eBay Inc Strategic Management
Short Description
Ebay strategic management paper...
Description
Strategic Management 2nd Individual Case Analysis (eBay Inc.-2009)
NAZIFA BTE ABD. GHANI MR111037
Associated Professor Dr. Mas Bambang Baroto
International Business School University Technology Malaysia June 2012
eBay Inc.-2009
[MR111037]
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 Competitive Profile Matrix Analysis .................................................................................... 42
3.8
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
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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 eBay’s 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
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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 world’s 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
Customers
Not included
Description
●
-
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 eBay’s 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. 5
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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 world’s
Acceptable
leading ecommerce franchise Length (Less than 250 words)
-
Acceptable, but too short.
-
Not mentioned
Identify the utility of the firm’s 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
Inspiring
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
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Opportunity
Threat
eBay Inc.-2009
[MR111037]
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
Conclusion:
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5
12
eBay Inc.-2009
[MR111037]
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-toconsumer, business-to-consumer and business-to-business), and online and offline shopping channels and networks. However, Amazon’s 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 9
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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 segment’s 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) EBay’s 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 segment’s competitors and Payments segment competitors, the competitive analysis is only focused on Marketplaces segment. Competitive Analysis for Marketplaces segment Key Variables Competitors strength
Case Facts
Amazon
10
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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Opportunity
Threat √
eBay Inc.-2009
[MR111037] 269,Para1)
√
Amazon achieved Low gross profit
Competitors Weakness
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
√
However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)
Competitors Capabilities
√
Amazon Competitors Distribution 11
-
No Data Available
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-
-
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Channels Competitors Financial Position
[MR111037]
-Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)
√
Amazon 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, 12
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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. EBay’s 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 segment’s 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 13
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263, para2) EBay’s 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
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)
Moderate
-Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)
eBay (Market places)
14
EBay’s 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
Strategic Management/SEM II/ 2011/2012
Weak
eBay Inc.-2009
[MR111037] users as of 2008.(Page 264, para3) -The key to success is eBay’s 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” ValueAdded Tools and Services to facilitate faster and safe trading and collections (Page 266, Para 2) -EBay’s 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
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Amazon -For the second quarter of 2009, eBay’s profit fell 29 percent and revenue declined 4 percent as the company continued its turnaround strategy in a harsh climate for consumer eBay (MarketSpending (Page 263, Para2) place) - 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 considered 16
in as
Strategic Management/SEM II/ 2011/2012
Growth
rate
weakness
is for
eBay Inc.-2009
[MR111037] 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)
- 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)
Competitors ’ objective and strategy
Amazon
- Amazon has initiated alliances with partners to gains sales by referring customers to Amazon.com (Page 269, Para1) - The success of Amazon is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation. (Page 268, para1)
- EBay plans to expand the Marketplaces segment by focusing on customers to improve the buyer’s experience and reduce 17
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seller costs by enhancing products and services, improving online trust and safety, enhancing customer support, extending product offerings geographically and into eBay(Mark new categories, and developing etplaces) 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)
However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)
Competitors Capabilities
Amazon
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[MR111037] -EBay’s global networked community of buyers and sellers interact 24/7 in a secure and trusted global marketplace (Page 264, para4)
eBay (Marketpla ces) - 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) 19
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Competitors ’ Distribution Channels
-
eBay (market places)
[MR111037]
No Data Available
-
-Nearly all of California’s 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) - Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)
Competitors Financial Position
Amazon 20
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eBay(Mark etplace)
[MR111037]
For the second quarter of 2009, eBay’s 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)
12
Total
20
4
3.3.3 Potential Entry of New Competitor
a) for Marketplaces Segment
Potential Entry of New Competitors Case facts
NO
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)
1
Competitive Forces Strong Moderate Weak
1
Total
b) for Communications Segment
Potential Entry of New Competitors 21
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Competitive Forces
eBay Inc.-2009
NO
[MR111037]
Case facts N/A
Strong
Moderate
Weak
-
-
-
Total
c) for Payments Segment
Potential Entry of New Competitors Case facts
NO
N/A
Competitive Forces Strong Moderate Weak -
-
-
Total
3.3.4 Potential Development of Substitute Products
a) For Marketplaces Segment
Potential Development of Substitute Products NO Case facts 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, 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.(Page
1
22
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Competitive Forces Strong Moderate Weak
eBay Inc.-2009
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268, Para2)
Companies such as Google Base and Microsoft Live Expo also offer similar online services and classified ads. (Page 268, Para2)
2
However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6)
3
1
Total
2
b) For Communications Segment
Potential Development of Substitute Products NO Case facts Traditional communications companies offer bundled services, such as cable or satellite television, along with internet and voice communications services (Page268, para2)
1
Competitive Forces Strong Moderate Weak
2 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) 23
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2
Total
c) For Payments Segment
Potential Development of Substitute Products Competitive Forces NO Case facts Strong Moderate Weak Other online payment services and offline 1 payment methods, such as cash, check, money order, and established credit card merchants (Page 268, Para1) 2 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) 2
Total
3.3.5 Bargaining Power of Suppliers a) For Marketplaces Segment
Bargaining Power of Suppliers NO Case facts 1 Competition is expected to increase in the future because barriers to entry in this segment are low (Page 268, Para2) Total 24
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Competitive Forces Strong Moderate Weak
1
eBay Inc.-2009
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b) For Communications Segment
Bargaining Power of Suppliers Case facts N/A
NO
Competitive Forces Strong Moderate Weak -
Total c) For Payments Segment
Bargaining Power of Suppliers Case facts N/A
NO
Competitive Forces Strong Moderate Weak -
Total
3.3.6 Bargaining Power of Consumers
a) For Marketplaces Segment
Bargaining Power of Consumers Case facts
NO
Competitive Analysis Strong Moderate Weak
Financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns.(Page 269, Para2)
1.
1
Total
b) For Communications Segment
25
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Bargaining Power of Consumers Case facts N/A
NO
Competitive Analysis Strong Moderate Weak -
Total
b) For Payments Segment
Bargaining Power of Consumers Case facts N/A
NO
Competitive Analysis Strong Moderate Weak -
Total
3.3.7 Conclusion of the Industry
a) For Marketplaces segment Porter’s Five Forces Analysis Result Competitive Forces Key Variables
Strong
Moderate
Weak
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 26
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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 Porter’s Five Forces Analysis Result Competitive Forces Key Variables
Strong
Moderate
Weak
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 Porter’s Five Forces Analysis Result Competitive Forces Key Variables
Strong
Moderate
Weak
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
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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
Providing Value to Customers
Key Success Factor NO Key Success Factor 1.
