University of the Philippines Cebu CollegeManagement Division

CASE NO. Title

Submitted toProf. Yvonne C. GomosMonth, Day, Year

Base, Joseph Arnie I.Dionson, Jan Zuriel A.Demillo Jr, Danilo S.

Executive SummaryI. Statement of the Problem/ Identification of Key Problem(s) and Strategic IssuesII. Vision and Mission Statements2.1 Existing Vision Statement 2.2 Existing Mission Statement We intend to continue to work toward our mission of creating the worlds leadingecommerce franchise by investing in our core Marketplaces segment and continuing tobuild our adjacent Marketplaces businesses. (2007 Annual Report)2.3 Evaluation of the Existing Vision and Mission StatementsEvaluation of the Vision/Mission StatementsComponentPresentNot PresentDescription

Customers The world (implied)

Products/Services e-commerce franchise

Markets The world (global)

Technology Investing in our core marketplaces segment (implied)

Concern for Survival, Profitability and Growth To be the worlds leading ecommerce franchise (implied)

Philosophy

Self-Concept Investing in Marketplaces segment and continuing to build Marketplaces business

Concern for Public Image

Concern for Employees

2.4 Proposed or Retained Vision and Mission StatementsProposed Vision StatementTo become the largest and the leading ecommerce platform in the worldProposed Mission StatementEBay, 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.III. Statement of ObjectivesIV. Analysis of the External Environment4.1 Assessment of the Firms Opportunities and Threat 4.1.1 Social, Economic, Political, and Ecological Factors Sales Tax and other taxesThe 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 ItemsConsidering 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 conditionsThe 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 RatesBasically, 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 measures4.1.2 Product/ Service and Technological FactorsUpsurge of online classified advertisementsOnline 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 changeCompanies 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 HighThe 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-HighThe 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 HighBasically, 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 lowBargaining 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) MatrixKey External FactorsWeightRatingWeighted Average Score

Opportunities

1) Web conferencing expected to grow 14.1 percent from 2008 through 20110.0830.24

2) Consumer electronics accounting for the largest percentage of trade (17%) in eBay.com0.0830.24

3) Anticipated synergistic benefits of recent acquisitions and good will costs0.130.3

4) Growth in international markets, 57% of the Marketplaces revenues came from markets outside the United States0.140.4

5) Profitability is also affected by currency exchange rates, weaker dollar inflates foreign denominated revenues0.0540.2

6) Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment0.0840.32

Threats

1) Several competitors and a wide range of alternatives available to customers0.0820.16

2) The payments segment competes against other online payment services and offline payment methods, like cash, check, money order, and established credit card merchants0.0830.24

3) Communications segment faces intense competition from local telephone or cable companies and other VoIP providers, with traditional communications companies offering bundled services0.0830.24

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 cost0.0820.16

5) Mortgage and worldwide credit financial crisis0.110.1

6) Security breach and identity theft0.0920.18

Total1.002.78

4.3 The Competitive Profile Matrix (CPM)Key Success Factors/Company StrengthsImportance WeighteBayAmazon

Brand Image/Reputation0.1540.640.6

Convenience0.0830.2430.24

Customer Service0.140.440.4

Reliability/Trustworthy0.1240.4840.48

Friendly Interface0.0830.2430.24

Global Distribution0.0940.3630.27

Financial Position0.1530.4540.6

Speed of Transaction0.0830.2430.24

Technological Innovation0.1540.640.6

Weighted Total13.613.67

Brand Image/ReputationA 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/TrustworthyBuyers 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 InterfaceeBay.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 DistributionIn 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 MarketRegional Markets

Asia PacificAustralia, China, Hong Kong, India, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan

EuropeAustria, Belgium, France, Germany, Ireland, Italy, Netherlands, Poland, Spain, Sweden, Switzerland, United Kingdom

North AmericaCanada, United States

Latin AmericaArgentina, 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 PositionAmazon, 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 TransactionSellers 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 InnovationAmazon 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 Environment5.1 Profile of Current Strategy5.1.1 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 CompetitionEBay, 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-to-person 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 e-commerce 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 early-stage, 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:

