EBay Case Study

1. Why has eBay succeeded as an online auction marketplace while so many others have failed?
EBay was one of the first online marketplaces on the world-wide web. It was created as an online auction
website, but it has now become the largest online marketplace that exists. EBays success truly created a
pricing revolution by allowing buyers to determine what they would pay for an item; the result pleases both
sides because customers gain control and receive the best possible price while sellers make good margins
due to the sites efficiency and wide reach. This is what we know as perceived value pricing: The
customers value perception is estimated on the image of the product etc., then the price is determined, and
later this will be observed. Nowadays even companies first check items on eBay before they estimate the
price they will charge for their products.
EBays success truly created a pricing revolution by allowing buyers to determine what they would pay for
an item; the result pleases both sides because customers gain control and receive the best possible price
while sellers make good margins due to the sites efficiency and wide reach. EBays business model is
based on connecting individuals who otherwise would not be connected. EBays originators did two things
well: they worked hard to make their Web site a community, and they developed tools to help reinforce
trust between strangers. EBays millions of passionate users also have a voice in all major decisions the
company makes through its Voice of the Customer program. The result is that users (eBays customers) feel
like owners, and they have taken the initiative to expand the company into ever-new territory. EBay
continues to expand its capabilities to build its community and connect people around the world by adding
services, partnerships, and investments.
Asia is different. Asia is different in culture, in economics, in political systems, people argue. But the
problem is, although Asia country is different from the U.S. Google/Facebook/Yahoo/eBay succeeded in
middle-east. They succeeded in Africa, and they succeeded in Muslim and Arabic countries. Compared to
the economic and culture difference those regions have with US, the gap between Asia and the U.S. cannot
be claimed to be bigger.

2. Evaluate eBays fee structure. Is it optimal or could it be improved? Why? How?

EBay doesnt sell or buy anything itself. It earns its money by collecting fees: an insertion fee for each
listing plus a final value fee based on the auction or fixed price. This pricing structure was developed to
attract high-volume sellers and deter those who list only a few low-priced items. This price setting is also
known as second degree price discrimination: eBay charges less to buyers who buy in a larger volume. This
pricing strategy is a good way to attract larger volume buyers, but I think that eBay should not forget the
small consumer who will also buy more and more online. It is not a good idea to charge the small
consumers with high fees because this can scare them off to other online marketplaces. For example, if an
item sells for $60.00, the seller pays 8.75 percent on the first $25.00 ($2.19) plus 3.5 percent on the
remaining $35.00 ($1.23). Therefore, the final-value fee for the sale is $3.42.This pricing structure was
developed to attract high-volume sellers and deter those who list only a few low-priced items. This fee
structure is optimal.

3. Whats next for eBay? How does it continue to grow when it needs both buyers and sellers? Where
will this growth come from?
When a company needs more buyers and sellers it will need to expand. EBay should invest more in mobile
applications. They must develop a mobile application that tells you where you can buy it, or sellers nearby
you. This way it can create more a social media idea and it will become more personal, in marketing terms
this is called personal selling. Personal selling refers to a set of activities directed at the attainment of
marketing goals by establishing and maintaining direct buyer-seller relationships through personal
communication. Also it is important for eBay to become more active in developing countries, like for
example the BRIC countries. But not only the BRIC countries are can provide growth, eBay should invest
in western Africa. In this part of the world people are already very familiar with buying on market places
and the development of better internet can help them do the same online. As the video underneath shows
us the internet is becoming better and better in Africa.
Southwest Airlines Case Study
1. Southwest has mastered the low-price model and has the financial results to prove it. Why dont the other
airlines copy Southwests model?
Southwest airlines is ranked United States most admired airline since 1997, the motto of the company was LUV
airline, they featured a bright red heart as its logo and relied on outrageous antics generate word of mouth. They
served Love Bites (peanuts) and Love Potions (drinks).
The most scoff Southwest is acknowledged by its unique market niche for serving only over 35 states in United
States especially in cities that has fewer airports and lower gate fees and less congestion. Southwest is a low-cost
airline that focuses on fast, no frills service. It has never served meals, does not have advanced seat reservations, and
flies only specific type of Boeing airplanes. These decisions have helped them to be flexible in the face of recent
decreases in airplane passengers due to economic crisis. Southwest is one of those airlines who are consistently
earning profits despite the problems the industry is facing. With such stability, the corporation is able to make
decisions and adjust policies, which other heavily burned airlines may not be able to imitate.

Following are the steps taken by Southwest to save money and pass to customers through low fares;

Flies over 3100 short and point to point trips in a day, Fast turnaround service, Unique boarding pass, Program to
hedge fuel prices by purchasing options years in advance long term contract, Lighter planes uses less fuel.

Southwest Airlines is also well-known for having a very productive a loyal workforce. Such loyalty and productivity
among the employees were brought by the way Southwests management treats them. Southwest is people-oriented
company that uses that orientation to leverage its advantage. The company also plans for the future and is not afraid
to take risk necessary to stay ahead of the competition.

2. What risks does Southwest face? Can it continue to thrive as a low-cost airline when though economic
times hit?

So far we have in that Southwest is ahead in the competition because of the decisions they have taken to minimize
their cost so that passengers are benefited. But there are certain risk factors that Southwest may face; firstly
Southwest Airlines have to run their flight even if only half of the seats are full. In such situation the airlines have a
risk of earning really low revenue. Secondly, South West Airlines is at constant price wars with its competitors. In
such price wars, sometimes South West is forced to keep the prices of tickets really low. Thus in this case to the
airline runs a risk of eventually earning low revenue which could hurt its overhead and affect scheduling and
workers.
Southwest Airlines use price as a market position. Customers may artificially relate low priced tickets with poor
quality flight equipment. Thus, in order to have passengers' confidences, Southwest could be forced to shed its
minimalist cost structure by providing higher services such as tickets and baggage transfer. On the other hand, price
is not the key to everything. People, some not focusing on price-sensitive clients, still have emotions, which can be
stronger than price motivation because the pricing is not the key to medium- to long-term success.
The fear of an oil hike remains. The price of the oil fluctuates and Southwest Airlines is trying to keep up with this
fluctuation of oil prices over the past couple of years, locking in fuel prices well under $51 per barrel. That spared
Southwest Airlines the squeeze from higher energy prices that hit other carriers. Unfortunately, those hedges are
ending, so Southwest faces higher energy costs even though crude prices have fallen.
Southwest has survived economic crisis once but the question is if the similar kind of situation arises again in the
future can Southwest survive this kind of unpredictable factors?