Case Facts
- 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 users as of 2008.(Page 264, para3) -The key to success is eBay’s 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)
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-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 “pretrade” and “post-trade” ValueAdded Tools and Services to facilitate faster and safe trading and collections (Page 266, Para 2)
Providing Reliability & Trustworthy
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). 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)
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5
Financial Position
4
Brand Image & Reputation
Friendly Interface
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) -Amazon states their success is based on: customer service; Web site convenience and accessibility; brand recognition, community cohesion, interaction, and size (Page 269, Para1)
-EBay’s 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)
- 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 30
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threats are coming from the marketplaces segment. In order to differentiate the segment, I have provided another table for the list of opportunities and threats for Communications and Payments segment. But for Pest analysis the results remains the same. 3.6 Opportunities and Threats for Marketplaces 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 goods/services at a local city or regional level(Page 266, Para4)
4
5.
The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1) Amazon achieved Low gross profit margins. Low in gross profit margin
1
6.
can be considered as a weakness for Amazon (Financial analysis) Opportunities Resulted from Industry Analysis (Porter’s 5 Forces)
N/A
31
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6
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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 Change(Page 268, Para2)
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
32
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14
[MR111037]
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) 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 (Porter’s 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, 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.(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
5 However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6) 33
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22
[MR111037]
Marketplaces segment, which is closely tied to consumer purchase patterns.(Page 269, Para2)
15
b) Opportunities and Threats for Communications segments The List of Opportunities No.
Case Fact
Prioritize
Opportunities Resulted from PEST Analysis
1.
Profitability is also affected by currency exchange rates (page 269, Para3)
3
2.
If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income (Page 269, Para3)
5
3.
Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5).
2
4.
Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4)
4
5.
The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1) Amazon achieved Low gross profit margins. Low in gross profit margin
1
6.
6
can be considered as a weakness for Amazon (Financial analysis) Opportunities Resulted from Industry Analysis (Porter’s 5 Forces)
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 34
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5
eBay Inc.-2009
[MR111037]
December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments (Page 269, Para 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)
6
4
The resources of existing competitor firms are larger and as a result, competitors could weather an economic downturn (Page 268, Para2)
2
5
The company continued its turnaround strategy in a harsh climate for consumer spending (Page 263, Para2)
7
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)
8
7
Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar (Page 269, Para3)
9
8
Declining economic environment (Page 268, Para4)
10
9
Dollar and the lingering weak economy with high unemployment (Page 274, Para1)
12
10
The revenue drop was attributable to the impact of the stronger.
4
11
Competition is intense in communications services and subject to rapid technological Change(Page 268, Para2)
3
Threats Resulted from Industry Analysis (Porter’s 5 Forces) 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
35
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c) Opportunities and Threats for Payments segments The List of Opportunities No.
Case Fact
Prioritize
Opportunities Resulted from PEST Analysis
1.
Profitability is also affected by currency exchange rates (page 269, Para3)
3
2.
If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase and inflate revenues, operating expenses, and net income (Page 269, Para3)
5
3.
Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5).
2
4.
Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4)
4
5.
The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1) Amazon achieved Low gross profit margins. Low in gross profit margin
1
6.
can be considered as a weakness for Amazon (Financial analysis) Opportunities Resulted from Industry Analysis (Porter’s 5 Forces)
N/A
36
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6
eBay Inc.-2009
[MR111037]
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 December 31, 2010. This new legislation may cause a reduction in trading activity that would negatively affect several business segments (Page 269, Para 6)
5
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)
6
4
The resources of existing competitor firms are larger and as a result, competitors could weather an economic downturn (Page 268, Para2)
2
5
The company continued its turnaround strategy in a harsh climate for consumer spending (Page 263, Para2)
3
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)
8
7
Alternatively, financial measures will be negatively impacted by a rise in the value of the U.S. dollar (Page 269, Para3)
4
8
Declining economic environment (Page 268, Para4)
7
9
Dollar and the lingering weak economy with high unemployment (Page 274, Para1)
10
10
The revenue drop was attributable to the impact of the stronger.
9
11
Competition is intense in communications services and subject to rapid technological Change(Page 268, Para2)
13
Threats Resulted from Industry Analysis (Porter’s 5 Forces)
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12
[MR111037] 12
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)
13
11
* Because of the lack information given in the case study particularly for competitors information I provided only EFE and CPM analysis for marketplaces segment.
3.7 The External Evaluation Factor (EFE) for Marketplaces segment
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)
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).
38
0.09
4
0.36
0.08
4
0.32
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[MR111037]
3
Profitability is also affected by currency exchange rates (page 269, Para3)
0.07
3
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
0.06
3
0.18
0.08
4
0.32
0.08
4
0.32
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
0.21
Threat
In addition, tax compliance will increase costs. (Page 269, Para 6)
6
7
Weak global economic conditions, in addition to the mortgage and worldwide credit related financial crisis, are expected to limit revenue growth, particularly 39
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in the Marketplaces segment, which is closely tied to consumer purchase patterns (Page 269, Para2)
The resources of existing competitor firms are larger and as a result, competitors could weather an economic downturn (Page 268, Para2)
8
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, Amazon’s 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
40
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[MR111037]
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.
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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 Providing Value to Consumers Reliability & Trustworthy Friendly Interface Brand Image & Reputation Financial Position Total
eBay Weight
Amazon
Rating
Score
Rating
Score
3
0.90
3
0.90
3
0.84
3
0.84
0.18
3
0.54
3
0.54
0.14
3
0.42
3
0.42
0.10
2
0.20
2
0.20
0.30 0.28
1
2.90
2.90
Conclusion: From the CPM analysis we can see that eBay’s 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.
