A Case Study On

EBay Inc. - 2009

Submitted to the Faculty of
School of Business and Governance
Business and Management Department
Ateneo de Davao University

In Partial Fulfillment of
Requirements in MGT 426 : Strategic Management
First Semester of Academic Year 2016-2017

Submitted by:
Pamela Denise B. Rufila

Submitted to:
Dr. Emmanuel C. Aznar
August 5, 2016
INTRODUCTION

and figure out financing. StubHub. Toshiba. Nearly all of California’s 250 GM dealers took part in the program so consumers could visit Web pages like gm. Pierre Omidyar. which was founded in December 1998. It is a community of buyers and sellers that interact 24/7 in a secure and trusted global marketplace. During this time. Shopping. (2) Payments. Brief History The idea of selling anything to anyone. PayPal is available to any online or offline individual or business with an e-mail address and allows members to securely send and receive payments online securely without sharing sensitive financial information. ask dealers questions. Continental Airlines. Skype. Bill Me Later was acquired. Online Advertising.ebay.S.com and chevy. anywhere started with Pez candy. The Marketplaces segment generates revenues from listings and fees paid by sellers. Californiabased eBay.’s Marketplaces platforms and services segment includes eBay. EBay has a 14 percent share of global e-commerce with 86.com. devised a code that enabled and ran the eBay auction Website from his home computer during the Labor Day weekend. anytime.com to browse new 2008 and 2009 GM vehicles. eBay Inc. since most of the vehicles sold on eBay Motors—a site that sells various types of vehicles and auto parts— had historically been used. It has three business segments: (1) Marketplaces. CIT Bank initiates a consumer loan at the point of sale. Marketplaces Segment EBay Inc. created an online auction in the form of a sole proprietorship business to solve his and his wife’s problem of contacting with other Pez collectors.com. merchants. a computer programmer. Pierre. the founder of eBay. Bill Me Later then purchases the consumer’s loan from CIT . In 2002. Because Bill Me Later is not a chartered financial institution.EBay is the first virtual online business community.ebay. and (3) Communications. founded in 2003.3 million active users as of 2008. formed a partnership with General Motors enabling hundreds of GM dealers in California to help consumers negotiate purchase of new GM cars and trucks through the eBay online marketplace. When a consumer makes a purchase on credit. 1998.com. EBay also acquired other companies. This program marked a shift for San Jose. The first eBay auction was also conducted on Labor Day. Three years later. Retailers that offer the Bill Me Later service include: Borders. Online Classifieds. and Walmart. JetBlue. The time setting for this case is in the year 2009. Payments Segment The Payments segment revenues are generated from fees paid by merchants for payment processing services through PayPal and Bill Me Later. PayPal is a recognized global leader in online payment solutions with 70 million active accounts. and Rent. eBay was incorporated in California and became public on September 24. was acquired in the year 2005. Later in May 1996. Bill Me Later offers consumers instant credit at the point of sale through over 1000 online U. QVC.com. Toys “R” Us. It encourages aspiring entrepreneurs to become e-commerce business owners. eBay acquired PayPal. Overstock. Fujitsu. an arrangement with CIT Bank allows Bill Me Later to extend credit to customers.

” Ebay’s Organizational Chart . our mission is to connect buyers and sellers. voicemail. and transaction fees. The Communications segment generates usage revenues from Skype VoIP for connection to traditional fixed and mobile telephones under eBay’s subsidiary Skype Technologies S.’s 2009 Annual Report: “As a global e-commerce company. Communications fees are assessed either on a subscription basis or per minute charge for “SkypeOut minutes. It is the world’s fastest-growing Internet communication software platform. formats.Bank. and geographies (2005 Annual Report) We intend to achieve our mission of creating the world’s leading e-commerce franchise by building upon our core Marketplaces business and building our adjacent businesses. Communications Segment The Communications segment is composed of Skype. this is both an opportunity and a responsibility … we’ve seen first-hand how individual actions can make a positive difference in the world.A. such as ringtones. Vision and Mission The following statements can be found in eBay’s yearly annual reports: We intend to achieve our mission of creating the world’s online marketplace by improving and expanding across three main areas: categories. (2006 Annual Report) We intend to continue to work toward our mission of creating the world’s leading ecommerce franchise by investing in our core Marketplaces segment and continuing to build our adjacent Marketplaces businesses. and personalization. To us. late fees.” Skype revenue is earned through premium services such as making/receiving domestic or international calls to and from landline and mobile phones. call forwarding. Bill Me Later earns revenues from interest on the outstanding balances. (2007 Annual Report) According to eBay Inc.

