eBay Inc Strategic Management

MR111037

eBay Inc.-2009[MR111037]

Strategic Management

2nd Individual Case Analysis (eBay Inc.-2009)

NAZIFA BTE ABD. GHANIMR111037

Associated Professor Dr. Mas Bambang Baroto

International Business School University Technology MalaysiaJune 2012Contents1.0 Executive Summary42.0 Vision and Mission Analysis42.1 Vision: There is no vision stated in the case42.2 Mission53.1 PEST Analysis63.2 Competitive Analysis93.3 Industry Analysis123.3.1 The Description of The Industry123.3.2 Rivalry Among Competitor143.3.3 Potential Entry of New Competitor213.3.4 Potential Development of Substitute Products223.3.5 Bargaining Power of Suppliers243.3.6 Bargaining Power of Consumers253.3.7 Conclusion of the Industry263.6 Defining the Key Success283.6 Opportunities and Threats313.7 The External Evaluation Factor (EFE)383.8Competitive Profile Matrix Analysis424.0 Internal Analysis434.1 Cultural Analysis434.2 Management Functions444.3 Marketing Strategy524.4 Financial Analysis614.4.1 Financial Ratio614.5 Production/Operation664.6 Research & Development (R&D)794.7 Management Information Systems Audit794.8 Value Chain Analysis (VCA)804.9 Strengths and Weaknesses874.9.1 Internal Factor Evaluation (IFE) Matrix1025.0 Existing Objectives and Strategies1065.3 Strategies1095.3.1 Strategies in Action1095.3.1 Generic Strategies (Business Level Strategies )1176.0 Strategy Formulation Tools1196.1 SWOT Analysis1196.2 SPACE Analysis1266.3 BCG Analysis1296.4 IE Analysis1296.5 Grand Strategy Matrix1306.6 Wrap Up Process1326.7 The Qualitative Strategic Planning Matrix (QSPM)1337.0 The New Strategies1377.1 Value Chain140

1.0 Executive SummaryEBay Inc. encompasses eBay.com, the online marketplace, PayPal, which refers to the online payments platform, and Skype, the Voice over Internet Protocol (VoIP) offered by eBays subsidiary Skype Technologies S.A. Corporate revenues are earned primarily from three business segments: (1) Marketplaces, (2) Payments, and (3) Communications.

In order to analyse these three segments, the analysis will be provided based on three separated segments which is absolutely depends on the case study given. As a matter of fact, this report provides an emphasis on strategic analysis based on its external and internal environment analysis and company analysis or resources, competence and culture. Two future strategic options are suggested in regards to the resource based strategies. As mentioned before, this report analysis information is only based on the case study given.

To be guided, this analysis addresses the following segment:1) Vision and Mission Analysis for eBay2) External Environment Analysis3) Internal Environment Analysis using value Chain analysis4) Defining the Existing Objectives and the existing Strategies of eBay5) Strategy Formulation Process with strategic tools 6) Implement New set Strategy7) Implement new set of marketing and financial8) Provide figure of existing objective, strategy, management issues, and financial issues versus new objective, strategy, management issues and financial Issues2.0 Vision and Mission Analysis 2.1 Vision: There is no vision stated in the case

2.2 Mission

The Original Mission Statement:We intend to continue to work toward our mission of creating the worlds leading ecommerce franchise by investing in our core Marketplaces segment and continuing to build our adjacent Marketplaces businesses. (2007 Annual Report)

*Based on the case study, there are three mission statements given in the case study for eBay. In this case, I only considered and analysed the latest mission statement which is in 2007.

Mission ComponentsIncludedNot includedDescription

Customers-

Products and Servicesecommerce franchise

MarketsLeader in the online marketplace

TechnologyLeading in e-commerce

Concern for Survival Growth and Profits-

Philosophy

Self-ConceptContinuously Investing in Marketplaces segment

Concern for Public Image-

Concern for Employees-

Table 1: Analyzing the eBays Mission Statement Based on the Nine ComponentTherefore, there are only 4 components out of 9 general components of mission statements and in this analysis the mission provided by eBay in 2007 has lacking of 5 components. Based on table 1, the 5 missing components are; customers, Concern for Survival growth and profits, Philosophy, Concern for Public Image as well as the Concern for Employees.

Mission Statement Evaluation

Key VariablesCase FactsEvaluation

Broad in Scopecreating the worlds leading ecommerce franchiseAcceptable

Length (Less than 250 words)

-Acceptable, but too short.

Inspiring

-Not mentioned

Identify the utility of the firms products

-Not mentioned

Reveal that the firm is socially responsible

-Not mentioned

Reveal that the firm is environmentally responsible

-Not mentioned

Include Nine Component

4 out of 9Unacceptable

Reconciliatory

-Unspecified

Enduring

-Unspecified

Therefore, It is clear to say that EBay does not have complete mission statement because of lacking of 5 components mentioned before. In fact, eBay mission statement is too broad and unspecified. 3.1 PEST AnalysisCase FactsOpportunityThreat

Political, Legal , and governmental forces

-Legislation is in effect which requires collection of taxes beginning after December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments (Page 269, Para 6)

-In addition, tax compliance will increase costs. (Page 269, Para 6)

-Legislation has also been proposed to prohibit sharing of certain information over theInternet, (Page 270, Para2)

Economic forces

-The resources of existingcompetitor firms are larger and as a result, competitors could weather an economic downturn (Page 268, Para2)

-The company continued its turnaround strategy in a harsh climate for consumer spending (Page 263, Para2)

-Weak global economic conditions, in addition to the mortgage and worldwide credit related financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns (Page 269, Para2)

-Profitability is also affected by currency exchange rates (page 269, Para3)

-If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income (Page 269, Para3)

-Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar (Page 269, Para3)

-Declining economic environment (Page 268, Para4)

- The revenue drop was attributable to the impact of the stronger.

-Dollar and the lingering weak economy with high unemployment (Page 274, Para1)

Social , Cultural , and Demographic forces

-Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5).

Breaches in data security are on the rise (Page 270, Para3)

Technological forces

Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4)

Competition is intense in communications services and subject to rapid technologicalChange(Page 268, Para2)

- The need for substantial resource investments intechnology and marketing in order to remain competitive (Page 268, Para1)

Total512

Conclusion:From the above PEST analysis, eBay has being treated by the Treats occurred from other Political, economic, social as well as Technology point of view. Since threat cannot be controlled, the company who want to invest in this industry really need to be aware of the treats in order to continuously sustain in the industry. As a matter of fact eBay Inc. cannot avoid from facing this treat but it can control to reduce the treat. 3.2 Competitive AnalysiseBay is active in three different categories such as; Business segment I:Marketplaces, Platforms, and Services; Business Segments II: Communications; and Business Segments III: Communications. Generally, E-Bay competitors include: online and offline retailers, distributors, liquidators, import and export companies, online and offline auctioneers, catalogue and mail-order companies, classifieds, directories, search engines, products of search engines, virtually all online and offline commerce participants (consumer-to-consumer, business-to-consumer and business-to-business), and online and offline shopping channels and networks. However, Amazons strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)

The summary of each category of segments comes as below:

1- Market place: competitors in this field includes traditional department, warehouse, discount, and general merchandise stores, emerging online retailers, online classified services, and other offline and online home shopping networks such as Wal-Mart, Target, Sears, Macy's, J .C. Penney, Costco, Office Depot, Staples, OfficeMax, Sam's Club, Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN, QVC, and Home Shopping Network. Companies such as Google Base and Microsoft Live Expo also offer similar online services and classified ads.