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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 Segment
Marketplaces
eBay
Amazon
EBay transformed the Internet and the way many of us shop and do business worldwide (Page 264,para3)
N/A
-The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customerdriven value creation (Page 268, Para1)
- The success of Amazon is built on similar customercentric entrepreneurial business models that focus on customerdriven 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)
43
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N/A
W
eBay Inc.-2009
[MR111037]
Payments N/A
N/A
4.2 Management Functions
Functions
Case Facts eBay
Segment
Marketplaces
Planning
Communications
-EBay plans to expand the Marketplaces segment by focusing on customers to Improve the buyer’s 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) 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
44
Strategic Management/SEM II/ 2011/2012
S W Amazon
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] 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 Skype’s 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 Skype’s 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
45
EBay’s 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
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] 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)
Marketplaces
Organising
-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 online self-help features 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 46
Strategic Management/SEM II/ 2011/2012
N/A
-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] site that offers comparisons on millions of products and product reviews.(Page266, Para6) -Rent.com, acquired by eBay in 2005, (Page 266, Para7)
Communications
-E-commerce is supported by eBay’s 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.
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Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
N/A
N/A
eBay Inc.-2009
[MR111037]
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)
Marketplaces
N/A
N/A
N/A
N/A
N/A
N/A
Payments
N/A
N/A
Marketplaces
As of December 31, 2008, eBay Inc. employed approximately 16,200 people. (Page264, Para3)
Motivating Communications
Staffing
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N/A
eBay Inc.-2009
[MR111037]
Communications N/A
N/A
N/A
N/A
-EBay’s global networked community of buyers and sellers interact 24/7 in a secure and trusted global marketplace (Page 264, para4)
N/A
Payments
Marketplaces Controlling
- EBay recently adopted a policy that no longer permits sellers to leave negative feedback (Page 266, Para2)
N/A
- Web Site Stability. Increased volume and greater complexity requires additional expensive investments in hardware, software, and personnel(Page 270, Para4)
N/A
- The SafeHarbor Program provides guidelines for resolving disputes among parties. Complaints are 49
Strategic Management/SEM II/ 2011/2012
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[MR111037] 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)
N/A
N/A
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, L’Oréal, and Lancôme for a lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Web sites. (Page 269, Para8) 50
Strategic Management/SEM II/ 2011/2012
N/A
N/A
eBay Inc.-2009
[MR111037]
- Prohibit sharing of certain information over the Internet, such as comments provided by customers in eBay’s Feedback Forum. This limitation would adversely affect eBay’s ability to provide a reliable and secure community that shares purchase information and aspects of trades with other members of eBay’s Marketplaces segment.(Page 270, Para2)
Communications
Payments
For the second quarter of 2009, eBay reported nice growth in Skype business segments (Page 263, Para2)
- 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 51
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] 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 writeoffs incurred by eBay Inc.(Page 270, Para2)
N/A
N/A
4.3 Marketing Strategy
Case Facts Factors
Segment
Marketplaces
Marketing Strategy
52
eBay
-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)
Strategic Management/SEM II/ 2011/2012
S Amazon
N/A
N/A
W
eBay Inc.-2009
[MR111037]
Communications
Payments
Promotion Programs
Marketplaces
N/A
N/A
Additional revenues are also earned from advertising and revenuesharing contracts with third parties that provide transaction services to eBay and PayPal account users.(Page 264, para1)
N/A
-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)
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[MR111037]
-Nearly all of California’s 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
N/A
N/A
distributed to recognize large buyers to sustain customer loyalty.(Page 266, Para2)
- The key to success is eBay’s user support, such as announcements,
N/A
bulletin boards, customer support, personal pages, and more (Page 265, Para5)
Communications
N/A
N/A
Payments
N/A
N/A
- The Marketplaces platform is the core online commerce platform eBay.com. (Page 265, Para6)
N/A
Product and Service
Marketplaces
Planning
- Web Site Usability. Growth in the number of products and Web site features has caused 54
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037] the site to become less userfriendly.(Page 270, Para4) - EBay’s 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 users.(Page 270, Para4)
-EBay, the first virtual online business community, Communications empowers entrepreneurial individuals to become ecommerce business owners(Pg.263,para4)
N/A
N/A
N/A
-Skype is the world’s fastestgrowing 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)
55
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037]
Payments
-PayPal is a recognized global leader in online payment solutions (Page 266, Para9) -EBay’s 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, eBay’s 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)
56
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
N/A
N/A
eBay Inc.-2009
Pricing
[MR111037]
Marketplaces
-EBay provides the virtual marketplace auction where the
N/A
market determines the price of
items sold (Page 264, Para3)
-In the Marketplaces platform, eBay.com, traditional auctionstyle or fixed-price options are offered in 39 markets. Auctionstyle 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 users.(Page 269, Para7)
Communications
-Communications fees are assessed either on a subscription basis or per minute charge for “SkypeOut minutes.”(Page 264, Para1)
57
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
eBay Inc.-2009
[MR111037]
Payments
-International business processing accounted for 45 percent of PayPal’s 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
N/A
N/A
over to a reduction in PayPal revenues (Page 269, Para7)
Marketplaces
-Nearly all of California’s 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)
N/A
N/A
Distribution
- 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) Shopping.com is available in the United States, the United Kingdom, France, Germany, and 58
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037] Australia.(Page 266, Para6) N/A -This program marked a shift for San Jose, California-based eBay, since most of the vehicles sold on eBay Motors—a site that sells various types of vehicles and auto parts— had historically been used. (Pg.263,para1)
N/A
- 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” ValueAdded 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)
N/A
N/A -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)
59
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
-Skype is available in 28 languages in over 225 countries Communications (eBay, 2006).(Page 263, page4)
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)
Marketplaces
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Marketing Research
Communications
Payments
60
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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: Company’s Revenue by Segments Segment
S
W
Year 2006
Year 2007
Year 2008 Year 2009
(Millions)
(Millions)
(Millions)
(Millions)
Marketplaces
4,334,290
5,363,891
5,586,751
-
-
-
Communicati
194,921
381,822
550,841
-
-
-
Payments
1,440,530
1,926,616
2,403,669
-
-
-
Total net
5,969,741
7,672,329
8,541,261
8,199,611
ons
Growth of
Revenue Revenue
eBay Revenue
29%
11%
-4%
rate has been
Growth
decreasing for
Percentage
the last 3 years. Therefore, this decline trend lead to decreasing the growth rate in
61
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037] 2009 by 4%. This revenue decline trend is considered as the weakness of eBay
b) eBay Stock Price: Company’s Share Price in Millions S Year
Year
Year
Year
Year
2004
2005
2006
2007
2008
W
Declining in stock price $43.22
$ 58.17
$30.07
$33.19
$13.96
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
62
Strategic Management/SEM II/ 2011/2012
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[MR111037]
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
Year 2007
Year 2008
-
2.27%
11.41%
-
Increased in
W
ROA is considered a strength for eBay Return on Equity (ROE)
S
Year 2007
Year 2008
-
3.0%
16.1%
-
Increased in ROE is considered as a strength for eBay
63
Strategic Management/SEM II/ 2011/2012
W
eBay Inc.-2009
[MR111037]
*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 (%) Year 2006
Year 2007
Year 2008
S
W
-
-
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 Company’s Working Capital Year 2007
Year 2008
4,022,926
2,581,503
S
W Decreased to almost double for working capital is considered as weakness for eBay
64
Strategic Management/SEM II/ 2011/2012
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[MR111037]
Finance / Accounting Audit Checklist 1.
