eBay Inc.

Delivering Commerce Opportunities for the Present and Future

Vasbinder, Andrew A.m.vasbinder@eagle.clarion.edu October 19, 2011 BSAD 490: Administrative Decision Making

Contents
Company Overview Page .............................................................................................................................. 3 Historical Overview ....................................................................................................................................... 4 Mission and Vision Statements ..................................................................................................................... 5 Core Values ................................................................................................................................................... 6 Organizational Objectives ............................................................................................................................. 8 SWOT Analysis............................................................................................................................................... 9 Internal Organization Environment Analysis ................................................................................................ 9 Corporate Governance.............................................................................................................................. 9 Financial Position and Capacity............................................................................................................... 11 Organizational Structure ......................................................................................................................... 13 Organizational Culture ............................................................................................................................ 14 Human Resources ................................................................................................................................... 15 Operations/Production ........................................................................................................................... 16 Marketing ................................................................................................................................................ 17 Research and Development .................................................................................................................... 18 Management Information Systems ........................................................................................................ 19 IFE Matrix ................................................................................................................................................ 20 External Organization Environment Analysis .............................................................................................. 20 Political, Legal, Regulatory, Governmental ............................................................................................. 20 Economic ................................................................................................................................................. 22 Social, Cultural, Demographic, Natural Environment ............................................................................. 23 Technological .......................................................................................................................................... 24 Industry/Competitive .............................................................................................................................. 26 Competitive Profile Matrix...................................................................................................................... 27 International ........................................................................................................................................... 28 EFE Matrix ............................................................................................................................................... 29 Consumer Characteristics and Behavior ................................................................................................. 29 Strategic Direction .................................................................................................................................. 30 Problem/Issue Diagnosis ............................................................................................................................. 30 Alternative Solutions................................................................................................................................... 31 Evaluate Alternative Solutions .................................................................................................................... 32

2 Implementing the Decision ......................................................................................................................... 35 Current Profile............................................................................................................................................. 37 Appendices.................................................................................................................................................. 39 Appendix A IFE Matrix .......................................................................................................................... 39 Appendix B CPM Matrix ....................................................................................................................... 40 Appendix C - EFE Matrix .......................................................................................................................... 41 Appendix D SWOT Matrix .................................................................................................................... 42 Appendix E - BCG Matrix ......................................................................................................................... 43 Appendix F Grand Strategy Matrix....................................................................................................... 44 Appendix G QSPM ................................................................................................................................ 45 Appendix H Organizational Chart......................................................................................................... 46 Works Cited ................................................................................................................................................. 47

Company Overview Page

Company Name eBay Inc. o Marketplaces o Payments

Corporate Headquarters Address Whitman Campus o 2065 Hamilton Avenue San Jose, California 95125 eBay Park North o 2211 North First Street San Jose, California 95131

Telephone Numbers (800) 322-9266 (408) 376-7400

Fax Number 408-376-6554

Website Address CEO John Donahoe www.ebayinc.com

Annual Sales Volume (In Thousands) 2010: $9,145 2009: $8,727 2008: $8,541

Number of Employees 17,700

NAICS Number 454112 Electronic Auctions o This U.S. Industry comprises establishments engaged in providing sites for and facilitating consumer-to-consumer or business-to-consumer trade in new and used goods, on an auction basis, using the Internet. Establishments in this industry provide the electronic location for retail auctions, but do not take title to the goods being sold (NAICS Search).

Historical Overview
The common misconception about eBay is that it was created as either a place for Pierre Omidyars wife to sell and trade her collectibles (Pez Dispensers) with other collectors (Maney). What actually happened is that the first model of eBay went online in 1995 and the first item he sold was a broken laser pointer (Hsiao). According to Maneys article from USAToday.com, Omidyar created the website because he felt that the internet could be used as a way to put everyone on the same level and allow that market to set the price, thus creating a perfect marketplace. The original site that he created was not just an individual site. Originally when he created eBay, it shared the site with a consulting company that he also operated called Echo Bay Technology Group. eBay which was originally called Auction Web received its current name because when Omidyar attempted to register EchoBay.com as the domain name for the website he found that it was already taken and figured he would just shorten the name to eBay. Soon after eBay became an official website and began its huge rise in popularity it landed Meg Whitman, a Harvard graduate as its CEO. The leaders of eBay state that it was extremely hard to keep up with the growth that they experienced once they became a real company. When eBay originally launched it did not use PayPal as its online payment service. According to Dave Andrews from The History of Ebay, when eBay started they were realized that one issue holding the site back was that there was very little trust on the site and people were always worried about payment. When eBay realized that fact they began using Billpoint as an online payment system. Soon after that, PayPal was introduced and it was very heavily outweighing the daily use of eBays Billpoint service. It was clear that consumers preferred PayPal over Billpoint so eBay then proceeded in 2002 to purchase PayPal to use on their website for 1.5 million dollars. Today, eBay has over 94 million users worldwide and in 2010 the total worth of goods sold on eBays website was 62 billion dollars (Who We Are). EBays auction site is a place for both buyers and sellers to come together and buy and sell just about anything imaginable. Sellers come to eBay and list the item or items that they want to sell and then are able to choose from two options. The first option is a traditional auction scenario where the seller lists the item and then selects a price for bidding to start and then a set time that the item will stay listed and then at the end of the time the buyer with the highest bid wins the item. The second option that a seller can choose

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is a buy now option where the seller sets a price for the item and the first buyer to pay that wins the item (What is EBay?). Today, eBay has over 94 million users worldwide and in 2010 the total worth of goods sold on eBays website was 62 billion dollars (Who We Are). As a company, we also own other e-commerce companies such as StubHub, Shopping.com, Half.com, and Rent.com. Also included in our portfolio are payment services such as PayPal and Bill Me Later (Who We Are).

Mission and Vision Statements

At eBay we do not have either a clearly defined mission statement or vision statement. However, if you look at our 2010 Annual Report you will find the following two statements: Our purpose is to pioneer new communities around the world built on commerce, sustained by trust and inspired by opportunity (Ebay 2010 Annual Report). We seek to create a global platform that provides individuals and businesses of all types and sizes with access to broad markets (Ebay 2010 Annual Report).

I believe that our vision is encompassed in the second statement above. A vision statement should always answer What do we want to become? In this statement we discuss what we want our business to become. Not only do we want to play a part in ecommerce and payments but we want to create a fully global platform that combines our products. We want these products to work together for both individuals and businesses and allow our consumers to reach more markets than they would typically have been able to reach. This statement however could be a little more specific possibly, and mention something about ecommerce and payments. As for the mission, I believe that the first statement above could constitute eBays mission. In that statement we mention exploring the current parts of business which include the commerce, such as eBay.com and StubHub, the trust, which involves making PayPal an even more dependable and trusted payment service, and opportunity which means capitalizing on any venture that we can add to benefit our company. There is a lot missing

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from this statement to make it a quality mission statement. To make this a better mission statement we could; mention our customers more specifically, explain the state of our current technology, give a brief statement on the beliefs and ethics of our company, and mention the employees of our company.