2- Payments: The Payments segment competes against other online Payments services and offline Payments methods, such as cash, check, money order, and established credit card merchants. (Page 268, Para1). Pay me Later is funded by CIT Bank and Bill Me Later is responsible for all functions related to the account (Page 269, Para5). Additional revenuesare also earned from advertising and revenue-sharing contracts with third parties that providetransaction services to eBay and PayPal account users.(Page 264,Para1) PayPal is a recognized global leader in online payment solutions with 70 million active accounts. PayPal generated $60 billion in net total payment volume in 2008, an increase of 27 percent over 2007.(Page 266, Para9) The Payments segment competes against other online payment services and offline payment methods, such as cash, check, money order, and established credit card merchants (Page 268, Para1)

3- Communications: Communications segments competitors have larger amount of resources compare to Skype. The Communications segment faces competition from local telephone or cable companies and other VoIP providers. (Page 268, Para 1). Traditional Communications companies offer bundled services, such as cable or satellite television, along with internet and voice Communications services. (Page 268, Para 3)

For the second quarter of 2009, eBay reported nice growth in both their PayPal and Skype business segments, which offset decline in their Marketplaces business segment.(page 263, para2) EBays popularity is due to the value offered to its users. EBay provides a faster, easier, safer online commerce experience (eBay, 2006, p. 7).(Page 263, para4).

*Because of lack of data for Communications segments competitors and Payments segment competitors, the competitive analysis is only focused on Marketplaces segment.Competitive Analysis for Marketplaces segmentKey Variables Case FactsOpportunityThreat

Competitors strength

Amazon

Amazon states their success is based on: the ability to attract buyers and sellers; the volume of transactions,price, and selection of goods; customer service; brand recognition, communitycohesion, interaction, and size; system reliability; delivery and payment reliability; Web site convenience and accessibility; level of service fees; and quality of search tools (eBay, 2006).(Page 269,Para1)

CompetitorsWeakness Amazon achieved Low gross profit margins. Low in gross profit margin can be considered as a weakness for Amazon (Financial analysis)

Competitors objective and strategy

Amazon- Several other online marketing channels such as: (1) syndicated store programs, (2) sponsored searches, (3) portal advertising, and (4) e-mail campaigns Amazon.com, 2006, p. 37).(Page 269, Para1)- Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com (Page 269, Para1)- The success of Amazon is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation. (Page 268, para1

Competitors Capabilities

Amazon

However, Amazons strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)

CompetitorsDistribution Channels -No Data Available--

Competitors Financial Position

Amazon

-Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)

Total16

Conclusion:Based on the competitive analysis, only Amazon has been found as the major competitors for eBay in the industry. Other competitors mentioned in the case study cannot be analysed since they only mentioned the name of the companies. Therefore, there are 1 opportunity with 6 threats have been found in this analysis.3.3 Industry Analysis3.3.1 The Description of The IndustryAs mentioned before, eBay is active in three different segments such as; Business segment I:Marketplaces, Platforms, and Services; Business Segments II: Communications; and Business Segments III: Communications. In order to analyse the industry based on the external analysis, five Porter Forces, which covered 5 components have been chosen in this study, which are: (1) Rivalry among Competing Firms; (2) Potential entry of new competitors; (3)Substitute Products; (4) Bargaining Power of suppliers; (5) Bargaining Power of Buyers.

The description of each category of segments for eBay in each industry is shown as below: 1- Market place: In 2008, eBay has a 14 percent share of global e-commerce with 86.3 million active users. In addition EBay is involved in long-term contractual agreements with firms that provide marketing, customer support, and technology (Page 263, Para7) June 2008, eBay Inc. was found liable for damages in the amount of 38.6 million Euro payable to the Louis Vuitton and Christian Dior firms competitors in this field includes traditional department, warehouse, discount, and general merchandise stores, emerging online retailers, online classified services, and other offline and online home shopping networks such as Wal-Mart, Target, Sears, Macy's, J .C. Penney, Costco, Office Depot, Staples, OfficeMax, Sam's Club, Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN, QVC, and Home Shopping Network. Companies such as Google Base and Microsoft Live Expo also offer similar online services and classified ads. The Marketplaces platform is the core online commerce platform eBay.com. (Page 265, Para6)

2- Payments: For the second quarter of 2009, eBay reported nice growth in both their PayPal and Skype business segments (Page 263, Para2) The Payments segment competes against other online Payments services and offline Payments methods, such as cash, check, money order, and established credit card merchants. (Page 268, Para1). Pay me Later is funded by CIT Bank and Bill Me Later is responsible for all functions related to the account (Page 269, Para5). Additional revenues are also earned from advertising and revenue-sharing contracts with third parties that provide transaction services to eBay and PayPal account users.(Page 264,Para1) PayPal is a recognized global leader in online payment solutions with 70 million active accounts. PayPal generated $60 billion in net total payment volume in 2008, an increase of 27 percent over 2007.(Page 266, Para9) The Payments segment competes against other online payment services and offline payment methods, such as cash, check, money order, and established credit card merchants (Page 268, Para1) Future profitability depends on the ability to manage credit while attracting new profitable consumers. EBays Bill Me Later has significant exposure to consumers potential default on loans.

3- Communications: For the second quarter of 2009, eBay reported nice growth in Skype business segments (Page 263, Para2)Communications segments competitors have larger amount of resources compare to Skype. The Communications segment faces competition from local telephone or cable companies and other VoIP providers. (Page 268, Para 1). Traditional Communications companies offer bundled services, such as cable or satellite television, along with internet and voice Communications services. (Page 268, Para 3)

For the second quarter of 2009, eBay reported nice growth in both their PayPal and Skype business segments, which offset decline in their Marketplaces business segment.(page 263, para2) EBays popularity is due to the value offered to its users. EBay provides a faster, easier, safer online commerce experience (eBay, 2006, p. 7).(Page 263, para4).

As a matter of fact, due to the lack of information about other competitors to compare with eBay, I have chosen only Amazon as the main competitors involved in this industry.3.3.2 Rivalry Among Competitor

Key Variables Case FactsCompetitive Forces

Strong ModerateWeak

Competitors strength

Amazon

-Amazon states their success is based on: the ability to attract buyers and sellers; the volume of transactions,price, and selection of goods; customer service; brand recognition, communitycohesion, interaction, and size; system reliability; delivery and payment reliability; Web site convenience and accessibility; level of service fees; and quality of search tools (eBay, 2006).(Page 269,Para1)

-Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)

eBay (Marketplaces)EBays popularity is due to the valueoffered to its users. EBay provides a faster, easier, safer online commerce experience(eBay, 2006, p. 7).(Page 263, para4)

EBay offers millions of items for trade throughauction-style and fixed-price trading in 39-markets and boasts 86.3 million active globalusers as of 2008.(Page 264, para3)-The key to success is eBays user support, such as announcements,bulletin boards, customer support, personal pages, and more. (Page 265, Para5)- EBay has also expanded specific Customer Support efforts, such as online self-help featuresto increase efficiency of trades. EBay offers both pre-trade and post-trade Value-Added Tools and Services to facilitate faster and safe trading and collections (Page 266, Para 2)-EBays popularity is due to the value offered to its users. EBay provides a faster, easier, safer online commerce experience (eBay, 2006, p. 7).(Page 263, para4)

-Increased in ROA is considered a strength for eBay(Financial analysis)

CompetitorsWeakness

Amazon

-Bay compared to Amazon achieved High gross profit margins High in gross profit margin can be considered as a strength for eBay (Financial analysis)

eBay (Marketplace)-For the second quarter of 2009, eBays profit fell 29 percent and revenue declined4 percent as the company continued its turnaround strategy in a harsh climate for consumerSpending (Page 263, Para2)- For thatquarter, eBay reported decline in their Marketplaces business segment.(Page263, Para2)

- EBay recently increased its fee structure for its Marketplaces business, which may negatively impact the number of new customers and revenue from existingusers.(Page 269, Para7)

- eBay Revenue Growth of rate has been decreasing for the last 3 years. Therefore, this decline trend lead to decreasing the growth rate in 2009 by 4%. This revenue decline trend is considered as the weakness of eBay (Financial analysis)

-Decrease in Growth rate is considered as weakness for eBay.(Financial analysis)

-Decreased to almost double for working capital is considered as weakness for eBay (Financial analysis)

-Declining in stock price started from 2005 to 2008 can be considered as the weakness for eBay.(Financial analysis)

Competitors objective and strategy

Amazon

- Several other online marketing channels such as: (1) syndicated store programs, (2) sponsored searches, (3) portal advertising, and (4) e-mail campaigns Amazon.com, 2006, p. 37).(Page 269, Para1)

- Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com (Page 269, Para1)- The success of Amazon is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation. (Page 268, para1)

eBay(Marketplaces)- EBay plans to expand the Marketplaces segment by focusing on customers to improve the buyers experience and reduce seller costs by enhancing products and services, improving online trust and safety, enhancing customer support, extending product offerings geographically and into new categories, and developing retention strategies. (Page 226, Para8)

-In August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds of GM dealers in California to help consumers negotiate purchase of new GM cars and trucks through the eBay online marketplace. (Pg.263,para1)-Acquired by eBay Inc. in 2005, Shopping.com is an online comparison shopping site that offers comparisons on millions of products and product reviews.(Page266, Para6)-In, 2008, eBay launched an advertising service that enables third parties to advertise their eBay listings and eBay stores on eBay Web sites.(Page 266, Para5)

Competitors Capabilities

Amazon


eBay(Marketplaces)-EBays global networked community of buyers and sellers interact 24/7 in a secure and trusted global marketplace (Page 264, para4)- The Verified Rights Owner Program enforces intellectual property owners rights by allowing owners to request the removal of listings that contain infringements. This program protects intellectual property and reduces counterfeit trade.(Page 266, Para2)- EBay.com offers a sense of community to buyers and sellers that is sustained by Communications and high transaction rates on a wide selection of goods/services (eBay.com, 2006).(Page 263, para4)-EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets and boasts 86.3 million active global users as of 2008.(Page 264, para3)-In response to the weak economy, eBay undertook a 10 percent reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,000 in restructuring costs. In the same year, eBay acquired Bill Me Later and announced an anticipated second acquisition of a vehicle classified ad site, eBay Motors(Page 269, para4)

Competitors Distribution Channels -No Data Available--

eBay (marketplaces)

-Nearly all of Californias 250 GM dealers took part in the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.com to browse new 2008 and 2009 GM vehicles, ask dealers questions, and figure out financing. (Pg.263,para1)- EBay Inc. also offers online classified advertisements to members in hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)- By 2009, eBay has attained customized local sites across four major areas of the world in the following regional markets; Asia Pacific, Europe, North America and Latin America (Page 265,Para1)- EBay offers both pre-trade and post-trade Value- Added Tools and Services to facilitate faster and safe trading and collections. Examples of value added service tools include calculator, shipping and UPS labels (Page 266, Para2)

Competitors Financial Position

Amazon

- Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end2008. (Page 268, Para4)

eBay(Marketplace)

For the second quarter of 2009, eBays profit fell 29 percent and revenue declined4 percent as the company continued its turnaround strategy in a harsh climate for consumerspending.(page 263, para 2)

In 2008, eBay.com generated approximately $59.7 billion in gross merchandise revenues with consumer electronics accounting for the largest percentage of trade at $6.0 billion or 17 percent, as indicated in Exhibit 1 (Page 263, Para 4)

Total12204

3.3.3 Potential Entry of New Competitor

a) for Marketplaces Segment

Potential Entry of New CompetitorsCompetitive Forces

NOCase factsStrongModerateWeak

1

Competition is expected to increase in the future because barriers to entry in this segmentare low and new online sites can be launched at a nominal cost (Page 268, Para2)

Total1

b) for Communications Segment



N/A

-

--

Total

c) for Payments Segment



N/A

-

--

Total

3.3.4 Potential Development of Substitute Products

a) For Marketplaces Segment

Potential Development of Substitute ProductsCompetitive Forces


1

2

3

Competitors include traditionaldepartment, warehouse, discount, and general merchandise stores, emerging onlineretailers, online classified services, and other offline and online home shopping networkssuch as Wal-Mart, Target, Sears, Macys, J.C. Penney, Costco, Office Depot, Staples,OfficeMax, Sams Club, Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN,QVC, and Home Shopping Network.(Page 268, Para2)

Companies such as Google Base and Microsoft LiveExpo also offer similar online services and classified ads. (Page 268, Para2)


Total1

2

b) For Communications Segment



1

2Traditional communications companies offer bundled services, such as cable orsatellite television, along with internet and voice communications services (Page268, para2)

The Communicationssegment faces competition from local telephone or cable companies and other VoIPproviders. Furthermore, eBay anticipates the need for substantial resource investments intechnology and marketing in order to remain competitive. (Page 1, Para268)

Total

2

c) For Payments Segment



1

2Other online payment services and offline payment methods, such ascash, check, money order, and established credit card merchants (Page 268, Para1)

The Payments segmentcompetes against other online payment services and offline payment methods, such ascash, check, money order, and established credit card merchants (Page 268, Para 1)

Total

2

3.3.5 Bargaining Power of Suppliersa) For Marketplaces Segment

Bargaining Power of SuppliersCompetitive Forces


1Competition is expected to increase in the future because barriers to entry in this segmentare low (Page 268, Para2)

Total1




N/A---

Total

c) For Payments Segment



N/A---

Total

3.3.6 Bargaining Power of Consumers

a) For Marketplaces Segment

Bargaining Power of ConsumersCompetitive Analysis


1.

Financial crisis, are expected to limit revenue growth, particularly in theMarketplaces segment, which is closely tied to consumer purchase patterns.(Page 269, Para2)

Total1




N/A---

Total

b) For Payments Segment



N/A---

Total

3.3.7 Conclusion of the Industrya) For Marketplaces segmentPorters Five Forces Analysis ResultKey VariablesCompetitive Forces

StrongModerateWeak

Rivalry Among Competitor12204

Potential Entry of New Competitor1N/AN/A

Potential Development of Substitute Products12N/A

Bargaining Power of Suppliers1N/AN/A

Bargaining Power of Consumers1N/AN/A

Total Result of Porters Five Forces 16224

Vertical Analysis:

According to the case and above analysis, it can be concluded that competitive pressure to the industry is moderate because 22 is the dominant number in this analysis. Therefore, it is attractive for new entrant and new investors to enter in this industry. Besides that this industry also having a large market size, fast growing in the market and it is not too many large competitors in this industry. Thus if a firm can develop a business plan which makes them diverse, customer oriental and unique, the potential of success is possible.

b) For Communications segmentPorters Five Forces Analysis ResultKey VariablesCompetitive Forces

StrongModerateWeak

Rivalry Among CompetitorN/AN/AN/A

Potential Entry of New CompetitorN/AN/AN/A

Potential Development of Substitute ProductsN/A2N/A

Bargaining Power of SuppliersN/AN/AN/A

Bargaining Power of ConsumersN/AN/AN/A

Total Result of Porters Five Forces -2-

Vertical Analysis:

Because of lack of competitors information for this industry, I cannot analyse the forces of this industry in details. But I concluded that the competitive pressure to the industry is moderate.

c) For Payments segmentPorters Five Forces Analysis ResultKey VariablesCompetitive Forces

StrongModerateWeak

Rivalry Among CompetitorN/AN/AN/A

Potential Entry of New CompetitorN/AN/AN/A

Potential Development of Substitute ProductsN/A2N/A

Bargaining Power of SuppliersN/AN/AN/A

Bargaining Power of ConsumersN/AN/AN/A

Total Result of Porters Five Forces -2-

Vertical Analysis:

As mentioned before, because of lack of competitors information for this industry, I cannot analyse the forces of this industry in details. But I concluded that the competitive pressure to the industry is moderate. 3.6 Defining the Key Success *For defining the key success factor, I have found out only the key success factor for marketplaces segment which is only involved Amazon as the main competitors. As a matter of fact, because of lack of information based on the ase study given, I also did not provide the key success factor for Communications segment as well as Payments segment.a) for marketplaces SegmentKey Success Factor

NOKey Success FactorCase Facts

1. Providing Valueto Customers

- The success of eBay and Amazon are built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation. Examination of thestrategies, business models, and customer benefits of eBay and Amazon reveals a commonemphasis on relationship value and customer-focused solutions (Page268, Para1)

-EBay offers millions of items for trade throughauction-style and fixed-price trading in 39 markets and boasts 86.3 million active globalusers as of 2008.(Page 264, para3)

-The key to success is eBays user support, such as announcements, bulletin boards, customer support, personal pages, and more.

