations producing products/services that are a close
substitute for each other, for example the hotel industry or the
manufacturing industry etc.

The Task

a) Briefly describe the industry and choose a reputed

organisation in that industry.
b) You need to gather information on that particular
organisation within that industry/sector. Information is to
be collected from a variety of sources.
c) You are then required to produce a single report that
assesses the nature, success or failure, benefits of the
innovation within the organisation.
d) First hand data on innovation may be collected by means
of interviews, e-mails, surveys or questionnaires from the
organisation. You may include employees, customers and
any researchers related to the innovation.

The Report

Your report should include an audit of how the innovation

process has been managed, by considering the following
points.

a) Approach adopted
b) Evaluating the implementation mechanisms
c) Determine how the innovation has improved the
performance of the organisation
d) Make recommendations outlining the practical steps
necessary to improve the management of innovation
within the organisation

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 e) Outline how innovation might be managed in the future
within the industry

INDEX

CONTENTS PAGE
NUMBER
INTRODUCTION 3
E-COMMERCE 4
EBAY 4
FOSTERING INNOVATION 5
THE EBAY WAY OF 6
MANAGING
CHALLENGES 7
FUTURE 7
CONCLUSION 9
REFERENCES 10
BIBLIOGRAPHY 11

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INTRODUCTION

Innovation is very essential for all organizations

as it is the factor which separates the best from the rest, by
adding value to the organization or their services. Today, most
organizations have recognized the importance of innovation
and these organizations are trying to integrate innovation with
their business strategies.

Innovation is mostly inter-linked with technology.

The increased competition as a result of globalization, has
prompted most of the companies to innovate with the
technologies to stay afloat in the competition. Similarly,
technologies are helping the companies to innovate new
business strategies and models. One example of such an
innovation which changed the business world is e-commerce. It
re-defined the basic concepts of business and the way business
operates.

Creation of innovative ideas alone will not do any

good. The success depends on making the ideas realistic and
commercialising it. So, a good vision of the future and an
organizational culture encouraging innovation are essential for
success. A continuously innovative organization will definitely
create a competitive advantage over others. One such
organization, which conquered the world through their
innovative ideas is ebay. The assignment will be focussing on
the innovative strategies followed by ebay to become the world
leader in e-commerce.

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E-Commerce

Technology is already pervasive in our lives

and it affects us, both as consumers and as business people.
Businesses and consumers continue to embrace technology
and it has brought about evolutionary and revolutionary
changes in the field. Electronic commerce was such a
revolutionary change, which was triggered by the internet era.

Gone are the days, where consumers had to go

to shops for purchasing goods and products. e-commerce
makes buying and selling of goods much easier. The main
advantage is that it has no defined boundaries, including time
zone and country. Now, a vast array of goods and services are
available just a mouse click away. The number of goods and
services selling online are increasing every day. E-commerce is
conquering the audience throughout the world. It is here to stay
and will continue to change the way we do business.

But only a handful of the companies were

successful in doing business on the web because, the others
neglected standard business practices such as good customer
service, strong fulfilment channels, and target marketing to the
right customers. The companies with the right vision, such as e-
Bay and Amazon, emerged victorious in the competition. Being

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the world leader in e-commerce, my assignment will be
focussing on eBay.

eBay

eBay is unquestionably successful as the world’s

online marketplace. With a community ranking in the millions, it
is the most popular trading place on the internet. It connects
millions of people by providing internet platforms of choice for
global commerce, payments and communications. It was
founded in 1995, and since then it has expanded by occupying
some of the strongest brands including PayPal and Skype.

e-commerce can be of different types such as

business to business, business to consumer and consumer to
consumer, and ebay is focussing on consumer to consumer
business. The main business of eBay is online auction. It acts as
an intermediary between the process of buying and selling.
Without a service like eBay, it would be difficult for buyers and
sellers to come together for online business. Even though it
wasn’t the first company to start online auctions, it was the one
which succeeded, and it maintained its top position over the
years.

Fostering Innovation

From a simple concept, this company grew to a

global virtual market by harnessing the resources of the
internet, and it is constantly looking to increase its markets by
providing international sites and moving into new markets. It is
their good vision and new innovative ideas that helped them in
occupying the prime spot. eBay is ranked among the top 20
innovative companies of the world. It is continuously evolving
and launching new ideas and tools for improving their
performance.

The company received the ‘National Medal of

Technology and Innovation’ in 2007 for pioneering the
technology that encouraged and supported online trade,

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enabling global entrepreneurship and the growth of the internet
worldwide (ebay Ink, 2008).

