MR111037 EBay Inc Strategic Management

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

NAZIFA BTE ABD. GHANI
MR111037

Associated Professor Dr. Mas Bambang Baroto

I nternational Business School
University Technology Malaysia
J une 2012
eBay Inc.-2009 [MR111037]

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Strategic Management/SEM II/ 2011/2012

Contents
1.0 Executive Summary .......................................................................................................................... 4
2.0 Vision and Mission Analysis ............................................................................................................ 5
2.1 Vision: There is no vision stated in the case ................................................................................. 5
2.2 Mission .......................................................................................................................................... 5
3.1 PEST Analysis .............................................................................................................................. 6
3.2 Competitive Analysis .................................................................................................................... 9
3.3 Industry Analysis ........................................................................................................................ 12
3.3.1 The Description of The Industry .......................................................................................... 12
3.3.2 Rivalry Among Competitor ................................................................................................. 14
3.3.3 Potential Entry of New Competitor ..................................................................................... 21
3.3.4 Potential Development of Substitute Products ..................................................................... 22
3.3.5 Bargaining Power of Suppliers ............................................................................................ 24
3.3.6 Bargaining Power of Consumers ......................................................................................... 25
3.3.7 Conclusion of the Industry ................................................................................................... 26
3.6 Defining the Key Success ........................................................................................................... 28
3.6 Opportunities and Threats ........................................................................................................... 31
3.7 The External Evaluation Factor (EFE) ........................................................................................ 38
3.8 Competitive Profile Matrix Analysis .................................................................................... 42
4.0 Internal Analysis ............................................................................................................................. 43
4.1 Cultural Analysis ........................................................................................................................ 43
4.2 Management Functions ............................................................................................................... 44
4.3 Marketing Strategy ...................................................................................................................... 52
4.4 Financial Analysis ....................................................................................................................... 61
4.4.1 Financial Ratio ..................................................................................................................... 61
4.5 Production/Operation .................................................................................................................. 66
4.6 Research & Development (R&D) ............................................................................................... 79
4.7 Management Information Systems Audit ................................................................................... 79
4.8 Value Chain Analysis (VCA) ..................................................................................................... 80
4.9 Strengths and Weaknesses ......................................................................................................... 87
4.9.1 Internal Factor Evaluation (IFE) Matrix ............................................................................ 102
5.0 Existing Objectives and Strategies ................................................................................................ 106
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5.3 Strategies ...................................................................................................................................... 109
5.3.1 Strategies in Action ............................................................................................................ 109
5.3.1 Generic Strategies (Business Level Strategies ) ................................................................. 117
6.0 Strategy Formulation Tools .......................................................................................................... 119
6.1 SWOT Analysis ........................................................................................................................ 119
6.2 SPACE Analysis ...................................................................................................................... 126
6.3 BCG Analysis .......................................................................................................................... 129
6.4 IE Analysis ............................................................................................................................... 129
6.5 Grand Strategy Matrix ............................................................................................................. 130
6.6 Wrap Up Process ...................................................................................................................... 132
6.7 The Qualitative Strategic Planning Matrix (QSPM) ................................................................ 133
7.0 The New Strategies ...................................................................................................................... 137
7.1 Value Chain ............................................................................................................................. 140

eBay Inc.-2009 [MR111037]

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1.0 Executive Summary
EBay 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 eBay
2) External Environment Analysis
3) Internal Environment Analysis using value Chain analysis
4) Defining the Existing Objectives and the existing Strategies of eBay
5) Strategy Formulation Process with strategic tools
6) Implement New set Strategy
7) Implement new set of marketing and financial
8) Provide figure of existing objective, strategy, management issues, and financial issues versus new
objective, strategy, management issues and financial Issues
eBay Inc.-2009 [MR111037]

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2.0 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 Components Included Not included Description
Customers -
Products and Services ecommerce franchise
Markets Leader in the online
marketplace
Technology Leading in e-commerce
Concern for Survival
Growth and Profits
-
Philosophy
Self-Concept
Continuously Investing in
Marketplaces segment
Concern for Public Image -
Concern for Employees -
Table 1: Analyzing the eBays Mission Statement Based on the Nine Component
Therefore, 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.
eBay Inc.-2009 [MR111037]

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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 Variables Case Facts Evaluation
Broad in Scope creating the worlds
leading ecommerce
franchise
Acceptable
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 9 Unacceptable
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 Analysis
Case Facts Opportunity Threat
eBay Inc.-2009 [MR111037]

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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 the
Internet, (Page 270, Para2)

Economic forces
-The resources of existing
competitor 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)

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-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 technological
Change(Page 268, Para2)

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

Total 5 12

Conclusion:
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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 Analysis
eBay 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 revenues
are also earned from advertising and revenue-sharing contracts with third parties that provide
eBay Inc.-2009 [MR111037]

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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)

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 segment
Key
Variables
Case Facts Opportunity Threat
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, 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

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269,Para1)

Competitors
Weakness

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)

Competitors
Distribution

-

No Data Available

-

-
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Channels
Competitors
Financial
Position

Amazon

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

Total 1 6
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 Analysis
3.3.1 The Description of The Industry
As 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,
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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
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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 Facts

Competitive Forces
Strong Moderate Weak
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, 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)

-Amazon, a leading online retailer,
billion as of year end 2008. (Page
268, Para4)

eBay
(Market
places)
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)

EBay offers millions of items for
trade through
auction-style and fixed-price
trading in 39-markets and boasts
86.3 million active global

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users 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 features
to 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)

Competitors
Weakness
-Bay compared to Amazon
achieved High gross profit margins
High in gross profit margin can be
considered as a strength for eBay

eBay Inc.-2009 [MR111037]

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Amazon

(Financial analysis)

eBay (Market
place)
-For the second quarter of 2009,
eBays profit fell 29 percent and
revenue declined
4 percent as the company continued
its turnaround strategy in a harsh
climate for consumer
Spending (Page 263, Para2)
- For that
quarter, 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
existing
users.(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

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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
entrepreneurial business models
that focus on customer-driven
value creation. (Page 268, para1)

- EBay plans to expand the
Marketplaces segment by focusing
on customers to improve the
buyers experience and reduce

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eBay(Mark
etplaces)
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

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

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eBay
(Marketpla
ces)
-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)

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Competitors

Distribution
Channels

-

No Data Available

-

-

eBay
(market
places)

-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,
billion as of year end
2008. (Page 268, Para4)

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eBay(Mark
etplace)

For the second quarter of 2009,
eBays profit fell 29 percent and
revenue declined
4 percent as the company
continued its turnaround strategy in
a harsh climate for consumer
spending.(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)

Total 12 20 4

3.3.3 Potential Entry of New Competitor

a) for Marketplaces Segment

Potential Entry of New Competitors Competitive Forces
NO Case facts Strong Moderate Weak

1

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)

Total 1

b) for Communications Segment

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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 Products Competitive Forces

1

Competitors include 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, 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

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2

3

268, Para2)

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

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

Total 1

2

b) For Communications Segment


1

2

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

The 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)

eBay Inc.-2009 [MR111037]

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Total

2

c) For Payments Segment

1

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

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, Para 1)

Total

2

3.3.5 Bargaining Power of Suppliers

Bargaining Power of Suppliers Competitive Forces
1 Competition is expected to increase in the future
because barriers to entry in this segment
are low (Page 268, Para2)

Total 1

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N/A - - -
Total

c) For Payments Segment

N/A - - -
Total

3.3.6 Bargaining Power of Consumers


Bargaining Power of Consumers Competitive Analysis

1.

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

Total 1


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N/A - - -
Total

b) For Payments Segment


N/A - - -
Total

3.3.7 Conclusion of the Industry
a) For Marketplaces segment
Porters Five Forces Analysis Result

Key Variables
Competitive Forces
Rivalry Among Competitor 12 20 4
Potential Entry of New Competitor 1 N/A N/A
Potential Development of Substitute Products 1 2 N/A
Bargaining Power of Suppliers 1 N/A N/A
Bargaining Power of Consumers 1 N/A N/A
Total Result of Porters Five Forces 16 22 4

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
eBay Inc.-2009 [MR111037]

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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 segment

Key Variables
Competitive Forces
Rivalry Among Competitor N/A N/A N/A
Potential Entry of New Competitor N/A N/A N/A
Potential Development of Substitute Products N/A 2 N/A
Bargaining Power of Suppliers N/A N/A N/A
Bargaining Power of Consumers N/A N/A N/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 segment

Key Variables
Competitive Forces
Rivalry Among Competitor N/A N/A N/A
Potential Entry of New Competitor N/A N/A N/A
Potential Development of Substitute Products N/A 2 N/A
Bargaining Power of Suppliers N/A N/A N/A
Bargaining Power of Consumers N/A N/A N/A
eBay Inc.-2009 [MR111037]

28

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 Segment

Key Success Factor
NO Key Success
Factor
Case Facts
1.
P
r
o
v
i
d
i
n
g

V
a
l
u
e

t
o

C
u
s
t
o
m
e
r
s

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

-EBay offers millions of items for trade through
auction-style and fixed-price trading in 39 markets and
boasts 86.3 million active global

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

-Amazon states
their success is based on: the ability to attract buyers
and sellers; the volume of transactions,
price, and selection of goods;(Page 269, Para1)
eBay Inc.-2009 [MR111037]

29

-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
minimum
price for opening bids that stay open for a period of
time. Alternatively, the fixed-price format
allows 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 features
to 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.
P
r
o
v
i
d
i
n
g

R
e
l
i
a
b
i
l
i
t
y

&

T
r
u
s
t
w
o
r
t
h
y

- 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 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)

- Amazon states
their success is based on: system reliability; delivery
and payment reliability (Page 266, Para1)
eBay Inc.-2009 [MR111037]

30

3.

