University of the Philippines Cebu College

Management Division

CASE NO.
Title

Submitted to
Prof. Yvonne C. Gomos
Month, Day, Year

Base, Joseph Arnie I.

Dionson, Jan Zuriel A.
Demillo Jr, Danilo S.

Executive Summary
I.

Statement of the Problem/ Identification of Key Problem(s) and Strategic Issues

II.
Vision and Mission Statements

2.1 Existing Vision Statement

2.2 Existing Mission Statement
We intend to continue to work toward our mission of creating the worlds leading
ecommerce franchise by investing in our core Marketplaces segment and continuing to
build our adjacent Marketplaces businesses. (2007 Annual Report)
2.3 Evaluation of the Existing Vision and Mission Statements
Evaluation of the Vision/Mission Statements
Component

Present

Customers
Products/Services
Markets
Technology

Concern for Survival, Profitability and

Growth
Philosophy
Self-Concept

Concern for Public Image

Concern for Employees

Not
Present

Description
The world (implied)
e-commerce franchise
The world (global)
Investing in our core marketplaces
segment (implied)
To be the worlds leading ecommerce
franchise (implied)

Investing in Marketplaces segment

and continuing to build Marketplaces
business

2.4 Proposed or Retained Vision and Mission Statements

Proposed Vision Statement
To become the largest and the leading ecommerce platform in the world
Proposed Mission Statement
EBay, Inc. aims to continuously work towards creating the worlds leading ecommerce
franchise at the same time providing great rewards to our shareholders by investing in our core
Marketplaces segment and constantly building our adjacent businesses through our advanced
technologies. In the same way, we are committed in creating opportunities and fostering
innovation among our employees while making a positive social impact to the world.
IV.

III.
Statement of Objectives
Analysis of the External Environment

4.1 Assessment of the Firms Opportunities and Threat

4.1.1 Social, Economic, Political, and Ecological Factors

Sales Tax and other taxes

The new requirement of the legislation to collect taxes starting December 2010 is
considered a threat to this EBay. It may have negative effects on the business segments of
eBay. Essentially, this will cause a reduction in the trading activity of the company. Besides, tax
compliance may equate to additional costs to the company, which will lower their operating
margin.
Prohibition of sharing of certain information in the Internet
In addition to the tax requirements, the US legislation also prohibits the sharing of
information over the internet, such as the comments provided by the customers in eBays
feedback forum. The feedback forum, and other related areas provided by EBay is a vital way
for them to reach to their customers and provide a reliable and secure community. The
prohibition limits the sharing of important information such as purchase information and aspects
of trade within other members in eBays marketplace.
Pirated and Counterfeit Items
Considering the nature of business in which EBay is involved in, which is a virtual
retailing and selling of goods and many different items, the company has a huge probability of
being sued for a wide scale sale of not for resale and counterfeit items on its website. This
scenario of infringement on trademarks and copyrights as well as the lack of policing trade has
been adversely affecting a lot of high-end or famous companies carrying a good brand name
and reputation. These brands are undertaking measures to deter these threats which on the
other end, affects eBay.
Weak global economic conditions
The weakening of the global economic conditions has always affected the lives of the
people, particularly their purchasing power. With these conditions, including the mortgage and
worldwide credit financial crisis, people spend less which affect the revenues of eBay. High
unemployment rate also poses a threat to the company.
Currency Exchange Rates
Basically, eBay uses fixed exchange rate conversions and uses foreign currency
denominations for foreign assets. Considering that 45% of the companys business is held
outside the US, the rise or the fall of the US dollar has a considerable impact to eBay. A weak
dollar, in comparison to foreign currency, will increase revenues, operating expenses and and
net income due to foreign transactions. Otherwise, a rise in the value of dollar will negatively
impact financial measures
4.1.2 Product/ Service and Technological Factors
Upsurge of online classified advertisements
Online classified advertisements have increasingly become a common thing in the global
marketplace. People these days enjoy trading in a safe, reliable and efficient commerce.
Basically, companies offering online advertisement services provide these to the customers.
Online classifieds help people meet, share ideas, and offer goods/services at a local city or
regional level. Due to these needs, online classifieds companies, which operate at a global or
local scale, have sprouted and have faced intense competition.
Rapid technological change

Companies such as eBay primarily use technology in its day-to-day operations. The
marketplaces, payments and communications segments make use of a lot software, hardware,
electronic tools, gadgets, as well as the internet. For the company to lead the industry, it must
strive to provide the fastest, most efficient and most reliable service to its customers. This can
be achieved by constantly updating with the latest trends in technology. Breakthroughs in
technologies have become so rapid that the technology used by eBay, especially in its Skype
operations, may be considered as obsolete. These considered, the company must constantly
innovate and adapt to technological changes.
4.1.3 Industry and Competitive factors
Rivalry among Competing Firms- Moderate to High
The e-commerce industry is dominated by two big players namely, Amazon and EBay.
EBay is known to provide a faster, easier, and safer online commerce experience. They rely on
the value of their offerings as a means for gaining popularity in the market. While Amazon, on
the other hand, is considered as the leading online retailer with revenues of 19.2 billion or more
than 50% than EBays. Basically, Amazon is considered as the main competitor of EBay. These
two firms have been competing in the industry for almost 13 years now. As of 2008, the main
advantage of EBay to Amazon is that they have high gross profit margin than the latter.
Nonetheless, Amazons high growth and satisfied customer base pose a greatest to EBay.
Threat of New Entrants-High
The barriers on entering the e-commerce industry are low. New online sites can be
easily launched at a nominal cost as stated in the case. Thus competition in the industry, also, is
expected to increase in the future.
Threat of Substitutes- Moderate to High
Basically, there are many substitutes available for the e-commerce business. The
shoppers, instead of buying online, can purchase products in the department, warehouses,
discount, and general merchandise stores. Some buyers preferred offline especially the risk
averse buyers, since they want to see the physical product before shelling out money.
In terms of communication segment, Skype can be substituted with traditional companies that
offer bundled services such as cable television with internet and voice communication services
as mentioned in the case. Moreover, people could just also use local telephone or cable
companies and other VoIP in place of Skype.
Lastly, for payment segments, offline payment methods such as cash, check, money order, and
other established credit card merchants are often used by customers instead of PayPal and Bill
Me Later.
Bargaining Power of Suppliers (Strong)
Competition in the e-commerce industry is expected to increase as many potential entrants
(new online sites will be launched) will join the industry soon due to low barriers to entry. If this
happens, suppliers of the goods/products that are sold online tend to increase its price since
many resellers are
Competition is expected to increase in the future because barriers to entry in this segment are
low

Bargaining Power of Consumers- Moderate to High

Due to financial crisis, growth of revenues will be negatively affected particularly in the
marketplaces segment which is closely tied to consumer purchase patterns as stated in the
case. This means that consumers, especially in the marketplaces, have high bargaining power
since they have a significant influence on the total revenues.