Core Values
At eBay we have a list of five core values that our company follows each and every day to make sure that we run an ethical and legal business. This last of core values can be taken from our Code of Business Conduct and Ethics. It includes that: We believe people are basically good We recognize and respect everyone as a unique individual We believe everyone has something to contribute We encourage people to treat others the way they want to be treated themselves We believe that an honest, open environment can bring out the best in people

All of these values apply to each and every subsidiary of the eBay company. It is also outlined in our Code of Business Conduct and Ethics that to work at eBay we must have an active and relevant knowledge of regulations and laws that affect our businesses. Just like most companies if these laws and regulations are not followed then we will face employee sanctions along with any lawsuits that might come forth from our actions. As a company we of course strive to generate good returns for ourselves and for our shareholders. At no point though is it approved for us to cut corners or do anything else illegal or unethical to reach what we want to. Not only is it viewed as unfair to our company but it is also viewed as unfair to the community that we operate in. At eBay it is also of utmost importance for our company to never falsify any of our books or records. We believe very strongly in properly disclosing any information that should be included in any reports that are given to the Securities and Exchange Commission and other agencies. There should also never be any falsification to any records that are given to the public and shareholders. Our employees should always be sure to follow any guidelines

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that are set and if they are suspicious of any violations to auditing, accounting, or finance regulations they should report this to any auditors, Legal, or Finance. Employees of our company are not to use internal resources from our company illegally and unethically. Also, the only use of these internal resources should be to benefit eBay. Our employees will also deal with different contracts while they work for our company. When working with these contracts our employees should never promise anything that they will not be able to deliver from our company. We should never exaggerate any benefits that we can deliver or any products that we have just to gain a contract as that usually leaves both companies in a difficult situation. We should also never exaggerate anything in any advertisements that we use in our marketing campaigns. Again this leads to difficult situations for our company and any user that feels they have been mislead by information that we have displayed. Conflicts of Interest can occur in any company. This is when you are in a position to influence a decision that hurts the company you work for but that same decision will benefit yourself or a close friend or loved one. At eBay if you feel that you will not be able to avoid a conflict of interest we believe that you should disclose that to the company and simply avoid any decision that you feel you cant make. At eBay, we also have employment guidelines. Our employment actions are governed by the fact that we are an Equal Opportunity Employer and also that we are a harassment and discrimination free workplace. With eBay being an Equal Opportunity Employer, we are committed to not discriminating against any applicant to a position. When we are evaluating the applicant we will look only at the abilities of that person. That being said we will not discriminate by race, color, religion, national origin, ancestry, pregnancy status, sex, age, marital status, disability, medical condition or sexual orientation, or on any other basis protected by law (Code of Business Conduct and Ethics). By being a harassment and discrimination free workplace we are allowing all employees the environment where they can reach their fullest potential and be most productive. However, if you are experiencing any harassment or discrimination eBay asks that you always make the company aware of whats happening so that we are able to keep a safe environment. In order to keep our company safe, we must protect the confidential information that we deal with everyday. Not only is it important to protect this information to save our company but its also important in protecting other companies. As a company we must never disclose any personal information to any outsiders or anybody that does not need to know the information. We must always be sure to keep up to date in protecting this

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information and never let our guard down because it only takes one time to ruin the company (Code of Business Conduct and Ethics). With everything that we do at our company it is always important to follow the guidelines that we have set. We also need to be sure that we are meeting all the governmental and ethical standards that affect our business on the day to day basis. Any documents that we ever have to report should never be falsified or made to look better than what they actually should. All in all we strive to be a most ethical company in every aspect of our business and operations.

Organizational Objectives
As with any company, it is important for our company to have objectives that we can strive for. These objectives along with the mission and vision give eBay and our employees a goal to focus our activities on. Having these organizational objectives helps our company to continue to grow and improve different aspects that we need to in the future. Our 2010 Annual Report lists in the section to our stockholders certain areas that we have been working on and plan to work on in the future. These areas include; extending our lead in payments, delivering a better eBay experience for customers, expanding our capabilities, connecting buyers and sellers anywhere, anytime, any device, driving sustainable commerce, and operating more efficiently and reducing costs (Ebay 2010 Annual Report). For our company to extend our lead in payments, we have to work to attract more buyers and sellers to PayPal. In order to attract more buyers and sellers, we need to expand our PayPal more and more internationally. Some ways that we have done that recently are by forming partnerships with local governments and banks and also in Mexico, Brazil, and China we have been working along with mobile providers. Not only is it our goal to expand PayPal more globally but we are aiming to expand it more for digital products. Another objective for our company to increase payments is by attracting more volume to our Bill Me Later service (Ebay 2010 Annual Report). We have also been striving to make consumers feel more comfortable and better about using our products. In order to help consumers feel more comfortable, we have worked on adding features to our sites to protect consumers and highlight which other users are more trusted to do business with. Not only have we added those

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features but we have been adding additional features to make the overall site much easier to use and find the stuff that you want (Ebay 2010 Annual Report). For our company to expand our capabilities it comes down to our ability to purchase and work with companies that improve our reach locally, globally, and digitally. There are countless companies across the world that will help in improving our company and help against our competition (Ebay 2010 Annual Report). Going along with other objectives of our company is the objective of connecting buyers and sellers anytime, anywhere, and on any device. We are continually aiming to increase the total volume that we see on our mobile platforms. Also according to our 2010 Annual Report, In 2010 our annual mobile volume increase to over 2 billion dollars. Our focus is to constantly increase the total number of people using these mobile applications in every market in the world (Ebay 2010 Annual Report). In the business world it is becoming more of a need to meet increasing environmental needs. At eBay we recognize these growing needs. That is why we have been determined to make our company more environmentally conscious and sustainable. We have been enacting various programs to conserve energy and recycle various items. Not only have we been working to benefit the environment that way but we have been encouraging our workers to go out into their communities and help with the environment as well (Ebay 2010 Annual Report). It is also important for our company to reach a goal that we set in 2009 of reducing our cost structure by 2 billion dollars over a 3 year period. At the time our 2010 Annual Report came out we were still on track to meet that goal that we set. We are not just focused on reducing our cost structure but we also working to find other ways to improve our financial standing (Ebay 2010 Annual Report).

SWOT Analysis Internal Organization Environment Analysis

Corporate Governance

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At eBay, we realize that to be an effective, legal and ethical organization we must have specific guidelines that help govern our company. We explain these guidelines in our Governance Guidelines for the Board of Directors. We want these guidelines that we have set to help our business be governed in the best interest of our business and our stockholders. The guidelines that we have set effect board composition, board procedures, board committees, annual self assessment, and succession planning. Under board composition, we have a guideline that requires the board to periodically review the number of members it has and determine if that number benefits the company. We also believe that the members of the board should be selected based on character, integrity, judgment, skills, background and experience of particular relevance to the company ("Governance Guidelines for the Board of Directors). It is also important to set guidelines for outside positions that our board of directors can take. It will benefit our company to avoid any conflict of interest or favoritism if one of our board members is affiliated with a company that we conduct an extensive amount of business with. When our board selects the Chief Executive Officer and Chairman of the Board, they are required to select a different person for each position to help our boards oversight of management. We have also set guidelines that define meeting attendance. Our board members should make every attempt possible to avoid time conflicts and attend each board meeting of the year. In order for our Board of Directors to efficiently do their jobs, they must form different committees. These committees will not have more power than the board as a whole and will only report their findings and make suggestions to the Board of Directors. To assure that the compensation that we are providing to our board members is fair and accurate we periodically check the compensation rates of similar United States companies. Each year we also require our Board of Directors to do an annual self assessment as recommended by the Governance Committee. Each individual committee is also required to do their own annual self assessment. We also realize that we must plan ahead in our company to stay competitive and that is why we require our board to annually discuss any potential successors to key members of our organization such as our Chief Executive Officer ("Governance Guidelines for the Board of Directors). Our board structure is focused on staggered terms for members. Shareholders of S&P 500 companies have been requesting declassification of these boards to remover staggered terms. In 2005, 53% of S&P 500 companies had staggered terms for board members, but now that number is down to 31%. At eBay, we have yet to declassify our board and shareholders of our company have put requests in. Our company is to vote on whether or not to declassify our board and require annual voting for board members (

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Financial Position and Capacity