F
r
i
e
n
d
l
y

I
n
t
e
r
f
a
c
e

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)

-Amazon states
their success is based on: customer service; Web
site convenience and accessibility; brand recognition,
community
cohesion, interaction, and size (Page 269, Para1)

4
B
r
a
n
d

I
m
a
g
e

&

R
e
p
u
t
a
t
i
o
n

-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)

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

5
F
i
n
a
n
c
i
a
l

P
o
s
i
t
i
o
n

- Amazon, a leading online retailer, reported net
revenues of $19.2 billion as of year end
2008. (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
eBay Inc.-2009 [MR111037]

31

threats are coming from the marketplaces segment. I n 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 segment
The List of Opportunities

No.

Case Fact

Prioritize

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

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

eBay Inc.-2009 [MR111037]

32

The list of threats
No. Case Fact Prioritize

Threats Resulted from PEST Analysis and Competitive Analysis

1 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)

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

1
3 Legislation has also been proposed to prohibit sharing of certain
information over the Internet, (Page 270, Para2)

17
4 The 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
6 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)

2
7 Alternatively, financial measures will be negatively impacted by a rise in
the value of the U.S. dollar (Page 269, Para3)

7
8 Declining economic environment (Page 268, Para4)

10
9 Dollar and the lingering weak economy with high unemployment (Page
274, Para1)

8
10 The revenue drop was attributable to the impact of the stronger.

11
11 Competition is intense in communications services and subject to rapid
technological

4
12 Breaches in data security are on the rise (Page 270, Para3)

12
13 Amazon states their success is based on: the ability to attract buyers and
sellers; the volume of transactions, price, and selection of goods; customer
13
eBay Inc.-2009 [MR111037]

33

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)
14 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)

18
15 Amazon has initiated alliances with partners to gains sales by referring
customers to Amazon.com (Page 269, Para1)

20
16 The success of Amazon is built on similar customer-centric entrepreneurial
business models that focus on customer-driven value creation. (Page
268, para1)

14
17 Amazon, 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)

18 Marketplaces: 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)

9
19 Competitors include 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, 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
20 Companies such as Google Base and Microsoft Live
Expo also offer similar online services and classified ads. (Page 268, Para2)

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

5
eBay Inc.-2009 [MR111037]

34

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

15

b) Opportunities and Threats for Communications segments

No.

Case Fact

Prioritize

Opportunities Resulted from PEST Analysis

Para3)

3

5
265, Para5).

2

4
1
6


N/A

The list of threats
No. Case Fact Prioritize

Threats Resulted from PEST Analysis

1 Legislation is in effect which requires collection of taxes beginning after 5
eBay Inc.-2009 [MR111037]

35

Para 6)


1

6

2
5


7

8

9

10
274, Para1)

12

4
technological

3

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

13
13 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,
Para 1)
11
eBay Inc.-2009 [MR111037]

36

c) Opportunities and Threats for Payments segments

No.

Case Fact

Prioritize

Opportunities Resulted from PEST Analysis

Para3)

3

5
265, Para5).

2

4
1
6


N/A

eBay Inc.-2009 [MR111037]

37

The list of threats

No.

Case Fact

Prioritize

Threats Resulted from PEST Analysis

1 Legislation is in effect which requires collection of taxes beginning after
Para 6)

5

1

6

2
5


3

8

4

7
274, Para1)

10

9
technological

13

eBay Inc.-2009 [MR111037]

38

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

Item

Key external factor

Weight

Rating

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

0.09 4 0.36
2 Buyers and sellers enjoy
trading among a wide
selection of goods and
services in a secure, trusted,
and efficient commerce
environment.(Page 265,
Para5).

0.08 4 0.32
eBay Inc.-2009 [MR111037]

39

3 Profitability is also affected
by currency exchange rates
(page 269, Para3)
0.07 3 0.21

4

Online 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

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

0.06

3

0.18

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

0.08 4 0.32
7 Weak global economic
conditions, in addition to
the mortgage and worldwide
credit related financial
crisis, are expected to limit
revenue growth, particularly
0.08 4 0.32
eBay Inc.-2009 [MR111037]

40

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

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

0.07 3 0.21
9 Competition is intense in
communications services
and subject to rapid
technological Change(Page
268, Para2)

0.06 3 0.18
10 However, Amazons strong
growth and satisfied
customer base pose the
greatest threat to eBay (Page
267, Para6)

0.06 3 0.18
11 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)
0.06 3 0.18
eBay Inc.-2009 [MR111037]

41

12 Alternatively, financial
measures will be negatively
impacted by a rise in the
value of the U.S. dollar
(Page 269, Para3)
0.05 3 0.15

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

0.05 3 0.15
14 Marketplaces: 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)

0.05 3 0.15
15 Declining economic
environment (Page 268,
Para4)

0.05 3 0.15
Total 1 3.27

Conclusion
Based 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.

eBay Inc.-2009 [MR111037]

42

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
FACTORS

Weight
eBay Amazon
Rating Score Rating Score
Providing Value
to Consumers

0.30
3 0.90 3 0.90
Reliability &
Trustworthy

0.28
3 0.84 3 0.84
Friendly
Interface
0.18 3 0.54 3 0.54
Brand Image &
Reputation
0.14 3 0.42 3 0.42
Financial
Position
0.10 2 0.20 2 0.20
Total 1 2.90 2.90

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.

eBay Inc.-2009 [MR111037]

43

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 Facts
S W
Segment eBay Amazon

Marketplaces
EBay 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 entrepreneurial
business models that focus on customer-
driven value creation (Page 268, Para1)

N/A

- The success
of Amazon is
built on
similar
customer-
centric
entrepreneurial
business
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 2
63, Para4)

N/A

eBay Inc.-2009 [MR111037]

44

Payments
N/A

N/A

4.2 Management Functions

Case Facts
S W
Functions Segment eBay Amazon
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

Communications

EBay also that quarter
announced they would
spin off and make an
initial public offering of
their Skype business
segment in the beginning
of year 2010.
(Pg.263,para2)

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

EBay Inc. plans to

N/A

N/A

eBay Inc.-2009 [MR111037]

45

implement a customer
management program
that emphasizes
acquiring new users and
upgrading current Skype
users to premium
products (Page 267,
Para5)

- Future plans
include expanding
Skypes desktop product
to mobile user devices
and other Web-based
devices. Plans include
also offering solutions to
a more diverse business
user and enhancing
the Skypes current
platform for greater
revenues because the
worldwide
communications
market is expected to
grow by 5.5 percent
annually with U.S. Web
conferencing
expected to grow 14.1
percent from 2008
through 2011 (eBay.com
2009).(Page 267, Para5)

N/A

N/A

Payments

EBays management
seeks to become the
number-one online
payment solution. EBay
plans to focus on
improving the customer
experience, enhancing
security, expanding
product
offerings, enhancing
buyer and seller
protection programs,
adding innovative
features, and
expanding its sales

N/A

eBay Inc.-2009 [MR111037]

46

channels (Page
267,Para2)

-Expansion
into international markets
and more currencies is
expected to improve the
ease and efficiency
of cross-border
transactions (Page 267,
Para2)

N/A

Organising

Marketplaces

-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)

EBay has also expanded
specific Customer
Support efforts, such as
to increase efficiency of
trades(Page 266, Para2)

-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)

- Acquired by eBay Inc.
in 2005, Shopping.com is
an online comparison
shopping
-Amazon has
initiated alliances
with partners to
gains sales by
referring customers
to Amazon.com
(Page 269, Para1)

N/A

N/A

eBay Inc.-2009 [MR111037]

47

site that offers
comparisons on millions
of products and product
reviews.(Page266, Para6)

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

N/A

N/A

Communications

-E-commerce is
supported by eBays
proprietary
Skype 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 and
acquired by eBay in
2005.