This assignment will be focusing on the business

strategy of eBay as the innovation, rather than the hundreds of
innovative ideas and applications developed by the company.

The main reason for the success of this company

is its innovative ideas. The company encourages the employers
to come forward with new ideas and incorporates these ideas
into their services. The company conducts innovation demo
expo at regular intervals which gives chance for the employees
to share their innovative ideas by building new applications and
showing them to the company executives. Many of the
applications used in the eBay site, including eBay mobile and
eBay pulse are developed through these innovation expos
(ebay Ink, 2008). The company also presents Star Developer
Awards for those who show the most innovative use of eBay
and PayPal platforms to improve the user experience and
customer service (ebay Ink, 2008). And, the company has a
Disruptive innovation team for working on the innovative ideas
developed by the employees (Computerworld, 2007).

eBay is introducing hundreds of new applications day

after day. Now, let us discuss about some of the innovative
ideas and applications used by eBay.

• Acquisition of PayPal: PayPal is a company owned by eBay

and it helps in financial transactions between the traders.
It is integrated into the eBay site and it helps in making
the payment immediate and secure. The decision of eBay
to use PayPal for payment was an innovative move,
because it facilitated sending and receiving of payments
in different currencies, which in turn was a boon for
international trade (MacRae, 2005).
• Acquisition of Skype: Skype is a communication software
owned by eBay which helps in the communication
between buyers and sellers.

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 • Acquisition of Shopping.com: Shopping.com is an online
shopping site owned by ebay.
• Feedback system: It is the lifeblood of eBay. It is actually a
very simple system, but in a community based more on
trust than legislation, it is the means by which buyers and
sellers make informed decisions about who to deal with
and who to avoid (MacRae, 2005). The feedbacks are
published on the eBay website and are publically available
to anyone, so that one can check a trader’s feedback
before entering into an auction.
• Applications: ebay is introducing new applications in their
web sites very frequently in order to improve the
customer experience. Examples include ebay pulse, Jaast,
ebay mobile etc.

The eBay way of managing

In this era of globalization, innovation is the

key to the success of all organizations. In the case of eBay, its
online business demands innovative ideas from IT and
business. Here, I will discuss some of the management
strategies followed by eBay.

Integrating technology with the business

teams is the most important step followed by eBay, which
contributes to their success. This helps in creating more
opportunities to introduce new technologies or to identify
changes to the existing ones. The business team and
technology team are introducing a continuing stream of
innovations into every process to improve the user experience.

Another management tactic followed by the

company is working closely with a few vendors to customize
their products. Normal products will not be useful due to the
huge volume of their business. So they invite some vendors to
their labs to work alongside with them. They also encourage

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third party developers to create applications for integrating
with the eBay system (Information Week, 2007).

Challenges

The main problem they faced was that, because of the new
nature of their business, they didn’t had any role models or
proved strategies to follow. So, they had to create their own
strategies and go in an unexplored way, which in turn was a
very risk step. But, by building on the first-mover advantage to
gain momentum, they went on to become the monopolies in
their area of business.

Another problem they had to face initially was the reluctance of

people to shop across the net because of concerns regarding
data protection and privacy. But, eBay was able to overcome
this problem to create a community of millions. The company
also won the award for the most trusted company for privacy
this year.

As the business blossomed, they faced more problems. They no

longer could use the ordinary platforms and applications
because of the huge volume of the business involved. They
overcome this by joining with some companies to create
platforms and applications specifically suited to eBay.

Future

The factors which are very vital for this business to survive are
intellectual capital in the form of creativity and innovation,
customer knowledge and service, brand equity and web site
popularity, and lifelong customer relationships. eBay is the
unassailable leader in e-commerce, but I am afraid whether
they can keep up the dominancy. It is facing tough competition
from other companies like Amazon.

The core business strategy of eBay has always been focussed

on auction business and the company was only trying to
enhance the variety and appeal of the products in its site. But
over the years, consumer preference had changed and they

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prefer more of a fixed price for the buying items. Even though
the company was aware of this change in consumer
preference, they were wary of changing the long existing and
profitable equilibrium between the buyers and sellers and they
refused to re-orient their core business model (The New York
Times, 2008). But of late, the company is trying to change their
business strategy to overcome the competition from Amazon,
Google etc. Now the company is focussing on diversification, by
providing products and services that people prefer to perform
on the internet. The company is extending its horizon to other
segments of e-commerce also. Acquisition of online shopping
site, Shopping.com and online telephony company, Skype are
steps in this direction. So, preference should be given to
consumer tastes to retain its top position in the market.