Table 1.2007 Net Revenue Increase 2007 . EBay Inc.Source: eBay. ending the 2008 year with an unimpressive performance. 3.’s Trend in Net Revenues Segment Net Revenue Increase 2006 .2008 Decrease in Net Revenue Growth Marketplaces 24% 4% 20% Payments 34% 25% 9% Communications 96% 44% 52% Total Net Revenues 29% 11% 18% . OBJECTIVE OF THE STUDY This study seeks to provide alternative courses of action to help the company achieve its objectives: 1.com. 2. To become the number-one online payment solution. To implement a customer management program that emphasizes acquiring new users and upgrading current Skype users to premium products. STATEMENT OF THE PROBLEM EBay experienced a downward trend in revenues. To expand the Marketplaces segment.

What can eBay do to improve its operations while avoiding the threats? AREAS OF CONSIDERATION Internal Assessment Strengths: 1.” 3. Europe.26 billion in revenue. eBay’s Marketplaces division reported $1.3 million active global users as of 2008. Skype is available in 28 languages in over 225 countries. Skype had approximately 405. eBay has attained customized local site across four major areas of the world: Asia Pacific. 2. 13.com offers a sense of community to buyers and sellers that is sustained by communication and high transaction rates on a wide selection of goods/services. 2009. EBay provides goods and services to buyers and sellers in a secure. EBay. The revenue drop was attributable to the impact of the stronger dollar and the lingering weak economy with high unemployment. 6. 12. 3. PayPal is accepted both online and offline in 190 markets worldwide and process payments in 19 currencies.3 million registered users worldwide as of 2008. easier. Skype is the world’s fastest-growing Internet communication software platform. 2. 10. EBay provides a “faster. . and efficient commerce environment. EBay’s core segment. Ebay’s Marketplaces platform bring buyers and sellers through fully automated online Websites 24/7. Ebay user support 7. 14. a 14 percent year-over-year decline. Nice growth in both their PayPal and Skype business segments in the second quarter of 2009. 9. trusted. eBay’s profit fell 29 percent and revenue declined 4 percent as the company continued its turnaround strategy in a harsh climate for consumer spending. By 2009. 5. the Marketplaces segment is struggling on fulfilling its mission to become the world’s leading ecommerce franchise due to some external factors. 8. Nearly 11 million Skype downloads are to mobile devices. safer online commerce experience. Increase of its fee structure for its Marketplaces business. Labor reduction in response to the weak economy. Weaknesses: 1. For the quarter ending July 30.For the second quarter of 2009. North America and Latin America. EBay offers millions of items for trade through auction-style and fixed-price trading in 39 markets and boasts 86. 4. 11. Reduction of Ebay’s available line of credit as a result of the global financial crisis. PayPal is a recognized global leader in online payment solutions with 70 million active accounts.

Secure. easier. Automated online Websites 24/7 0. 12.01 3 0. To date.05 4 0.05 4 0. and personnel due to increased volume and greater complexity.05 4 0. Table 2 Internal Factor Evaluation (IFE) Matrix Key Internal Factors Weight Rating Weighted Score 1. operations.3 million active global users as of 2008 0. 8.12 6.03 4 0. 5. and efficient commerce environment 0. Customer support is challenged from greater trade activity and an increased number of users.16 8.20 2.04 4 0.03 7.4. More difficult transaction-processing and revenue collection becomes as the number of transactions increase and consumers default on loans. software. trusted. PayPal . 13. Offers millions of items for trade in 39 markets and boasts 86. eBay has never paid a cash dividend on stock and specifically states that there are no anticipated cash dividends forthcoming in the future. Significant strain on management.12 3.20 5.recognized global leader in online payment solutions 0.03 4 0. Requires additional expensive investments in hardware. Ebay user support 0.190 markets worldwide and process payments in 19 currencies 0. 9. Decline in their Marketplaces business segment for the second quarter of 2009.20 9. safer online commerce experience 0. The stock price for 2005 through 2009 ranged from a high around $60 per share to a low near $10. Wide selection of goods/services 0. Illegal listings of counterfeit and stolen goods.20 Strengths . Customized local site across four major areas of the world 0. Lack of policing trade and infringement on trademarks and copyrights for the sale of “not for resale” and counterfeit items on eBay’s Web sites. 7. 6.05 4 0. PayPal . and financial resources due to expansion of eBay both in the United States and internationally. Faster. Less user-friendly Web site due to growth in the number of products and Web site features.05 4 0.20 4. 11. 10.