-Amazon statestheir success is based on: the ability to attract buyers and sellers; the volume of transactions,price, and selection of goods;(Page 269, Para1)

-In the Marketplaces platform, eBay.com, traditional auction-style or fixed-price options are offered in 39 markets. Auction-style listing allows a seller to select a minimumprice for opening bids that stay open for a period of time. Alternatively, the fixed-price formatallows sellers to name a sale price upon listing instead of waiting for the auction period to expire.(Page 265,Para 6)

- EBay has also expanded specific Customer Support efforts, such as online self-help featuresto increase efficiency of trades. EBay offers both pre-trade and post-trade Value-Added Tools and Services to facilitate faster and safe trading and collections (Page 266, Para 2)

2. Providing Reliability & Trustworthy- Buyers and sellers enjoy trading among a wide selection of goods and services in a secure,trusted, and efficient commerce environment (Page 265, Para5).

To facilitate trading with unknown partners on the Internet, eBay Inc. provides a trustedand safe trading environment by offering the following services: Feedback Forum, SafeHarbor Program, Verified Rights Owner Program, Customer Support, Value-Added Toolsand Services, and Loyalty Programs.(Page 266, Para1)

- Amazon statestheir success is based on: system reliability; delivery and payment reliability (Page 266, Para1)

3.

Friendly InterfaceEBay.com offers a sense of community tobuyers and sellers that is sustained by Communications and high transaction rates on a wideselection of goods/services (eBay.com, 2006).(Page 263, para4)

-Amazon statestheir success is based on: customer service; Website convenience and accessibility; brand recognition, communitycohesion, interaction, and size (Page 269, Para1)

4Brand Image & Reputation-EBays popularity is due to the valueoffered to its users. EBay provides a faster, easier, safer online commerce experience(eBay, 2006, p. 7).(Page 263, para4)

-Amazon statestheir success is based on: customer service; brand recognition; level of service fees; and quality of search tools(Page 266, Para1)

5Financial Position

- Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end2008. (Page 268, Para4)

-In 2008, eBay.com generated approximately $59.7 billion in gross merchandise revenues with consumer electronics accounting for the largest percentage of trade at $6.0 billion or 17 percent, as indicated in Exhibit 1 (Page 263, Para 4)

*Based on the case study given, because of the general information provided for the PEST, I have considered the PEST analysis is meant for Marketplaces segment, Communications segment and Payments segment. As a matter of fact, most of the list of opportunities and threats are coming from the marketplaces segment. In order to differentiate the segment, I have provided another table for the list of opportunities and threats for Communications and Payments segment. But for Pest analysis the results remains the same. 3.6 Opportunities and Threats for Marketplaces segmentThe List of OpportunitiesNo.Case FactPrioritize

Opportunities Resulted from PEST Analysis and Competitive Analysis

1. Profitability is also affected by currency exchange rates (page 269, Para3)

3

2. If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income (Page 269, Para3)

5

3. Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5).

2

4. Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4)

4

5. The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1)1

6. Amazon achieved Low gross profit margins. Low in gross profit margin can be considered as a weakness for Amazon (Financial analysis)6

Opportunities Resulted from Industry Analysis (Porters 5 Forces)

N/A

The list of threatsNo.Case FactPrioritize

Threats Resulted from PEST Analysis and Competitive Analysis

1Legislation is in effect which requires collection of taxes beginning after December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments (Page 269, Para 6) 6

2In addition, tax compliance will increase costs. (Page 269, Para 6)

1

3Legislation has also been proposed to prohibit sharing of certain information over the Internet, (Page 270, Para2)

17

4The resources of existing competitor firms are larger and as a result, competitors could weather an economic downturn (Page 268, Para2)

3

5

The company continued its turnaround strategy in a harsh climate for consumer spending (Page 263, Para2)

16

6Weak global economic conditions, in addition to the mortgage and worldwide credit related financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns (Page 269, Para2)

2

7Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar (Page 269, Para3)

7

8Declining economic environment (Page 268, Para4)

10

9Dollar and the lingering weak economy with high unemployment (Page 274, Para1)

8

10The revenue drop was attributable to the impact of the stronger.

11

11Competition is intense in communications services and subject to rapid technologicalChange(Page 268, Para2)

4

12Breaches in data security are on the rise (Page 270, Para3)

12

13Amazon states their success is based on: the ability to attract buyers and sellers; the volume of transactions, price, and selection of goods; customer service; brand recognition, community cohesion, interaction, and size; system reliability; delivery and payment reliability; Web site convenience and accessibility; level of service fees; and quality of search tools (eBay, 2006).(Page 269,Para1)13

14Several other online marketing channels such as: (1) syndicated store programs, (2) sponsored searches, (3) portal advertising, and (4) e-mail campaigns Amazon.com, 2006, p. 37).(Page 269, Para1)

18

15Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com (Page 269, Para1)

20

16The success of Amazon is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation. (Page 268, para1)

14

17Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)

22

Threats Resulted from Industry Analysis (Porters 5 Forces)

18Marketplaces: Competition is expected to increase in the future because barriers to entry in this segmentare low and new online sites can be launched at a nominal cost (Page 268, Para2)

9

19Competitors include traditionaldepartment, warehouse, discount, and general merchandise stores, emerging onlineretailers, online classified services, and other offline and online home shopping networkssuch as Wal-Mart, Target, Sears, Macys, J.C. Penney, Costco, Office Depot, Staples,OfficeMax, Sams Club, Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN,QVC, and Home Shopping Network.(Page 268, Para2)

19

20Companies such as Google Base and Microsoft LiveExpo also offer similar online services and classified ads. (Page 268, Para2)

21

21However, Amazons strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)

5

22Marketplaces segment, which is closely tied to consumer purchase patterns.(Page 269, Para2)

15

b) Opportunities and Threats for Communications segmentsThe List of OpportunitiesNo.Case FactPrioritize

Opportunities Resulted from PEST Analysis


3


5


2


4




N/A


Threats Resulted from PEST Analysis

1Legislation is in effect which requires collection of taxes beginning after December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments (Page 269, Para 6)

5


1


6


2

5


7


8


9


10


12


4


3


12Other online payment services and offline payment methods, such ascash, check, money order, and established credit card merchants (Page 268, Para1)

13

13The Payments segmentcompetes against other online payment services and offline payment methods, such ascash, check, money order, and established credit card merchants (Page 268, Para 1)

11

c) Opportunities and Threats for Payments segmentsThe List of OpportunitiesNo.Case FactPrioritize

Opportunities Resulted from PEST Analysis


3


5


2


4




N/A


Threats Resulted from PEST Analysis


5


1


6


2

5


3


8


4


7


10


9


13


12Traditional communications companies offer bundled services, such as cable orsatellite television, along with internet and voice communications services (Page268, para2)12

13The Communications segment faces competition from local telephone or cable companies and other VoIP providers. Furthermore, eBay anticipates the need for substantial resource investments in technology and marketing in order to remain competitive. (Page 1, Para268)

11

* Because of the lack information given in the case study particularly for competitors information I provided only EFE and CPM analysis for marketplaces segment.

3.7 The External Evaluation Factor (EFE) for Marketplaces segmentItemKey external factorWeightRatingWeighted score

Opportunity

1The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1)

0.0940.36

2Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5).

0.0840.32

3Profitability is also affected by currency exchange rates (page 269, Para3)0.073 0.21

4Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4)

0.07

3

0.21

5If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income (Page 269, Para3)

0.06

3

0.18

Threat


0.0840.32


0.0840.32


0.0730.21

9Competition is intense in communications services and subject to rapid technological Change(Page 268, Para2)

0.0630.18

10However, Amazons strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)

0.0630.18


0.0630.18

12Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar (Page 269, Para3)0.0530.15


0.0530.15

14Marketplaces: Competition is expected to increase in the future because barriers to entry in this segment are low and new online sites can be launched at a nominal cost (Page 268, Para2)

0.0530.15


0.0530.15

Total13.27

ConclusionBased on External Factor Evaluation Analysis, eBay achieved 3.27 for marketplaces segment which shows that the company is fairly stabil towards the opportunities and threats in its industries. As a matter of fact, we can clearly see that eBay external strategies have fairly success in taking advantage of existing opportunities and at the same time struggle to reduce the threats since there is not too many large company involved in the industry.