Financial ratios can give very meaningful data to companies. Whether these ratios are analyzed one at a time or analyzed along with other ratios or industry averages they can be very useful. First, we will look at eBays liquidity ratios which measure our firms ability to meet our short-term obligations. EBays current ratio, as of the quarter ending 06/2011, is at 1.6 which indicates that it is rather capable of meeting its current obligations. While its competitor Amazon is also above 1 with its current ratio, eBays ratio is .2 higher than Amazons. However, since 2007 eBays current ratio has decreased steadily from the 2.3 mark that it had reached and Amazons current ratio has been staying relatively steady since 2007 at either 1.3 or 1.4. With eBay having little to no inventory, our quick ratio is the same as our current ratio which makes our quick ratio 1.6. Amazons quick ratio is sitting just at the 1.0 mark. This also shows that eBay is currently more capable of meeting its short term obligations. Looking at past ratios, Amazons quick ratio has stayed pretty consistent since 2007 whereas, eBays ratio has been fluctuating. Next, we will look at the total debt to equity ratio for our company. The total debt to equity ratio is a leverage ratio which indicates the extent to which a firm has been financed by debt. At eBay, our total debt to equity ratio was most recently at .16 which indicates that our company has been financed relatively little by debt which is a benefit because we will have little debt to outweigh any returns that our company may generate. Activity ratios measure how effectively a firm is using its resources. The total assets turnover is an activity ratio that is used to measure whether or not our company is generating a sufficient volume of business compared to its asset investment. Our total asset turnover of .5x indicates a low total asset turnover. Previous financial statements indicate that our current total asset turnover of .5x is at par with where it has been. Most recently, Amazons total asset turnover was at 2.7x which indicates that Amazon is generating more revenue as compared to their asset investment than eBay. An activity ratio that might be misleading to our company as compared to Amazon is our accounts receivable turnover. According to the latest ratios from Forbes, our accounts receivable turnover was 2.3x. This ratio has greatly decreased from previous years which indicates that it is taking longer and longer for our company to collect on our credit, as compared to Amazon whose ratio is 35.9x. One reason why our rate might be so much lower for collecting on our credit is because of the payment segment of our company.

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The last set of ratios to look at for our company are our profitability ratios. At eBay, we have a very impressive gross profit margin. According to our financial statements our gross profit margin is at 77.7%. This indicates that for basically every dollar of revenue that we bring in, about .78 of that dollar is profit. This is attributed to the fact that our cost of goods sold is very low because our company relies on people selling their own items and on people using our payment software so we have very low costs because we produce very few items. Our gross profit margin has stayed around the same mark that we are at now since the year 2006. Perhaps a more telling sign of how well we are running our company would be our return on assets since our assets are used more to generate revenue for our company. Currently our return on assets is at 7.0% which means that for about every 14.25 million dollars spent on assets we are generating about 1 million dollars of net income. In recent years our highest return on assets was in 2007 when it was at 8.7%. The decrease in this ratio shows that our managers are not using our assets as well as they have in the past. At our competitor Amazon, according to Forbes, their most recent return on assets was at 5.8% which is also down from their past return on assets. Another profitability ratio, return on equity, shows how much profit we are generating from the money that our shareholders have invested. At eBay, our most recent return on equity indicates that we have not been as profitable with our shareholders money as Amazon has. Our last ratio shows our return on equity being 10.8% while Amazons was at 13.4%. Looking at past ratios, our return on equity is not much lower than what it has been previous years, while Amazons return on equity has been falling significantly over the past few years. In 2007 their return on equity was at 58.5% and in 2008 it was at 33.3%. This shows that while Amazon was using their shareholders money more efficiently in the past, their use of the money has been generating less and less profit for their company and our use of our shareholders money to generate profit has been staying about the same in recent years and has not been decreasing as rapidly as Amazons. The price to earnings ratio of our company is also a useful profitability ratio. This ratio can show what earnings investors are expecting our company to make in the future. Our latest price to earnings ratio was 22.2 while Amazons was at 95.3. This means that investors are expecting significantly less earnings for our company as compared to Amazon. Over the past three years at eBay, we have increased and then decreased our net income. At the year ending December 31st, 2008 our net income was $1,779,474. At the end of 2009, our net income had gone up to $2,389,097, and at the end of 2010, our net income had dropped down to $1,800,961. Each of these years our net revenue had increased from the previous years though. The fact that our net income in 2009 was significantly

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higher than the other two years can be contributed to the higher earnings before interest and taxes that our income statement shows that year. Judging by these ratios, there are both strengths and weaknesses to our financial position. With our current and quick ratio it appears that at eBay we are more able to meet our current obligations than Amazon. We are also financed relatively little by debt which means that any returns that we generate should not be outweighed by debt. Also, we have a very high gross profit margin which means that for each dollar of revenue we generate we are gaining more profit than Amazon. However, the asset turnover ratio shows that Amazon is more efficient at generating revenue with their assets. Our inability to effectively use our assets is also demonstrated with our return on asset which has been steadily decreasing from 2007.

* All the current data on ratios for eBay was obtained from: http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=EBAY * All the current data on ratios for Amazon was obtained from: http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=AMZN * All the data on past ratios for eBay was obtained from: http://www.businessinsider.com/~~/f?id=4af320420000000000ae5b45 *All the data on past ratios for eBay was obtained from: http://www.businessinsider.com/~~/f?id=4af31405000000000015add6

* The income statement for 2008, 2009, and 2010 was obtained from:
http://finance.yahoo.com/q/is?s=EBAY&annual

Organizational Structure
The organizational structure of eBay revolves around two different business segments. These two business segments include our marketplace and payment segment. Our marketplace segment consists of the ecommerce companies that we own. These companies include ebay.com, stubhub.com, shopping.com, rent.com and half.com. These websites give our company the ability for global commerce. The company is structured such that these individual commerce companies fall under the management of the President of Ebay Marketplaces (Ebay 2010

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Annual Report). It was announced on September 6th, 2011 that Devin Wenig will be the new President of Global Marketplaces. The President of Global Marketplaces is required to report to eBay Inc. CEO John Donahoe. CEO John Donahoe states that, "Devin's deep global operating and leadership experience, combined with his record of delivering innovation and of understanding global technology platforms and communities, makes him uniquely qualified to lead our eBay Marketplaces business ("Devin Wenig Joins EBay as President of Global Marketplaces Business). The PayPal segment of our business is headed by Scott Thompson. He is the president of PayPal and has the responsibility of making PayPal the global leader in online payments (Leadership). CEO John Donahoe also oversees many other functions of the company. Looking at an eBay organizational chart located in Appendix H, the different departments that report to Donahoe include the legal, marketplaces, communication, PayPal, Shopping.com, international and human resource. The other two positions that report to our CEO include our Chief Financial Officer, Robert Swan, and our Chief Technology Officer, Mark Carges (Organizational Chart Ebay). As described by Business week, John Donahoe also oversees, strategic and financial planning, marketing, operations, product development, and business development for the eBay North America and eBay International businesses (Executive Profile: John J. Donahoe). Also integral to the management of our company is the Board of Directors. The current Board of Directors at eBay includes twelve members. These members include CEO John Donahoe, Founder and Chairman Pierre Omidyar, and various other members from our company and other companies (Ebay Inc Board Members). Recently, at eBay we have been working to trim down upper management and make a more efficient management process. One way that we have been doing this is by combining roles of upper management and not always hiring a replacement if we lose a manager. In 2010, Stephanie Tilenius stepped down as head of global product and North America and we did not hire a direct replacement for her position. Instead we added her former position to Lorrie Norrington who already worked as our global head of marketplaces (EBay Streamlines Senior Management). This action will definitely streamline the management process but it is going to put even more responsibility and stress on our current management. This added responsibility could lead to management unhappiness and shorter stays with our company.

