Ebay

2006, Tony Gauvin, UMFK*EBay A Case Study In Strategic ManagementTony Gauvin, UMFKApril 2006

2006, Tony Gauvin, UMFK

2006, Tony Gauvin, UMFK*Some AcknowledgementsGraphics and some Data for presentation taken from investor.ebay.com The analysis is based in part on the case study prepared by the following students in Spring of 2005Corey Daigle, Megan Foreman, and Seth Fraser Other material was provided by the authors of the Case Marcelo De Mattos and Forest David


2006, Tony Gauvin, UMFK*Overview

Some Cool Facts

Who we are, What we sell, Where we are

Mission and VisionInternal Assessment- Financial Condition- IFE Matrix ??External Assessment- EFE Matrix- CPM MatrixStrategy Formulation- SWOT Matrix- Space Matrix- IE Matrix- Grand Strategy Matrix- QSPM Matrix- Matrix AnalysisStrategic Planning for the FutureEPS/EBITDecisions/Implementation/Evaluation2004&05 FinancialseBay press releases


2006, Tony Gauvin, UMFK*eBay is evolution1996 1998: US only, collectibles onlyStarted by Pierre Omidyar to assist his girl friend in collecting Pez Dispensers 1999 Moving beyond collectibles1999 Going global2000 Introducing Fixed Price and eBay Stores2002 PayPal: removing friction and building a huge new business2004 2005: Creating other marketplaces Marktplaats, Mobile, Rent.com, Shopping.com, Kijiji, ProStores

Common theme expanding our vision, our market and our opportunity

Aspirational goal of growing faster than e-commerce


2006, Tony Gauvin, UMFK*High performance companyYears since started


2006, Tony Gauvin, UMFK*Registered users


2006, Tony Gauvin, UMFK*Gross merchandise volume


2006, Tony Gauvin, UMFK*Total PayPal Accounts


2006, Tony Gauvin, UMFK*PayPal Payment Growth


2006, Tony Gauvin, UMFK*Who we Are Founded in September 1995, eBay is The World's Online Marketplace for the sale of goods and services by a diverse community of individuals and small businesses. Today, the eBay community includes more than a hundred million registered members from around the world. People spend more time on eBay than any other online site, making it the most popular shopping destination on the Internet.


2006, Tony Gauvin, UMFK*What we Sell On an average day, there are millions of items listed on eBay. People come to eBay to buy and sell items in thousands of categories from collectibles like trading cards, antiques, dolls, and house wares to practical items like used cars, clothing, books and CDs, and electronics. Buyers have the option to purchase items in an auction-style format or items can be purchased at a fixed price through a feature called Buy It Now.


2006, Tony Gauvin, UMFK*Where we Are People from all over the world buy and sell on eBay. Currently, eBay has local sites that serve Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Malaysia, the Netherlands, New Zealand, the Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States. In addition, eBay has a presence in Latin America through its investment MercadoLibre.com.


2006, Tony Gauvin, UMFK*eBays Community ValueseBay is a community that encourages open and honest communication among all its members. Our community is guided by five fundamental values:

We believe people are basically good.We believe everyone has something to contribute.We believe that an honest, open environment can bring out the best in people.We recognize and respect everyone as a unique individual.We encourage you to treat others the way you want to be treated.


2006, Tony Gauvin, UMFK*eBay's mission is to provide a global trading platform where practically anyone can trade practically anything.1eBays Mission Statement


2006, Tony Gauvin, UMFK*Proposed Mission Statement eBays mission is to be the worlds most utilized and profitable trading post. Having bright and talented employees that are dedicated to serving both customers and communities, eBay provides the most technologically advanced, reliable, and secure trading platform available to anyone, anywhere, while always doing business in a highly ethical manner.

1


2006, Tony Gauvin, UMFK* Our vision at eBay is provide an online business to enable anyone to auction practically anything.