3.8 Competitive Profile Matrix Analysis

*For CPM analysis, I have only considered Amazon as the only one competitor in the marketplace segment since there is lack of data given based on the case study. Key SUCCESS FACTORSWeighteBayAmazon

RatingScoreRatingScore

Providing Value to Consumers0.3030.9030.90

Reliability & Trustworthy0.2830.8430.84

Friendly Interface0.1830.5430.54

Brand Image & Reputation0.1430.4230.42

Financial Position0.1020.2020.20

Total12.902.90

Conclusion:From the CPM analysis we can see that eBays CPM value is 2.90 which is the same to its competitor, Amazon. On the other hand, because of the lack information about the competitors, I am going to focus only on Amazon as the main competitor for the internal analysis since it is the major treat for eBay in this industry.

4.0 Internal Analysis

4.1 Cultural Analysis *Based on the case study given, the cultural analysis factor provided in the case is a very general statement for eBay without mentioning specifically for which segment. So because of lack of data I did not separate them into different segment.Case FactsSW

SegmenteBayAmazon

MarketplacesEBay transformed the Internet and the way many of us shop and do business worldwide (Page 264,para3)

-The success of eBay is built on similar customer-centric entrepreneurialbusiness models that focus on customer-driven value creation (Page 268, Para1)

N/A

- The success of Amazon is built on similar customer-centric entrepreneurialbusiness models that focus on customer-driven value creation (Page 268, para1)

Communications-EBay, the first virtual online business community, empowers entrepreneurial individuals to become e-commerce business owners.(Page 263, Para4)

N/A

PaymentsN/AN/A

4.2 Management Functions Case FactsSW

FunctionsSegmenteBayAmazon

Planning

Marketplaces -EBay plans to expand the Marketplaces segment by focusing on customers to Improve the buyers experience and reduce seller costs by enhancing products and services,improving online trust and safety, enhancing customer support, extending product offerings geographically and into new categories, and developing retention strategies. (Page 226, Para8)

N/A

CommunicationsEBay also that quarterannounced they would spin off and make an initial public offering of their Skype businesssegment in the beginning of year 2010. (Pg.263,para2)

- Registered subscribersare expected to reach 500 million by 2012 and revenues are anticipated to doubleby 2011.(Page 267, Para4)

EBay Inc. plans to implement a customer management program that emphasizesacquiring new users and upgrading current Skype users to premium products (Page 267, Para5)

- Future plansinclude expanding Skypes desktop product to mobile user devices and other Web-baseddevices. Plans include also offering solutions to a more diverse business user and enhancingthe Skypes current platform for greater revenues because the worldwide communicationsmarket is expected to grow by 5.5 percent annually with U.S. Web conferencingexpected to grow 14.1 percent from 2008 through 2011 (eBay.com 2009).(Page 267, Para5)N/A

N/A

N/A

N/A

PaymentsEBays management seeks to become the number-one online payment solution. EBayplans to focus on improving the customer experience, enhancing security, expanding productofferings, enhancing buyer and seller protection programs, adding innovative features, andexpanding its sales channels (Page 267,Para2)

-Expansioninto international markets and more currencies is expected to improve the ease and efficiencyof cross-border transactions (Page 267, Para2)

N/A

N/A

Organising

Marketplaces

-In August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds ofGM dealers in California to help consumers negotiate purchase of new GM cars and trucksthrough the eBay online marketplace. (Pg.263,para1)

EBay has also expanded specific Customer Support efforts, such as online self-help featuresto increase efficiency of trades(Page 266, Para2)

-In, 2008, eBay launched an advertising service that enables third partiesto advertise their eBay listings and eBay stores on eBay Web sites.(Page 266, Para5)

- Acquired by eBay Inc. in 2005, Shopping.com is an online comparison shoppingsite that offers comparisons on millions of products and product reviews.(Page266, Para6)

-Rent.com, acquired by eBay in 2005, (Page 266, Para7)

-Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com (Page 269, Para1)

N/A

N/A

N/A

N/A

Communications

-E-commerce is supported by eBays proprietarySkype VoIP technology, which allows free telephone calls using a broadband Internet connection to any telephone number.(Page 263, para4)

-The Communications segment is composed of Skype, which was founded in 2003 andacquired by eBay in 2005.

- As of December 2008, Skype had acquired370 million users, a 51 percent growth over the same time a year ago.

N/A

N/A

N/A

Payments-PayPal was founded in December 1998 and acquired by eBay Inc. in 2002 (Page 266, Para 9)

Bill Me Later, acquired by eBay Inc. in 2008, offers consumers instant credit at the pointof sale through over 1000 online U.S. merchants (Page 267, Para1)N/A

N/A

Motivating

Marketplaces

N/A

N/A

Communications

N/A

N/A

PaymentsN/A

N/A

Staffing

Marketplaces

As of December 31,2008, eBay Inc. employed approximately 16,200 people. (Page264, Para3)N/A

Communications

N/A

N/A

Payments

N/A

N/A

Controlling

Marketplaces

-EBays global networked community of buyers and sellers interact 24/7 in a secure and trusted global marketplace (Page 264, para4)

- EBay recently adopted a policy that nolonger permits sellers to leave negative feedback (Page 266, Para2)

- Web Site Stability. Increased volume and greater complexity requires additionalexpensive investments in hardware, software, and personnel(Page 270, Para4)

- The SafeHarbor Program provides guidelines for resolving disputes among parties. Complaints are investigated and offendersmay receive warnings that are posted to users. Violators may be suspended from either bidding on or listing items for sale.(Page 22, Para2)

The Verified Rights Owner Program enforces intellectual property owners rights by allowing owners to request the removal of listings that containinfringements. This program protects intellectual property and reduces counterfeit trade.(Page 266, Para2)

For thatquarter, eBay reported offset decline in their Marketplaces business segment (Page 263, Para2)

- EBay has recently been involved in litigation with Tiffany & Co., Rolex, Louis Vuitton, Christian Dior, LOral, and Lancme for a lack of policing trade and infringement on trademarks and copyrights for the sale of not for resale and counterfeit items on eBays Websites. (Page 269, Para8)

- Prohibit sharing of certain information over the Internet, such as comments provided by customers in eBays Feedback Forum. This limitation would adversely affect eBays ability to provide a reliable and secure community that shares purchase information and aspects of trades with other members of eBays Marketplaces segment.(Page 270, Para2)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

CommunicationsFor the second quarter of 2009, eBay reported nice growth in Skype business segments (Page 263, Para2)

N/A

Payments

- For the second quarter of 2009, eBay reported nice growth in both their PayPal (Page 263, Para2)

-Although Bill Me Later accounts are funded by CIT Bank, Bill Me Later is responsiblefor all functions related to the account.

-As of October 2008 certain transactions on eBay.com purchased using PayPal are protected for the full purchase price in the event that the buyer does not receive thegoods. This may result in greater losses and write-offs incurred by eBay Inc.(Page 270, Para2)

N/A

N/A

N/A

4.3 Marketing Strategy

FactorsCase FactsSW

SegmenteBayAmazon

Marketing Strategy

Marketplaces-The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation (Page 268, Para1)

- EBay Inc. also offers online classified advertisements to members in hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)N/A

N/A

CommunicationsN/A

N/A

PaymentsAdditional revenuesare also earned from advertising and revenue-sharing contracts with third parties that providetransaction services to eBay and PayPal account users.(Page 264, para1)

N/A

Promotion Programs

Marketplaces-Facilitate trading with unknown partners on the Internet, eBay Inc. provides a trusted and safe trading environment by offering the following services: Feedback Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support, Value-Added Toolsand Services, and Loyalty Programs.(Page 266, Para1)

-Nearly all of Californias 250 GM dealers took partin the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.com (Page 263 Para1)

-Loyalty Programs that provide cash back buyer rewards coupons were selectivelydistributed to recognize large buyers to sustain customer loyalty.(Page 266, Para2)

- The key to success is eBays user support, such as announcements,bulletin boards, customer support, personal pages, and more (Page 265, Para5)-Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com through several other online marketingchannels such as: (1) syndicated store programs, (2) sponsored searches, (3) portaladvertising, and (4) e-mail campaigns (Amazon.com, 2006, p. 37).(Page 269, Para1)