Organizational Culture

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At eBay, we believe in being a diverse and socially responsible company. We encourage a creative, diverse environment characterized by respect for the individual and their background (Culture). Our company is an equal opportunity employer which entails that we will not discriminate against any employee for any reason. We are much more committed to employing individuals based on their qualifications and abilities. It is also an important belief in our company to be socially responsible. In order to be a more socially responsible company we have enacted various programs to improve the world that we are a part of. These programs include; the eBay Green Team, the eBay Foundation, WorldofGood.com, the Opportunity Project, and various PayPal nonprofit programs (Sustainability). Reviews from our employees have certain complaints directed toward eBay. Some of these complaints address that the work is demanding and that you should expect more than a 40 hour work week. These reviews indicate that there is a poor work/life balance in the company. Other reviews have indicated other problems such as a disconnect between managers and employees, excess politics in the company, hiring outside the company for upper management, and there being little room for advancement. One employee stated that, eBay attracts a lot of great people, then the company culture beats them down and they leave within a couple of years (Ebay Employee Review). Obviously, any company will have problems completely pleasing each employee in every aspect. The overall rating for eBay given by employees though is a 2.9 out of 5 (Ebay Reviews).

Human Resources
There are many different activities that our company must perform to make a quality and rewarding work environment for our employees. At eBay, we are committed to hiring, promoting, and compensating employees based on their qualifications and demonstrated ability to perform job responsibilities (Culture). In order for our company to recruit, hire, and develop the best workers we can we have developed various features to benefit and develop our employees. When working for our company we provide development workshops. These workshops are used to give further training to managers and to give career development planning to all employees. We also cover our employees with different health and wellness benefits. These benefits include; medical, dental, and vision insurance, flexible spending accounts, employee assistance program, life, accidental death and dismemberment insurance, short and long term disability insurance, business travel accident insurance, and our wellness program. Our employees are also given time off in different forms. We provide paid time off which

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employees are able to use for vacation, personal time, and/or illness. To prevent our employees from getting burned out from the demand of their jobs, after five years with the company employees receive four weeks of sabbatical time for themselves. There are also financial benefits to working for our company. To aid employees in saving for their retirement we feature a tax advantaged 401(k) plan. Employees are also able to purchase our stock at a 15% discount and lock the premium in for two years. Another financial benefit that we provide is the employee referral program which gives employees $1,000 if the person they referred is hired (Benefits). The employee referral program also aids our company in recruiting and hiring the best talent we can. At eBay, we do not have any long-term employment agreements with key personnel in our company. This may lead to losing key managers or directors for our company, which we will then have to incur costs to finding replacements for positions that they might leave vacant (Annual Report 2010).

Operations/Production
In order for our company to be competitive, we must have capable and strategically located facilities. We own and lease various properties in the U.S. and 29 other countries around the world (Ebay 2010 Annual Report). The properties that we own and lease are used for administrative, executive, product development, and customer service offices as well as data centers. As of December 31, 2010, facilities for the marketplace segment of our company covered 2.2 million square feet and facilities for our payments segment covered 1.9 million square feet. We believe that the facilities that we possess now currently meet our needs. However, if our company grows in the future then we may need to assess our facilities and land. If we expand in the future we will either need to update and improve the land and facilities we currently own or lease or purchase more land and facilities (Ebay 2010 Annual Report). In 2008, we unveiled that we would be constructing a $334 million data center in South Jordan Utah. This area of Utah has been becoming more popular as a home for data centers. Another reason our company constructed the data center in South Jordan is because of incentives from the local government. We were given $27.3 million in tax incentives over 10 years to build the data center ("EBay Picks Utah for $334 Million Data Center"). This data center finally came online May4, 2010. This data center will house the eBay and PayPal websites and have approximately $2,000 worth of transactions coming through it each second. It is also going to be 50% less

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expensive to operate than the average of the rest of our data centers and 30% more efficient than the previous most efficient center that we own ("EBay Unveils New Flagship Data Center). Layoffs can be a serious problem for a company and attempting to meet the security needs of employees. At eBay, we work hard to avoid layoffs for many different reasons. However, in 2008we cut about 10% of our workforce which totaled approximately 1,600 people with 1,000 of those being full time employees (Heibert, Aaron). These layoffs affected our business in many different ways. The layoffs effect the perception of everyone in the community and perception is extremely important to the survival of any business ("EBay Layoffs What Effect Will It Have on You?").

Marketing
The auction and marketplace portions of our company provide a community where practically anyone can sell practically anything (Who We Are). With our online auction and marketplace options, the number and option of products that our users can find is almost endless. The price that users pay to sell items on our ebay auction site is the total from the listing fee and the selling fee. The listing fee for items varies by the initial bidding price that the user sets. This fee starts as low as 10 cents and can go as high as 2 dollars. The selling fee is calculated as 9.0% of the final selling price of the item. The maximum that this fee can go up to is 100 dollars. There are also fees charged for selling with our Buy It Now feature. These fees range from 5 cents for an item listed under 10 dollars to 25 cents for items that are listed for 50 dollars or more (Fees for Selling on eBay). As for our affiliate, Half.com, there is no listing fee for items but we do take a commission based on the selling price. This commission ranges from 15.0% for items that sell for 50 dollars and under to 5.0% for items that sell for more than 500 dollars ("Half.com Policies - Seller Payment & Commissions). Users will find our product strictly on the internet as our company focuses on ecommerce rather than in physical stores. We promote our ecommerce platforms through different media. Recently we have been focusing advertisements towards the new mobile shopping experience for our ecommerce sites (Kats, Rimma). We also place ads and links for our various sites and products we think you might be interested on the internet. By doing this it ensures that the consumer is only a click away from using our products.

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The payment segment of our company, mainly including PayPal, has made it possible for individuals and businesses to pay and get paid online across different locations, currencies and languages (Who We Are). With PayPal we have, built a single global payments engine that has some of the best risk and fraud detection capabilities in the payments industry, PayPal continues to be one of the leading ways to pay online (Who We Are). Our PayPal service has a fee that it charges our users whenever they complete a transaction. The price to our users is a rate on however much the transfer is for. This rate ranges from 2.9% + $0.30 on transactions under 3,000 dollars to 1.9% + $0.30 on transactions over 100,000 dollars ("PayPal Fees for Domestic Payments). Our PayPal service is able to be used not just on eBay but it can also be used to pay online at thousands of other retailers. All our users need to do is look for the PayPal symbol when they are checking out online and select that option (How to Use PayPal). The most common way that we promote PayPal is by featuring the PayPal symbol at the checkout of every site that users our payment feature. This not only promotes our product but it reaches out to consumers at the time when they are most likely to use our product.

Research and Development

Research and development aids our company in developing new products and improving our existing products to offer a better experience to our users. There are many different areas of research and development that our eBay labs are currently working on. These areas include; search, machine learning, analytics, trust and safety, emerging platforms, and ecommerce economics. With our auction site there are millions of searches being performed each day and it is very key that we provide the best search possible. We are currently working to improve our search system by focusing on search quality and relevance. Our site will be enhanced with new features revolving around these two key areas of searching (Research Focus Areas). Under machine learning, we are focused on making our user feedback system a better feature. We believe that the feedback system should be adaptive. In order to build this feedback system we are constructing algorithms that look at user interactions and behaviors. Our feedback system is very important to trust and safety as well. This system is very valuable to our reputation and to the safety of our users (Research Focus Areas).

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It is also important for our company to effectively collect, store, and process the information that we can. Effectively analyzing all this data that we store is also beneficial to our search system. Information that we must look at includes user profiles, queries, click through events, and domain categories. Being efficient with all this information can provide users with a much finer search experience. We are also researching ways for this information to provide benefits for sellers (Research Focus Areas). One area that we have been highly focused on recently are emerging platforms. We have been working to develop a relevant experience for our users on mobile platforms. Not only have we been working to develop mobile platforms for our ecommerce sites but we have been developing mobile products for PayPal as well. Our challenge with this is to allow users to feel secure doing business on mobile devices (Research Focus Areas). A main part of research and development involves introducing new products and features before competitors. According to a former high level company employee, eBay is recognizing other people's innovations, and are not drivers of innovation themselves (Steiner, Ina). The last thing that we need to have happen as a company is to just follow what other companies are doing. We need to constantly work to innovate new products and features and not sit back and let other companies capitalize before we can.