4.2 The External Factor Evaluation (EFE) Matrix

Key External Factors

Opportunities
1) Web conferencing expected to grow 14.1 percent
from 2008 through 2011
2) Consumer electronics accounting for the largest
percentage of trade (17%) in eBay.com
3) Anticipated synergistic benefits of recent acquisitions
and good will costs
4) Growth in international markets, 57% of the
Marketplaces revenues came from markets outside the
United States
5) Profitability is also affected by currency exchange
rates, weaker dollar inflates foreign denominated
revenues
6) Buyers and sellers enjoy trading among a wide
selection of goods and services in a secure, trusted, and
efficient commerce environment
Threats
1) Several competitors and a wide range of alternatives
available to customers
2) The payments segment competes against other
online payment services and offline payment methods,
like cash, check, money order, and established credit
card merchants
3) Communications segment faces intense competition
from local telephone or cable companies and other VoIP
providers, with traditional communications companies
offering bundled services
4) Competition in the marketplaces segment is
expected to increase because barriers to entry in this
segment is low and new online sites can be launched at
a nominal cost
5) Mortgage and worldwide credit financial crisis
6) Security breach and identity theft
Total

Weight

Ratin
g

Weight
ed
Averag
e Score

0.08

0.24

0.08

0.24

0.1

0.3

0.1

0.4

0.05

0.2

0.08

0.32

0.08

0.16

0.08

0.24

0.08

0.24

0.08
0.1
0.09
1.00

2
1
2

0.16
0.1
0.18
2.78

4.3 The Competitive Profile Matrix (CPM)

Key Success
Factors/Company Strengths

Importance
Weight

eBay

Amazon

Brand Image/Reputation

0.15

0.6

0.6

Convenience

0.08

0.24

0.24

Customer Service

0.1

0.4

0.4

Reliability/Trustworthy

0.12

0.48

0.48

Friendly Interface

0.08

0.24

0.24

Global Distribution

0.09

0.36

0.27

Financial Position

0.15

0.45

0.6

Speed of Transaction

0.08

0.24

0.24

Technological Innovation

0.15

0.6

0.6

Weighted Total

3.61

3.67

Brand Image/Reputation
A rating of 4 is given to eBay and Amazon. eBays popularity is due to the value offered
to its users. eBay provides a faster, easier, safer online commerce experience. Meanwhile
Amazon states that their success is based on customer service, brand recognition, level of
service fees and quality of search.
Convenience
Shopping websites such as Amazon and eBay provide convenience to consumers.
They dont need to go to stores to buy products and services. They can buy and sell items in the
comforts of their homes. Accessing the websites of eBay and Amazon in the internet provide the
consumers access to a virtual marketplace where they can interact with different buyers and
sellers around the globe.
Customer Service
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. The key to success is eBays user support,
such as announcements, bulletin boards, customer support, personal pages and more. eBay
has also expanded specific Customer Support efforts such as online self-help features to
increase efficiency of trades. Amazon states that their success is based on the ability to attract
buyers and sellers, volume of transactions, price and selection of goods.

Reliability/Trustworthy
Buyers and sellers enjoy trading among a wide selection of goods and services in a
secure, trusted and efficient commerce environment. To facilitate trading with unknown partners
on Internet, eBay Inc provides a trusted and safe trading environment by offering services such
as Feedback Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support,
Value-Added Tools and Services, and Loyalty Program. Amazon states that their success is
based on system reliability, delivery and payment reliability.
Friendly Interface
eBay.com offers a sense of community to buyers and sellers that is sustained by
Communications and high transaction rated on a wide selection of goods and services. Amazon
states that their success is based on customer service, Web site convenience and accessibility,
brand recognition, community cohesion, interaction and size.
Global Distribution
In the Marketplaces platform, eBay.com, traditional auction-style or fixed-price options
are offered in 39 markets. They also attained customized local sites across four major areas of
the world in the following regional markets:
World Market

Regional Markets

Asia Pacific

Australia, China, Hong Kong, India,

Malaysia, New Zealand, Philippines,
Singapore, South Korea, Taiwan

Europe

Austria, Belgium, France, Germany,

Ireland, Italy, Netherlands, Poland, Spain,
Sweden, Switzerland, United Kingdom

North America

Canada, United States

Latin America

Argentina,
Brazil,
Chile,
Colombia,
Ecuador, Mexico, Peru, Uruguay and
Venezuela, Costa Rica, the Dominican
Republic, and Panama

Meanwhile Amazon has separate retail websites for United States, United Kingdom &
Ireland, France, Canada, Germany, The Netherlands, Italy, Spain, Australia, Brazil, Japan,
China, India and Mexico. Amazon also offers international shipping to certain other countries for
some of its products.
Financial Position
Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year end
2008. eBay however only reported net revenues of $8.5 billion at the end of year of 2008. Based
on the revenues, this shows that Amazon has a larger market share compared to eBay.
Speed of Transaction
Sellers can easily post what they want to sell in eBay and Amazon. These two shopping
websites offer million of object for trades in auction-style or fixed-price trading. They provide the

virtual marketplace where the market determines the price of the items sold. When a buyer
wants to buy the product, he/she can reasily do transaction with seller and get into agreement.
Technological Innovation
Amazon and eBay constantly upgrade the features of its website to keep up with the
ever changing consumer preference and technology innovation. Ebay has expanded specific
Customer Support, such as online self-help features to increase efficiency of trades. eBay offers
both pre-trade and post-trade Value-Added Tools and Services to facilitate faster and safe
trading and collections.
V.