1. Creating economic opportunity1. Enabling greener commerce1. Powering giving (i.e. charitable giving by eBayers)1. Driving employee engagement (i.e. in social innovation)1. Running a responsible business1. 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 DimensionOperationsBasically, 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 31Horizontal AnalysisVertical

5-Year Consolidated Statement of Income: (in thousands, except per share amounts)2006200720082006-20072007-2008Average Inc/Dec200620072008

Net revenues 5,969,741 7,672,329 8,541,261 28.52%11.33%19.92%100.00%100.00%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 4,712,949 5,909,357 6,313,192 25.39%6.83%16.11%78.95%77.02%73.91%

Operating expenses:

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 494,695 619,727 725,600 25.27%17.08%21.18%8.29%8.08%8.50%

General and administrative 744,363 904,681 998,871 21.54%10.41%15.97%12.47%11.79%11.69%

Provision for transaction and losses 266,724 293,917 347,453 10.20%18.21%14.20%4.47%3.83%4.07%

Amortization of acquired intangible assets 197,078 204,104 234,916 3.57%15.10%9.33%3.30%2.66%2.75%

Restructuring - - 49,119 0.58%

Impairment of goodwill - 1,390,938 - 18.13%

Total operating expenses 3,289,993 5,296,177 4,237,510 60.98%-19.99%20.49%55.11%69.03%49.61%

Income from operations 1,422,956 613,180 2,075,682 -56.91%238.51%90.80%23.84%7.99%24.30%

Interest and other income, net 130,017 154,271 115,919 18.65%-24.86%-3.10%2.18%2.01%1.36%

Interest expense (5,916) (16,600) (8,037)180.59%-51.58%64.51%-0.10%-0.22%-0.09%

Income before incom taxes 1,547,057 750,851 2,183,564 -51.47%190.81%69.67%25.91%9.79%25.56%

Provision for income taxes (421,418) (4,012,600) (404,090)852.17%-89.93%381.12%-7.06%-52.30%-4.73%

Net income 1,125,639 348,251 1,779,474 -69.06%410.97%170.96%18.86%4.54%20.83%

Net income per share:

Basic $ 0.80 $ 0.26 $ 1.37 -67.50%426.92%179.71%0.00%0.00%0.00%

Diluted $ 0.79 $ 0.25 $ 1.36 -68.35%444.00%187.82%0.00%0.00%0.00%

Weighted average shares:

Basic 1,399,251 1,358,797 1,303,454 -2.89%-4.07%-3.48%23.44%17.71%15.26%

Diluted 1,425,472 1,376,174 1,312,608 -3.46%-4.62%-4.04%23.88%17.94%15.37%

eBay Consolidated Balance SheetHorizontalVertical

CONSOLIDATED BALANCE SHEETDecember 31,2007December 31,20082007-200820072008

(in thousands, except par value amounts)

ASSETS

Current Assets:

Cash and cash equivalents4,221,1913,188,928-24.45%27.47%20.45%

Short-term investments 676,264163,734-75.79%4.40%1.05%

Accounts receivable, net480,557435,197-9.44%3.13%2.79%

Loans receivable, net0570,0710.00%3.66%

Funds receivable and customer accounts1,513,5781,467,962-3.01%9.85%9.41%

Other current assets230,915460,69899.51%1.50%2.95%

Total current assets7,122,5056,286,590-11.74%46.35%40.32%

Long-term incestments138,237106,178-23.19%0.90%0.68%

Property and equipment, net1,120,4521,198,7146.98%7.29%7.69%

Goodwill6,257,1537,025,39812.28%40.72%45.06%

Intangible assets, net596,038736,13423.50%3.88%4.72%

Other assets131,652239,42581.86%0.86%1.54%

Total assets15,366,03715,592,4391.47%100.00%100.00%

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts Payable156,613170,3328.76%1.02%0.65%