Management Information Systems

Gathering information to make proper decisions is extremely important and with all the information that can be gathered today an effective information system will be an important part of any organization. Without proper information, any decision that we make as a company is basically a blind decision. Managing by making blind decisions can be a sure way to ruin a company. At eBay, we have Mark Carges as our Chief Technology Officer. As Chief Technology Officer, Mark has responsibility for our technology, software development and site operations. Being the CTO his responsibilities cover our information systems. Mark has had education and past experience that make him a valuable leader for this position. In previous companies he has held other senior technology leadership and software management roles. He also holds BA and MS degrees in Computer Science with the MS degree being from New York University (Leadership). While he has had valuable experience and is qualified for the position that he currently holds, it

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may be beneficial to have a person in charge of just our management information systems seeing as how they have become such an integral part of companies. In order to make better decisions at eBay, we have recently been using the idea of a social network for analytics and information sharing. This social network allows all of our employees to collaborate on and share information throughout the company. The information that employees will be getting is coming from our web analytics program which tracks an immense amount of data from our websites including, where people go on the websites, what they look at, what they have purchased and many other things. Gathering all this data and allowing our employees to share this data much easier with each other allows for better decisions and a more efficient company (Sibley, Lisa).

IFE Matrix
* IFE Matrix is located in Appendix A
The scores for an IFE Matrix can range from a low of 1.0 to a high of 4.0. The closer the score is to the upper range the better the company is internally. With the IFE Matrix that I have constructed, at eBay we are almost exactly average internally. This indicates that we are not a weak company internally but that we also have a significant amount for our company to improve internally.

External Organization Environment Analysis

Political, Legal, Regulatory, Governmental

One big threat to the payment segment of our business is if we are found to be violating any laws or regulations. These laws and regulations include those that govern money transmission, electronic funds transfers, money laundering, counter-terrorist financing, and banking and lending. In Europe, we have been providing localized versions of PayPal in different EU countries. That being said, PayPal is subject to fines and enforcement if we violate the disclosure, reporting, anti-money laundering, capitalization, funds management, corporate governance

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or other requirements imposed on Luxembourg banks (Ebay Annual Report 2010). Any fines or enforcement that we may encounter from our payment operations in these countries will inevitably increase our costs and also slow down our business expansion. We also encounter these problems in our other global markets including Australia and China (Ebay Annual Report 2010). In the United States, we operate as a money transmitter in every state. Of the fifty states, forty two states require PayPal to be a licensed money transmitter, seven states licensing is not required, and the last state does not regulate money transmitters. Our business is subject to restrictions on the investment of customer funds, reporting and bonding requirements, and we are also inspected by regulatory agencies of each state. If we were found to be at fault with the laws and regulations, then PayPal may be forced to stop doing business with certain states or to alter our business. Either of these options would be costly to our company and make us a less attractive payment company which will also hurt business on eBay.com (Ebay Annual Report 2010). At eBay, we also have difficulties with our products being used for illegal purposes. Our service has dealt with people selling unlawful or stolen goods and unlawful services. We have had several lawsuits against our company for this reason. Due to these lawsuits and accusations against our service for allowing these illegal activities we may be forced to use additional resources to protect our service against these illegal operations. There have also been large retailers lobbying for legislation regarding stolen goods. With this legislation it would require our company to confirm the source of the item for sale and that the seller has a legal right to sell the item (Ebay 2010 Annual Report). In China, we have created a business model that has been working well for our auction company. We realized that the auction site that was dominating the Chinese market had very little reach outside of China. To capitalize on this we have been catering to the Chinese consumers. In order to provide a service that worked for Chinese consumers to sell their product to global consumers easier we have worked with the Chinese Post and the United States Postal Service to provide free shipping from China. This cross-border model works well for our company which is continually trying to find ways to connect buyers and sellers (Einhorn, Bruce). This is a model that we may be able to use to attract business in other countries.

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Economic
At eBay, we have a strong international presence. In fact the majority of our revenues are generated from our international presence. That being said, the revenues that our company generates are going to be subject to the foreign currency exchange rates. We currently have a program that is designed to reduce the effect of the foreign currency exchange rates. This programs effectiveness will vary from period to period. Our operating results will be significantly affected. Recently, the movement of foreign currency relative to the dollar has been negatively affecting our business. For the year ended December 31, 2010, these movements negatively affected our revenues by $9.6 million compared to the previous year. These foreign currency exchange rates affect both the marketplace and the payment segment of our company. The marketplace segment of our company was negatively affected by approximately $7.1 million and our payment segment was negatively affected by approximately $2.5 million. These two segments combined for the $9.6 million for our whole company (Ebay 2010 Annual Report). The current economic downturn is also adversely affecting our business. Our business is dependent on consumer purchases. The economic downturn has resulted in reduced buyer demand and reduced selling prices and may reduce the volume of purchases on our Marketplaces platforms and the volume of transactions paid for using our Payment services, all of which would adversely affect our business (Ebay 2010 Annual Report). This is not the only part of our business that this has affected. Our company has also been experiencing negative effects on our advertising revenue. With the current downturn we also may need to focus on increasing our reserve for bad debt, transaction, and loan losses (Ebay 2010 Annual Report). According to the Asian Exporters Index, India has been eBays second fastest growing exporter. Indias eBay exports have been growing 85% year on year. This trend can be attributed to the rise in demand that developed nations have had for country-specific, exotic items. Not only have the exports been increasing, but the majority of these exports are coming from small scale manufacturers. With these exports coming from these manufacturers, this is a very good situation for eBay. If we continue to support these items our company should see a good return from areas such as the Asia-Pacific Region (Trefis). In recent years, our effective tax rate has been decreasing. In 2008, our effective tax rate was at 19% and it then decreased to 17% in 2009 and was most recently at 14% in 2010. The decrease from 2009 to 2010 was mainly

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attributable to our company settling multiple uncertain tax positions (Ebay 2010 Annual Report). With our effective tax rate being lower this means that less of our revenue will be leaving our company in taxes. Also, with more revenue being retained in our company we can increase funding to other parts of our company to improve it. Due to the recent economic recession worldwide, consumers have a lower propensity to spend money. Shopping online has become the most common way to find a bargain. Surveys about online shopping show that more consumers are using online shopping services on a regular basis. Three-quarters of consumers that responded to a survey about shopping stated that they were going to be extremely frugal. This survey was conducted going into 2010. Most consumers I feel are still in a frugal state of mind because of the economic recession that we went through ("Consumer Spending Habits and Thrift in an Uncertain Global Economy). This frugal state of mind plays well for eBay. Consumers will be using online commerce sites to find the best deals that they can and eBay is a site that is known for being able to find good deals on products.