eBay Revenue Growth of rate has been decreasing for the last 3 years. Therefore, this decline trend lead to decreasing the growth rate in 2009 by 4%. This revenue decline trend is considered as the weakness of eBay
2.
Declining in stock price started from 2005 to 2008 can be considered as the weakness for eBay
3.
Decreased in Current Ratio is the weakness for eBay
4.
eBay Debt Ratio is increased and it is considered as the weakness for eBay
5.
Increased in Debt to equity Ratio is the weakness for eBay
6.
eBay Debt Ratio is increased and it is considered as the weakness for eBay
7.
Increased in ROA is considered a strength for eBay
8.
Increased in ROE is considered as a strength for eBay
9.
eBay compared to Amazon achieved High gross profit margins .High in gross profit margin can be considered as a strength for eBay
10.
Decrease in Growth rate is considered as weakness for eBay
11.
Decreased to almost double for working capital is considered as weakness for eBay
65
Strategic Management/SEM II/ 2011/2012
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[MR111037]
4.5 Production/Operation
Decision Area
Process
Case Facts Strength Segment
Marketplaces
eBay -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)
-EBay’s 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)
66
Strategic Management/SEM II/ 2011/2012
Amazon Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end 2008. (Page 268, Para4)
N/A
Weakness
eBay Inc.-2009
[MR111037] -EBay’s 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)
67
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037]
- 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)
Communicati ons
68
-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.
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] -EBay’s 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) -EBay’s ecommerce 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. EBay’s success is sustained through Communications and trust (eBay 2006).(Page 263,para4)
69
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037] -The Communications segment generates usage revenues from Skype VoIP for connection to traditional fixed and mobile telephones under eBay’s 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)
70
Strategic Management/SEM II/ 2011/2012
N/A
N/A
eBay Inc.-2009
[MR111037] N/A
Payments
-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 consumer’s loan from CIT Bank. Bill Me Later earns revenues from interest on the outstanding balances, late fees, and transaction fees.(Page 267, Para1)
71
- The Payments segment revenues are generated from fees paid by merchants for payment processing services through PayPal and Bill Me Later (Page 264,Para1)
Strategic Management/SEM II/ 2011/2012
N/A
N/A
eBay Inc.-2009
[MR111037] -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, eBay’s available line of credit was reduced (Page 269, Para5)
-Customer Account Billing. Transactionprocessing 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
72
- EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets and boasts 86.3 million
Strategic Management/SEM II/ 2011/2012
N/A
eBay Inc.-2009
[MR111037] 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)
73
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
N/A
eBay Inc.-2009
[MR111037]
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)
-EBay’s 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)
74
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] - 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)
Payments
75
-PayPal is a recognized global leader in online payment solutions with 70 million active
Strategic Management/SEM II/ 2011/2012
N/A
N/A
N/A
eBay Inc.-2009
[MR111037] 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 PayPal’s net Total Payment Volume during 2008 (Page 264, para2)
Marketplaces
Communicati ons
N/A
N/A
N/A
N/A
N/A
Inventory
Payments N/A
Workforce Marketplaces
76
eBay undertook a 10 percent reduction in its workforce with the elimination of 1,000 jobs in 2008
Strategic Management/SEM II/ 2011/2012
N/A
N/A
eBay Inc.-2009
[MR111037] and incurred $49,000 in restructuring costs (Page 269, Para4)
Communicati ons
N/A
N/A
N/A Payments
-
Marketplaces
Quality
N/A
-
-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’s 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)
77
Strategic Management/SEM II/ 2011/2012
-
-
N/A
N/A
eBay Inc.-2009
[MR111037]
-In June 2008, eBay Inc. was found liable for damages in the
N/A
N/A
N/A
N/A
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 eBay’s reputation. (Page 270, Para1)
Communicati ons
Payments
78
- The potential also exists for Skype technology to become obsolete. (Page 268, Para2) PayPal also reports a very low percentage of 0.33 percent loss from fraud.(Page 266, Para10)
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
4.6 Research & Development (R&D) Case Facts Strength eBay
Amazon
N/A
N/A
-
4.7 Management Information Systems Audit Case Facts Segment eBay Marketplaces
Information is recorded up to 12 months and provides color-coded star ratings(Page 266, Para2)
Amazon
N/A
N/A
N/A
N/A
Communications
Payments
79
Strategic Management/SEM II/ 2011/2012
-
Strength
N/A
Weakness
Weakness
eBay Inc.-2009
[MR111037]
4.8 Value Chain Analysis (VCA) a) Marketplaces Segment Case Facts Variables
Inbound Logistics
eBay 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)
EBay’s 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) EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)
Process
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) 80
Strength
Strategic Management/SEM II/ 2011/2012
Weakness
eBay Inc.-2009
[MR111037]
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)
The success of eBay is built on similar customercentric 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 California’s 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) Outbound Logistics
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 eBay’s 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)
Facilitate trading with unknown partners on the Internet, eBay Inc. provides a trusted and safe trading Marketing environment by offering the following services: & Sales Feedback Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support, ValueAdded Tools and Services, and Loyalty 81
Strategic Management/SEM II/ 2011/2012
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[MR111037]
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) - EBay’s Marketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year decline(Page 274, Para1) Nearly all of California’s 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)
Service
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)
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)
82
Strategic Management/SEM II/ 2011/2012
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[MR111037]
*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 Case Facts Variables
Inbound Logistics
N/A
EBay’s prior expenditures were focused on traditional wired routes; however, 50 percent of expenditures are now in the wireless telecommunications sector.(Page 267, Para 5) EBay’s 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. EBay’s 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 eBay’s subsidiary Skype Technologies S.A (Page 264,Para1)
83
Weakness
eBay
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
Process
Strength
Strategic Management/SEM II/ 2011/2012
-
-
eBay Inc.-2009
[MR111037]
EBay, the first virtual online business community, empowers entrepreneurial individuals to become ecommerce business owners(Pg.263,para4)
Outbound Logistics
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)
Skype is the world’s fastest-growing Internet communication Marketing software platform.(Page 267, Para3) & Sales
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)
*For the supporting activities, there have already covered in management function, Management Information System and Research & Development as well as in financial analysis.