Analysis of the Internal Environment

5.1 Profile of Current Strategy

5.1.1 Concept of Business
EBay Inc. basically offers online marketplaces where sellers and buyers exchange
good/s and service/s for a fee. They also provide platforms, online payment solutions and online
communication offerings in order to facilitate transaction among people in 39 markets.
The company generates primarily on three business segments, namely marketplaces,
communications and payments. The marketplace infrastructure enables people to engage in
global online commerce by using EBays platform which includes the traditional eBay.com,
stubhub.com (services for buyers and sellers of ticketsconcert and other live entertainment
events), shopping.com (online shopping website), and rent.com (apartment listing service).
Meanwhile, the communication segmentconsisting Skype, allows Skype users with Voice over
Internet Protocol (VoIP) to aid transaction on EBay conveniently and economically as compared
to the traditional fixed-line and mobile phones. Lastly, the payment segmentconsisting Paypal
and Bill Me Later allows the buyers and seller to settle transaction, cash or credit.
5.1.2 Concept of Competition
EBay, one of the leading e-commerce companies in the world, continuously aim to
provide faster, easier, and safer online commerce experience to its customers. With a
considerable number of huge and small competitors present, the popularity of the company is
mainly attributed to the value it offers to its customers. The company, throughout its history, has
been striving to be a diversified business, mainly through acquisitions. Some of these huge
acquisitions include PayPal, Rent.com and Shopping.com. With these undertakings, the
company has directed towards widening their customer base as well as global reach. Moreover,
one of the companys goals is to provide, as much as possible, everything that customers are
looking for and are wanting to purchase.
Basically, in its strategic business levels, it competes in the online industry using a broad
differentiation strategy, with the largest variety huge of products and the widest span of
categories to be offered in the market. The company appeals to enormous group of consumers
which comprises of individual sellers, small entrepreneurs and corporations. Apparently, the
company ignites entrepreneurial individuals to become owners of their own businesses, through
e-commerce. Its business model creates and maintains person-to-person and business-toperson safe trading community.

Becoming a key player in the industry, the company ensures that its community of
buyers and sellers interact 24 hours a day in a secure and trusted global marketplace.
Communication, apparently, is very important in this endeavour. With that, EBay supports its ecommerce through its proprietory Skype VoIP technology. Skype has become a very powerful
tool used by the company in serving its customers worldwide. Essentially, the company also
offers programs to ensure a safety and secure environment. Among these programs are
Feedback Forums, Safe Harbor Programs, Value-Added Tools and Customer Support.
5.1.3 Company Self Concept
eBay Inc.s goal is to build on their heritage of community, innovation and
entrepreneurship and introduce millions more to the power of platforms and services. In order to
achieve this goal, firstly eBay intended to make the shopping website easier and safer to use.
As the the Internet has involved, buyers have become accustomed to streamlined purchasing
experiences that put a premium on speed, convenience, and reliability. While eBay made strides
in these areas, its clear that they need to do much more. Secondly the company intended to
expand the selection of products on eBay.com through appropriate pricing and incentives to
their vast seller community. eBay will also weave the strengths of auctions with their fixed price
offering. Lastly, eBay Inc. Intended to extend Paypals lead in online payments by making it
ease and faster to use- on and off eBay. They believe that the growth prospects of their earlystage, off eBay merchant services business are stellar and that PayPal which already has 57
million active users and is accepted in 190 countries can have its best years yet.
Social innovation is the core value of eBay Inc. The following are the core social innovation
values of eBay:

Creating economic opportunity

Enabling greener commerce

Powering giving (i.e. charitable giving by eBayers)

Driving employee engagement (i.e. in social innovation)

Running a responsible business

Supporting the eBay Foundation (i.e. charitable giving by eBay)

5.2 Assessment of the Firms Strengths and Weaknesses
5.2.1 Operational/ Marketing/ Technical Dimension
Operations
Basically, EBay has three business segments namely: marketplaces, payments, and
communications, in which they derived their revenues. In the marketplaces or also known as
markets pace, online virtual trading for the sale of goods and services from the sellers to the
individual buyers takes place. The company generates revenue from the listing and fees paid by
the seller. To ensure a safe trading environment for the buyers, the company in return, offers
programs such as Feedback forum, Safe Harbour Programs, Verified Rights Owner Program,
Customer Support, Value-Added Tools and Services and Loyalty Programs. This feature meets
one of the success factors in the area operation, which is providing friendly interface to
customers.

As a support to the 24/7 interaction of buyers and sellers of EBay, its proprietary Skype
VoIP technology allows free telephone calls to any telephone number using the help of
broadband internet connection. Moreover, the virtual platform also provides full support for the
buying process from registration of bidding to closing the transaction, community bulletins,
purchase protection program, personal homepage with tailored information, automated
merchant services, etc. All of these are created in order for the customers to have proper
communication and build trusts to each other. The communication segment of EBay promotes
reliability and trustworthiness among buyers and seller, which is considered in gauging the
success of the operation area.
After every auction, transaction is completed through the settlement of payments and
fee. EBay made this activity easier and convenient for the customer by acquiring PayPal and Bill
Me Later in 2002 and 2008, respectively. PayPal is used by customers to pay and transfer
online money in over 190 markets worldwide in 19 currencies. Meanwhile, Bill Me Later caters
to customers who purchase on credit online. The company can earn from transaction fees
generated from PayPal and interest on the outstanding balances generated from Bill Me Later.
Primarily, EBay provides a virtual online business community for buyers and sellers daily
worldwide. The company creates the marketplace, facilitates payment as well as communication
for many different products through their three business segments. Basically, it offers a very
wide range of categories and products that are for sale in their eBay.com website. EBay builds
and grows on consumer-centric entrepreneurial business models that create customer-driven
values. Its strong suit lies in its global presence, as reflected in the hundreds of cities and
regions of the world it serves.
The Marketplaces segment, specifically its main website, is the companys core platform,
which constantly has a growth in the number of products and website features. However, this
growth in website features bombards the customers, making it less appealing. It also offers
supplemental services such as customer support as well as other security and safety programs
for its customers. For its communications segment, the company operates Skype, which allows
buyers and sellers to communicate 24/7. Moreover, PayPal and Bill Me Later facilitate the
transactions in EBays Payments segments. Favorably, Skype is the worlds fastest growing
Internet communication software platform while PayPal is a global leader in online payment
which is available to online and offline individual or business.
EBay provides a virtual marketplace auction wherein the pricing of items sold are
dictated by the market itself. In various markets of the Marketplaces platform, pricing is carried
out in two ways: traditional auction-style and fixed-price options. The former style of listing
allows the seller to select minimum price for opening bids while the latter allows the seller to
name a sale price upon listing instead of waiting for the expiration period. On the other hand,
communication fees are measured through subscriptions or minute charges.
The company promotes itself and the products/service it offers through a variety of ways.
These involve partnering with other companies and providing the customers with services that
promote a safe trading environment. The company also invests in Loyalty programs and user
supports such as personal pages, bulletins, announcements and many more.
5.2.2 Financial Dimension
EBays financial performance is basically dependent on its capability of realizing the
synergistic effect between the existing and newly acquired companies. Moreover, the company
is also challenged to recoup the goodwill costs after acquiring certain businesses such as the