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

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

48

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 point
of 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

Payments

N/A

N/A

Staffing

Marketplaces

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

N/A

eBay Inc.-2009 [MR111037]

49

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 no
longer permits sellers to
leave negative feedback
(Page 266, Para2)

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

- The SafeHarbor
Program provides
guidelines for resolving
disputes among parties.
Complaints are

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

50

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 22,
Para2)

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)

For that
quarter, 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 Web
sites. (Page 269, Para8)

N/A

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

51

- 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

Communications

For 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

N/A

eBay Inc.-2009 [MR111037]

52

is responsible
for 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 the
goods. This may result in
greater losses and write-
offs incurred by eBay
Inc.(Page 270, Para2)

N/A

N/A

4.3 Marketing Strategy

Factors
Case Facts S W
Segment eBay Amazon

Marketing
Strategy

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

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

eBay Inc.-2009 [MR111037]

53

Communications

N/A

N/A

Payments

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)

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 Tools
and Services, and Loyalty
Programs.(Page 266, Para1)

-Amazon has
initiated
alliances with
partners to
gains sales by
referring
customers to
Amazon.com
through
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)

eBay Inc.-2009 [MR111037]

54

-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 (Page 263
Para1)

-Loyalty Programs that provide
cash back buyer rewards
coupons were selectively
distributed 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)

N/A

N/A

N/A

Communications

N/A

N/A

Payments

N/A

N/A

Product and
Service
Planning

Marketplaces

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

- Web Site Usability. Growth in
the number of products and
Web site features has caused

N/A

N/A

eBay Inc.-2009 [MR111037]

55

the site to become less user-
friendly.(Page 270, Para4)

- EBays
Marketplaces 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 an
increased number of

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
communication
software platform.(Page 267,
Para3)

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

N/A

N/A

eBay Inc.-2009 [MR111037]

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Payments
-PayPal is a recognized
global 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-mail
address and allows members to
securely send and receive
payments online securely
without
sharing 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 in
revenue, an increase of 11
percent year over year. The
growth was driven by
continued
momentum 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

eBay Inc.-2009 [MR111037]

57

Pricing

Marketplaces
-EBay provides the virtual
marketplace auction where the
market 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 minimum
price for opening bids that stay
open for a period of time.
Alternatively, the fixed-price
format
allows 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 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
existing

N/A

N/A

N/A

Communications

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

N/A

eBay Inc.-2009 [MR111037]

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Payments
-International business
processing accounted for 45
percent of PayPals total
revenues for
2008. Higher fees earned on
international transactions
have provided eBay with
higher revenues
and 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 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)

and regions of the world,
such as the Netherlands,
Germany, and so on. (Page
266, Para4)

Shopping.com
is available in the United
States, the United Kingdom,
France, Germany, and

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

59

Australia.(Page 266, Para6)

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

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)

-In August 2009, eBay Inc.
formed a partnership with
hundreds of
GM dealers in California to
help consumers negotiate
purchase of new GM cars
and trucks

N/A

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

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

N/A

Payments
Retailers that offer the Bill Me
Later service
include: 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

eBay Inc.-2009 [MR111037]

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4.4 Financial Analysis
4.4.1 Financial Ratio
Because 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 Segments

S

W
Segment Year 2006
(Millions)
Year 2007
(Millions)
Year 2008
(Millions)
Year 2009
(Millions)

Marketplaces
4,334,290

5,363,891

5,586,751

- - -
Communicati
ons
194,921

381,822

550,841

- - -
Payments
1,440,530

1,926,616

2,403,669

- - -
Total net
Revenue
5,969,741

7,672,329

8,541,261

8,199,611 eBay Revenue
Growth of
rate has been
decreasing for
the last 3
years.
Therefore,
this decline
trend lead to
decreasing the
growth rate in
Revenue
Growth
Percentage
29% 11%
-4%
eBay Inc.-2009 [MR111037]

62

2009 by 4%.
This revenue
decline trend
is considered
as the
weakness of
eBay

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

W
Year
2004
Year
2005
Year
2006
Year
2007
Year
2008

$ 58.17

$43.22

$30.07

$33.19

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

c) eBay Liquidity Ratio
Current Ratio S W
Year 2007 Year 2008
2.30 1.70

Decreased in Current Ratio is
the weakness for eBay
Quick Ratio
Year 2007 Year 2008
1.17 0.71

Decrease in Quick Ration is
the weakness for eBay
eBay Inc.-2009 [MR111037]

63

d) eBay Leverages Ratio
Debt to Equity Ratio S W
Year 2007 Year 2008
0.41 0.47

Increased in Debt to equity
Ratio is the weakness for
eBay
Debt Ratio
Year 2007 Year 2008
0.24 0.29 eBay Debt Ratio is increased
and it is considered as the
weakness for eBay

e) Profitability Ratio
Return on Assets (ROA) S W
Year 2007 Year 2008 -

2.27% 11.41%

- Increased in
ROA is
considered a
strength for
eBay

Return on Equity (ROE) S W
Year 2007 Year 2008 -
3.0% 16.1% - Increased in
ROE is
considered as
a strength for
eBay

eBay Inc.-2009 [MR111037]

64

*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 (%) S W
Year 2006 Year 2007 Year 2008 - -

eBay

Amazon

eBay

Amazon

eBay

Amazon

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- 2006 Year 2006 to 2007 Year 2007 to 2008 S W
eBay Amazon eBay Amazon eBay Amazon
- - 25% 37% 7% 27%
Decrease in Growth
rate is considered as
weakness for eBay

f) Working Capital
Companys Working Capital S W
Year 2007 Year 2008

4,022,926

2,581,503
Decreased to almost double for
weakness for eBay

eBay Inc.-2009 [MR111037]

65

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


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

eBay Inc.-2009 [MR111037]

66

4.5 Production/Operation

Decision
Area
Case Facts

Strength Weakness
Segment
eBay Amazon

Process

Marketplaces

-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
264,Para2)

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

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

N/A

eBay Inc.-2009 [MR111037]

67

-EBays
Marketplaces
platform
brings 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 can
be 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)

N/A

eBay Inc.-2009 [MR111037]

68

- Rent.com lists
apartment
availability,
rental costs, virtual
tours, roommate
searches, and more.
Revenue is earned
from landlords
who 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 tickets
to sporting, events,
theater, and other
entertainment
events (Page
266,Page3)

N/A

N/A

Communicati
ons

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

N/A

eBay Inc.-2009 [MR111037]

69

-EBays prior
expenditures were
focused on
traditional wired
routes; however, 50
percent of
expenditures
are now in the
wireless
telecommunication
s 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 is
sustained through
Communications
and trust (eBay
2006).(Page
263,para4)

N/A

eBay Inc.-2009 [MR111037]

70

-The
Communications
segment generates
usage revenues
from Skype VoIP
for connection to
traditional fixed
and mobile
telephones
under 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

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71

Payments

- The
Payments segment
revenues are
generated from
fees paid by
merchants for
payment
processing
services 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 consumer
makes a purchase
on credit, CIT
Bank initiates a
consumer loan at
the point of sale.
Bill
Me Later then
purchases the
consumers loan
from CIT Bank.
Bill Me Later earns
revenues
from interest on the
outstanding
balances, late fees,
and transaction
fees.(Page 267,
Para1)

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

72

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

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

N/A

N/A

Capacity

Marketplaces

- EBay offers
millions of items
for trade through
auction-style and
fixed-price trading
in 39 markets and
boasts 86.3 million

N/A

eBay Inc.-2009 [MR111037]

73

active global
users as of
2008.(Page 264,
para3)

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

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

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

As
of December 2008,
approximately
516,000 online
storefronts were
listed in locations
across the globe
(Page 265, Para5)

N/A

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

74

Communicati
ons

-As of
2008, 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 downloaded
more than a billion
times.(Page 267,
Para3)

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

-Interestingly,
nearly 11 million
Skype 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 by
Skype
software.(Page
267, Para4)

N/A

N/A

N/A

N/A

N/A

eBay Inc.-2009 [MR111037]

75

- 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 of
international
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
percent
year-over-year
growth. Skype
added 37.3 million
registered users
during the quarter
and
ended the period
with more than
480.5 million
registered
users(Page 274,
Para1)

N/A

N/A

Payments
-PayPal is a
recognized
global leader in
online payment
solutions with 70
million active

N/A

eBay Inc.-2009 [MR111037]

76

accounts (Page
266, Para9)

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

N/A

Inventory

Marketplaces
N/A

N/A

Communicati
ons

N/A

N/A

Payments
N/A

N/A

Workforce

Marketplaces
eBay undertook a
10 percent
reduction in its
workforce with the
elimination of
1,000 jobs in 2008

N/A

eBay Inc.-2009 [MR111037]

