To: John Donahoe, CEO eBay
From: Connor, eBay Efficiency Analyst
In Reference To: eBay’s decreasing market share

There are four generic business strategies for achieving a profitable business. They are; differentiation, cost, scope, and focus. In the past eBay has thrived due to the first three factors. It was able to differentiate itself from other websites by offering an original service, giving customers access to an online marketplace where demand determined the price of the merchandise. eBay’s cost strategy was that it was cheaper than a typical newspaper classified ad, while increasing the audience of potential bidders exponentially. eBay also was able to exploit the internet to provide clientele with a scope that could not be matched by any traditional classified publication, through the internet eBay was able to become a truly global marketplace. However, eBay’s early and sustained success has attracted powerful competitors. Rival websites such as Amazon and Facebook have adopted similar marketplaces on their domains. eBay’s first mover advantage is being eroded and its largest and most important resource, its large and loyal customer base, is being siphoned off by competitors. How can eBay turn its declining fortunes around and 1once again dominate the virtual marketplace, we must examine some specific factors and how to address them:

A. How does eBay create value?
B. Potential contracting problems with the site and how they can be fixed
C. Contracting costs at eBay
D. What does this all mean?
E. Ideas for expanding growth

A. How does eBay create value? eBay’s business model is based around its ability to lower customer’s transaction costs associated with buying and selling new or used goods. eBay is basically a virtual version of a bazaar. Buyers and sellers are able to congregate virtually and bid for goods they desire. eBay