$1.4billion goodwill costs associated with the purchase of Skype. As of 2007, EBays total costs
have dramatically increased due to improvements on customer support, website operations,
payment processing, and telecommunications operations.
The financial performance of the company is declining in terms of revenue and
gross margin. The total revenues have increased for an average of 19.92% from 2006 to 2008
however; the rise of 28.52% in total revenues from 2006 to 2007 was not sustained in the
following year and has able to increase sales by only 11.33%. Gross profit margin grew by
25.39% in 2006 to 2007 but shrank by 6.83% in 2007 to 2008.
On the good side, total operating expenses which escalated by 60.98% in 2007 from
2006, has decreased by 20% in 2008. As a result, net income which was down by 69.06% in
2007 has risen substantially to 170.96%.
The company did not declare dividends in 2008. Hence, the maximum sustainable
growth rate is just equal to the return on total equity of 8.14%. Given the existing financial
condition, the 8.14% growth rate is achievable as long as the company continues to recover
from the 2007s whopping increase of total costs. Moreover, as seen in the 2008 financial
analysis, the company is gradually recovering, though the increase in sales and net income is
not within the normal range from the previous years. If this positive improvement will be
sustained, profitability and productivity as well be realizable.

Year Ended December 31

5-Year Consolidated
Statement of Income: (in
thousands, except per
share amounts)

Horizontal Analysis

2006

20062008 2007

2007

20072008

Vertical

Average
Inc/Dec

Net revenues

5,969,741

7,672,329

8,541,261

28.52%

11.33%

19.92%

2006
100.00
%

2007
100.00
%

2008
100.00%

Cost of net revenues

1,256,792

1,762,972

2,228,069

40.28%

26.38%

33.33%

21.05%

22.98%

26.09%

Gross profit
Operating expenses:

4,712,949

5,909,357

6,313,192

25.39%

6.83%

16.11%

78.95%

77.02%

73.91%

Sales and marketing

1,587,133

1,882,810

1,881,551

18.63%

-0.07%

9.28%

26.59%

24.54%

22.03%

Product development
General and
administrative
Provision for transaction
and losses
Amortization of acquired
intangible assets

494,695

619,727

725,600

25.27%

17.08%

21.18%

8.29%

8.08%

8.50%

744,363

904,681

998,871

21.54%

10.41%

15.97%

12.47%

11.79%

11.69%

266,724

293,917

347,453

10.20%

18.21%

14.20%

4.47%

3.83%

4.07%

197,078

204,104

234,916

3.57%

15.10%

9.33%

3.30%

2.66%

2.75%

Restructuring

49,119

Impairment of goodwill

1,390,938

Total operating expenses

3,289,993

5,296,177

4,237,510

60.98%

Income from operations

Interest and other income,
net

1,422,956

613,180

2,075,682

-56.91%

130,017

154,271

115,919

Interest expense

(5,916)

(16,600)

(8,037)

0.58%
18.13%

18.65%
180.59
%

-19.99%
238.51
%

20.49%

55.11%

69.03%

49.61%

90.80%

23.84%

7.99%

24.30%

-24.86%

-3.10%

2.18%

2.01%

1.36%

-51.58%

64.51%

-0.10%

-0.22%

-0.09%

Income before incom

taxes

1,547,057

750,851

2,183,564

Provision for income taxes

(421,418)

(4,012,600)

(404,090)

-51.47%
852.17
%

Net income
Net income per share:

1,125,639

348,251

1,779,474

-69.06%

$
0.80
$
0.79

$
0.26
$
0.25

$
1.37
$
1.36

Basic

1,399,251

1,358,797

Diluted

1,425,472

1,376,174

Basic
Diluted
Weighted average shares:

eBay Consolidated Balance Sheet

CONSOLIDATED BALANCE SHEET
ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Loans receivable, net
Funds receivable and customer
accounts
Other current assets
Total current assets
Long-term incestments
Property and equipment, net

190.81
%
-89.93%
410.97
%

69.67%

25.91%

9.79%

25.56%

381.12%

-7.06%

-52.30%

-4.73%

170.96%

18.86%

4.54%

20.83%

179.71%

0.00%

0.00%

0.00%

187.82%

0.00%

0.00%

0.00%

-68.35%

426.92
%
444.00
%

1,303,454

-2.89%

-4.07%

-3.48%

23.44%

17.71%

15.26%

1,312,608

-3.46%

-4.62%

-4.04%

23.88%

17.94%

15.37%

-67.50%

Horizontal
December
December
31,2007
31,2008
2007-2008
(in thousands, except par value amounts)