84
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
C) Payments Segment Case Facts Variables
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
The Payments segment revenues are generated from fees paid by merchants for payment processing services through PayPal and Bill Me Later (Page 264,Para1)
Process
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, eBay’s 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)
85
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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, eBay’s 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 Marketing contribution made by Bill Me Later (Page 274,Para1) & Sales
Any reduction in trading spill over to a reduction in PayPal revenues (Page 269, Para7)
International business processing accounted for 45 percent of PayPal’s 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)
EBay’s Payments segment is composed of PayPal and Bill Me Later transaction services. (Page 266, Para9)
Service
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)
86
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
*For the supporting activities, there have already covered in management function, Management Information System and Research & Development as well as in financial analysis.
*Based on the case study given, as a matter of fact, in order to differentiate the segment, I have provided another table for the list of strengths and weaknesses for Marketplaces segment, Communications segment and Payments segment. But, because of the financial analysis is the analysis based on eBay as a whole, therefore, the list of the strengths and weaknesses
for
financial
analysis
are
the
same
for
Marketplaces
segment,
Communications segment and Payments segment.
4.9 Strengths and Weaknesses for Marketplaces segment Strengths List:
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 creation (Page 268, Para1)
6
Strengths Resulted from Management Functions
3. 87
EBay plans to expand the Marketplaces segment by focusing on 35 customers to Improve the buyer’s experience and reduce seller costs by Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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 marketplace. (Pg.263,para1)
5
5.
EBay has also expanded specific Customer Support efforts, such as online self-help features to increase efficiency of trades(Page 266, Para2)
38
6.
In, 2008, eBay launched an advertising service that enables third parties to advertise their eBay listings and eBay stores on eBay Web sites.(Page 266, Para5)
37
7.
Acquired by eBay Inc. in 2005, Shopping.com is an online comparison shopping site that offers comparisons on millions of products and product reviews.(Page266, Para6)
39
8. 9.
Rent.com, acquired by eBay in 2005, (Page 266, Para7) As of December 31, 2008, eBay Inc. employed approximately 16,200 people. (Page264, Para3)
19 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
33
hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on. (Page 266, Para4)
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 88
Strategic Management/SEM II/ 2011/2012
23
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Services, and Loyalty Programs.(Page 266, Para1) 14. Nearly all of California’s 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
loyalty.(Page 266, Para2)
16. The key to success is eBay’s user support, such as announcements,
10
bulletin boards, customer support, personal pages, and more (Page 265, Para5)
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
7
determines the price of items sold (Page 264, Para3)
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 Motors—a site that sells various types of vehicles and auto parts— had historically been used. (Pg.263,para1) 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)
32
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 89
Strategic Management/SEM II/ 2011/2012
42
eBay Inc.-2009
[MR111037]
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. 8 High in gross profit margin can be considered as a strength for eBay. 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. EBay’s 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) 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)
29
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. EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)
1
17
35. EBay offers millions of items for trade through auction-style and fixed- 12 price trading in 39 markets and boasts 86.3 million active global users as of 2008.(Page 264, para3) 36. In 2007, eBay sold nearly $60 billion goods, which equates to worldwide eBay users trading more than $1,900 worth in goods 90
Strategic Management/SEM II/ 2011/2012
4
eBay Inc.-2009
[MR111037]
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. EBay’s 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)
91
Strategic Management/SEM II/ 2011/2012
16
eBay Inc.-2009
[MR111037]
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, L’Oréal, and Lancôme for a lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Websites. (Page 269, Para8)
3
5.
Prohibit sharing of certain information over the Internet, such as comments provided by customers in eBay’s Feedback Forum. This limitation would adversely affect eBay’s ability to provide a reliable and secure community that shares purchase information and aspects of trades with other members of eBay’s 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.
EBay’s 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
92
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Weaknesses Resulted from Financial Analysis
10. eBay Revenue Growth of rate has been decreasing for the last 3 years. 7 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 11. Declining in stock price started from 2005 to 2008 can be considered as the 15 weakness for eBay 16 12. Decreased in Current Ratio is the weakness for eBay 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 4 for eBay 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
10
(Page 269, Para8) 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 eBay’s reputation. (Page 270, Para1)
2
Weaknesses Resulted from Research & Development Functions
N/A Weaknesses Resulted from Management Information System (MIS) Functions
N/A
93
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b) Strengths and Weaknesses for Communications segments Strengths List:
NO
Case Facts Strengths Resulted from Cultural Functions
1.
EBay, the first virtual online business community, empowers entrepreneurial individuals to become e-commerce business owners.(Page 2 63, Para4) Strengths Resulted from Management Functions
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 Skype’s 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 Skype’s 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 E-commerce is supported by eBay’s 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.
6.
7.
8. 94
As of December 2008, Skype had acquired Strategic Management/SEM II/ 2011/2012
Prioritize
eBay Inc.-2009
[MR111037]
370 million users, a 51 percent growth over the same time a year ago. For the second quarter of 2009, eBay reported nice growth in Skype business segments (Page 263, Para2)
9.
Strengths Resulted from Marketing Strategy Function
10.
EBay, the first virtual online business community, empowers entrepreneurial individuals to become e-commerce business owners(Pg.263,para4)
11.
Skype is the world’s 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)
15.