1Proposed Vision Statement


2006, Tony Gauvin, UMFK*External Audit


2006, Tony Gauvin, UMFK*2Opportunities


2006, Tony Gauvin, UMFK*Threats


2006, Tony Gauvin, UMFK*3EFE Matrix


2006, Tony Gauvin, UMFK*EFE Matrix


2006, Tony Gauvin, UMFK*CPM4


2006, Tony Gauvin, UMFK*Internal Audit


2006, Tony Gauvin, UMFK*Organizational TeamBeth Axelrod, Senior Vice President, Human ResourcesMatt Bannick, President, eBay InternationalWilliam C. Cobb, President, eBay North AmericaJohn Donahoe, President, eBay MarketplaceMichael Jacobson, Senior Vice President and General CounselJeff Jordan, President, PayPalPierre Omidyar, Founder and Chairman of the BoardBob Swan, Senior Vice President, Finance and Chief Financial OfficerMaynard Webb, Chief Operating OfficerMeg Whitman, President and CEO


2006, Tony Gauvin, UMFK*Key FinancialsEnd of year 2003Net Income grew to $442 million, up 77%Resulted in record operating cash flows of $874 million, up 82%Year end Balance Sheet$5.8 billion in total assets$2.7 billion in cash and investments


2006, Tony Gauvin, UMFK*Key Financial Ratios Company Industry Sector S&P 500Valuation RatiosP/E Ratio (TTM) 97.12 41.01 28.90 24.01Beta 1.77 1.30 0.96 1.00Growth Rates %Sales - 5 Yr Growth Rate90.58 35.47 17.25 9.30EPS (MRQ) vs Qtr 1 Yr Ago55.07 27.30 15.43 28.69EPS (TTM) vs TTM 1 Yr Ago60.76 27.58 16.37 21.92EPS - 5 Yr Growth Rate 111.74 43.79 15.23 12.15Financial Strength Quick Ratio (MRQ) 3.13 1.22 0.93 1.26Total Debt to Equity (MRQ) 0.03 0.73 0.82 0.855


2006, Tony Gauvin, UMFK*Key Financial Ratios Company Industry Sector S&P 500Profitability Ratios %Gross Margin (TTM) 80.78 42.23 42.8447.32Gross Margin - 5 Yr Avg 79.48 41.08 42.0647.01Operating Margin (TTM) 29.01 11.97 12.9020.33Operating Margin - 5 Yr Avg 16.21 6.75 11.2118.35Net Profit Margin (TTM) 21.00 7.76 7.5413.12Net Profit Margin - 5 Yr Avg 13.53 3.74 7.6211.59Management Effectiveness %Return on Assets (TTM) 9.10 8.29 5.91 6.40Return on Investment (TTM) 10.18 11.53 7.989.97Return on Equity (TTM) 10.50 14.04 13.5118.71www.investor.stockpoint.com


2006, Tony Gauvin, UMFK*eBay Stock Information


2006, Tony Gauvin, UMFK*eBay as an Investment


2006, Tony Gauvin, UMFK*Strengths1.eBay is the most well known online auction company in the world.2.Strong auction community of loyal customers.3.Excellent financial situation.4.Have a fair payment system that encourages merchants to list products. 5.Strong presence in strategic global markets.6.Experienced management team.7.eBay has very little inventory since they do not actually take position of items sold on their site.8.Strong customer service. 9.Percent of revenue in international markets increasing significantly.


2006, Tony Gauvin, UMFK*WeaknessesWeak promotional and marketing activitieseBay does not pay dividends on their stock.Some customers feel the website is cluttered eBays position in the business to business (B2B) market is weak. eBay has very little debt, therefore the company is not taking advantage of low interest rates to expand.eBay has a higher tax rate since they do not take advantage of depreciation as well as other companies.The company relies too much on word of mouth advertising, assuming everyone already knows about eBay.The company does not do enough to convince leery potential customers that Internet business is financially safe. Longer transaction times, since many merchants will not receive payment until a buyers check clears.eBay is mainly a cash business.