Vertical
2007

2008

4,221,191
676,264
480,557
0

3,188,928
163,734
435,197
570,071

-24.45%
-75.79%
-9.44%

27.47%
4.40%
3.13%
0.00%

20.45%
1.05%
2.79%
3.66%

1,513,578
230,915
7,122,505
138,237
1,120,452

1,467,962
460,698
6,286,590
106,178
1,198,714

-3.01%
99.51%
-11.74%
-23.19%
6.98%

9.85%
1.50%
46.35%
0.90%
7.29%

9.41%
2.95%
40.32%
0.68%
7.69%

Goodwill
Intangible assets, net
Other assets
Total assets
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts Payable
Funda payable and amounts due to
customers
Accrued expenses and other current
liabilities
Deferred revenue and customer
advances
Income taxes payable
Borrowings under credit agreement
Total current liabilities
Deferred and other tax liabilities, net
Other liabilities
Total liabilities
Stockholders' equity
Common stocl, $0.001 par value;
3,580,000 shares authorized;
1,350,219 and 1,282,025 shares
outstanding
Additional paid-in capital
Treasury stock at cost, 107,522 and
188,200 shares
Retained earnings
Accumulated other comprehensive
income
Total stockholders' equity

6,257,153
596,038
131,652

7,025,398
736,134
239,425

12.28%
23.50%
81.86%

40.72%
3.88%
0.86%

15,366,037

15,592,439

1.47%

100.00%

45.06%
4.72%
1.54%
100.00
%

156,613

170,332

8.76%

1.02%

0.65%

1,513,578

1,467,962

-3.01%

9.85%

5.57%

951,139

784,774

-17.49%

6.19%

2.98%

166,495
111,754
200,000
3,099,579
510,557
51299
3,661,435

181,596
100,423
1,000,000
3,705,087
753,965
49529
4,508,581

9.07%
-10.14%
400.00%
19.54%
47.67%
-3.45%
23.14%

1.08%
0.73%
1.30%
20.17%
3.32%
0.33%
23.83%

0.69%
0.38%
3.80%
14.06%
2.86%
0.19%
17.11%
0.00%

1,458
8,996,303

1,470
9,585,853

0.82%
6.55%

0.01%
58.55%

0.01%
36.38%

(3,184,981)
4,190,546

5,376,970
5,970,020

-268.82%
42.46%

-20.73%
27.27%

20.41%
22.66%

1,701,276
11,704,602

903,485
21,837,798

-46.89%
86.57%

11.07%
76.17%

3.43%
82.89%

Total liabilities and stockholders'

equity

Financial Ratios
Liquidity Ratios
Current Ratio
Leverage Ratios
Debt-to-Total Assets Ratio
Debt-to-Equity Ratio
Times-Interest Earned ratio
Fixed Asset Turnover
Total Asset Turnover
Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Total Assets
(ROA)
Return on Total Equity
(ROE)
Earnings per Share (Basic)
Earnings per Share
(Diluted)
Growth Ratios
Sales
Net Income

$15,366,037

$26,346,379

71.46%

100.00%

100.00
%

2006

2007

2008

20072008

20062007

Averag
e

n/a

2.30

1.70

-26.16%

n/a

n/a

n/a
n/a
n/a
n/a
n/a

23.83%
31.28%
36.94
6.85
0.50

28.92%
20.65%
258.27
7.13
0.55

21.35%
-34.00%
599.18%
4.06%
9.71%

n/a
n/a
n/a
n/a
n/a

n/a
n/a
n/a
n/a
n/a

0.789472944
0.24

77.02%
10.00%

73.91%
25.66%

-4.03%
156.52%

-2.44%
-58.03%

0.188557427

4.54%

20.83%

358.99%

-75.93%

-3.24%
49.24%
141.53
%

n/a

2.27%

11.41%

403.56%

n/a

n/a

n/a
$
0.80
$
0.79

2.98%
$
0.26
$
0.25

8.15%
$
1.37
$
1.36

173.87%

n/a

426.92%

-67.50%

4.44

-68.35%

n/a
179.71
%
187.82
%

28.52%

11.33%

-0.690619284

4.109745557

19.92%
170.96
%

Dividend Pay-out Ratio

Common Shares
Outstanding
Dividends
Maximum Sustainable
Growth

0
1,303,454
0
0.081485963

5.2.3 Management Dimension

5.2.4 Research and Development Dimension
5.2.5 Management of Information System
5.2.6 Others
5.3 The Internal Factor Evaluation (IFE) Matrix
Key Internal Factors
Strengths
1) As of 2008, eBay has a 14% share of the global ecommerce with 86.3 million active users
2) EBay offers millions of items for trade through auctionstyle and fixed-price trading in 39 markets
3) EBay provide a trusted and safe trading environment
by offering the following services: Feedback Forums, Safe
Harbor Program, Verified Rights Owner Program,
Customer Support, Value-Added Tools and services and
Loyalty Programs
4) Payments Divisions 11% year over year growth,
Communications segments 25% year-over-year growth
5) (Marketplaces Segment) Stubhub is a leading US ticket
marketplace that allows users to buy and sell tickets to
sporting events, theater, and other entertainment events
6) (Marketplaces Segment) Rent.com, acquired by eBay,
is the most visited online apartment listings with service
with over 20,000 listings
7) (Payments Segment) PayPal is accepted both online
and offline in 190 markets worldwide and processes in 19
currencies, had an increase of 27% in net total payment
volume from 2007 to 2008
8) (Communications Segment) Skype is the worlds
fastest growing internet communication software
platform, with approx. 405.3 million registered users, and
has been downloaded a billion times
9) EBays net profit margin, return on total assets, and
return on equity have increased by 3.59%, 4.03%, and
1.74%, accordingly from 2007 to 2008.
Threats
1) Litigation with famous brands/ companies for the sale
of pirated or counterfeit items
2) Marketplaces division reporting a 14 percent yearover-year decline from 2007 to 2009
3) eBay undertook a 10% reduction in its workforce with
the elimination of 1,000 jobs in 2008 and incurred $49,00
in restructuring costs
4) Downward trend in total revenues, revenues from
Marketplaces, Payments and Communication division

Weigh
t

Rati
ng

Weighte
d Score

0.1

0.3

0.08

0.32

0.07

0.21

0.09

0.36

0.05

0.2

0.05

0.2

0.05

0.2

0.06

0.24

0.08

0.24

0.08

0.08

0.07

0.14

0.07
0.08

1
1

0.07
0.08

from 2007 to 2008, as compared to growth in 2006 to

2007
5) Expansion of EBay in US and International has strained
the management, operations, and financial resources,
specifically in areas such as Website Usability, Website
Stability, Customer Account Billing, and Customer
Account
Total

VI.