N/A

N/A

N/A

Communications

N/A

N/A

PaymentsN/A

N/A

Product and Service Planning

Marketplaces- The Marketplaces platform is the core online commerce platformeBay.com. (Page 265, Para6)

- Web Site Usability. Growth in the number of products and Web site features has caused the site to become less user-friendly.(Page 270, Para4)

- EBaysMarketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year decline(Page 274, Para1)

- Customer Support. Customer support is challenged from greater trade activity and anincreased number of users.(Page 270, Para4)

N/A

N/A

N/A

N/A

Communications-EBay, the first virtual online business community, empowers entrepreneurial individuals to become e-commerce business owners(Pg.263,para4)

-Skype is the worlds fastest-growing Internet communicationsoftware platform.(Page 267, Para3)

-Skype allows buyer/seller communications 24/7 in asecure and trusted community that is supported by free unlimited Internet voice and videocommunication (Page 267, Para3)

N/A

N/A

Payments-PayPal is a recognizedglobal leader in online payment solutions (Page 266, Para9)

-EBays Payments segment is composed of PayPal and Bill Me Later transaction services. (Page 266, Para9)

-PayPal is available to any online or offline individual or business with an e-mailaddress and allows members to securely send and receive payments online securely withoutsharing sensitive financial information.(Page 266, Para10)

-If credit availability is further reduced, Bill Me Later may not be able to extend credit to customers (Page 269, Para5)

- For the quarter ending July 30, 2009, eBays Payments division reported $669.3 million inrevenue, an increase of 11 percent year over year. The growth was driven by continuedmomentum in PayPal Merchant Services and the contribution made by Bill Me Later (Page 274,Para1)

N/A

N/A

N/A

N/A

N/A

Pricing

Marketplaces-EBay provides the virtual marketplace auction where themarket determines the price of items sold (Page 264, Para3)

-In the Marketplaces platform, eBay.com, traditional auction-style or fixed-price options are offered in 39 markets. Auction-style listing allows a seller to select a minimumprice for opening bids that stay open for a period of time. Alternatively, the fixed-price formatallows sellers to name a sale price upon listing instead of waiting for the auction period to expire.(Page 265,Para 6)

-If revenue significantly declines, eBay may not be able to meetcontractual obligations. EBay recently increased its fee structure for its Marketplaces business, which may negatively impact the number of new customers and revenue from existingusers.(Page 269, Para7)

N/A

N/A

N/A

Communications-Communications fees are assessed eitheron a subscription basis or per minute charge for SkypeOut minutes.(Page 264, Para1)

N/A

Payments-International business processing accounted for 45 percent of PayPals total revenues for2008. Higher fees earned on international transactions have provided eBay with higher revenuesand gross margins in comparison to revenues from domestic transactions (Page 266, Para9)

- Any reduction in trading spill over to a reduction in PayPal revenues (Page 269, Para7)N/A

N/A

Distribution

Marketplaces-Nearly all of Californias 250 GM dealers took partin the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.comto browse new 2008 and 2009 GM vehicles, ask dealers questions, and figure out financing. (Pg.263,para1)

- EBay Inc. also offers online classified advertisements to members in hundreds of citiesand regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)

Shopping.comis available in the United States, the United Kingdom, France, Germany, and Australia.(Page 266, Para6)

-This program marked a shift for San Jose, California-based eBay, since most of thevehicles sold on eBay Motorsa site that sells various types of vehicles and auto partshad historically been used. (Pg.263,para1)

- By 2009, eBay has attained customized local sites across four major areas of theworld in the following regional markets; Asia Pacific, Europe, North America and Latin America (Page 265,Para1)

EBay offers both pre-trade and post-trade Value-Added Tools and Services to facilitate faster and safe trading and collections. Examples of value added service tools include calculator, shipping and UPS labels (Page 266, Para2)

-In August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds ofGM dealers in California to help consumers negotiate purchase of new GM cars and trucksthrough the eBay online marketplace. (Pg.263,para1)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Communications-Skype is available in 28 languages in over 225 countries (eBay, 2006).(Page 263, page4)

N/A

PaymentsRetailers that offer the Bill Me Later serviceinclude: Borders, Continental Airlines, Fujitsu, JetBlue, Overstock, QVC, Toshiba, Toys R Us, and Walmart.com (Page 267, Para 1)N/A

Marketing Research

Marketplaces

N/A

N/A

Communications

N/A

N/A

Payments

N/A

N/A

4.4 Financial Analysis 4.4.1 Financial RatioBecause of lack of the needed information for its competitor, Amazon about financial statements, only eBay Inc. has been analyzed in financial terms. These ratios come from the exhibit given in this case and again this financial analysis has only considered eBay based on their financial position from year to year because of the lack of data from its competitor, Amazon.

*Because of lack of data, this financial analysis covered for all three segments in eBay Corp; Marketplaces segment; Communications segment; and Payments segment.a) Growth of the revenue:Companys Revenue by SegmentsSW

SegmentYear 2006 (Millions)Year 2007(Millions)Year 2008(Millions)Year 2009(Millions)

Marketplaces4,334,290

5,363,891

5,586,751

---

Communications194,921

381,822

550,841

---

Payments1,440,530

1,926,616

2,403,669

---

Total net Revenue5,969,741

7,672,329

8,541,261

8,199,611eBay Revenue Growth of rate has been decreasing for the last 3 years. Therefore, this decline trend lead to decreasing the growth rate in 2009 by 4%. This revenue decline trend is considered as the weakness of eBay

Revenue Growth Percentage29%11%-4%

b) eBay Stock Price:Companys Share Price in Millions SW

Year 2004Year 2005Year 2006Year 2007Year 2008

$ 58.17

$43.22

$30.07

$33.19

$13.96Declining in stock price started from 2005 to 2008 can be considered as the weakness for eBay

c) eBay Liquidity RatioCurrent RatioSW

Year 2007Year 2008

2.301.70

Decreased in Current Ratio is the weakness for eBay

Quick Ratio

Year 2007Year 2008

1.170.71

Decrease in Quick Ration is the weakness for eBay

d) eBay Leverages RatioDebt to Equity RatioSW

Year 2007Year 2008

0.410.47

Increased in Debt to equity Ratio is the weakness for eBay

Debt Ratio

Year 2007Year 2008

0.240.29eBay Debt Ratio is increased and it is considered as the weakness for eBay

e) Profitability RatioReturn on Assets (ROA)SW

Year 2007Year 2008-

2.27%11.41%

-Increased in ROA is considered a strength for eBay

Return on Equity (ROE)SW

Year 2007Year 2008-

3.0%16.1%-Increased in ROE is considered as a strength for eBay

*In terms of the gross Profits margins this financial analysis can be compared with Amazon since there is an information given in the case study given:Gross Profit Margin (%)SW

Year 2006Year 2007Year 2008--

eBayAmazoneBayAmazoneBayAmazon

78.9%

22.9%

77%22.6%74%22.3%eBay compared to Amazon achieved High gross profit margins .High in gross profit margin can be considered as a strength for eBay

Gross Profit Growth Rate (%)

Year 2005- 2006Year 2006 to 2007Year 2007 to 2008SW

eBayAmazoneBayAmazoneBayAmazon

--25%37%7%27%Decrease in Growth rate is considered as weakness for eBay

f) Working CapitalCompanys Working CapitalSW

Year 2007Year 2008

4,022,926

2,581,503Decreased to almost double for working capital is considered as weakness for eBay

Finance / Accounting Audit Checklist 1. eBay Revenue Growth of rate has been decreasing for the last 3 years. Therefore, this decline trend lead to decreasing the growth rate in 2009 by 4%. This revenue decline trend is considered as the weakness of eBay

2. Declining in stock price started from 2005 to 2008 can be considered as the weakness for eBay

3. Decreased in Current Ratio is the weakness for eBay

4. eBay Debt Ratio is increased and it is considered as the weakness for eBay

5. Increased in Debt to equity Ratio is the weakness for eBay

6. eBay Debt Ratio is increased and it is considered as the weakness for eBay

7. Increased in ROA is considered a strength for eBay

8. Increased in ROE is considered as a strength for eBay

9. eBay compared to Amazon achieved High gross profit margins .High in gross profit margin can be considered as a strength for eBay