04 20.04 1 0. operations. Requires additional expensive investments in hardware.04 16.05 1 0.06 18. Skype . Less user-friendly Web site 0. More difficult transaction-processing and revenue collection 0.world’s fastest-growing communication software platform Internet 0.05 2 0.02 2 0. Increase of its fee structure for its Marketplaces business 0.10.04 1 0.03 2 0.04 21. Customer support is challenged 0. Skype .03 4 0.05 1 0.04 1 0.02 3 0.04 1 0.02 2 0. and personnel 0.405.06 15.05 Weaknesses .04 4 0.20 12.04 25. Decrease in stock price 0.06 23. Nearly 11 million Skype downloads are to mobile devices 0.03 2 0. Illegal listings of counterfeit and stolen goods 0.04 24.04 22.05 27.02 2 0. Nice growth in both their PayPal and Skype business segments in the second quarter of 2009 0. Reduction of Ebay’s available line of credit 0.04 19. Lack of policing trade and infringement on trademarks and copyrights 0.05 4 0. Skype is available in 28 languages in over 225 countries 0. Decline in their Marketplaces business segment for the second quarter of 2009 0. Labor reduction 0. and financial resources 0. software. eBay has never paid a cash dividend on stock 0. Significant strain on management.16 13.3 million registered users worldwide as of 2008 0. To date.12 11.06 17.03 2 0.04 4 0.10 26.16 14.

75 Where: ● Weight ○ 0.0 = not important ○ 1. Rise of breaches in data security Table 3 External Factor Evaluation (EFE) Matrix Key External Factors Weight Rating Weighted . Weak global economic conditions 6. and Lancôme 11. External Assessment Opportunities: 1. New legislation that requires collection of taxes beginning after December 31. Potential for Skype technology to become obsolete 5. Potential consumers in current markets that have yet to discover the benefits of online auctions. should still improve internally. Mortgage and worldwide credit-related financial crisis. New and emerging markets in different countries.0 = all important ● Rating ○ ○ ○ ○ 1 = major weakness 2 = minor weakness 3 = minor strength 4 = major strength The total weighted score of 2.75. L’Oreal.00 2. 3. Christian Dior. 2. Fluctuations of currency exchange rates 8. 7. Rapid technological change 4. Threats: 1. 10. Strong growth and satisfied customer base pose of Amazon 2. 9. Low barriers to entry in the marketplaces segment and new online sites can be launched at a nominal cost 3. Recent litigations with Tiffany & Co.. Louis Vuitton.50. EBay’s Bill Me Later has significant exposure to consumers’ potential default on loans. indicates a good internal position. which is above 2. but eBay Inc. Rolex. 2010. Consumers are shopping more and more via their mobile phones (2009 Annual Report).Total 1.

24 12.12 9.10 7.0 = very important ● Rating .24 Threats Total 1.20 5.06 4 0.07 3 0.08 3 0. New legislation 0. Weak global economic conditions 0.00 2.21 8.06 3 0. Potential consumers in current markets that have yet to discover the benefits of online auctions.04 3 0.indicate how effectively the firm’s current strategies respond to the factor ○ 1 = the response is poor ○ 2 = the response is average ○ 3 = the response is above average ○ 4 = the response is superior .09 3 0.18 6. Rise of breaches in data security 0.27 14.06 2 0. Potential for Skype technology to become obsolete 0.12 11.30 4. Rapid technological change 0.10 2 0. New and emerging markets in different countries.04 3 0. Consumers are shopping more and more via their mobile phones.10 2 0.20 2.33 3. Fluctuations of currency exchange rates 0.Score Opportunities 1. 0.10 3 0. Consumers’ potential default on loans 0.0 = not important ○ 1. 0. Mortgage and worldwide credit-related financial crisis 0.05 2 0.12 10. Strong growth and satisfied customer base pose of Amazon 0.71 Where: ● Weight ○ 0. 0. Low barriers to entry in the marketplaces segment 0.04 2 0.08 13. Recent litigations 0.11 3 0.