0.07
1.00

0.07
2.71

The Strategic Agenda

6.1 SWOT Matrix

Strengths
1) As of 2008, eBay has a
14% share of the global ecommerce with 86.3 million
active users
2) EBay offers millions of items
for trade through auction-style
and fixed-price trading in 39
markets
3) eBay provide a trusted and
safe trading environment by
offering the following services:
Feedback Forums, Safe Harbor
Program, Verified Rights Owner
Program, Customer Support,
Value-Added Tools and services
and Loyalty Programs
4) Payments Divisions 11%
year over year growth,
Communications segments
25% year-over-year growth

Weaknesses
1) Litigation with
famous brands/
companies for the sale
of pirated or
counterfeit items
2) Marketplaces
division reporting a 14
percent year-overyear decline from
2007 to 2009
3) eBay undertook a
10% reduction in its
workforce with the
elimination of 1,000
jobs in 2008 and
incurred $49,00 in
restructuring costs

5) (Marketplaces Segment)
Stubhub is a leading US ticket
marketplace that allows users to
buy and sell tickets to sporting
events, theater, and other
entertainment events

4) Downward trend in
total revenues,
revenues from
Marketplaces,
Payments and
Communication
division from 2007 to
2008, as compared to
growth in 2006 to
2007

6) (Marketplaces Segment)
Rent.com, acquired by eBay, is
the most visited online

5) Expansion of EBay
in US and
International has

apartment listings with service

with over 20,000 listings
7) (Payments Segment) PayPal
is accepted both online and
offline in 190 markets worldwide
and processes in 19 currencies,
had an increase of 27% in net
total payment volume from 2007
to 2008

strained the
management,
operations, and
financial resources,
specifically in areas
such as Website
Usability, Website
Stability, Customer
Account Billing, and
Customer Account

8) (Communications Segment)
Skype is the worlds fastest
growing internet communication
software platform, with approx.
405.3 million registered users,
and has been downloaded a
billion times

Opportunities
1) Web conferencing
expected to grow 14.1
percent from 2008
2) Consumer
electronics accounting
for the largest
percentage of trade
(17%) in eBay.com
3) Anticipated
synergistic benefits of
recent acquisitions
and good will costs
4) Growth in
international markets,
57% of the
Marketplaces
revenues came from
markets outside the
United States
5) Profitability is also

9) EBays net profit margin,

return on total assets, and
return on equity have increased
by 3.59%, 4.03%, and 1.74%,
accordingly from 2007 to 2008.
SO Strategies
1) Cater to global companies that have
headquarters all over the world. Skype as a
means for web conferencing among
businessmen worldwide. (S8, O1)
2) Develop new platforms solely for
electronic products. (S1, O2)
3) Advertise services to International
Market; Acquire local online e-commerce
sites; Add/develop features to the existing
platforms that are specifically applicable
and relevant to the country being served
(e.g., Selling of tickets for local but large
events-- KPOP concerts in Manila,
Philippines); Acquire shipping companies
for the delivery of goods bought from the
site (S5, S6, S7, S8, 04)
4) Increase market share in International
segment by intensive marketing strategies,
Acquire local online e-commerce site (S1,
S2, O5)

WO Strategies
1) Develop new
features for the site
that will prevent fraud
(e.g., authorization
and authentication
features) (W1, O6)
2) Add/Develop new
features for the
current platforms.
Declining sales in the
market would possibly
mean that the services
are in the maturity
stage. (W2, O4)
3) Add/Develop new
features that will
address the website
usability, Website
Stability, Customer
Account Billing, and
Customer Account
(W5, O3)

affected by currency
exchange rates,
weaker dollar inflates
foreign denominated
revenues

5) introduce new platforms ((S3, O6)

6) Buyers and sellers

enjoy trading among a
wide selection of
goods and services in
a secure, trusted, and
efficient commerce
environment

Threats
1) Several
competitors and a
wide range of
alternatives available
to customers
2) The payments
segment competes
against other online
payment services and
offline payment
methods, like cash,
check, money order,
and established credit
card merchants
3) Communications
segment faces
intense competition
from local telephone
or cable companies
and other VoIP
providers, with
traditional
communications
companies offering
bundled services
4) Competition in the
marketplaces
segment is expected

ST Strategies
1) Improve product offerings of Skype, add
more features, greater accessibility (S8, S4,
T3)
2) Improve the service offerings of PayPal,
working towards less hassle payment
process (S7, S4, T2)
3) Lessen the costs available to customers
(S1, S2,T1)
4) Invest on new security features to the
website and improve identity security in
order to attract new customers and retain
new ones (S2, S3, T4, T6)
5) Increase promotional efforts for
Rent.com (S6,T1,T4)
6) Expand to global markets, increase
visibility in international markets to allow far
more interactions of people in different
parts of the world (S1,S4,T3)