Funda payable and amounts due to customers1,513,5781,467,962-3.01%9.85%5.57%

Accrued expenses and other current liabilities951,139784,774-17.49%6.19%2.98%

Deferred revenue and customer advances166,495181,5969.07%1.08%0.69%

Income taxes payable111,754100,423-10.14%0.73%0.38%

Borrowings under credit agreement200,0001,000,000400.00%1.30%3.80%

Total current liabilities3,099,5793,705,08719.54%20.17%14.06%

Deferred and other tax liabilities, net510,557753,96547.67%3.32%2.86%

Other liabilities5129949529-3.45%0.33%0.19%

Total liabilities3,661,4354,508,58123.14%23.83%17.11%

Stockholders' equity0.00%

Common stocl, $0.001 par value; 3,580,000 shares authorized; 1,350,219 and 1,282,025 shares outstanding1,4581,4700.82%0.01%0.01%

Additional paid-in capital8,996,3039,585,8536.55%58.55%36.38%

Treasury stock at cost, 107,522 and 188,200 shares(3,184,981)5,376,970-268.82%-20.73%20.41%

Retained earnings4,190,5465,970,02042.46%27.27%22.66%

Accumulated other comprehensive income1,701,276903,485-46.89%11.07%3.43%

Total stockholders' equity11,704,60221,837,79886.57%76.17%82.89%

Total liabilities and stockholders' equity$15,366,037$26,346,37971.46%100.00%100.00%

Financial Ratios2006200720082007-20082006-2007Average

Liquidity Ratios

Current Ration/a2.301.70-26.16%n/an/a

Leverage Ratios

Debt-to-Total Assets Ration/a23.83%28.92%21.35%n/an/a

Debt-to-Equity Ration/a31.28%20.65%-34.00%n/an/a

Times-Interest Earned ration/a36.94258.27599.18%n/an/a

Fixed Asset Turnovern/a6.857.134.06%n/an/a

Total Asset Turnovern/a0.500.559.71%n/an/a

Profitability Ratios

Gross Profit Margin0.78947294477.02%73.91%-4.03%-2.44%-3.24%

Operating Profit Margin0.2410.00%25.66%156.52%-58.03%49.24%

Net Profit Margin0.1885574274.54%20.83%358.99%-75.93%141.53%

Return on Total Assets (ROA)n/a2.27%11.41%403.56%n/an/a

Return on Total Equity (ROE)n/a2.98%8.15%173.87%n/an/a

Earnings per Share (Basic)$ 0.80$ 0.26$ 1.37426.92%-67.50%179.71%

Earnings per Share (Diluted)$ 0.79$ 0.25$ 1.364.44-68.35%187.82%

Growth Ratios

Sales28.52%11.33%19.92%

Net Income-0.6906192844.109745557170.96%

Dividend Pay-out Ratio0

Common Shares Outstanding1,303,454

Dividends0

Maximum Sustainable Growth0.081485963

5.2.3 Management Dimension5.2.4 Research and Development Dimension5.2.5 Management of Information System5.2.6 Others5.3 The Internal Factor Evaluation (IFE) MatrixKey Internal FactorsWeightRatingWeighted Score

Strengths

1) As of 2008, eBay has a 14% share of the global e-commerce with 86.3 million active users 0.130.3

2) EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets 0.0840.32

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 Programs0.0730.21

4) Payments Divisions 11% year over year growth, Communications segments 25% year-over-year growth0.0940.36

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 events0.0540.2

6) (Marketplaces Segment) Rent.com, acquired by eBay, is the most visited online apartment listings with service with over 20,000 listings 0.0540.2

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 20080.0540.2

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 times0.0640.24

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 2008.0.0830.24

Threats

1) Litigation with famous brands/ companies for the sale of pirated or counterfeit items0.0810.08

2) Marketplaces division reporting a 14 percent year-over-year decline from 2007 to 20090.0720.14

3) eBay undertook a 10% reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,00 in restructuring costs0.0710.07

4) Downward trend in total revenues, revenues from Marketplaces, Payments and Communication division from 2007 to 2008, as compared to growth in 2006 to 20070.0810.08

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 Account0.0710.07

Total1.002.71

VI. The Strategic Agenda6.1 SWOT MatrixStrengthsWeaknesses

1) As of 2008, eBay has a 14% share of the global e-commerce 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

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.