10. Decrease in Growth rate is considered as weakness for eBay

11. Decreased to almost double for working capital is considered as weakness for eBay

4.5 Production/Operation Decision AreaCase Facts

StrengthWeakness

SegmenteBayAmazon

Process

Marketplaces

-In 2008, eBay.com generated approximately $59.7 billion in gross merchandise revenueswith consumer electronics accounting for the largest percentage of trade at $6.0 billionor 17 percent, as indicated in Exhibit 1(Page 264,Para2)

-EBays marketplace, or marketspace, is an online virtual trading platform for the sale ofgoods and services by a community of users that comprises individual buyers and sellers,as well as small business owners (Page 264,Para3)

-EBays Marketplaces platformbrings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)

-Feedback Forum provides feedback, comments, and ratings on other users that canbe viewed by potential users when considering a purchase.(Page 266, Para2)

Revenue is earned from advertisers and retailers who pay a fee for directing shoppers to their own sites (Page 266, Para6)

- The Marketplaces segment generates revenues from listings and fees paid by sellers (Page 264,Para1)

- Rent.com lists apartment availability,rental costs, virtual tours, roommatesearches, and more. Revenue is earned from landlordswho pay a fee for renters who find apartments through Rent.com.(Page 266, Para7)

- StubHub is a leading U.S. ticket marketplace that allows users to buy and sell ticketsto sporting, events, theater, and other entertainment events (Page 266,Page3) Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end2008. (Page 268, Para4)

N/A

N/A

N/A

N/A

Communications

-Skype revenue is earned through premium services such as making/receiving domesticor international calls to and from landline and mobile phones, voicemail, call forwarding,and personalization, such as ringtones.

-EBays priorexpenditures were focused on traditional wired routes; however, 50 percent of expendituresare now in the wireless telecommunications sector.(Page 267, Para 5)

-EBays e-commerce platform also provides full support for the buying process (registration, bidding, management of outbids, item listing, and transaction close), community bulletins, chat, a proprietary product search engine, purchase protection programs, customer support, value added services for auction users, a personal home page that includes tailored information, and fully automated merchant services. EBays success issustained through Communications and trust (eBay 2006).(Page 263,para4)

-The Communications segment generatesusage revenues from Skype VoIP for connection to traditional fixed and mobile telephonesunder eBays subsidiary Skype Technologies S.A (Page 264,Para1)

-Skype headquarters are located in Luxembourg, with global offices in Europe,the United States, and Asia(Page 267, Para 3)

N/A

N/A

N/A

N/A

Payments- ThePayments segment revenues are generated from fees paid by merchants for payment processingservices through PayPal and Bill Me Later (Page 264,Para1)

-PayPal is accepted both online and offline in 190 markets worldwide and processes payments in 19 currencies (Page 266, Para10)

-When a consumermakes a purchase on credit, CIT Bank initiates a consumer loan at the point of sale. BillMe Later then purchases the consumers loan from CIT Bank. Bill Me Later earns revenuesfrom interest on the outstanding balances, late fees, and transaction fees.(Page 267, Para1)

-Bill Me Later initially funds consumers loans using cash from business activities and a line of credit. As a result of the global financialcrisis, eBays available line of credit was reduced (Page 269, Para5)

-Customer Account Billing. Transaction-processing and revenue collectionbecomes more difficult as the number of transactions increase and consumersdefault on loans.(Page 270, Para4)N/A

N/A

N/A

N/A

N/A

Capacity

Marketplaces

- EBay offers millions of items for trade throughauction-style and fixed-price trading in 39 markets and boasts 86.3 million active globalusers as of 2008.(Page 264, para3)

- In 2007, eBay sold nearly $60 billion goods, which equates to worldwideeBay users trading more than $1,900 worth in goods every second.(Page 264, Para3)

Listings of items for sale have exceeded140.0 million per day.(Page 265, Para5)

Rent.com, acquired by eBay in 2005, is the most visited online apartment listing servicewith over 20,000 listings in the United States (Page 266, Para7)

Asof December 2008, approximately 516,000 online storefronts were listed in locationsacross the globe (Page 265, Para5)

N/A

N/A

N/A

N/A

N/A

Communications

-As of2008, eBay has a 14 percent share of global e-commerce with 86.3 million active users.(Page 263, para 3)

-EBays proprietary Skype technology has been downloadedmore than a billion times.(Page 267, Para3)

-Skype had approximately 405.3 million registered usersworldwide. (Page 267, para3)

-Interestingly, nearly 11 millionSkype downloads are to mobile devices.(Page 267, Para3)

- In 2008, Skype users logged approximately 16 billion minutes in a single quarter,an increase of 54 percent from the prior year. Large volumes are also easily supported bySkype software.(Page 267, Para4)

- At any given point in time there may be 300,000 simultaneous calls and over 100,000 information queries per second. Overall, Skype accounted for 6 percent ofinternational worldwide calling minutes in 2007. Business calls represent 30 percent of current Skype usage and 25 percent of calls also use video technology.(Page 267, Para4)

-Skype contributed $170.0 million in revenue for the quarter, representing 25 percentyear-over-year growth. Skype added 37.3 million registered users during the quarter andended the period with more than 480.5 million registered users(Page 274, Para1)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Payments-PayPal is a recognizedglobal leader in online payment solutions with 70 million active accounts (Page 266, Para9)

-PayPal earned approximately $30.4 billion of nettotal payment revenues directly from eBay.com transactions, which represented approximately51 percent of PayPals net Total Payment Volume during 2008 (Page 264, para2)

N/A

N/A

Inventory

MarketplacesN/A

N/A

Communications

N/A

N/A

PaymentsN/A

N/A

Workforce

MarketplaceseBay undertook a 10 percent reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,000 in restructuringcosts (Page 269, Para4)

N/A

Communications

N/A

N/A

PaymentsN/A

N/A

--

--

Quality

Marketplaces

-EBay.com offers a sense of community to buyers and sellers that is sustained by Communications and high transaction rates on a wideselection of goods/services (eBay.com, 2006).(Page 263, para4)

-EBays popularity is due to the valueoffered to its users. EBay provides a faster, easier, safer online commerce experience(eBay, 2006, p. 7).(Page 263, para4)

-In June 2008, eBay Inc. was found liable for damages in the amount of 38.6 million Euro payable to the Louis Vuitton and Christian Dior firms. (Page 269, Para8)

The German Federal Supreme Court has also ruled that eBay may owe penalties from illegal listings of counterfeit and stolen goods. Theseevents may also negatively affect eBays reputation. (Page 270, Para1)

N/A

N/A

N/A

N/A

Communications

- The potentialalso exists for Skype technology to become obsolete. (Page 268, Para2)N/A

PaymentsPayPal also reports a very low percentage of 0.33 percent loss from fraud.(Page 266, Para10)N/A

4.6 Research & Development (R&D)Case Facts

StrengthWeakness

eBayAmazon

N/A

N/A--

4.7 Management Information Systems Audit SegmentCase Facts

StrengthWeakness

eBayAmazon

Marketplaces

Information is recorded up to12 months and provides color-coded star ratings(Page 266, Para2)N/A

Communications

N/A

N/A

PaymentsN/AN/A

4.8 Value Chain Analysis (VCA) a) Marketplaces SegmentVariablesCase Facts

StrengthWeakness

eBay

Inbound LogisticsIn August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds ofGM dealers in California to help consumers negotiate purchase of new GM cars and trucksthrough the eBay online marketplace. (Page 263,para1)

ProcessEBays marketplace, or marketspace, is an online virtual trading platform for the sale ofgoods and services by a community of users that comprises individual buyers and sellers,as well as small business owners (Page 264,Para3)

EBays Marketplaces platformbrings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)

Feedback Forum provides feedback, comments, and ratings on other users that canbe viewed by potential users when considering a purchase.(Page 266, Para2)

Revenue is earned from advertisers and retailers who pay a fee for directing shoppers to their own sites (Page 266, Para6)

The Marketplaces segment generates revenues from listings and fees paid by sellers (Page 264,Para1)

Rent.com lists apartment availability,rental costs, virtual tours, roommate searches, and more. Revenue is earned from landlordswho pay a fee for renters who find apartments through Rent.com.(Page 266, Para7)