WT Strategies
1) Add/Develop new
features that will
address fraudulent
transactions (W1, T6)
2) Add/Develop new
features of the existing
platforms. The decline
in revenues could be a
result of the services
reaching the maturity
stage. (W4, T2, T3,
T4)

to increase because
barriers to entry in this
segment is low and
new online sites can
be launched at a
nominal cost
5) Mortgage and
worldwide credit
financial crisis
6) Security breach
and identity theft
6.2 SPACE Matrix
Rating
s
Financial Position (1,7)
Payments Divisions 11% year over year growth, Communications segments 25%
year-over-year growth
PayPal had an increase of 27% in net total payment volume from 2007 to
2008
EBays net profit margin have increased by an average of 141.53% from 2006 to
2008; return on total assets, and return on equity have increased by 403.56% and
173.87%, respectively, from 2007 to 2008
Marketplaces division reporting a 14 percent year-over-year decline from 2007 to
2009
eBay undertook a 10% reduction in its workforce with the elimination of 1,000 jobs in
2008 and incurred $49,00 in restructuring costs
Downward trend in total revenues, revenues from Marketplaces, Payments and
Communication division from 2007 to 2008, as compared to growth in 2006 to 2007
Competitive Position (-1,-7)
As of 2008, eBay has a 14% share of the global e-commerce with 86.3 million active
users
EBay offers millions of items for trade through auction-style and fixed-price trading in
39 markets
eBay provide a trusted and safe trading environment by offering the following
services: Feedback Forums, Safe Harbor Program, Verified Rights Owner Program,
Customer Support, Value-Added Tools and services and Loyalty Programs
Stubhub is a leading US ticket marketplace that allows users to buy and sell tickets
to sporting events, theater, and other entertainment events
PayPal is accepted both online and offline in 190 markets worldwide and processes
in 19 currencies
Skype is the worlds fastest growing internet communication software platform, with
approx. 405.3 million registered users, and has been downloaded a billion times
Anticipated synergistic benefits of recent acquisitions and good will costs

7
6
7
3
3
3

-2
-2
-2
-1
-2
-1
-3

Expansion of EBay in US and International has strained the management,

operations, and financial resources, specifically in areas such as Website Usability,
Website Stability, Customer Account Billing, and Customer Accounts
Industry Position (1,7)
Web conferencing expected to grow 14.1 percent from 2008 through 2011
Consumer electronics accounting for the largest percentage of trade (17%) in
eBay.com
Buyers and sellers enjoy trading among a wide selection of goods and services in a
secure, trusted, and efficient commerce environment
Barriers to entry in this segment is low and new online sites can be launched at a
nominal cost

-5

7
6
7
4

Stability Position (-1,-7)

-6
Litigation with famous brands/ companies for the sale of pirated or counterfeit items
Several competitors and a wide range of alternatives available to customers
-4
The payments segment competes against other online payment services and offline
payment methods, like cash, check, money order, and established credit card
-5
merchants
Communications segment faces intense competition from local telephone or cable
companies and other VoIP providers, with traditional communications companies
-5
offering bundled services
Profitability is also affected by currency exchange rates
-3
Mortgage and worldwide credit financial crisis
-5
Security breach and identity theft
-5
SP Average = -4.71429
IP Average
=6
CP Average = -2.25
FP Average= 4.83
Directional Vector Coordinates:
x-axis=
3.75
y-axis=
0.11905

Since the directional vector lies on the first quadrant of the first matrix, EBay should
pursue an aggressive strategy. The company can choose between integration, intensive and
diversification strategies.
6.3 BCG Matrix
6.4 IE

High
3.0 to 4.0

EFE Total
Weighted
Scores

Strong
3.0 to 4.0
I

IFE Total Weighted Scores

Average
Weak
2.0 to 2.99
1.0 to 1.99
II
III

Medium
2.0 to 2.99

IV

Low
1.0 to 1.99

VII

VIII

20.83%

VI

VIII

Since the circle is located on the fifth cell, EBay should pursue hold and maintain strategy. The
company can either do market penetration or product development.
6.5 GRAND STRATEGY Matrix

eBay

EBay is located in the first quadrant of the matrix since the company has a rapid growth rate of
19.92%. Moreover, it has also a relatively strong competitive position as seen in the CPM
matrix. EBay can pursue any of the Integration, intensive, and related diversification strategies.
Summary of Matrices

Market Penetration
Market
Development
Product
Development
Forward
Integration
Backward
Integration
Horizontal
Integration
Related
diversification
Unrelated
diversification
Retrenchment
Divestiture
Liquidation

SPACE

Grand
Strategy

IE Matrix

Scores
3
2

6.6 QSPM Matrix

IFE
Strengths
As of 2008, eBay has a 14% share of the global ecommerce with 86.3 million active users
EBay offers millions of items for trade through auctionstyle and fixed-price trading in 39 markets
eBay provide a trusted and safe trading environment
by offering the following services: Feedback Forums,
Safe Harbor Program, Verified Rights Owner Program,
Customer Support, Value-Added Tools and services
and Loyalty Programs
Payments Divisions 11% year over year growth,
Communications segments 25% year-over-year
growth
(Marketplaces Segment) Stubhub is a leading US
ticket marketplace that allows users to buy and sell
tickets to sporting events, theater, and other

Weight
0.1

Alternative Strategies
Product
Developmen
Market
t
Penetration
AS
TAS AS
TAS
4

0.4

0.3

3
3

0.27
0.15

4
4

0.3
6
0.2

0.08

0.07
0.09
0.05

entertainment events
(Marketplaces) Rent.com, acquired by eBay, is the
most visited online apartment listings with service with
over 20,000 listings
(Payments Segment) PayPal is accepted both online
and offline in 190 markets worldwide and processes in
19 currencies, had an increase of 27% in net total
payment volume from 2007 to 2008
(Communications Segment) Skype is the worlds
fastest growing internet communication software
platform, with approx. 405.3 million registered users,
and has been downloaded a billion times
EBays net profit margin, return on total assets, and
return on equity have increased by 3.59%, 4.03%, and
1.74%, accordingly from 2007 to 2008.
Weakness
Litigation with famous brands/ companies for the sale
of pirated or counterfeit items
Marketplaces division reporting a 14 percent yearover-year decline from 2007 to 2009
eBay undertook a 10% reduction in its workforce with
the elimination of 1,000 jobs in 2008 and incurred
$49,00 in restructuring costs
Downward trend in total revenues, revenues from
Marketplaces, Payments and Communication division
from 2007 to 2008, as compared to growth in 2006 to
2007
Expansion of EBay in US and International has
strained the management, operations, and financial
resources, specifically in areas such as Website
Usability, Website Stability, Customer Account Billing,
and Customer Account
Opportunities
Web conferencing expected to grow 14.1 percent from
2008 through 2011
Consumer electronics accounting for the largest
percentage of trade (17%) in eBay.com
Anticipated synergistic benefits of recent acquisitions
and good will costs
Growth in international markets, 57% of the
Marketplaces revenues came from markets outside the
United States
Profitability is also affected by currency exchange
rates, weaker dollar inflates foreign denominated
revenues
Buyers and sellers enjoy trading among a wide
selection of goods and services in a secure, trusted,
and efficient commerce environment