1) Litigation with famous brands/ companies for the sale of pirated or counterfeit items

2) Marketplaces division reporting a 14 percent year-over-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 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

OpportunitiesSO StrategiesWO Strategies

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 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 environment1) 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)

5) introduce new platforms ((S3, O6)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)

ThreatsST StrategiesWT Strategies

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 theft1) 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)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)

6.2 SPACE Matrix Ratings

Financial Position (1,7)

Payments Divisions 11% year over year growth, Communications segments 25% year-over-year growth7

PayPal had an increase of 27% in net total payment volume from 2007 to 20086

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 20087

Marketplaces division reporting a 14 percent year-over-year decline from 2007 to 20093

eBay undertook a 10% reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,00 in restructuring costs3

Downward trend in total revenues, revenues from Marketplaces, Payments and Communication division from 2007 to 2008, as compared to growth in 2006 to 20073

Competitive Position (-1,-7)

As of 2008, eBay has a 14% share of the global e-commerce with 86.3 million active users -2

EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets -2

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-2

Stubhub is a leading US ticket marketplace that allows users to buy and sell tickets to sporting events, theater, and other entertainment events-1

PayPal is accepted both online and offline in 190 markets worldwide and processes in 19 currencies-2

Skype is the worlds fastest growing internet communication software platform, with approx. 405.3 million registered users, and has been downloaded a billion times-1

Anticipated synergistic benefits of recent acquisitions and good will costs-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-5

Industry Position (1,7)

Web conferencing expected to grow 14.1 percent from 2008 through 20117

Consumer electronics accounting for the largest percentage of trade (17%) in eBay.com6

Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment7

Barriers to entry in this segment is low and new online sites can be launched at a nominal cost4

Stability Position (-1,-7)

Litigation with famous brands/ companies for the sale of pirated or counterfeit items-6

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 merchants-5

Communications segment faces intense competition from local telephone or cable companies and other VoIP providers, with traditional communications companies offering bundled services-5

Profitability is also affected by currency exchange rates-3

Mortgage and worldwide credit financial crisis-5

Security breach and identity theft-5

SP Average= -4.71429IP Average= 6CP Average= -2.25 FP Average= 4.83Directional Vector Coordinates: x-axis= 3.75y-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 Matrix6.4 IEIFE Total Weighted Scores

EFE Total Weighted ScoresStrong3.0 to 4.0Average2.0 to 2.99Weak1.0 to 1.99

High3.0 to 4.0I

IIIII

Medium2.0 to 2.99IV

V 20.83%

VI

Low1.0 to 1.99VII

VIIIVIII

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

eBayEBay 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 MatricesSPACEGrand StrategyIE MatrixScores

Market Penetration3

Market Development2

Product Development3

Forward Integration2

Backward Integration2

Horizontal Integration3

Related diversification2

Unrelated diversification1

Retrenchment

Divestiture

Liquidation

6.6 QSPM Matrix Alternative Strategies

IFEProduct DevelopmentMarket Penetration

StrengthsWeightASTASASTAS

As of 2008, eBay has a 14% share of the global e-commerce with 86.3 million active users 0.140.430.3

EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets 0.08

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 Programs0.07

Payments Divisions 11% year over year growth, Communications segments 25% year-over-year growth0.0930.2740.36

(Marketplaces Segment) Stubhub is a leading US ticket marketplace that allows users to buy and sell tickets to sporting events, theater, and other entertainment events0.0530.1540.2

(Marketplaces) Rent.com, acquired by eBay, is the most visited online apartment listings with service with over 20,000 listings 0.0530.1540.2