StubHub is a leading U.S. ticket marketplace that allows users to buy and sell ticketsto sporting, events, theater, and other entertainment events (Page 266,Page3)

Outbound Logistics

The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation (Page 268, Para1)

EBay Inc. also offers online classified advertisements to members in hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)

Nearly all of Californias 250 GM dealers took partin the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.com (Page 263 Para1)

Loyalty Programs that provide cash back buyer rewards coupons were selectivelydistributed to recognize large buyers to sustain customer loyalty.(Page 266, Para2)

The key to success is eBays user support, such as announcements, bulletin boards, customer support, personal pages, and more (Page 265, Para5)

EBay provides the virtual marketplace auction where the market determines the price of items sold (Page 264, Para3)

Marketing & Sales Facilitate trading with unknown partners on the Internet, eBay Inc. provides a trusted and safe trading environment by offering the following services: Feedback Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support, Value-Added Tools and Services, and Loyalty Programs.(Page 266, Para1)

- Web Site Usability. Growth in the number of products and Web site features has caused the site to become less user-friendly.(Page 270, Para4)

- EBaysMarketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year decline(Page 274, Para1)

ServiceNearly all of Californias 250 GM dealers took partin the program so consumers could visit Web pages like gm.ebay.com and chevy.ebay.comto browse new 2008 and 2009 GM vehicles, ask dealers questions, and figure out financing. (Pg.263,para1)

EBay Inc. also offers online classified advertisements to members in hundreds of citiesand regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)

If revenue significantly declines, eBay may not be able to meet contractual obligations. EBay recently increased its fee structure for its Marketplaces business, which may negatively impact the number of new customers and revenue from existingusers.(Page 269, Para7)

Customer Support. Customer support is challenged from greater trade activity and anincreased number of users.(Page 270, Para4)

EBay.com offers a sense of community to buyers and sellers that is sustained by Communications and high transaction rates on a wideselection of goods/services (eBay.com, 2006).(Page 263, para4)

*For the supporting activities, there have already covered in management function, Management Information System and Research & Development as well as in financial analysis.b) Communications SegmentVariablesCase Facts

StrengthWeakness

eBay

Inbound LogisticsN/A

--

ProcessSkype revenue is earned through premium services such as making/receiving domesticor international calls to and from landline and mobile phones, voicemail, call forwarding,and personalization, such as ringtones

EBays priorexpenditures were focused on traditional wired routes; however, 50 percent of expendituresare now in the wireless telecommunications sector.(Page 267, Para 5)

EBays e-commerce platform also provides full support for the buying process (registration, bidding, management of outbids, item listing, and transaction close), community bulletins, chat, a proprietary product search engine, purchase protection programs, customer support, value added services for auction users, a personal home page that includes tailored information, and fully automated merchant services. EBays success issustained through Communications and trust (eBay 2006).(Page 263,para4)

The Communications segment generatesusage revenues from Skype VoIP for connection to traditional fixed and mobile telephonesunder eBays subsidiary Skype Technologies S.A (Page 264,Para1)

Outbound LogisticsEBay, the first virtual online business community, empowers entrepreneurial individuals to become e-commerce business owners(Pg.263,para4)

Skype allows buyer/seller communications 24/7 in asecure and trusted community that is supported by free unlimited Internet voice and videocommunication (Page 267, Para3)

Communications fees are assessed eitheron a subscription basis or per minute charge for SkypeOut minutes.(Page 264, Para1)

Marketing & SalesSkype is the worlds fastest-growing Internet communicationsoftware platform.(Page 267, Para3)

Service

Skype is available in 28 languages in over 225 countries (eBay, 2006).(Page 263, page4

Interestingly, nearly 11 millionSkype downloads are to mobile devices.(Page 267, Para3)

*For the supporting activities, there have already covered in management function, Management Information System and Research & Development as well as in financial analysis.

C) Payments SegmentVariablesCase Facts

StrengthWeakness

eBay

Inbound LogisticsAlthough Bill Me Later accounts are funded by CIT Bank, Bill Me Later is responsiblefor all functions related to the account

ProcessThePayments segment revenues are generated from fees paid by merchants for payment processingservices through PayPal and Bill Me Later (Page 264,Para1)

Bill Me Later initially funds consumers loans using cash from business activities and a line of credit. As a result of the global financialcrisis, eBays available line of credit was reduced (Page 269, Para5)

Customer Account Billing. Transaction-processing and revenue collectionbecomes more difficult as the number of transactions increase and consumersdefault on loans.(Page 270, Para4)

Outbound LogisticsPayPal is available to any online or offline individual or business with an e-mailaddress and allows members to securely send and receive payments online securely withoutsharing sensitive financial information.(Page 266, Para10)

If credit availability is further reduced, Bill Me Later may not be able to extend credit to customers (Page 269, Para5)

Marketing & SalesAdditional revenuesare also earned from advertising and revenue-sharing contracts with third parties that providetransaction services to eBay and PayPal account users.(Page 264, para1)

PayPal is a recognizedglobal leader in online payment solutions (Page 266, Para9)

For the quarter ending July 30, 2009, eBays Payments division reported $669.3 million inrevenue, an increase of 11 percent year over year. The growth was driven by continuedmomentum in PayPal Merchant Services and the contribution made by Bill Me Later (Page 274,Para1)

Any reduction in trading spill over to a reduction in PayPal revenues (Page 269, Para7)

International business processing accounted for 45 percent of PayPals total revenues for2008. Higher fees earned on international transactions have provided eBay with higher revenuesand gross margins in comparison to revenues from domestic transactions (Page 266, Para9)

ServiceEBays Payments segment is composed of PayPal and Bill Me Later transaction services. (Page 266, Para9)

Retailers that offer the Bill Me Later serviceinclude: Borders, Continental Airlines, Fujitsu, JetBlue, Overstock, QVC, Toshiba, Toys R Us, and Walmart.com (Page 267, Para 1)

PayPal is accepted both online and offline in 190 markets worldwide and processes payments in 19 currencies (Page 266, Para10)

*For the supporting activities, there have already covered in management function, Management Information System and Research & Development as well as in financial analysis.

*Based on the case study given, as a matter of fact, in order to differentiate the segment, I have provided another table for the list of strengths and weaknesses for Marketplaces segment, Communications segment and Payments segment. But, because of the financial analysis is the analysis based on eBay as a whole, therefore, the list of the strengths and weaknesses for financial analysis are the same for Marketplaces segment, Communications segment and Payments segment.

4.9 Strengths and Weaknesses for Marketplaces segment Strengths List:NOCase Fact

Prioritize

Strengths Resulted from Cultural Functions

1. EBay transformed the Internet and the way many of us shop and do business worldwide (Page 264,para3)

11

2. The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation (Page 268, Para1)

6

Strengths Resulted from Management Functions

3. EBay plans to expand the Marketplaces segment by focusing on customers to Improve the buyers experience and reduce seller costs by enhancing products and services, improving online trust and safety, enhancing customer support, extending product offerings geographically and into new categories, and developing retention strategies. (Page 226, Para8)

35

4. In August 2009, eBay Inc. formed a partnership with General Motors enabling hundreds of GM dealers in California to help consumers negotiate purchase of new GM cars and trucks through the eBay online marketplace. (Pg.263,para1)

5

5. EBay has also expanded specific Customer Support efforts, such as online self-help features to increase efficiency of trades(Page 266, Para2)

38

6. In, 2008, eBay launched an advertising service that enables third parties to advertise their eBay listings and eBay stores on eBay Web sites.(Page 266, Para5)

37

7. Acquired by eBay Inc. in 2005, Shopping.com is an online comparison shopping site that offers comparisons on millions of products and product reviews.(Page266, Para6)

39

8. Rent.com, acquired by eBay in 2005, (Page 266, Para7)19

9. As of December 31, 2008, eBay Inc. employed approximately 16,200 people. (Page264, Para3)

40

10. The SafeHarbor Program provides guidelines for resolving disputes among parties. Complaints are investigated and offenders may receive warnings that are posted to users. Violators may be suspended from either bidding on or listing items for sale.(Page 2

Documents

eBay Inc Strategic Management