77

and incurred
$49,000 in
restructuring
costs (Page 269,
Para4)

Communicati
ons

N/A

N/A

Payments
N/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 wide
selection of
goods/services
(eBay.com, 2006).
(Page 263, para4)

-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)

N/A

N/A

eBay Inc.-2009 [MR111037]

78

-In June 2008,
eBay Inc. was
found liable for
damages in the

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. These
events may also
negatively affect
eBays reputation.
(Page 270, Para1)

N/A

N/A

Communicati
ons

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

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

eBay Inc.-2009 [MR111037]

79

4.6 Research & Development (R&D)
Case Facts

Strength Weakness
eBay Amazon

N/A

N/A
- -

4.7 Management Information Systems Audit

Segment
Case Facts

Strength Weakness
eBay Amazon

Marketplaces

Information is
recorded up to
12 months and
provides color-coded
star ratings(Page 266,
Para2)

N/A

Communications

N/A

N/A

Payments

N/A

N/A

eBay Inc.-2009 [MR111037]

80

4.8 Value Chain Analysis (VCA)
a) Marketplaces Segment
Variables
Case Facts

Strength Weakness
eBay
Inbound
Logistics

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. (Page
263,para1)

Process

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

EBays Marketplaces platform
brings 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 can
be 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 landlords
who pay a fee for renters who find apartments through
Rent.com.(Page 266, Para7)

eBay Inc.-2009 [MR111037]

81

StubHub is a leading U.S. ticket marketplace that
allows users to buy and sell tickets
to 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 part
in 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 selectively
distributed to recognize large buyers to sustain customer

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

eBay Inc.-2009 [MR111037]

82

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)

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

Service

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)

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 existing

Customer Support. Customer support is challenged
from greater trade activity and an
increased 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 wide
selection of goods/services (eBay.com, 2006).
(Page 263, para4)

eBay Inc.-2009 [MR111037]

83

*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 Segment
Variables
Case Facts

Strength Weakness
eBay
Inbound
Logistics

N/A

-

-
Process

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

EBays prior
expenditures were focused on traditional wired routes;
however, 50 percent of expenditures
are 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 is
sustained through Communications and trust (eBay
2006).(Page 263,para4)

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

eBay Inc.-2009 [MR111037]

84

Outbound
Logistics

EBay, 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 a
secure and trusted community that is supported by
free unlimited Internet voice and video
communication (Page 267, Para3)

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

Marketing
& Sales

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

Service

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

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

Management Information System and Research & Development as well as in financial
analysis.

eBay Inc.-2009 [MR111037]

85

C) Payments Segment
Variables
Case Facts

Strength Weakness
eBay
Inbound
Logistics

Although Bill Me Later accounts are funded by CIT
Bank, Bill Me Later is responsible
for all functions related to the account

Process

The
Payments segment revenues are generated from fees
paid by merchants for payment processing
services 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 financial
crisis, eBays available line of credit was reduced
(Page 269, Para5)

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

Outbound
Logistics

PayPal is available to any online or offline individual
or business with an e-mail
address and allows members to securely send and
receive payments online securely without
sharing 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)

eBay Inc.-2009 [MR111037]

86

Marketing
& Sales
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
(Page 266, Para9)

For the quarter ending July 30, 2009, eBays
Payments division reported $669.3 million in
revenue, an increase of 11 percent year over year. The
growth was driven by continued
momentum 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 for
2008. Higher fees earned on international
transactions have provided eBay with higher
revenues
and gross margins in comparison to revenues from
domestic transactions (Page 266, Para9)

Service

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

Retailers that offer the Bill Me Later service
include: 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)

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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
Strengths List:
NO Case 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

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
35
eBay Inc.-2009 [MR111037]

88

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)

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

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 22, Para2)

20
11. 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)

21

Strengths Resulted from Marketing Strategy Function

12.
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)

33
13. 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
23
eBay Inc.-2009 [MR111037]

89

Services, and Loyalty Programs.(Page 266, Para1)

14. 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. (Page 263 Para1)

22
15. Loyalty Programs that provide cash back buyer rewards coupons were
selectively distributed to recognize large buyers to sustain customer

24
16. The key to success is eBays user support, such as announcements,
bulletin boards, customer support, personal pages, and more (Page 265,
Para5)

10
17. The Marketplaces platform is the core online commerce platform
eBay.com. (Page 265, Para6)

34
18. EBay provides the virtual marketplace auction where the market
determines the price of items sold (Page 264, Para3)

7
19. 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 minimum price for opening bids that stay
open for a period of time. Alternatively, the fixed-price format allows
sellers to name a sale price upon listing instead of waiting for the
auction period to expire.(Page 265,Para 6)

41
20. Shopping.com is available in the United States, the United Kingdom,
France, Germany, and Australia.(Page 266, Para6)

31
21. This program marked a shift for San Jose, California-based eBay,
since most of the vehicles sold on eBay Motorsa site that sells
various types of vehicles and auto parts had historically been used.
(Pg.263,para1)
32
22. 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)

42
23. 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)

27

Strengths Resulted from Financial Analysis
eBay Inc.-2009 [MR111037]

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24. Increased in ROA is considered a strength for eBay 25
25. Increased in ROE is considered as a strength for eBay 26
26. eBay compared to Amazon achieved High gross profit margins.
High in gross profit margin can be considered as a strength for
eBay.
8
Strengths Resulted from Production / Process Functions

27. 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 264,Para2)

2
28. EBays marketplace, or marketspace, is an online virtual trading
platform for the sale of goods and services by a community of users
that comprises individual buyers and sellers, as well as small business
owners (Page 264,Para3)

36
29. Feedback Forum provides feedback, comments, and ratings on other
users that can be viewed by potential users when considering a
purchase.(Page 266, Para2)

18
30. Revenue is earned from advertisers and retailers who pay a fee for
directing shoppers to their own sites (Page 266, Para6)

28
31. The Marketplaces segment generates revenues from listings and fees
paid by sellers (Page 264,Para1)
29
32. Rent.com lists apartment availability, rental costs, virtual tours,
roommate searches, and more. Revenue is earned from landlords
who pay a fee for renters who find apartments through Rent.com.(Page
266, Para7)

17
33. StubHub is a leading U.S. ticket marketplace that allows users to buy
and sell tickets to sporting, events, theater, and other entertainment
events (Page 266,Page3)

30
34. EBays Marketplaces platform brings buyers and sellers together
through fully automated online Web sites 24/7 (Page 265, Para5)

1
35. EBay offers millions of items for trade through auction-style and fixed-
price trading in 39 markets and boasts 86.3 million active global

12
36. In 2007, eBay sold nearly $60 billion goods, which equates to
worldwide eBay users trading more than $1,900 worth in goods
4
eBay Inc.-2009 [MR111037]

91

every second.(Page 264, Para3)

37. Listings of items for sale have exceeded 140.0 million per day.
(Page 265, Para5)

13
38. Rent.com, acquired by eBay in 2005, is the most visited online
apartment listing service with over 20,000 listings in the United States
(Page 266, Para7)

14
39. As of December 2008, approximately 516,000 online storefronts
were listed in locations across the globe (Page 265, Para5)

9
40. 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)

3
41. 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)

15

Strengths Resulted from Management Information System (MIS) Functions

42. Information is recorded up to 12 months and provides color-coded star
ratings(Page 266, Para2)

16

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Weaknesses List:
NO Case Facts

Prioritize

Weaknesses Resulted from Management Functions

1. EBay recently adopted a policy that no longer permits sellers to leave
negative feedback (Page 266, Para2)

11
2. Web Site Stability. Increased volume and greater complexity requires
additional expensive investments in hardware, software, and
personnel(Page 270, Para4)

8
3. For that quarter, eBay reported offset decline in their Marketplaces
business segment (Page 263, Para2)

13
4. 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)

3
5. 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)

12
Weaknesses Resulted from Marketing Strategy Functions

6. 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)

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

1
8. Customer Support. Customer support is challenged from greater trade
activity and an increased number of users.(Page 270, Para4)

5
9. 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 existing users.(Page 269, Para7)

6
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93

Weaknesses Resulted from Financial Analysis

10. 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
7
11. Declining in stock price started from 2005 to 2008 can be considered as the
weakness for eBay
15
12.
Decreased in Current Ratio is the weakness for eBay 16
13. eBay Debt Ratio is increased and it is considered as the weakness for eBay 17
14. Increased in Debt to equity Ratio is the weakness for eBay 18
15. eBay Debt Ratio is increased and it is considered as the weakness for eBay 19
16. Decrease in Growth rate is considered as weakness for eBay 20
17. Decreased to almost double for working capital is considered as weakness
for eBay
4
Weaknesses Resulted from Production / Process Functions

18. 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 (Page 269, Para4)