6. 8. trusted. Reduction of Ebay’s available line of credit 3. 2. and personnel 9. 12. and efficient commerce environment. Skype is available in 28 languages in over 225 countries.71 also indicates that there is still a lot of room for improvement because the highest total weighted score would be 4. eBay has never paid a cash dividend on stock 13. Skype . the total weighted score of 2. 12. To date. 4.world’s fastestgrowing Internet communication software platform. easier.The total weighted score of 2. Customized local site across four major areas of the world 5. Table 4 Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix Strengths Weaknesses 1. Customer support is challenged 11. 6. PayPal is a recognized global leader in online payment solutions 9. Decline in their Marketplaces business segment for the second quarter of 2009. Secure. is doing well in taking advantage of the external opportunities and avoiding the threats facing the firm. Decrease in stock price . so Yahoo! Inc. 10. Illegal listings of counterfeit and stolen goods. Significant strain on management.3 million active global users as of 2008. software.405. More difficult transactionprocessing and revenue collection 10. Skype . 1. Wide selection of goods/services. Faster. operations. Ebay user support 7. safer online commerce experience 3.0. 11. Offers millions of items for trade in 39 markets and boasts 86.71 is above the average (midpoint) of 2. Increase of its fee structure for its Marketplaces business.190 markets worldwide and process payments in 19 currencies. Labor reduction 2.3 million registered users worldwide as of 2008. PayPal .5. 4. Requires additional expensive investments in hardware. However. Marketplaces platform bring buyers and sellers through fully automated online Websites 24/7. Lack of policing trade and infringement on trademarks and copyrights 5. Less user-friendly Web site 8. and financial resources 7.

New legislation 10. O2) Expand into international markets and more currencies. 3. (S8. (S3. Weak global economic conditions 6. 9. Nearly 11 million Skype downloads are to mobile devices. (W2. S13. T2) Integrate PayPal with Amazon and other Marketplaces businesses. O1) Improve eBay’s mobile app. T11) Invest in additional hardware. Recent litigations 11. Consumers’ potential default on loans. T7. Rise of breaches in data security Strengths-Opportunities (S4. 2. T8) Sell Bill Me Later. 7. Threats 1. Strong growth and satisfied customer base pose of Amazon 2. Weaknesses-Opportunities (W7. Consumers are shopping more and more via their mobile phones. New and emerging markets in different countries. Fluctuations of currency exchange rates 8. ALTERNATIVE COURSES OF ACTION . Nice growth in both their PayPal and Skype business segments in the second quarter of 2009.13. 14. Opportunities 1. O3) Penetrate the current markets by putting more effort on advertising eBay. Strengths-Threats Weaknesses-Threats (S11. T1. T4) Improve Skype mobile app. (W8. Potential consumers in current markets that have yet to discover the benefits of online auctions. Rapid technological change 4. software and personnel to fix technical and security errors. S9. Low barriers to entry in the marketplaces segment 3. Mortgage and worldwide credit-related financial crisis. Potential for Skype technology to become obsolete 5.

● Disadvantages: ○ It needs more capital. will create more jobs and help address the problem of high unemployment. ● Advantages: ○ It will accomplish the company’s three objectives.4 billion goodwill associated with the purchase of Skype. should do all three courses of action. ● Advantages ○ It will eliminate the significant risk of consumers’ potential default on loans. ● Advantages ○ Revenues from Marketplaces segment will increase. ○ This would let eBay focus more on the remaining segments. ○ Revenues from Marketplaces and Communications Segment will increase. ○ EBay Inc. ○ It will prevent Skype technology from deteriorating. ● Advantages: ○ This will help eBay recoup the $1. ○ Revenues from Payments segment will also increase since PayPal is integrated with eBay. should sell Bill Me Later (Divestiture). ○ It will reduce the risk of incurring losses on foreign exchange rates. Alternative 4: EBay Inc. Alternative 2: EBay Inc. ● Disadvantages ○ Consolidated revenues will decrease. should expand into international markets and more currencies (Market Development). ● Disadvantages: ○ It needs intensive management of resources. ○ Future opportunities that Bill Me Later can provide will be lost. ● Disadvantages: ○ This will require product development costs. ○ A number of employees will be laid off and restructuring costs will be incurred. should improve their Skype mobile app (Product Development).Alternative 1: EBay Inc. ○ Introducing present products or services into new geographic areas is risky. . Alternative 3: EBay Inc. ○ This will increase users and downloads. ○ It takes a lot of effort.