Another problem area for eBay was that, it tends to give more
importance to sellers than buyers. For any business to succeed,
customer satisfaction is essential. So ,it is high time for eBay to
change its policy.

Another problem is the difficulties with its site. The eBay site is
very complicated and it is very confusing for an ordinary
customer. A well-designed, easy to navigate, uncluttered web
site is very essential to prompt the customers to revisit the site
(Feather, 2000). Moreover people are no longer interested in
browsing through all the sites. eBay has already recognised this
problem and they are working on some software to integrate
with other sites, so that the customers can view eBay listings
on their personal websites.

Maintaining its customer base will be the most important

challenge faced by the company in future. The increasing
number of fraud and illegal auctions is a major concern for the
company. It will lead to a reduction in its customer base, if not
dealt with.

Moreover, the company has reached a stage of stagnation. It is

not able to sustain their growth rate and the sales have

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dropped marginally. There is a limit to every growth and the
company is reaching that.

CONCLUSION

The key to the success of any business in this global village is

innovation. The success story of ebay underlines its
importance. The company which started with relatively zero net
asset grew phenomenally to become the world leader in e-
commerce, by using innovative ideas and strategies. Knowing
the importance of innovation, the company developed a culture
which fosters innovative ideas, and by following the policy of
continuing innovation, the company was able to maintain its
first mover advantage.

Online auction was an unexplored area when they started their

business. But, with the right visionary goals, creativity and
innovation, they overcame all the challenges to become the
global marketplace for online auctions. But, as the technology
advances day by day, innovation has to be a continuous
process, and for this, it has to be integrated with the company’s
business strategy. So, ebay is a role model for all companies
that wish to prosper.

(WORD COUNT- 2289)

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REFERENCES

1) Feather, F (2000) future consumer.com, Toronto: Warwick

Publishing, p.258-261.
2) MacRae, K (2005) eBay Manual, Somerset: Haynes
publishing, p.45, 57.

Web

3) Computerworld (2007) Mancini to boost eBay's innovation,

[online]. Available from:
http://www.computerworld.com/s/article/9012225/Mancini_to_
boost_eBay_s_innovation (Accessed on: 15/12/2009).
4) Ebay Ink (2008) eBay Receives 2007 National Medal of
Technology and Innovation, [online]. Available from:
http://ebayinkblog.com/2008/09/03/ebay-receives-2007-
national-medal-of-technology-and-innovation/ (Accessed
on: 25/11/2009).
5) Ebay Ink (2008) eBay Innovation Demo Expo, [online].
Available from: http://ebayinkblog.com/2008/10/24/ebay-
innovation-demo-expo/ (Accessed on: 20/11/2009).

6) Ebay Ink (2008) Star Developer Awards announced,

[online]. Available from:
http://ebayinkblog.com/2008/06/16/star-developer-
awards-announced/ , (Accessed on: 20/11/2009).

7) Information Week (2007) The Ebay way, [online]. Available

from: http://www.informationweek.com/news/global-
cio/showArticle.jhtml?articleID=201200007 (Accessed on:
10/12/2009).

8) The New York Times (2008) Amid the Gloom, an E-Commerce

War, [online]. Available from:

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 http://www.nytimes.com/2008/10/12/business/12giants.ht
ml?_r=1&partner=permalink&exprod=permalink
(Accessed on 18/11/2009).

BIBLIOGRAPHY
1) Angel, D & Heslop, B (1995) The Internet Business
Companion, Wokingham: Addison-Wesley Publishing
Company.
2) Birch, et al (2000) The Age of e-tail, Oxford: Capstone
Publishing Ltd.
3) Cunningham, M (2000) Smart Things to Know About e-
commerce, Oxford: Capstone Publishing Ltd.
4) Korper, S & Ellis, J (2001) The e-commerce book, 2nd
edition, London: Academic Press.
5) Turban, E et al (2006) Electronic Commerce-A Managerial
Perspective, New Jersey: Prentice Hall.
6) Tiernan, B (2000) e-tailing, USA: Dearborn.
7) Willcocks, L & Sauer, C (2000) Moving to e-business-The
Ultimate Practical Guide to Effective e-business, London:
Random House

Internet retailer (2009) Transforming eBay, [online]. Available

from: http://www.internetretailer.com/article.asp?id=29241
(Accessed on: 12/12/2009).

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BBC (2009) The rise of the eNation, [online]. Available from:
http://www.bbc.co.uk/blogs/digitalrevolution/2009/08/the-rise-
of-the-enation.shtml (Accessed on: 10/12/2009).

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