2006, Tony Gauvin, UMFK*IFE Matrix


2006, Tony Gauvin, UMFK*The Analysis


2006, Tony Gauvin, UMFK*SWOT Matrix7

SO StrategiesWO StrategiesExpand operations into Asia (S 1,2 &5; 0 1,3 & 8)Start B2B operations in Asia (W 4,5,&10, O 4,7 & 9)Increase advertising (1 1,6,7 & 10; 0 1,3,4,6 & 8)ST StrategiesWT StrategiesLobby to keep Internet sales tax free (S 1&3; T 1)Increase Fraud Awareness (S 1,4 & 8; T 3)Use extra Cash to educate all customers that Internet Transactions are safe (W 8; T 4&10)


2006, Tony Gauvin, UMFK*SPACE Matrix


2006, Tony Gauvin, UMFK*IE Matrix11


2006, Tony Gauvin, UMFK*Grand Strategy Matrix10


2006, Tony Gauvin, UMFK*QSPM


2006, Tony Gauvin, UMFK*Suggestion/Recommendations

New StrategiesExpand to all countries of the worldCost: $500,000.00-1,000,000.00(advertising)Advance in security of personal information1,000,000.00+Increase in IndustryN/AIncrease revenues by capturing more customersN/ALook into new pay system or create own (PayPal only in 38 countries)Millions


2006, Tony Gauvin, UMFK*We believe that our continued profitability at historical levels will depend in large part on our ability to do the following: attract new users and keep existing users active on our websites; manage the costs of our business, including the costs associated with maintaining and developing our websites, customer support, transaction and chargeback rates, and international and product expansion; maintain sufficient transaction volume to attract buyers and sellers; increase the awareness of our brands; and provide our customers with superior community, customer support, and trading experiences.

eBays ThoughtsFrom 2003 annual report


2006, Tony Gauvin, UMFK*EPS/EBIT Analysis$Amount Needed: $1,500Stock Price $45Tax Rate 80/162=40%Interest Rate 5%# Shares Outstanding 609 14


2006, Tony Gauvin, UMFK*EPS/EBIT Analysis


2006, Tony Gauvin, UMFK*DecisionsPrimary:Expand aggressively into China

Secondary:Increase business to business operationsIncrease marketing campaigns in Asia


2006, Tony Gauvin, UMFK*ImplementationObjectives:

Create a fully translated Chinese eBay siteIncrease sales by 35%Increase number of registered users


2006, Tony Gauvin, UMFK*EvaluationQuarterly & Yearly Financial Statements

Annual strategic meetings of divisionmanagement and corporate management


2006, Tony Gauvin, UMFK*2004 Financial InformationMore than 104.8 million registered users

327.7 million items

More than $8 billion in gross merchandise sales

* All from first quarter of 2004


2006, Tony Gauvin, UMFK*2005 Highlights


2006, Tony Gauvin, UMFK*We have an incredible set of assetshttp://www.skype.com/ http://www.paypal.com http://www.ebay.com


2006, Tony Gauvin, UMFK*Increased marketing


2006, Tony Gauvin, UMFK*eBay International;


2006, Tony Gauvin, UMFK*CHINA


2006, Tony Gauvin, UMFK*eBay in the NewsMarch 30, 2006 eBay Statement on Supreme Court Oral Argument and MercExchange Patent ReexaminationMarch 6, 2006 eBay Announces Matt Bannick To Head Efforts in Corporate Philanthropy and the Developing WorldFebruary 27, 2006 eBay Community To Gather in Las Vegas for 5th Annual eBay Live! Conference February 24, 2006 Celebrities Turn to eBay for Academy Awards LooksDecember 21, 2005 Matt Carey Named Chief Technology Officer for eBay MarketplacesNovember 3, 2005 Star Wars LEGO Sets and Thomas the Tank Engine Top eBay's 2005 Hot New Toys ListOctober 14, 2005 eBay Completes Acquisition of Skype


2006, Tony Gauvin, UMFK*Questions


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Ebay