EBay Makes a Comeback

EBay

Today’s world is primarily driven by the internet, including e-commerce. This does not come to the surprise of EBay CEO, John Donahoe. Technology has driven scale and automation and our shopping experiences have become less dependent on human interaction and more dependent on a steady WiFi connection. Donahoe says, “these changes in the commercial landscape tend to be ‘phrased in zero-sum terms: big retailers versus the little guy. Local versus global. ‘”

While EBay is a major contributor in this landscape, its biggest competition is Amazon. Amazon is known for driving retailers out of business, especially with its most recent proposition to deliver packages with drones. One thing that stands out about Amazon is the idea of “showrooming.” Amazon’s mobile application will allow you to scan a barcode of any item in a store and it will show comparable items with competitive pricing. You can essentially buy the item in a few clicks while still in the store.

EBay is initially thought of as an auction website. However, “since Donahoe took over in 2008, he has slowly moved the company beyond auctions, developing technology partnerships with big retailers like Home Depot, Macy’s, Toys ‘‘R’’ Us and Target and expanding eBay’s online marketplace to include reliable, returnable goods at fixed prices.” This is EBay’s process strategy that will revolutionize the e-commerce world, and to Donahoe’s hope, take on Amazon.

In our Management of Operations course, we have talked about the idea of a “process strategy.” The objective is to create a process to produce products that meets customer requirements within cost and other managerial constraints. EBay is taking on a “mass customization” approach to its process strategy. It is the rapid, low-cost production of goods and service to satisfy increasingly unique customer desires. EBay is creating a “process redesign.” It is the fundamental thinking of business processes to bring about dramatic improvements in performance. We learned that changing processes like this can be difficult and expensive. EBay did not acquire all of its retailers for cheap, they had to put in an investment in order to create profitability which is what is needed in a process redesign.

EBay wants to push the concept of a “digital wallet.” While other digital payment options exist, like Google Wallet and Apple Pay, EBay wants to expand it. In 2002, EBay bought PayPal as a way to safely transfer money between people who don’t know each other. EBay has also been experimenting with a concept it calls Connected Glass, an interactive glass that may one day create a “smart” mirror in a store that can take measurements and allow you to try on outfits virtually.

While Donahoe doesn’t know exactly where all of his technological efforts will lead him and EBay, he says, ‘‘I would say everything we’re doing is just enabling the future.’’

Do you think the PayPal Digital Wallet is going to take off? Or will it be forced to the side by Apple Pay and other digital wallets?

Read the article here

The ‘Walmarting’ of the Airline Industry

Norwegian Air Shuttle’s ambitious plans involve some complex logistics
Norwegian Air Shuttle’s ambitious plans involve some complex logistics

Many companies choose to employ a global strategy where different pieces of the process are completed in different regions of the world. These global processes can be accomplished in numerous combinations and it is up to the company to find the most effective one.

In this article, Norwegian Air Shuttle, an airline that specializes in low-cost flights around Europe, is bringing it business model to the United States and Asia, to the dismay of U.S. airline companies.

Their strategy is a complex one that has different cost-effective parts. Norwegian is “moving its long-haul operations from Norway to Ireland, basing some of its pilots and crew in Bangkok, hiring flight attendants in the United States, and flying the most advanced jetliner in service — the Boeing 787 Dreamliner.” Other airlines have tried but failed to do a low-fare approach on long-haul flights.

Bjorn Kjos, Norwegian’s CEO, is confident that they can offer fares that are 50 percent cheaper than the competition’s, which will ultimately drive out competition. American Labor groups, “see it as a backhanded attempt to outsource cheaper labor and undercut competition” as well as taking advantage of the open-skies agreement made with the EU (even though Norway isn’t part of the EU).

“United Airlines and American Airlines said the low-cost airline wanted to skirt labor laws by resettling its long-haul operations in Dublin, while using a Singapore-based company to hire pilots on its behalf in Thailand. The result would give it ‘a competitive advantage on trans-Atlantic routes in direct competition with U.S. carriers.’”

In class, we talked about competitive advantages in relation to globalization. According to the lecture there are many reasons to globalize:

  1. Improve the supply chain
  2. Reduce costs
  3. Improve operations
  4. Understand markets
  5. Improve products
  6. Attract and retain global talent

I think that the way that Norwegian Air Shuttle is globalizing falls in line with these points and it is effectively improving supply chain, reducing costs, and improving operations better than their American counterparts. They improve the supply chain by finding the most beneficial process to establish their airline. They lower direct and indirect costs by eliminating unnecessary expenses and finding the cheapest way to provide labor, and reducing taxes and tariffs. They also improve operations by understanding differences in how business is handled in different countries, and using it to their advantage.

There are also strategies for competitive advantage: differentiation, cost-leadership, and response. I believe that the Norwegian Air Shuttle company is competing on cost; they are they are providing the maximum value as perceived by the customer at the lowest cost and it is creating the most demand.

Do you think that the way Norwegian Air Shuttle handles their business model is considered a strategic competitive advantage or is it an unfair advantage? Why?

Source:  Long-Haul Expansion by a Norwegian Carrier Upsets U.S. Airlines