0.05

0.15

0.2

0.05

0.15

0.2

0.06

0.18

0.2
4

0.08

0.08

0.32

0.07

0.28

0.1
6
0.1
4

0.07

0.28

0.1
4

0.08

0.32

0.08

0.24

0.2
4
0.3
2

0.1

0.4

0.3

0.1

0.3

0.4

0.05

0.15

0.2

0.08

0.32

0.1
6

0.07

0.08

Threats
Several competitors and a wide range of alternatives
available to customers
The payments segment competes against other online
payment services and offline payment methods, like
cash, check, money order, and established credit card
merchants
Communications segment faces intense competition
from local telephone or cable companies and other
VoIP providers, with traditional communications
companies offering bundled services
Competition in the marketplaces segment is expected
to increase because barriers to entry in this segment is
low and new online sites can be launched at a nominal
cost
Mortgage and worldwide credit financial crisis
Security breach and identity theft

0.08

0.32

0.2
4

0.08

0.32

0.2
4

0.08

0.32

0.2
4

0.08
0.1

3
2

0.24
0.2

4
4

0.09

0.36

Total

5.67

0.3
2
0.4
0.1
8
5.1
8

6.7 Recommendations: Strategic Choice

VII.

Implications of the Strategic Agenda

7.1 Management
7.2 Marketing
7.3 Production and Operation
Since the strategy to be pursued is product and development, it is expected that operation area
of EBay will be broadened. This is because part of the strategy is to either add new or develop
new features of the existing platforms of the company. Moreover, the company should enhance
monitoring the new sites since safe and reliable e-commerce environment is one of the main
concerns of buyers and sellers the market.

7.4 Finance
7.5 Accounting
Forecasted Income
Statement (3-year)
Assumptions

2009

Net revenues

19.92%

Cost of net revenues

33.33%

Gross profit

Sales and marketing

Product development
General and
administrative
Provision for
transaction and
losses
Amortization of
acquired intangible
assets

3,960,724

2,970,651

9.28%

21.18%
15.97%
14.20%
9.33%

2,056,185
879,276
1,158,436
396,808
256,835
49,119

-3.10%

5,280,773

2,455,582

1,065,500

1,291,164

1,343,490

1,558,106

453,175

517,548

280,800

307,000
49,119

2,475,619

14,730,874

2,247,027

49,119

5,439,111

4,796,659

2011

9,804,093

8,443,820

Restructuring
Impairment of
goodwill
Total operating
expenses
Income from
operations
Interest and other

12,283,619

10,242,929

7,272,278

Operating expenses:

2010

6,178,519
3,625,573

3,004,709
108,837

105,460

income, net
Interest expense

112,322
64.51%

Income before
income taxes
Provision for income
taxes
Net income
Gross Profit Margin
Operating Margin
Net Profit Margin

(21,750)

(13,221)

3,135,296

2,601,163
4.73% of total sales
(normal range from
2006 to 2008)

581,015

484,491
2,116,672

3,766,813
696,770
3,070,042

2,554,281
71.00%
24.17%
20.66%

(35,779)

68.74%
24.46%
20.79%

66.55%
24.61%
20.84%

The forecasted net income shows that the total net revenues are expected to increase by 19.92%. This figure, the average
increase of revenues, is obtained from the horizontal analysis of the income statement in the financial dimension part. Due to lack of
data, the group considers this figure as the basis for forecasting the sales of EBay for the three-year period. Also, accounts such as
cost of revenues, product and development, general and administrative, provision for transaction and losses, interest and other
incomenet, and interest were forecasted using each of their average increase from year 2006 to 2008 as computed in the
horizontal analysis of the income statement.
Meanwhile, in forecasting the provision of taxes, the average amount allocated in this account is around 4% based on the
vertical analysis of the income statement. Thus, the group assumed that payments for taxes will be just on the same range as on the
2008s provision of taxes as a percentage of the total sales, 4.73%.
The increase on total revenues is accompanied with the increase of cost revenues. Based on the forecast, gross profit margin
will decrease. Thus, the company must look for avenues to at least minimize this expense. Also, operating margin and net profit
margin is expected to remain within the range of 24% and 20%m respectively, though it would be better if the company could
increase this on the actual years.

7.6 Research and Development

7.7 Managerial of Information Systems
7.8 Corporate Social Responsibility
7.9 Environmental Concerns
VIII.

Strategy Implementation: The Balanced Scorecard

8.1 Functional Fits

8.2 Administrative Fits
8.3 Plan of Action
The suggested action plan for EBay is composed of three (3) stages. This is explained further in
the box below.
Strategy: Product Development
Action Step
Responsible Parties

Start and End

Dates

Resources

STEP 1:
1) Expand the influence
of Starbucks through
capitalizing on their
current marketing
strategy and offering
the new varieties of
products.
2) Strengthen
relationship with current
alliances and joint
ventures with the
current partners (e.g.,
creating new variety of
Frappocino with Pepsi
Co.)

2009-2011

Starbucks and
Pepsi Co

2009

Debts and Equities

Legal Contracts

2010

Debts and Equities

Legal Contracts

STEP 2:
1) Form a new joint
venture and alliances
with multi-national firms.
(e.g., Proposal on
having a joint venture
with Tata Global
Beveragesworlds
largest manufacturer

Starbucks and Tata

Global Beverages

and distributor of tea)

STEP 3:
1) Starbucks should
open new retail
stores in untapped/
unsaturated market.
2) Starbucks should
also consider
acquiring other
brands aside from
their existing brands
(Seattles Best
Coffee, Torrefazione
Italia Coffee, Tazo
Tea, etc.) that are
related to the
companys core
products.

8.4 Strategic Control

Starbucks and
(Potential Market)

2010-2011

Debts and Equities

Legal Contracts