Social, Cultural, Demographic, Natural Environment

Another variable that affects our business is the age of the population. Looking at our services, it is more likely that the younger population will be using them. Surveys have found that 34% of online shoppers that are ages 18-24 have used PayPal or another similar service in the past 12 months. That is compared to only 27% of all online users ("Age Makes a Difference in How Consumers Pay Online). This indicates that the older population is less likely to use our payment services. With the older age of the overall United States population currently and with the baby boom generation getting older this may mean that we will have a large population that is not comfortable using our services (Population Profile of the United States"). Therefore we will be missing out on a large amount of revenue from the older population. A big problem for our services is user fraud. On eBay, our users have had problems with not receiving items that they have purchased and also problems with not receiving payment for items that they have sold. Users of PayPal have reported problems with merchants that have not performed and also with items that dont match with the description that merchants gave. These scenarios lead to user uncertainty and can lead to decreased use of our services. Both of these services affect each other. If less people use eBay then there will be less people using

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PayPal because they wont be using it to pay on eBay. Therefore if less people want to use PayPal then they wont feel comfortable using eBay because PayPal is the main payment system on eBay. There are also threats to trying to solve buyer uncertainty because there will need to be more funds put towards making sure that there will be no problems like these when our services are used (Ebay 2010 Annual Report). As mentioned above, the age of the United States population and technology use is a threat to our company. However there can also be a big opportunity in the future for our company. I feel that in the future if we continue to build our brand with the consumers just starting to buy online then our company will be able to start a relationship with younger groups and also keep these relationships as our users age which will allow us to reach across different age groups. While buyer uncertainty is a threat to our company as it is now. We can also work to improve this aspect of our business. This will be costly as was mentioned earlier but this can be an important step to fostering relationships with users. At eBay we have been attempting to figure out better ways to improve the user experience when they use our services. This is a main focus because we believe that a negative experience is one of the key reasons that users stop using our sites. To combat this we have been considering more active mechanisms that will work against bad transactions and help to improve experiences. In order to do this we will evaluate sellers on their past transaction history and then either restrict their service or suspend it based on our evaluation (Ebay 2010 Annual Report). If we are successfully able to improve buyer satisfaction and certainty we may be able to attract and retain more users due to this feature.

Technological
At eBay because our services are placed on the internet, we are always at risk for security risks such as breaches. Our company stores our users proprietary information which could be at risk if there is a security breach on our sites. It is often hard to tell when a security breach may happen so it is important for our company to always be working to prevent them. However, a security breach may occur and the information we store may be compromised then. If the information we store is compromised this can lead to a market perception that believes that we are not a capable site and they will stop using our service. Compromising information due to a security

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breach can also lead to a violation of certain privacy and other laws. These combinations of results will cause us to incur significant financial and legal exposure, damage to our reputation, and a loss of confidence in our security measures. All these scenarios will of course harm our business (Ebay 2010 Annual Report). Not only are our services at risk for security breaches but we also are susceptible to viruses on our company servers. Viruses and other interruptions have caused breaks in service for our different sites. These viruses and interruptions cause periods of time where our sites are not available for use. These disruptions in service can damage our reputation and frustrate our users. If our users become frustrated they can easily switch to competing sites (Ebay 2010 Annual Report). In order to access our products and services it require our customers to have uninterrupted access to the Internet. This internet access is often provided by companies that compete with at least some of our offerings, including incumbent telephone companies, cable companies, mobile communications companies, and large Internet service providers (Ebay 2010 Annual Report). In the past these providers have claimed that they will take measures against our services. The ways that they have indicated that they would do this is by restricting or prohibiting the use of their infrastructure to support our services, or by increasing fees for our company or users of our services. Around the world there have been many companies that have announced plans of action such as these against our company (Ebay 2010 Annual Report). A current opportunity that we have at eBay is expanding our role into mobile payments and platforms. These mobile technologies will be gaining significant ground in the very near future. Currently at eBay we are working to capitalize on this mobile movement. We have been working to strengthen our services for mobile payments through PayPal. Juniper research has made a bold prediction that by 2015, mobile payments will be a $670 billion market. In order to make our PayPal service better for mobile payments we recently purchased Zong for $240 million. The purchase of Zong allows our company to provide additional ways for our customers to pay using mobile technology (Kim, Ryan). The other opportunity with mobile technology for our company is mobile commerce. Mobile commerce technology will allow users to conduct transactions over mobile devices. At eBay we have been making purchases of other companies that will help to bolster our mobile commerce capabilities. Our most recent estimate indicates

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that we will be doing $5 billion in retail on our eBay mobile app this year. We can only expect this number to keep growing as the demand for quality mobile shopping increases. This is a huge opportunity for our company to be a leader in this regard and establish ourselves as the best option in the market (Tode, Chantal). It is important for our company to capitalize on this segment before competitors such as Amazon and Google.

Industry/Competitive (Porters Five Forces Model and Competitive Profile Matrix)

eBay is made up of two different business segments; Marketplaces and Payments. These two segments will react nearly the same when looking at Porters Five Forces. That being said, in order to analyze eBay using Porters Five Forces Model, we will look at the eBay company as a whole rather than analyzing our company separately. The first of Porters Five Forces that we will look at is the potential entry of new competitors. The potential entry of new competitors for eBay is relatively high. There are low technological barriers to prevent new entrants from entering the same market. Established companies are also always looking for different markets to get into and can have resources to start up similar companies. Any retail site that opens up is a competitor to eBay because it can steal away users from our site. There is also the availability of many companies to enter into the payment industry too. Being that we provide our services on the internet there is always the high potential for another site to come along and cut into our market. The next factor from Porters Five Forces is the potential development of substitute products. With our products being offered on the internet there is always a chance that there will be new products introduced that steal our market share. Also, current online retailers and online payment companies are always working to develop new features for their sites that can also hurt our company. Recently, the movement has been to mobilize retailing and payments and this has lead to other companies working to develop their own products and introducing them in these fields. At eBay we rely heavily on our consumers. In our view consumers have very high bargaining power for our company. Our consumers can inexpensively switch to competing brands because our services are provided on the internet and the costs to sign up for services similar to ours are either very low or non-existent. The consumers

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are also very important to our company because without them transactions for either of our business segments would not be possible and we would therefore hardly have a company. It is also always to the consumers discretion of whether or not they choose to use our products because they can just as easily choose another companies products. For eBay it is difficult to say whether or not suppliers have a high or low bargaining power for our firm. We feel that suppliers also possess a high bargaining power on our firm. In order for our marketplace to generate revenue it requires a person buying a product but there also must be a person or company supplying that good to be bought. Without users supplying goods to be bought on our sites there will be fewer options for our consumers. That being said a decrease in suppliers on our marketplace would lead to less demand from our buyers. Also we charge a supplier fee on our marketplaces so if we have fewer suppliers we are generating less revenue from our marketplaces. If we have less suppliers and in turn less transactions on our marketplaces then that will also hurt our payment service because it will see less traffic. We feel that our payment segment is a little less susceptible to the bargaining power of suppliers however. The last component of the Five Forces is Rivalry Among Competing Firms. For eBay, our Rivalry Among Competing Firms is relatively high for both our segments. As for our marketplaces, our users can find, buy, sell and pay for similar items through a variety of competing online and offline channels (Ebay 2010 Annual Report). These other options can include retailers, liquidators, online and offline auctioneers, catalog companies, classifieds, and online and offline shopping networks. There will also be other competing firms as we will also continue to broaden our companys product offerings. As for our payment services, our users may choose to pay through a variety of alternative means, including credit and debit cards, automated clearing house and bank wires, other online payment services, offline payment methods such as cash, check or money order and using mobile phones (Ebay 2010 Annual Report). The competition that we face overall as a firm is immense when you consider all the other options that are currently in our markets.

Competitive Profile Matrix

* CPM is located in Appendix B

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Ebays top three competitors that were chosen to analyze in this CPM are Amazon, Google, and Overstock. When looking at the total scores for each of the companies, there is a relatively small gap among eBay, Amazon, and Google. Overstock was the only company to fall below the 2.5 average mark. These scores show that the top three companies are better able to use the resources and strengths that we feel lead to a good strategic position in their market. Of the companies that we picked, Google has the highest total score which is at 2.91, Amazon was second with a 2.77 score which is .01 higher than eBay which has a 2.76 score. The success factor that really helped to push eBay up around Amazon and Google was the fact that they have a very well established payment segment in their portfolio which is very beneficial in this market. Other than this main factor, each individual factor was scored nearly the same for each of the top three scorers. Negatives for eBay dealt with the human resources and a big negative for eBay came with the customer loyalty factor. It is very easy to switch between the brands and there has been unrest in recent years with eBay users.