Strengths Resulted from Financial Analysis Increased in ROA is considered a strength for eBay
16.
Increased in ROE is considered as a strength for eBay
17.
eBay compared to Amazon achieved High gross profit margins. High in gross profit margin can be considered as a strength for eBay.
18.
19.
20.
95
Strengths Resulted from Production / Process Functions 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. EBay’s prior expenditures were focused on traditional wired routes; however, 50 percent of expenditures are now in the wireless telecommunications sector.(Page 267, Para 5) EBay’s 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
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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. EBay’s 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 eBay’s 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.
EBay’s 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) 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)
28.
29.
96
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)
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
Strengths Resulted from Research & Development Functions N/A Strengths Resulted from Management Information System (MIS) Functions
N/A
Weaknesses List:
NO
Case Fact Weaknesses Resulted from Management Functions
N/A Weaknesses Resulted from Marketing Strategy Functions
N/A
Weaknesses Resulted from Financial Analysis
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. 4.
Decreased in Current Ratio is the weakness for eBay
5.
Increased in Debt to equity Ratio is the weakness for eBay
6.
eBay Debt Ratio is increased and it is considered as the weakness for eBay
7.
Decrease in Growth rate is considered as weakness for eBay
8.
Decreased to almost double for working capital is considered as weakness
eBay Debt Ratio is increased and it is considered as the weakness for eBay
for eBay Weaknesses Resulted from Production / Process Functions
9.
The potential also exists for Skype technology to become obsolete. (Page 268, Para2) 97
Strategic Management/SEM II/ 2011/2012
Prioritize
eBay Inc.-2009
[MR111037]
Weaknesses Resulted from Research & Development Functions
N/A Weaknesses Resulted from Management Information System (MIS) Functions
N/A c) Strengths and Weaknesses for Payments segment Strengths List:
NO
Case Facts Strengths Resulted from Cultural Functions
N/A Strengths Resulted from Management Functions
1. EBay’s 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 channels (Page 267,Para2) 2.
3.
4.
5.
Expansion into international markets and more currencies is expected to improve the ease and efficiency of cross-border transactions (Page 267, Para2) 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) For the second quarter of 2009, eBay reported nice growth in both their PayPal (Page 263, Para2)
Strengths Resulted from Marketing Strategy Function
98
Strategic Management/SEM II/ 2011/2012
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[MR111037]
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.
EBay’s 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)
9.
10.
International business processing accounted for 45 percent of PayPal’s 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)
12.
Strengths Resulted from Financial Analysis Increased in ROA is considered a strength for eBay
13.
Increased in ROE is considered as a strength for eBay
14.
eBay compared to Amazon achieved High gross profit margins. High in gross profit margin can be considered as a strength for eBay.
15.
Strengths Resulted from Production / Process Functions 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
99
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
purchases the consumer’s 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 PayPal’s 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 Strengths Resulted from Management Information System (MIS) Functions
N/A
Weaknesses List:
NO
Case Facts
Weaknesses Resulted from Management Functions
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) Weaknesses Resulted from Marketing Strategy Functions
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, eBay’s Payments division reported $669.3 million in revenue, an increase of 11 percent year over year. The growth was
100
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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) Weaknesses Resulted from Financial Analysis
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
7.
Declining in stock price started from 2005 to 2008 can be considered as the weakness for eBay
8. 9.
Decreased in Current Ratio is the weakness for eBay
10.
Increased in Debt to equity Ratio is the weakness for eBay
11.
eBay Debt Ratio is increased and it is considered as the weakness for eBay
12.
Decrease in Growth rate is considered as weakness for eBay
13.
Decreased to almost double for working capital is considered as weakness for
eBay Debt Ratio is increased and it is considered as the weakness for eBay
eBay Weaknesses Resulted from Production / Process Functions
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, eBay’s 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) Weaknesses Resulted from Research & Development Functions
N/A Weaknesses Resulted from Management Information System (MIS) Functions
N/A
101
Strategic Management/SEM II/ 2011/2012
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[MR111037]
4.9.1 Internal Factor Evaluation (IFE) Matrix
a) For Marketplaces segment
Item
Key external factor
Weight
Rating
Weighted score
Strengths 1
2
3
4
102
EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)
0.10
4
0.40
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
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)
0.09
4
0.36
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
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
Para3) 5
6
7
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) The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation (Page 268, Para1) EBay provides the virtual marketplace auction where the market determines the price of items sold (Page 264, Para3)
0.06
3
0.21
0.07
3
0.21
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
2
0.10
Weaknesses
1
103
EBay’s Marketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year
0.05
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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 eBay’s reputation. (Page 270, Para1)
0.05
2
0.10
3
EBay has recently been involved in litigation with Tiffany & Co., Rolex, Louis Vuitton, Christian Dior, L’Oréal, and Lancôme for a lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s 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 users.(Page 270, Para4)
0.04
2
104
Strategic Management/SEM II/ 2011/2012
0.08
eBay Inc.-2009
[MR111037]
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)
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 personnel(Page 270, Para4)
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.
105
Strategic Management/SEM II/ 2011/2012
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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
1.
Market places
Goals 1) To expand the Marketpla ces segment by focusing on customer
Objectives
N/A
2) To enhance online trust and safety and develop new products
2.
Commu nication s
106
1) Increase Registere d subscribe rs.
Case Facts 1) EBay plans to expand the Marketplaces segment by focusing on customers by enhancing products and services, (Page266, Para8)
Remarks
Product Development
Unsuccess ful
2) Improving online trust Product and safety, enhancing Development customer support, extending product Unsuccess offerings geographically ful and into new categories, and developing retention strategies.(Page266, Para8) 1)Increase Registered subscribers to 500 million by 2012.
Strategic Management/SEM II/ 2011/2012
1)Registered subscribers are expected to reach 500 million by 2012 (Page267, Para4)
(Market Penetration)
Successful
eBay Inc.-2009
3
Paymen ts
[MR111037]
2) Increase the grow of worldwide communicati ons market.
2) Increase the grow of worldwide communications market to 5.5 percent annually.
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.
