EBay Contracting Case
eBay Creates value not by actually producing, distributing, or selling any goods and services, but rather by facilitating this sale through its online site. This is a service provision of sorts, however it is a service that depends on their being another buyer and another seller at both ends of the service and would be considered simply a supportive element of the value chain in a more traditional construction (QuickMBA, 2012). As a facilitator of the sale of goods in a more traditional setting, eBay creates value by matching buyers with sellers in a secure environment that optimizes price for all involved in the auction model (Case, n.d.). Although the company only serves as a facilitator and thus avoids many contracting issues, there are still potential problems that eBay could face. Because the company offers a guarantee of a certain measure of security to both buyers and sellers, including providing insurance on certain items up to a value of $2,000, items that arrive damaged or not as described by the seller could indeed lead to contractual problems for the company (Case, n.d.). An implicit contract also exists regarding the Feedback Forum that eBay operates, which purports to provide reliable and non-fraudulent reviews of both buyers and sellers and thus must be maintained with some degree of oversight by eBay (Case, n.d.).
There are several steps that eBay takes to address these problems; the offering of insurance on items is actually one way to cover potential issues (and serves as an additional revenue stream for the company, no doubt) while at the same time incurring different albeit more controllable contracting issues. The Feedback Forum is similar, presenting certain complications to the company in terms of implicit…
Sample Source(s) Used
References
Case. (n.d.).
QuickMBA. (2012). Value chain. Accessed 7 April 2012.
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