International
As a company, eBays marketplaces operate in 38 countries with localized sites and our payment service operates in approximately 190 markets worldwide. There are many different threats that we can encounter worldwide. As we expand more and more globally there is a high chance that we will encounter stronger competition from already established local services that are similar to our product. We have already faced a problem similar to this when we first introduced our product to the Chinese market. While in China we lost most of our market share to a Chinese startup called Taobao (Arrington, Michael). Another threat to expanding our products globally is that we must meet the regulations and laws of all the countries. Each country will have different rules that will govern how we operate our marketplace services and our payment services. Adapting our products to fit these regulations can be very expensive for our company (Ebay 2010 Annual Report). Another international factor that we will have to analyze is the age of the populations. In the United States where we conduct a lot of business, the age of the population is increasing. With increasing age, there is a much stronger likelihood that users may become less comfortable with using our products. In the United States the median age of the population is up to 36.5 (World Demographical Statistics). We may look to introduce our products to younger populations. This could

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help our company attract a new set of users that may be more open to using our product and will adapt better to any changes that we have to make. Though costs may be high to expanding our portfolio internationally it is still a very large opportunity for our firm. There are many markets around the world that we can look into for introducing our product. Also, as we improve our products and potentially add more products we can look to generate more interest in our products worldwide and possibly be better able to tailor our products to fit specific markets (Ebay 2010 Annual Report).

EFE Matrix
*EFE Matrix is located in Appendix C According to this EFE Matrix for eBay, it shows that the biggest opportunities for eBay come from extending more into mobile platforms and payments, utilizing the Indian/Asian-Pacific Market more, and expanding our portfolio even more internationally. Mobile platforms and payments are going to be the next big wave in consumer retailing and though we have been working to get ahead in this market it is still relatively untapped and expanding our products into that market can greatly benefit our company. The EFE Matrix also shows that our two biggest threats come from strong local competition and user fraud on our sites.

Consumer Characteristics and Behavior

Our main consumers for our traditional auction website have been buyers that are looking for bargains and other specific items. These users have regularly included hobbyists or collectors. The sellers that have been using our auction website have been casual sellers that have items that they no longer want and they have also been those that are looking to make a business from selling on eBay. Given that our products are provided on the internet and now mobile devices, we have a lot of younger to middle aged consumers that are more familiar with the internet technology than older consumers. These consumers feel more comfortable with using online services but are also

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more inclined to switch products if they become dissatisfied with our products. As for our payment services, we generate a lot of customers from our marketplaces. That being said the characteristics of our payment users are similar to the users of our marketplaces. Our payment users are consumers that are looking for a secure way to pay and transfer money. The consumers are also the middle to younger aged consumers that are using retail sites that use our PayPal service to make online payments

Strategic Direction
eBays past strategic direction involved providing the best ecommerce experience for our users. Initially our business revolved around our auction site and then as time went on we realized that we needed to expand into more areas to support our company. We expanded into the payment market because we realized that our users favored the PayPal system over our current payment system. Then we worked to expand PayPal because we realized the capabilities that it had. At one point we attempted to break into the communication market by acquiring Skype but when that acquisition did not work for our company we sold Skype and backed out of the communication market. Our present strategic direction at eBay involves a few different areas. One area that we are looking into for our company is providing a better overall experience and a more secure experience for the users of our marketplace and payment products. Another area we are heading into is expanding our products to more local markets internationally. Finally the major area that we are heading as a company is in mobilizing our products. We have been acquiring many companies that will aid in making our company more suitable in the mobile market. We have also been developing our own mobile products to aid in this effort.

Problem/Issue Diagnosis
We feel that at eBay our main strategic problem at this point in our companys life is that we have been more of an innovation follower rather than an innovation leader. Being behind the curve on new innovations can lead to a wide variety of problems for any business. With the current competition that we are facing on a daily basis

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and the high potential of more competition that we face in the future following the innovations of other companies puts us significantly behind our present and future competition. We can work to address this problem now and instill the whole way through our company the importance of new and innovative ideas. As Steve Jobs said, Innovation distinguishes between a leader and a follower. At eBay we cannot afford to be viewed as a follower but rather we need to be seen as a leader. Another strategic problem that we face at eBay is what we should do next with our auction site. Our auction site has recently been struggling and we have lost our lead to Amazon (MacMillan, Douglas, Galante). We must make decisions on what we realistically see our auction site being in the next year and few years from now. There are many different options that we have to keep working with it but we must decide what would be our best option for our auction site in the future.

Alternative Solutions
In order to decide where our company should go in the future it is important for our company to formulate strategies. It is important that these strategies address key factors of our organization. These factors involve our companys strengths, weakness, opportunities, and threats. A helpful tool in analyzing all these factors to come up with a valid set of strategies is to complete a SWOT Matrix. This allows us to match up different factors and identify strategies that meet these different factors. It is important for our firm to overcome weaknesses and make them strengths and also to focus on opportunities and minimize threats. There are four types of strategies involved in a SWOT Matrix. They involve Strength-Opportunity (SO) strategies, Weakness-Opportunity (WO) strategies, Strength-Threat (ST) strategies, and Weakness-Threat (WT) strategies. The SWOT matrix that we performed for eBay is located in Appendix D. We used the strength, weakness, opportunity, and threat factors that were identified in the previous IFE and EFE matrices. First, we analyzed our companys strengths and opportunities to form the SO strategies. We determined three strategies that could be formed from looking at our strengths and opportunities. These strategies included; further establishing our company in mobile platforms and payments, attracting more customer with better security features on our sites, and use

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partnerships to provide better and easier products for customers. We then determined four strategies from looking at our weaknesses and opportunities. These included; lowering our product fees to users, creating a CIO position so that we are better at analyzing information, constructing more international facilities, and further establishing our company in mobile platforms and payments. The next step was to determine strategies that involved our strengths and threats. These strategies are; Use partnerships to provide better and easier products to consumers globally, attract customers with better user security features, decrease stress in the workplace, and advertise the bargain capabilities of our website. The final set of strategies that we formulated are the weakness-threat strategies. These strategies included decreasing stress in the workplace, training key personnel on key factors for the companies we operate in, and to train managers to better utilize the assets we possess. Not all of these strategies will be selected for implementation. This tool is simply to determine feasible strategies that our company could use.

Evaluate Alternative Solutions

After looking at the strategies that were developed from our SWOT Matrix there are three strategies that we have picked to analyze. These include further establishing our company in mobile platforms and payments, advertising the bargain capabilities of our websites, and lowering our product fees to users. These strategies initially seem to us that they would have the greatest impact on our company in the future. Throughout this section we will discuss each of these strategies based on the information that we have discussed from previous sections of this analysis. Another analysis tool that will help us evaluate each of these solutions will be certain matrices. The first step in evaluating these strategies is by completing matrices to determine which course of action best suits our companys current position. The first matrix that we have used to determine where our strategies should focus is the Boston Consulting Group or BCG Matrix which is located in Appendix E. The BCG Matrix graphically portrays our companies standing in terms of relative market share position and industry growth rate. The relative market share position is the ratio of our companys market share to the market share of the largest rival firm in our industry. To determine our companys relative market share position we compared our revenues to the