9
19. In June 2008, eBay Inc. was found liable for damages in the amount of
(Page 269, Para8)

10
20. The German Federal Supreme Court has also ruled that eBay may owe
penalties from illegal listings of counterfeit and stolen goods. These
events may also negatively affect eBays reputation. (Page 270, Para1)

2
Weaknesses Resulted from Research & Development Functions

N/A

Weaknesses Resulted from Management Information System (MIS) Functions

N/A

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b) Strengths and Weaknesses for Communications segments
Strengths List:
NO Case Facts

Prioritize

1. EBay, the first virtual online business community, empowers
entrepreneurial individuals to become e-commerce business
owners.(Page 2
63, Para4)


2. EBay also that quarter
announced they would spin off and make an initial public
offering of their Skype business
segment in the beginning of year 2010. (Pg.263,para2)

3. Registered subscribers
are expected to reach 500 million by 2012 and revenues are
anticipated to double
by 2011.(Page 267, Para4)

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

5. Future plans include expanding Skypes desktop product to
mobile user devices and other Web-based devices. Plans include
also offering solutions to a more diverse business user and
enhancing
the Skypes current platform for greater revenues because the
worldwide communications market is expected to grow by 5.5
percent annually with U.S. Web conferencing expected to grow
14.1 percent from 2008 through 2011 (eBay.com 2009).(Page
267, Para5

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

7. The Communications segment is composed of Skype, which was
founded in 2003 and
acquired by eBay in 2005.

8. As of December 2008, Skype had acquired
eBay Inc.-2009 [MR111037]

95

370 million users, a 51 percent growth over the same time a
year ago.
9. For the second quarter of 2009, eBay reported nice growth in
Skype business segments (Page 263, Para2)


10.
EBay, the first virtual online business community, empowers
entrepreneurial individuals to become e-commerce business
owners(Pg.263,para4)

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

12. Skype allows buyer/seller communications 24/7 in a
secure and trusted community that is supported by free unlimited
Internet voice and video communication (Page 267, Para3)

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

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

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

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

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

20. 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

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96

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 is
sustained through Communications and trust (eBay 2006).(Page
263,para4)

21. -The Communications segment generates
usage revenues from Skype VoIP for connection to traditional
fixed and mobile telephones
under eBays subsidiary Skype Technologies S.A (Page
264,Para1)

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

23. As of 2008, eBay has a 14 percent share of global e-commerce
with 86.3 million active users.(Page 263, para 3)

24. EBays proprietary Skype technology has been downloaded
more than a billion times.(Page 267, Para3)

25. Skype had approximately 405.3 million registered users
worldwide. (Page 267, para3)

26. Interestingly, nearly 11 million
Skype downloads are to mobile devices.(Page 267, Para3)

27. 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 by Skype
software.(Page 267, Para4)

28. 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 of international
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)

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

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97

Strengths Resulted from Research & Development Functions

N/A


N/A

Weaknesses List:
NO Case Fact

Prioritize

N/A

N/A


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

weakness for eBay

3.
Decreased in Current Ratio is the weakness for eBay
8. Decreased to almost double for working capital is considered as weakness
for eBay


9. The potential also exists for Skype technology to become obsolete. (Page
268, Para2)

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98


N/A


N/A

c) Strengths and Weaknesses for Payments segment
Strengths List:
NO Case Facts

Prioritize

N/A


1.
EBays management seeks to become the number-one online
plans to focus on improving the customer experience, enhancing
security, expanding product
offerings, enhancing buyer and seller protection programs,
adding innovative features, and
expanding its sales channels (Page 267,Para2)

2. Expansion into international markets and more currencies is
expected to improve the ease and efficiency
of cross-border transactions (Page 267, Para2)

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

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

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


eBay Inc.-2009 [MR111037]

99

6. 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)

7. PayPal is a recognized global leader in online payment solutions
(Page 266, Para9)

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

9. PayPal is available to any online or offline individual or business
with an e-mail address and allows members to securely send and
receive payments online securely without sharing sensitive
financial information.(Page 266, Para10)

10. International business processing accounted for 45 percent of
PayPals total revenues for 2008. Higher fees earned on
international transactions have provided eBay with higher
revenues
and gross margins in comparison to revenues from domestic
transactions (Page 266, Para9)

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

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

15. The Payments segment revenues are generated from fees paid
by merchants for payment processing services through PayPal
and Bill Me Later (Page 264,Para1)

16.
PayPal is accepted both online and offline in 190 markets worldwide
and processes payments in 19 currencies (Page 266, Para10)

17. When a consumer makes a purchase on credit, CIT Bank
initiates a consumer loan at the point of sale. Bill Me Later then

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100

purchases the consumers loan from CIT Bank. Bill Me Later
earns revenues from interest on the outstanding balances, late
fees, and transaction fees.(Page 267, Para1)

18. PayPal is a recognized global leader in online payment solutions
with 70 million active accounts (Page 266, Para9)

19. PayPal earned approximately $30.4 billion of net total payment
revenues directly from eBay.com transactions, which
represented approximately 51 percent of PayPals net Total
Payment Volume during 2008 (Page 264, para2)

20. PayPal also reports a very low percentage of 0.33 percent loss
from fraud.(Page 266, Para10)

Strengths Resulted from Research & Development Functions

N/A

N/A

Weaknesses List:
NO Case Facts


1. Although Bill Me Later accounts are funded by CIT Bank, Bill Me Later is
responsible for all functions related to the account.

2. 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
the goods. This may result in greater losses and write-offs incurred by eBay
Inc.(Page 270, Para2)

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

4. For the quarter ending July 30, 2009, eBays Payments division reported $669.3
million in revenue, an increase of 11 percent year over year. The growth was
eBay Inc.-2009 [MR111037]

101

driven by continued momentum in PayPal Merchant Services and the contribution
made by Bill Me Later (Page 274,Para1)

5.
Any reduction in trading spill over to a reduction in PayPal revenues (Page 269, Para7)


6. 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
weakness for eBay
8.
13. Decreased to almost double for working capital is considered as weakness for
eBay

14.
Bill Me Later initially funds consumers loans using cash from business activities
and a line of credit. As a result of the global financial
crisis, eBays available line of credit was reduced (Page 269, Para5)

15. Customer Account Billing. Transaction-processing and revenue collection
becomes more difficult as the number of transactions increase and consumers
default on loans.(Page 270, Para4)

N/A


N/A

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4.9.1 Internal Factor Evaluation (IFE) Matrix

a) For Marketplaces segment

Item

Key external factor

Weight

Rating

Weighted
score
Strengths
1 EBays Marketplaces
platform brings buyers and
sellers together through fully
automated online Web sites
24/7 (Page 265, Para5)
0.10 4 0.40
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
264,Para2)
0.09 4 0.40
3 EBay.com offers a sense of
community to buyers and
sellers that is sustained by
transaction rates on a wide\
(eBay.com, 2006). (Page
263, para4)
0.09 4 0.36
4 In 2007, eBay sold nearly
$60 billion goods, which
equates to worldwide eBay
users trading more than
$1,900 worth in goods
every second.(Page 264,
0.07 4 0.24
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103

Para3)
5 In August 2009, eBay Inc.
formed a partnership with
hundreds of GM dealers in
California to help consumers
negotiate purchase of new
GM cars and trucks through
the eBay online
0.06 3 0.21
6 The success of eBay is built
0.07 3 0.21
7 EBay provides the virtual
marketplace auction where
the market determines the
price of items sold (Page 264,
Para3)
0.06 3 0.18
8 eBay compared to Amazon
achieved High gross profit
margins. High in gross profit
margin can be considered as
a strength for eBay.
0.06 3 0.18
9 As of December 2008,
approximately 516,000
online storefronts were
listed in locations across the
globe (Page 265, Para5)
0.05 3 0.18
Weaknesses
1 EBays Marketplaces
billion in revenue, a 14
0.05 2 0.10
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104

2 The German Federal
Supreme Court has also
ruled that eBay may owe
penalties from illegal
listings of counterfeit and
stolen goods. These events
may also negatively affect
eBays reputation. (Page
270, Para1)
0.05 2 0.10
3 EBay has recently been
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)
0.05 2 0.10
4 Decreased to almost double
for working capital is
considered as weakness for
eBay
0.04 2 0.08

5 Customer Support.
Customer support is
challenged from greater
trade activity and an
increased number of

0.04 2
0.08

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105

6 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 existing
0.04 2 0.08
7 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
0.05 2 0.10
8 Web Site Stability. Increased
volume and greater
complexity requires
additional expensive
investments in hardware,
software, and

0.03 2 0.06
Total 1 3.10

Conclusion
IFE matrix shows the information related to strategy formulation EBay. EBay achieved an
overall of 3.10 total weighted score. 3.10 indicates that the business of eBay on this
marketplaces segment is strong because of eBay has an ability to respond to internal factors
of the organisation.