1) To be integrate PayPal with eBay.com listings and other Marketpl aces businesse s
2) To expand into internatio nal market
107
N/A
N/A
Strategic Management/SEM II/ 2011/2012
2) The worldwide communications market is expected to grow by 5.5 percent annually (Page 267, Para5)
3)U.S. Web conferencing expected to grow 14.1 percent from 2008 through 2011 (Page 267, Para5)
1) Global expansion is to be gained by integrating PayPal with eBay.com listings and other Marketplaces businesses. (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)
Market Penetration
Unsuccessful
Product development
Unsuccess ful
Forward Integration
Unsuccess ful
Market Development
Successful
eBay Inc.-2009
[MR111037]
b) Financial Objective: No.
Segment
1.
2.
Marketplaces
Goals
Objectives
1) To reduce seller cost.
Increase Communications Revenue
N/A
- Increase revenue to double by 2011
Case Facts
Remarks
1) To improve By enhancing the buyer’s Product and experience and services reduce seller (Product costs(Page266, Development) Unsuccessful Para8) 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
108
Increase Revenue
Strategic Management/SEM II/ 2011/2012
N/A
By integrating 3) Increased PayPal with revenues eBay.com are to be listings and other gained by Marketplaces integrating segment PayPal (Forward Integration) with eBay.com Unsuccessful listings and other Marketplac es businesses. (Page 267, Para2)
eBay Inc.-2009
[MR111037]
5.3 Strategies 5.3.1 Strategies in Action
The Type of Strategies
The Title of Strategies
Segment
Marketplaces Forward Integration
Case Facts - 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)
N/A Integration
Communications N/A Payments
Marketplaces
N/A
Back ward Integration N/A Communications
Payments
Marketplaces Horizontal Integration
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) -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
109
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037] availability, rental costs, virtual tours, roommate searches, and more. (Page 266, Para7 -The Communications segment is Communications composed of Skype, which was founded in 2003 and acquired by eBay in 2005. Skype is the world’s fastest-growing Internet communication software platform. As of 2008, Skype had approximately 405.3 million registered users worldwide. (Page 267,Para3) -Bill Me Later, acquired by eBay Inc. in 2008, offers consumers Payments 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)
Marketplaces Product Development
Intensive
-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 listings and eBay stores on eBay Web sites.(Page 266, Para5) - 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)
110
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[MR111037] - 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)
E-commerce is supported by Communications eBay’s proprietary Skype VoIP technology, which allows free telephone calls using a broadband Internet connection to any telephone number.(Page 263, para4)
Payments
Marketplaces Market Development
-EBay’s Payments segment is composed of PayPal and Bill Me Later transaction services. (Page 266, Para9) - 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)
- 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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-offering solutions to a more diverse Communications business user and enhancing the Skype’s 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)
Marketplaces Marketing Penetration
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 Customer Support efforts, such as online self-help features 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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[MR111037] of the United States(Page 274, 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) - 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)
- 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’s 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) EBay also that quarter Communications announced they would spin off and make an initial public offering of their Skype business segment in the beginning of year 113
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[MR111037] 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
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-PayPal is accepted both online and offline in 190 markets worldwide and processes payments in 19 currencies (Page 266, Para10)
eBay Inc.-2009
[MR111037]
Marketplaces Related Diversification
-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 classified advertisements to members in hundreds of cities and regions of the world, such as the Netherlands, Germany, and so on (Page 266, Para4)
Diversification
EBay has also expanded specific Customer Support efforts, such as online self-help features 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
EBay’s e-commerce platform also Communications 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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[MR111037] N/A Payments
Marketplaces
N/A
Not Related Diversification Communications EBay’s 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
Marketplaces Retrenchment
- 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 and announced an anticipated second acquisition of a vehicle classified ad site, eBay Motors. (Page 269, Para4) N/A
Communications
Payments
Divestiture
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 (Page 269, Para4) N/A
Marketplaces N/A Communications
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N/A Payments N/A Liquidation
Marketplaces N/A Communications N/A Payments
5.3.1 Generic Strategies (Business Level Strategies )
No.
1.
Segment
Marketplaces
Case Facts EBay plans to expand the Marketplaces segment by focusing on customers to improve the buyer’s experience and reduce seller costs by enhancing products and services, improving online trust and safety, enhancing customer support, extending product offerings geographically and into new categories, and developing retention strategies. (Page 226, Para8) In 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
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BLS
Cost Leadership Strategies
eBay Inc.-2009
[MR111037] period of time. Alternatively, the fixedprice 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
3
Payments
118
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) EBay’s 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 channels (Page 267,Para2)
Strategic Management/SEM II/ 2011/2012
Focus strategies
Focus Strategies
eBay Inc.-2009
[MR111037]
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 IFE 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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Strength 1) EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)
SWOT MATRIX
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
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Weakness 1) EBay’s 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 eBay’s reputation. (Page 270, Para1)
3)
EBay has recently been involved in litigation with Tiffany & Co., Rolex, Louis Vuitton, Christian Dior, L’Oréal, and Lancôme for a lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Websites. (Page 269, Para8)
4)
Decreased to almost double for working capital is considered as weakness for eBay
5)
Customer Support. Customer support is challenged from greater trade activity and an increased number of users.(Page 270, Para4)
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
eBay Inc.-2009
[MR111037] 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)
6) The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customerdriven 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 globe (Page 265, Para5)
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8)
Web Site Stability. Increased volume and greater complexity requires additional expensive investments in hardware, software, and personnel(Page 270, Para4)
eBay Inc.-2009
[MR111037]
Opportunity
SO
1. The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1)
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. 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)
2. With focus on customer-driven value creation, eBay should continuously maintain simplicity of interaction with the online community’s capability and meet the demand in the industry in order to be competitive. (S3,S4,S6,O1,O2,04)
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)
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WO 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)
eBay Inc.-2009
Threat 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)
[MR111037]
ST
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)
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, Amazon’s strong growth and satisfied
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WT
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)
eBay Inc.-2009
[MR111037]
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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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 Market Development new product offering , into new Market Penetration emerging market especially in new Product Development 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) 2. With focus on customer-driven value creation, eBay should continuously maintain simplicity of interaction with the online community’s 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 community’s 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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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) EBay’s Marketplaces division reported $1.26 billion in revenue, a 14 percent year-over-year decline(Page 274, Para1)
3
eBay Revenue Growth of rate has been decreasing for the last 3 years. Therefore, this
2
decline trend lead to decreasing the growth rate in 2009 by 4%. This revenue decline trend is considered as the weakness of eBay Decreased in Current Ratio is the weakness for eBay
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
3.33
FP Average Industry Position (IP) However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6) Competition is expected to increase in the future because barriers to entry in this segment are low (Page 268, Para2)
3
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
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4
eBay Inc.-2009
[MR111037]
success is possible IP Average
4
Stability Position (SP) In addition, tax compliance will increase costs. (Page 269, Para 6) 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) -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 -4
The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1)
-3
-6
-3
-4.2
SP Average 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) EBay has recently been involved in litigation with Tiffany & Co., Rolex, Louis Vuitton, Christian Dior, L’Oréal, and Lancôme for a lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Web sites. (Page 269, Para8)
-2
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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-5
eBay Inc.-2009
[MR111037]
and revenue from existing users.(Page 269, Para7) -2.0
CP Average 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.