Table 5 Quantitative Strategic Planning Matrix (QSPM) STRATEGIC ALTERNATIVES 1 2 3 Market Developmen t Divestiture Product Developmen t Weight AS TAS AS TAS AS TAS AS TAS 1.20 4 0. 0.40 2. Opportunities and in emerging different .10 2 0.33 Key Factors 4 Do all 3.22 3 0.44 1 0.○ The company’s focus on implementing strategies will be divided among the the three courses of action. New markets 0.10 3 0.11 4 0. ○ Future opportunities that Bill Me Later can provide will be lost.30 1 0. Consumers are shopping more and more via their mobile phones.11 2 0.

countries 3.06 2 0.06 1. Recent litigations 0.28 3 0.04 2 0. New legislation 0. Strong growth and satisfied customer base pose of Amazon 0.40 1 0.06 4 0.18 3 0.04 2 0.15 4 0.15 .18 9.30 2.10 4 0.20 1 0.23 Strengths 1.04 4 0.24 Threats the marketplaces segment potential Subtotal 1.30 1.10 4 0. Fluctuations of currency exchange rates 0.27 11.10 2 0.40 1 0. Weak global economic conditions 0. Low barriers to entry in 0.12 1 0.16 1 0.24 1 0.08 3 0.24 1 0.20 4.08 4 0.05 4 0.09 2 0.36 1 0.18 8. Rapid technological change 0. Consumers’ default on loans 0.10 2 0.04 3 0.05 2 0. Rise of breaches in data security 0.06 3 0.07 4 0.12 4 0.16 6.05 2 0.06 2 0. Mortgage and worldwide credit-related financial crisis 0.14 1 0.07 2 0.08 2 0.08 3 0.12 3 0.00 3.12 4 0.91 3.12 1 0.24 1 0.21 5.80 1.12 7.16 10.04 3 0.06 3 0.20 3 0. Wide selection goods/services of 0.32 1 0.09 4 0.05 3 0.10 3 0. Potential for Skype technology to become obsolete 0.10 1 0.16 4 0.20 3 0.04 2 0.06 2 0.08 4 0. Potential consumers in current markets that have yet to discover the benefit of online auctions 0.18 3.

PayPal .04 2 0. PayPal .03 4 0.12 trusted.05 3 0.05 2 0.06 1 0.3 million active global users as of 2008 0.05 3 0.04 2 0.05 2 0.03 2 0. Skype . safer online commerce experience 0.15 12.15 9.03 2 0.06 4 0.20 2 0. Nearly 11 million Skype downloads are to mobile devices 0.world’s fastestgrowing Internet communication software platform 0.05 2 0.190 markets worldwide and process payments in 19 currencies 0.05 3 0.05 3 0.20 1 0. easier. Faster.06 3 0.09 11.01 - - - - online 0.04 - - - - 8.08 1 0.recognized global leader in online payment solutions 0. efficient environment 0.09 3.2.05 4 0.20 3 0.03 3 0.04 4 0.03 1 0.10 1 0.15 10.3 million registered users worldwide as of 2008 0.08 1 0.03 4 0.05 4 0.09 0.12 1 0.10 4 0.20 2 0.10 1 0.405.15 5.16 3 0. Skype . Secure.10 1 0.12 13.12 3 0.20 1 0. and commerce 6. Customized local site across four major areas of the world 0. Skype is available in 28 languages in over 225 countries 0.10 4 0. Offers millions of items for trade in 39 markets and boasts 86. Ebay user support 7.16 3 0.15 4.05 4 0.12 2 0. Automated Websites 24/7 .04 4 0.