(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 20080.0530.1540.2

(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 times0.0630.1840.24

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 2008.0.0800

Weakness

Litigation with famous brands/ companies for the sale of pirated or counterfeit items0.0840.3220.16

Marketplaces division reporting a 14 percent year-over-year decline from 2007 to 20090.0740.2820.14

eBay undertook a 10% reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,00 in restructuring costs0.07

Downward trend in total revenues, revenues from Marketplaces, Payments and Communication division from 2007 to 2008, as compared to growth in 2006 to 20070.08

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 Account0.0740.2820.14

Opportunities

Web conferencing expected to grow 14.1 percent from 2008 through 20110.0840.3230.24

Consumer electronics accounting for the largest percentage of trade (17%) in eBay.com0.0830.2440.32

Anticipated synergistic benefits of recent acquisitions and good will costs0.140.430.3

Growth in international markets, 57% of the Marketplaces revenues came from markets outside the United States0.130.340.4

Profitability is also affected by currency exchange rates, weaker dollar inflates foreign denominated revenues0.0530.1540.2

Buyers and sellers enjoy trading among a wide selection of goods and services in a secure, trusted, and efficient commerce environment0.0840.3220.16

Threats

Several competitors and a wide range of alternatives available to customers0.0840.3230.24

The payments segment competes against other online payment services and offline payment methods, like cash, check, money order, and established credit card merchants0.0840.3230.24

Communications segment faces intense competition from local telephone or cable companies and other VoIP providers, with traditional communications companies offering bundled services0.0840.3230.24

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 cost0.0830.2440.32

Mortgage and worldwide credit financial crisis0.120.240.4

Security breach and identity theft0.0940.3620.18

Total5.675.18

6.7 Recommendations: Strategic ChoiceVII. Implications of the Strategic Agenda7.1 Management7.2 Marketing7.3 Production and OperationSince 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 Finance7.5 Accounting Forecasted Income Statement (3-year)

Assumptions200920102011

Net revenues19.92% 10,242,929 12,283,619 14,730,874

Cost of net revenues33.33% 2,970,651 3,960,724 5,280,773

Gross profit 7,272,278 8,443,820 9,804,093

Operating expenses: - - -

Sales and marketing9.28% 2,056,185 2,247,027 2,455,582

Product development21.18% 879,276 1,065,500 1,291,164

General and administrative15.97% 1,158,436 1,343,490 1,558,106

Provision for transaction and losses14.20% 396,808 453,175 517,548

Amortization of acquired intangible assets9.33% 256,835 280,800 307,000

Restructuring 49,119 49,119 49,119

Impairment of goodwill - -

Total operating expenses 4,796,659 5,439,111 6,178,519

Income from operations 2,475,619 3,004,709 3,625,573

Interest and other income, net-3.10% 112,322 108,837 105,460

Interest expense64.51% (13,221) (21,750) (35,779)

Income before income taxes 2,601,163 3,135,296 3,766,813

Provision for income taxes4.73% of total sales (normal range from 2006 to 2008) 484,491 581,015 696,770

Net income 2,116,672 2,554,281 3,070,042

Gross Profit Margin71.00%68.74%66.55%

Operating Margin24.17%24.46%24.61%

Net Profit Margin20.66%20.79%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 Systems7.8 Corporate Social Responsibility7.9 Environmental ConcernsVIII. Strategy Implementation: The Balanced Scorecard8.1 Functional Fits8.2 Administrative Fits8.3 Plan of ActionThe suggested action plan for EBay is composed of three (3) stages. This is explained further in the box below.Strategy: Product Development

Action StepResponsible PartiesStart and End DatesResources

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.)

Starbucks and Pepsi Co

2009-2011

2009

Debts and EquitiesLegal 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 and distributor of tea)

Starbucks and Tata Global Beverages

2010

Debts and EquitiesLegal Contracts

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.

Starbucks and (Potential Market)

2010-2011

Debts and Equities Legal Contracts

8.4 Strategic Control