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5.0 Existing Objectives and Strategies

*Because of lack of data, I found out that the information for strategic objectives and
financial objectives for Marketplaces segment and Payments segment are too general
without any specific target or objectives. I provided the strategic objectives and financial
objective for communication segment base on the case study given.

a) Strategic Objective:
No.

Segment

Goals Objectives Case Facts Remarks

1.

Market
places

1) To expand
the
Marketpla
ces
segment
by
focusing
on
customer

N/A
1) EBay plans to expand
the Marketplaces
segment by focusing on
customers by
enhancing products
and services, (Page266,
Para8)

Product
Development

Unsuccess
ful

2) To
enhance
online
trust and
safety and
develop
new
products
2) Improving online trust
customer support,
extending product
and developing
retention
strategies.(Page266,
Para8)

Product
Development

Unsuccess
ful

2.

Commu
nication
s
1) Increase
Registere
d
subscribe
rs.

1)Increase
Registered
subscribers to
500 million by
2012.

1)Registered subscribers
are expected to reach 500
million by 2012 (Page267,
Para4)

(Market
Penetration)
Successful

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107

2) Increase
the grow of
worldwide
communicati
ons market.

2) Increase the
grow of
worldwide
communications
market to 5.5
percent
annually.

2) The worldwide
communications
market is expected to grow
by 5.5 percent annually
(Page 267, Para5)

Market
Penetration
Un-
successful

3)Increase
the grow of
U.S Web
Conferencing
.

3) Increase the
grow of U.S
Web
conferencing to
14.1 percent
from 2008
through 2011.

3)U.S. Web conferencing
expected to grow 14.1
percent from 2008 through
2011 (Page 267, Para5)

Product
development

Unsuccess
ful

3

Paymen
ts

1) To be
integrate
PayPal
with
eBay.com
listings
and other
Marketpl
aces
businesse
s

N/A

1) Global expansion is to
be gained by
integrating PayPal
with eBay.com listings
and other Marketplaces
businesses. (Page 267,
Para2)

Forward
Integration

Unsuccess
ful

2) To
expand
into
internatio
nal
market

N/A

2) Expansion into
international markets
and more currencies is
expected to improve the
ease and efficiency of
cross-border
transactions (Page 267,
Para2)

Market
Development

Successful

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b) Financial Objective:
No.

Segment

Goals Objectives Case Facts Remarks

1.

Marketplaces

1) To reduce
seller
cost.

N/A

1) To improve
the buyers
experience and
reduce seller
costs(Page266,
Para8)

By enhancing
Product and
services
(Product
Development)
Unsuccessful

2.

Communications
Increase
Revenue
- Increase
revenue to
double by 2011
1) Revenues
are anticipated
to double
by 2011 (Page
267, Para4)

By raising the
total registers
subscribers to
500 million by
2012
(Market
Penetration)

Unsuccessful

3

Payments

Increase
Revenue

N/A

3) Increased
revenues
are to be
gained by
integrating
PayPal
with
eBay.com
listings
and other
Marketplac
es
businesses.
(Page 267,
Para2)

By integrating
PayPal with
eBay.com
listings and
other
Marketplaces
segment
(Forward
Integration)

Unsuccessful

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5.3 Strategies
5.3.1 Strategies in Action
The Type of
Strategies
The Title of
Strategies
Segment Case Facts

Integration

Forward
Integration

Marketplaces

- 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
marketplace. (Page 263,para1)

Communications

N/A

Payments

N/A

Back ward
Integration

Marketplaces

N/A

Communications

N/A

Payments

Because Bill Me Later is not a
chartered financial institution, an
arrangement with CIT Bank allows
Bill Me Later to extend credit to
customers
(Page 267, Para1)

Horizontal
Integration

Marketplaces

-Acquired by eBay Inc. in 2005,
Shopping.com is an online
comparison shopping site that offers
comparisons on millions of products
and product reviews. Shopping.com
is available in the United States, the
United Kingdom, France, Germany,
and Australia (Page 266, Para6)

- Rent.com, acquired by eBay in
2005, Rent.com lists apartment
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availability,
rental costs, virtual tours, roommate
searches, and more. (Page 266,
Para7

Communications

-The Communications segment is
composed of Skype, which was
founded in 2003 and
acquired by eBay in 2005. Skype is
the worlds fastest-growing Internet
communication
software platform. As of 2008,
Skype had approximately 405.3
million registered users
worldwide. (Page 267,Para3)

Payments

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

- PayPal was founded in December
1998 and acquired by eBay Inc. in
2002. PayPal is a recognized
global leader in online payment
solutions with 70 million active
accounts (Page 266, Para9)

Intensive

Product
Development

Marketplaces

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

- In, 2008, eBay launched an
advertising service that enables third
parties to advertise their eBay

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

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

Communications

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

Payments

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

Market
Development

Marketplaces

major areas of the
world in the following regional
markets; Asia Pacific, Europe, North
America and Latin America (Page
265,Para1)

- Global expansion and increased
revenues are to be gained by
integrating PayPal with eBay.com
listings and other Marketplaces
businesses. Expansion
into international markets and
more currencies is expected to
improve the ease and efficiency
of cross-border transactions and
grow both the Marketplaces and
Payments segments.(Page 267,
Para2)

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Communications

-offering solutions to a more diverse
business user and enhancing
the Skypes current platform for
greater revenues because the
worldwide communications
market is expected to grow by 5.5
percent annually with U.S. Web
conferencing
expected to grow 14.1 percent from
2008 through 2011 (eBay.com
2009).(Page 267, Para5)

Payments

Global expansion and increased
revenues are to be gained by
integrating PayPal with eBay.com
listings and other Marketplaces
businesses. (Page 267, Para2).

Expansion
into international markets and more
currencies is expected to improve
the ease and efficiency
of cross-border transactions (Page
267, Para2)

Marketing
Penetration

Marketplaces

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.(Page264, Para3)

- EBay has also expanded specific
to increase efficiency of trades(Page
266, Para2)

-As of December 2008,
approximately 516,000 online
storefronts were listed in locations
across the globe (Page 265, Para5)

- 57 percent of Marketplaces
revenue,
however, came from markets outside
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of the United States(Page 274,
Para1)

members in hundreds of cities and
regions of the world, such as the
Netherlands, Germany, and so on.
(Page 266, Para4)

- In, 2008, eBay launched an
advertising service that enables third
parties to advertise their eBay

major areas of the world in the
following regional markets; Asia
Pacific, Europe, North America and
Latin America (Page 265,Para1)

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

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

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

Communications

announced they would spin off and
make an initial public offering of
segment in the beginning of year
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2010. (Pg.263,para2)

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

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

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

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

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

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

Payments

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

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Diversification

Related
Diversification

Marketplaces

-EBay Inc.s Marketplaces platforms
and services segment includes
eBay.com, StubHub,
Online Classifieds, Online
Advertising, Shopping.com, and
Rent.com.(Page 265, Para4)

EBay Inc. also offers online
and regions of the world, such as the
Netherlands, Germany, and so on
(Page 266, Para4)

EBay has also expanded specific
to increase efficiency of trades(Page
266, Para2)

- 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

Communications

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(Page
263,para4)
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Payments

N/A

Not Related
Diversification

Marketplaces

N/A

Communications

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

Payments

N/A

Defensive

Retrenchment

Marketplaces

- eBay undertook a 10 percent
restructuring
costs and announced an anticipated
second acquisition of a vehicle
classified ad site, eBay Motors.
(Page 269, Para4)

Communications

N/A

Payments

eBay undertook a 10 percent
restructuring
costs. In the same year, eBay
acquired Bill Me Later (Page 269,
Para4)

Divestiture

Marketplaces

N/A

Communications
N/A

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Payments

N/A

Liquidation

Marketplaces

N/A

Communications

N/A

Payments

N/A

5.3.1 Generic Strategies (Business Level Strategies )
No.

Segment
Case Facts BLS

1.

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
customer support,
extending product
and developing retention
strategies. (Page 226,
Para8)

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 minimum
price for opening bids
that stay open for a

Cost Leadership
Strategies
eBay Inc.-2009 [MR111037]

118

period of time.
Alternatively, the fixed-
price format
allows sellers to name a
sale price upon listing
instead of waiting for
the auction period to
expire.(Page 265,Para 6)

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

2.

Communications
announced they would
spin off and make an
initial public offering of
segment in the
beginning of year 2010.
(Pg.263,para2)

Focus strategies

3

Payments

EBays management
seeks to become the
number-one online
plans to focus on
improving the customer
experience, enhancing
security, expanding
product
offerings, enhancing
buyer and seller
protection programs,
adding innovative
features, and
expanding its sales
channels (Page
267,Para2)

Focus Strategies

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6.0 Strategy Formulation Tools
6.1 SWOT Analysis

*Based on the case study given, in order to make analysis using
SWOT, I need information from EFE matrix and I FE matrix.
Because of lack of data from EFE matrix for communications
segment and payments segment, I only provided SWOT analysis for
marketplaces segment.