Lack of policing trade and infringement on trademarks and copyrights 0.04 4 0. Requires additional expensive investments in hardware.02 3 0.08 1 0.08 1 0. Customer support is challenged 0. Increase of its structure for Marketplaces business fee its 0.09 1 0. Less user-friendly Web site 0. Illegal listings of counterfeit and stolen goods 0. Reduction of Ebay’s available line of credit 0.03 2 0.12 2 0.04 - 5.10 1 0.06 1 0.03 4 0.08 2 0.02 3 0. and personnel 0.04 1.04 4 0.20 2 - 0.04 2 0. and financial resources 0.06 3.04 8.06 1 0. software.12 2 0.04 4 0.04 10. Labor reduction 0.05 3 0.03 4 0. More difficult transactionprocessing and revenue collection 0.08 1 0.02 1 0.16 2.08 3 0.14.12 6. Significant strain on management.12 1 0.02 - 11.03 3 0.08 3 0.02 4 0.12 2 0.06 9.03 3 0.04 3 0.15 .09 4.16 2 0. Decline in their Marketplaces business segment for the second quarter of 2009 0.05 4 Weaknesses - - 0.04 3 0. operations.12 2 0.03 3 0.16 7.06 4 0. Nice growth in both their PayPal and Skype business segments in the second quarter of 2009 0.09 4 0.12 1 0.02 2 0.02 4 0.

Expanding into international markets and improving the Skype mobile app need a lot of capital. To date.10 1 0.05 4 0. The company can first sell and liquidate Bill Me Later so that they can have the financial resources to do the other two actions.10 1 0.05 3 0.90 1. eBay has never paid a cash dividend on stock 0.00 2. eBay Inc.96 versus 5. EBay can pay the loan when they have already achieved their objectives. CONCLUSION Based on the foregoing findings and recommendations.70 2. it is not enough to choose only one course of action.20 Subtotal Grand Total 1. Hence.05 4 0.63 1.69 3. EBay Inc. This can help them achieve their mission. they can finance the other costs through debt financing.70 3.70 and 3.61 5.96 Where: ● Weight ○ 0. the company can become the number-one online payment solution by selling Bill Me Later. Next.12. in order to provide Skype . Lastly.61 indicates the fourth alternative (do all three courses of action) is the most attractive. can do all of the three courses of action one at a time. This segment has a huge exposure to threats like fluctuations in currency rates and potential default of customers on loans. Decrease in stock price 0.20 13.0 = all important ● AS = Attractiveness Score ○ 1 = not attractive ○ 2 = somewhat attractive ○ 3 = reasonably attractive ○ 4 = highly attractive ● TAS = Total Attractiveness Score = Weight x AS The sum total attractiveness score of 5.15 2 0.15 2 0. eBay can focus to PayPal. eBay can now choose either of the two actions.69. this study recommends to do the three actions.05 3 0. making it the number-one online payment solution.0 = not important ○ 1. Due to limited resources. but some of the needed capital will be financed by the proceeds from selling Bill Me Later.73 5. Second. this study concludes that first. RECOMMENDATIONS Considering the facts of the case and its findings. is a really big company since they operate worldwide as well as their acquired segments. By eliminating Bill Me Later. If the proceeds of the sale of Bill Me Later is not enough. eBay should expand the Marketplaces segment to other countries. 3.

eBay should enhance the the Skype mobile app since more users are communicating in the Internet through their mobile devices. EBay Annual Report 2009 [Letter written February 17. Ltd. (2014). Strategic Management Concepts and Cases: A Competitive Advantage Approach (Philippine Edition. February). REFERENCES ● David. (2014). P.. Retrieved July 25.pdf ● EBay SWOT .marketingteacher. R.). (2010.com/downloads/ebay/923940436x0x361552/b45137ee-aa41-4c2c94ca-d72d5b0844be/eBay_77655_BANNERLESS. F. In EBay . ● Donahoe.Annual Report and Proxy Statement.com/ebay-swot/ .shareholder. 2016. 2016. R.. Fourteenth ed. from http://files. J..users with premium services. DePaul. Singapore: Pearson Education South Asia Pte. 2010 to Shareholders]... Retrieved July 25. Swan..Marketing Teacher. from http://www.