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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
I
II
III
3.0
2.0
1.0 THE EFE TOTAL WEIGTHED SCORES EFE : 3.27 IFE: 3.10
FALLS INTO CELL II: Grow & Build Therefore intensive Market Penetration, Market Development and Product Development can be most appropriate for this division.
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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.
Marketplaces
Net Revenue by Segments 2006 2007 $4,334,290 24% $5,363,891 4%
2008 $5,586,751
Payments
$1,440,530 34%
$1,926,616 25%
$2,403,669
$381,822
$550,841
Communications $194,921 Total Net Revenues
96%
$5,969,741 29%
44%
$7,672,329 11%
$8,541,261
In 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, eBay’s 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)
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[MR111037] RAPID MARKET GROWTH
QUADRANT II
QUADRANT I
Pos QUADRANT III
QUADRANT IV
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
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6.6 Wrap Up Process Methods
Product
Market
Market
Related
Unrelated
Development
Development
Penetration
Diversification Diversification
(PD)
(MD)
(MP)
-
-
-
-
N/A
N/A
N/A
N/A
N/A
IE Matrix
Grand
-
-
-
3
3
3
1
1
Swot Matrix SPACE Matrix BCG Matrix
Strategy Total
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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
Key Factors
Product
Market
Development
Penetration
Weight
AS
TAS
AS
TAS
0.15
4
0.6
3
0.45
0.10
4
0.40
3
0.30
0.09
1
0.09
3
0.27
0.08
3
0.24
1
0.08
0.07
1
0.07
3
0.21
Opportunities The need for substantial resource investments in technology and marketing in order to remain competitive (Page 268, Para1) Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment.(Page 265, Para5). Profitability is also affected by currency exchange rates (page 269, Para3) Online classifieds help people meet, share ideas, and offer goods/services at a local city or regional level(Page 266, Para4) If the U.S. dollar weakens against foreign currencies, transactions conducted in foreign currency denominations will increase 133
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[MR111037]
and inflate revenues, operating expenses, and net income (Page 269, Para3) 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 Change(Page 268, Para2) However, Amazon’s strong growth and satisfied customer base pose the greatest threat to eBay (Page 267, Para6) 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)
0.12
3
0.36
2
0.24
0.10
3
0.36
2
0.20
2
0.14
3
0.21
2
0.30
3
0.45
0.07
1.00 Strengths EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5) 134
0.15
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
As of December 2008, approximately 516,000 online storefronts were listed in locations across the globe (Page 265, Para5) 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) 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) The success of eBay is built on similar customer-centric entrepreneurial business models that focus on customer-driven value creation (Page 268, Para1)
0.12
2
0.24
3
0.36
0.12
3
0.36
1
0.12
0.09
2
0.18
3
0.27
0.09
3
0.27
1
0.09
1
0.10
2
0.20
3
0.40
1
0.10
2
0.27
1
0.09
Weaknesses EBay’s Marketplaces division reported $1.26 0.10 billion in revenue, a 14 percent year-over-year decline(Page 274, Para1) The German Federal Supreme Court has also ruled that eBay may owe penalties from illegal listings of 0.10 counterfeit and stolen goods. These events may also negatively affect eBay’s reputation. (Page 270, Para1) EBay has recently been involved in litigation with 0.09 Tiffany & Co., Rolex, Louis Vuitton, Christian Dior, L’Oréal, and Lancôme for a lack of policing trade and infringement on 135 Strategic Management/SEM II/ 2011/2012 trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Websites. (Page 269, Para8)
eBay Inc.-2009
[MR111037]
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) 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 Total
0.08
1
0.08
3
0.24
0.06
2
0.12
3
0.18
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 community’s 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 community’s 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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eBay Inc.-2009
[MR111037]
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.
1.
Segment
Market places
137
Goals (New)
Objectives (New)
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.
N o f r a u d u l e n t activities may happened through authentication and verifications.
Introduce “zero fraud” by introducing web security system for fraudulent activities that may happened through authentication and verifications.
Going to make eBay as generic brand for consumers
Enforce the marketing department to improve advertising by global branding.
Strategic Management/SEM II/ 2011/2012
Remarks
Product Development& Market Development
Product Development
eBay Inc.-2009
No.
1.
[MR111037]
Segment
Marketplaces
Goals
Objectives
.Increase revenue and long term profit by satisfying the needs of the customers.
Increase revenue in marketplace segment by 30% annually
Increase working capital to $ 5,000,000.00 by 2012
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
138
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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 customer’s needs. 3. The Marketing manager must attract more and more customers to buy the firm’s 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.
139
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
7.1 Value Chain For Marketplaces segment
Inbound Logistics and The process (Production) remains the same in this case.
Case Facts Variables
Inbound Logistics
eBay 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)
EBay’s 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) EBay’s Marketplaces platform brings buyers and sellers together through fully automated online Web sites 24/7 (Page 265, Para5)
Process
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) 140
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
[MR111037]
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)
Generic brand for consumers Outbound Logistics
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. Marketing & Sales
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.
141
Strategic Management/SEM II/ 2011/2012
eBay Inc.-2009
Service
[MR111037]
I n t r o d u c e “zero Fraud ” by web security system for fraudulent activities that may happened through authentication and verifications. N o f r a u d u l e n t activities may happened through authentication and verifications.
142
Strategic Management/SEM II/ 2011/2012
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