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120

SWOT
MATRIX

Strength

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

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
264,Para2)

3) 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)

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

5) In August 2009, eBay
Inc. formed a
partnership with
General Motors
1) EBays Marketplaces division reported
$1.26 billion in revenue, a 14 percent
year-over-year decline(Page 274,
Para1)

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

3) 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)

4) Decreased to almost double for
weakness for eBay

5) Customer Support. Customer support
is challenged from greater trade
activity and an increased number of

6) 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 existing users.(Page 269,
Para7)

7) 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

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121

GM dealers in
California to help
consumers negotiate
purchase of new GM
cars and trucks through
the eBay online
marketplace.
(Pg.263,para1)

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

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

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

9) As of December 2008,
approximately
516,000 online
storefronts were listed
in locations across the

8) Web Site Stability. Increased volume
and greater complexity requires
additional expensive investments in
hardware, software, and

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122

Opportunity

SO

WO

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

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

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

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

5. 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)

1. With the High in gross
profit margin of eBay,
this company should
expand their market
into global, new and
emerging market
especially new market
in China and India
which they are
considered as the most
populated area and it is
a huge opportunity for
eBay. (global
expansion)
(S2,S4,S8,S9,O1,O5)

2. With focus on
creation, eBay should
continuously maintain
simplicity of interaction
with the online
communitys capability
and meet the demand in
the industry in order to
be competitive.
(S3,S4,S6,O1,O2,04)

1. Improve market services in current
markets can make large number of
potential customers to subscribe.(W
2,W3,W6,O1,O2)

2. Strategic Alliance with courier
companies and by providing online
banking system can help eBay to
improve the efficiency of the operation
system and could help to give the best
service for customers satisfaction.
(W5,W6, W8,02,04)

3. Inability of eBay to measure illegal
activity on site and lacking of policing
trade eBay should be able to provide
system for online verification of
products.(W2,W3,O1,O2)

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123

Threat ST WT
1. In addition, tax
compliance will
increase costs.
(Page 269, Para 6)

2. 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)

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

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

5. However,
Amazons strong

1. Through acquisition
strategy, eBay should
be able to expand in
global (global
expansion).
(S4,S5,S9,T9)

2. eBay should reinforce
marketing and
management system.
(S1,S2,S6,S8,S9,T2,T3
,T4,T5,T9)

1. eBay should alliance with postal
services (W5,W8,T2,T3,T4,T5)

2. With the issue of stolen goods and
lacking in policy, eBay should
invest in customer service web
security. In addition, eBay also
should provide an authentication
consumers identity in order to
provide a secure environment
online system.
(W2,W3, W5,T2,T5)

3. EBay should recover the financial
crisis of the organizations by
rearrange the website policies and
features to make it user friendly
including wide range of offering.
(W1,W3,W4,W6,W7,W8,T1,T2,T
4,T6,T7,T8,T10)

4. eBay should be able to develop its
product as well as its market (new
and emerging market) especially in
the high populated area like China
and India.(W7,T2,T3T5)
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124

customer base pose
the greatest threat to
eBay (Page 267,
Para6)

6. 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)

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

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

9. Marketplaces:
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)

10. Declining economic
environment (Page
268, Para4)

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125

Strategies driven from SWOT analysis:
The chosen quadrant : SO

Result

Strategy
1. With the High in gross profit margin of
eBay, this company should expand their
market into global as well as focus for
new product offering , into new
emerging market especially in new
market of China and India which they
are considered as the most populated
area and it is a huge opportunity for
eBay. (global expansion)
(S2,S4,S8,S9,O1,O5)

Market Development
Market Penetration
Product Development

2. With focus on customer-driven value
creation, eBay should continuously
maintain simplicity of interaction with
the online communitys capability and
meet the demand in the industry in order
to be competitive. (S3,S4,S6,O1,O2,04)

Product Development

Conclusion of SWOT analyis:
Selected Corporate level strategies:
1. Product Development
2. Market Penetration
3. Market development

Selected Business Level strategies:
With maintain simplicity of interaction with the online communitys capability and meet the
demand in the industry in order to be competitive. (S3,S4,S6,O1,O2,04) : Differentiation
Strategies

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126

6.2 SPACE Analysis

*Due to the lack of information SPACE analysis showed below is the SPACE analysis for eBay
marketplaces segment.
For Marketplaces segment
Financial Position (FP)

EBays
Marketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year

3
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

2
Increased in ROA is considered a strength for eBay

5
Decreased to almost double for working capital is considered as weakness for eBay

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 264,Para2)

6
FP Average

3.33
Industry Position (IP)

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

3
Competition is expected to increase in the future because barriers to entry in this
segment are low (Page 268, Para2)
4

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

5
eBay Inc.-2009 [MR111037]

127

success is possible
IP Average

4
Stability Position (SP)

In addition, tax compliance will increase costs. (Page 269, Para 6) -5
The company continued its turnaround strategy in a harsh climate for consumer
spending (Page 263, Para2)
-4
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)
-6
-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)

-3
The need for substantial resource investments in
technology and marketing in order to remain competitive (Page 268, Para1)

-3
SP Average

-4.2
Competitive Position (CP)

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)

-2
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)

-1
The success of eBay is built on similar customer-centric entrepreneurial business
models that focus on customer-driven value creation (Page 268, Para1)
-2
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 Web
sites. (Page 269, Para8)

-5
Loyalty Programs that provide cash back buyer rewards coupons were selectively
distributed to recognize large buyers to sustain customer loyalty.(Page 266, Para2)

-2
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
-5
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128


CP Average

-2.0
Conclusion

X= IP + CP = (4) + (-2.0) = 2.0
Y = FP + SP = (3.33) + (-4.2) = -0.9
Coordinate : (x, y)= (2, -0.9)
FP

CP IP

SP

COMPETITIVE PROFILE:
1. Product Development
2. Market Development
3. Market Penetration
Conclusion:
This quadrant, shows that eBay with major competitive advantages in a high growth
industry. Therefore, the chosen strategies are related to the focus on eBay growth
potential in highly competitive industry position. eBay then should pursue strategy of:
Product Development, Market Development as well as Market Penetration.

eBay Inc.-2009 [MR111037]

129

6.3 BCG Analysis
*As a matter of fact, in order for implementing BCG analysis, the information related to
competitors is needed. But, due to the lack of information the BCG analysis cannot be
proceeded.

6.4 IE Analysis

*As a matter of fact, eBay consisted of three segments. But due to the lack of information,
I only can focused on the position of eBay based on Marketplaces segments.

THE IFE TOTAL WEIGTHED SCORES

4.0 3.0 2.0

3.0

2.0

1.0
THE EFE TOTAL
WEI GTHED SCORES
EFE : 3.27 FALLS I NTO CELL I I : Grow & Build
I FE: 3.10 Therefore intensive Market Penetration, Market
Development and Product Development can be most
appropriate for this division.

I II III
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130

6.5 Grand Strategy Matrix

*Due to the fact that this matrix needs the resulted from CPM analysis, I only analysed
Grand Strategy Matrix for Marketplaces segment. Grand Strategy Matrix for
Communications segment and Payment segment cannot be done in this analysis.

Net Revenue by Segments
2006 2007 2008
Marketplaces $4,334,290

24% $5,363,891

4% $5,586,751

Payments $1,440,530

34% $1,926,616

25% $2,403,669

Communications $194,921

96% $381,822

44% $550,841

Total Net
Revenues
$5,969,741

29% $7,672,329

11% $8,541,261

I n this situation, I only consider the latest growth rate of revenue in 2007 to 2008 for eBay.
As a matter of fact, because of lack of information related to the industry growth rate for each
segment, eBays growth rate will be used for this analysis. From table above, we can see that
the growth rate of revenue for eBay annually higher than 5 percent. So, therefore the growth
rate for eBay, as a whole, is in the Rapid growth. But, the growth rate of eBay in
Marketplaces segment is 4%. This situation can be considered as slow growth rate. As
mentioned before, CPM analysis will be used in this analysis. Due to the lack of information,
only CPM for marketplaces segment is provided in this analysis where the value is (CPM:
eBay = 2.9, Amazon = 2.9)

eBay Inc.-2009 [MR111037]

131

RAPI D MARKET GROWTH

Pos

SLOW MARKET GROWTH
MARKETPLACES
SEGMENT

eBay for Marketplaces segment falls to Quadrant IV. Based on the growth revenue rate for
Marketplaces segment, it has been proved that the percentage is 4percent which is less that
5percent. Therefore the growth rate for marketplaces segment is the slow growth rate. In
addition, based on the CPM analysis, It has been proved eBay possess a strong competitive
position in the industry especially from Amazon. Therefore, eBay falls to fourth quadrant
which means that strong competitive position with a slow growth industry. Thus the
strategies that suit for eBay are :
1)Related Diversification
2) Unrelated Diversification
3) Joint Ventures

QUADRANT II QUADRANT I

QUADRANT III QUADRANT IV

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6.6 Wrap Up Process

Methods Product
Development
(PD)
Market
Development
(MD)
Market
Penetration
(MP)
Related
Diversification
Unrelated
Diversification
Swot
Matrix
- -
SPACE
Matrix
- -
BCG
Matrix
N/A N/A N/A N/A N/A
IE Matrix
Grand
Strategy
- - -
Total 3 3 3 1 1

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6.7 The Qualitative Strategic Planning Matrix (QSPM)
* Because of lack of information from the EFE of communications segment and
payments segment, the qualitative strategic planning matrix here is only for Marketplaces
segment.
Strategic Alternatives
Product
Development

Market
Penetration
Key Factors Weight AS TAS AS TAS
Opportunities
The need for substantial
resource investments in
technology and marketing in
order to remain
competitive (Page 268,
Para1)

0.15 4 0.6 3 0.45
Buyers and sellers enjoy
trading among a wide
selection of goods and
services in a secure, trusted,
and efficient commerce
environment.(Page 265,
Para5).

0.10 4 0.40 3 0.30
Profitability is also affected
by currency exchange rates
(page 269, Para3)
0.09 1 0.09 3 0.27
Online classifieds help
people meet, share ideas, and
offer goods/services at a local
city or regional level(Page
266, Para4)

0.08 3 0.24 1 0.08
If the U.S. dollar weakens
against foreign currencies,
transactions conducted in
foreign currency
denominations will increase
0.07 1 0.07 3 0.21
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134

and inflate revenues,
operating expenses, and net

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

0.12 1 0.12 2 0.24
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)

0.10 3 0.30 4 0.40
Competition is intense in
communications services and
subject to rapid technological
0.12 3 0.36 2 0.24
However, Amazons strong
customer base pose the
greatest threat to eBay (Page
267, Para6)

0.10 3 0.36 2 0.20
Marketplaces: 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)

0.07 2 0.14 3 0.21
1.00
Strengths
EBays Marketplaces
platform brings buyers and
sellers together through fully
automated online Web sites
24/7 (Page 265, Para5)
0.15 2 0.30 3 0.45
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135

As of December 2008,
approximately 516,000
online storefronts were
listed in locations across the
0.12 2 0.24 3 0.36
EBay.com offers a sense of
community to buyers and
sellers that is sustained by
transaction rates on a wide\
(eBay.com, 2006). (Page
263, para4)
0.12 3 0.36 1 0.12
In 2007, eBay sold nearly
$60 billion goods, which
equates to worldwide eBay
users trading more than
$1,900 worth in goods every
second.(Page 264, Para3)
0.09 2 0.18 3 0.27
The success of eBay is built
0.09 3 0.27 1 0.09

Weaknesses
EBays Marketplaces
billion in revenue, a 14
0.10 1 0.10 2 0.20
The German Federal
Supreme Court has also ruled
that eBay may owe penalties
from illegal listings of
counterfeit and stolen goods.
These events may also
negatively affect eBays
reputation. (Page 270, Para1)
0.10 3 0.40 1 0.10
EBay has recently been
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)
0.09 2 0.27 1 0.09
eBay Inc.-2009 [MR111037]

136

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
0.08 1 0.08 3 0.24
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
0.06 2 0.12 3 0.18
Total 4.9 4.68

Based on the QSPM analysis:
QSPM Outcome:
1. Product Development :4.9
2.Market Penetration : 4.68
Corporate Level Strategies
PD :
-With focus on customer-driven value creation, eBay should continuously maintain
simplicity of interaction with the online communitys capability and meet the demand in the
industry in order to be competitive. (S3,S4,S6,O1,O2,04)
-With the High in gross profit margin of eBay, this company should expand their market
into global as well as focus for new product offering , into new emerging market
especially in new market of China and India which they are considered as the most populated
area and it is a huge opportunity for eBay. (global expansion) (S2,S4,S8,S9,O1,O5)
Business Level Strategies: Differentiation Strategies
-With maintain simplicity of interaction with the online communitys capability and meet the
demand in the industry in order to be competitive. (S3,S4,S6,O1,O2,04) : Differentiation
Strategies

eBay Inc.-2009 [MR111037]

137

7.0 The New Strategies
*This new strategies is focused on Marketplaces segment. Because of lack of
information from communications segment and Payments segment of eBay, the analysis
for this new strategies cannot be completed. As a matter of fact, each analysis for each
segment or division cannot be combined into one analysis. This matter is impossible to
be done because each division represent different product category as well as different
strategies. Therefore, in this situation, due to the lack of information I provided only the
new strategies for eBay in marketplaces segment.

No.

Segment

Goals (New)
Objectives
(New)
Remarks

1.

Market
places

Maintaining global
growth initiative as a
strategy to motivate
consumers through
acquisitions, new market
and new products in order
to adopt into different
culture demand.
Develop new
market with new
product in China
and India (the
highest
population) in
order to adopt
into different
culture demand.

Product
Development&
Market
Development

No f r audul ent activities
may happened through
authentication and
verifications.
I nt r oduce
zero fraud by
introducing web
security system
for fraudulent
activities that
may happened
through
authentication
and verifications.

Product
Development
Going to make eBay as
generic brand for consumers
Enforce the
marketing
department to
improve
advertising by
global branding.

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138

No.

Segment

Goals Objectives

1.

Marketplaces

.Increase revenue and
long term profit by
satisfying the needs of
the customers.

Increase working
capital to $
5,000,000.00 by 2012

Increase revenue in
marketplace segment by
30% annually

Achieved the working
capital to $ 5,000,000.00
by 2012

New Policy for New strategies:
The manager should monitor the eBay progression of growth every week.
Technical Department should make a corrective action immediately, and improve
after sale services.
10 days training provided for current staff, 15 days for new staff per year. Training
can help the organization to increase efficiency as well as increase the level of
motivation of the employees.
Special rewards is provided for the staff who achieved high performance in work and
complete attendance monthly.

Marketing Department

Company Objective: Ensure the effectiveness of virtual marketing through online
advertising as well as other media.

Supporting Policies:
1. Management is concerned with all those activities which are essential to determine and
satisfy the needs of customers so as to achieve the objectives of business

eBay Inc.-2009 [MR111037]

139

2. The marketing manager must scientifically study the demands of customers before
offering them any goods or services. Selling the goods or services is not that important,
as the satisfaction of the customers needs.
3. The Marketing manager must attract more and more customers to buy the firms products
and services.
4. The marketing department provides quality products to customers at reasonable prices
and thus creates its impact on the customers.

Reorganise:
Roles of Key Players for eBay organisation.
Project Manager
The Project Manager has the ability to provide resources as needed for the project and has
final say on determining the membership of the Project Team. The project manager also
should be able to organise efficiently partnership as well as the acquisition process.

Project Administrator
The Project Administrator is the leader in the effort to define, understand and measure the
process. He/she serves on the Project Team and is available to dedicate 20-30% of his or her
time to the reorganising effort.

Project Team
The Project Team is composed of managers and employees from each of the potentially
affected functional/divisional areas.
The roles of the Project Team in simplifying the processes include:
Participate in the creation of the "As-Is" Process Model.
Highlight major problems and issues, and recommend areas where improvements and
"Quick Wins" can be made.
Assist in addressing the immediate workload distribution problems.
Participate in the recommendations on how work should be completed.

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140

7.1 Value Chain
For Marketplaces segment
Inbound Logistics and The process (Production) remains the same in this case.

Variables
Case Facts

eBay
Inbound
Logistics

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

Process

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

EBays Marketplaces platform
brings 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 can
be 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 landlords
who pay a fee for renters who find apartments through Rent.com.(Page
266, Para7)
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141

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

Generic brand for consumers

Marketing &
Sales
Increase revenue and long term profit by satisfying the needs of the
customers.

Increase working capital to $ 5,000,000.00 by 2012

Develop new market with new product in China and India (the highest
population) in order to adopt into different culture demand.

Enforce the marketing department to improve advertising by global
branding.

Maintaining global growth initiative as a strategy to motivate
consumers through acquisitions, new market and new products
in order to adopt into different culture demand.
eBay Inc.-2009 [MR111037]

142

Service

I nt r oduce zero Fraud by web security system for fraudulent
activities that may happened through authentication and verifications.

No f r audul ent activities may happened through authentication and
verifications.

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