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revenues of Amazon. The revenues that were used are from the 2010 income statements for both companies. EBays revenue on this income statement was $9,156.27 and Amazons revenue from 2010 was $34,204.00. These income statements can be found from each companys 2010 Annual Report. These numbers are also in millions of dollars. After analyzing these numbers we determined that eBays relative market share position was at 27% in comparison to Amazons revenue. The second step in setting up the BCG Matrix is to determine the industry growth rate. In order to figure out our industrys growth rate, we analyzed the average annual increase in revenues for several leading firms in our industry. The firms that we used to determine this were Amazon, Overstock, and our company. To attempt to determine the best industry growth rate we calculated the growth percentage for each company between 2009 and 2010 and between 2008 and 2009. We then averaged those two percentages for each company and totaled them up and divided by three to figure out the industry growth rate. The number that we finally determined for the growth rate is 18.36%. Then, using these two numbers we were able to plot eBay on

the BCG Matrix. The two numbers that we calculated place eBay in Quadrant 1. This means that our company is a Question Mark according to this analysis tool. Being a Question Mark means that we have a low relative market share position but we compete in a high-growth industry. This also shows that our cash needs are high but cash generation is low. We should decide whether or not to strengthen our company or to make moves to minimize or eliminate parts of our company. The second matrix that we used to evaluate what strategies we should pursue is the Grand Strategy Matrix which is located in Appendix F. This matrix is used to evaluate two dimensions of our company which are competitive position and market growth. We determined from our opinion and the research that we have conducted throughout this analysis that eBay has a strong competitive position. We feel this way because we are an established company and we have been competitive for a number of years and we believe that we are very able to capitalize in new and current markets with proper strategy implementation. We also placed our company in the rapid market growth segment of the Grand Strategy Matrix. We determined this because our industrys annual sales growth that we determined for the BCG Matrix was at 18.36%. This number is well above the 5% that is considered to be rapid growth for an industry. When we combine the market growth and competitive position areas, we have determined that eBay should be placed in Quadrant 1 of the Grand Strategy Matrix.

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This means that our company should not switch too notably from established competitive advantages that we possess. This also indicates that we can afford to take advantage of external opportunities that fit our companys objectives. There are also times that we can be aggressive at taking risks if we feel that it is necessary. The first strategy that we will evaluate in this section is to further establish our company in mobile commerce platforms and payments. Our company has already been reaching into the mobile commerce and payment market and to this point the response by consumers has been wonderful. Mobile commerce platforms and payments are to become the next big market in buying and paying for items that consumers want. ABI research states that the mobile commerce market is expected to grow to $119 billion globally by 2015 (Batista, Amanda F). Seeing as how we have already been improving our companys portfolio to develop this market, we should continue these efforts to further our reach to these markets. Gaining control over this up and coming market will benefit our company by placing us ahead of our competitors and establishing a strong relationship between our products and our customers. This strategy will fit into the recommendations that we generated by forming the BCG and Grand Strategy Matrix. With this strategy we can focus more on market development and product development. The second strategy to evaluate is extensively advertising the bargain capabilities of our websites. Due to the recent economic downturn more consumers have been looking for better deals and bargains. Our ecommerce sites have been known as a place where you can find good deals on things you want. In order to further establish this capability of our sites and remind consumers of this benefit of our sites, an extensive advertising plan could do that for our company. By forming and implementing a successful advertising plan we could increase traffic to our sites not only by buyers but also sellers. Implementing an effective advertising plan of our services features, advantages, and benefits would also help to lure customers away from other services similar to ours. This strategy would increase the expenses that we currently generate through advertising. However, if we are able to draw more customers to our site then the increased revenue that we generate from this increase should outweigh the expenses. Also, if we generate more traffic to our website then we should develop relationships with customers that last longer than we incur the expenses of the advertising. This will help our company in further penetrating the market we participate in. The final strategy for evaluation is to lower our product fees for users. This strategy would entail lowering the fees that we charge to users when they use each of our services. Increasing our fees has been a main reason in

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the past as to why we lost customers to other companies. Lowering our fees may be a way to draw consumers back to our services or to draw new consumers to use our services. This strategy will lower our revenue per purchase or transaction on our sites. This strategy may increase the volume of consumers that use our services though. This increase in volume could be expected to offset the lost revenue from decreasing our service fees. Lowering our fees will be another way to further penetrate our market and take market share away from our competitors. To officially determine which of these strategies fits our organizations current position we have constructed a Quantitative Strategic Planning Matrix or a QSPM. The QSPM objectively indicates which alternative strategies are best. This matrix uses inputs and matching results to decide among a set of strategies. The strategies are evaluated based on the critical success factors that were identified earlier in the company analysis. The QSPM that we completed for eBay is located in Appendix G. As previously mentioned, the three strategies that we evaluated in the QSPM are further establishing our company in mobile platforms and payments, advertising the bargain capabilities of our websites, and lowering our product fees to users. We evaluated each of these strategies against the strengths and weaknesses from the IFE Matrix and the opportunities and threats from the EFE Matrix. The weights that we used for each factor remained the same as the weights used in the IFE and EFE matrices. After evaluating the three strategies the strategy that possessed the highest score was to lower our product fees to users. This strategy received a score of 2.48 while the strategies of further establishing our company in mobile platforms and payments and advertising the bargain capabilities of our websites scored 2.37 and 2.15 respectively. Factors where lowering our product fees to users scored high on include the opportunity of bargain hunting consumers, the threat of the current economic downturn, the strength of users being able to find nearly anything with our products and being able to pay with our secure payment services, and the weakness of charging fees to users when a product is listed and when its sold. This strategy received a score of four in each of these areas which indicates a highly attractive score. A rating of four indicates that a strategy capitalizes on a strength, improves a weakness, exploits an opportunity, or avoids a threat.

Implementing the Decision

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The strategy that will be implemented to attempt to benefit our organization will be lowering our product fees to users. In order to effectively implement this strategy we must have a procedure to follow. This procedure should look at not only what needs to be done internally but also externally. One benefit of this procedure is that it should not require our company to have to acquire a large amount of additional funding as we would not be expanding our facilities or anything similar to that. The costs that we will incur as a result of this strategy will be the decrease in revenue generated each time that our products are used. Initially, we should complete market research to determine the amount of increased traffic we can expect on our sites if we move to lower our product fees. Some funding may be needed internally to set aside a set of qualified employees to determine an optimal amount that we can afford to lower fees. The fees that we implement should compete better with rival competitors such as Amazon, if not beat the fees that they are charging. It will also be beneficial to meet with managers throughout our company to address the changes that we are planning to make and to assure them that if we are able to determine a better set of fees it will benefit the company in the short and long terms. Some different variables that we should account for in determining the new fees are fees of competing companies, how low we can set our fees and still generate a substantial amount of revenue, market response, and the response of our industry. In determining and implementing the new fees, we should attempt to determine the optimal fees as soon as we can. Introducing the fee changes in a suitable amount of time will be vital to the success of the strategy. When we say a suitable amount of time that means that we do not want to rush into a bad decision but we also do not want to keep postponing the action. As a company we need to allocate enough time to conduct proper market research. While this market research is being conducted we can be working to determine feasible sets of lower fees that we can enact. After we conduct the marketing research and determine a feasible set of fees we should have a small gap in time before we introduce the fees. A reasonable amount of time should then take into account setting up the sites to accommodate the new fees. This amount of time to enact the new fees after the research and formulation should be no greater than a month. If we determine as we rework the sites that we are able to finish before that time and we are sure that there will be no setbacks with the introduction of the fees then we can move up the introduction of the new fees.

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After we determine the fees that we can set, there are steps that we need to continue to do as an organization. One step that we should complete prior to setting the new fees for our products is to advertise the changes and make the consumers aware. One of the most important steps that we should complete is to monitor the actual market response to our new lower fees. If we track the actual market response to the new fees we should be able to determine whether or not our action is meeting expectations. The actual market response should also allow us to determine if our company will be able to generate the revenue that we need to support our operations. If we determine that the new fees we are charging are not meeting our expectations then we need to formulate a strategy to effectively relinquish the lower fees without turning away a large part of our market. If we determine that the new fees have been a success then we should continually formulate strategies to capitalize on this and to update fees in the wake of an industry response. Internally, we should keep analyzing all the external trends that will affect the fees on our sites. We should stress the importance of working to keep the fees competitive with or lower than our competition. There should also be a large amount of consideration on whether or not we should form a department in our organization that solely focuses on ways that we can keep our fees low and ways that we can use the low fees to generate more traffic to the site. We should also use our companys social system to keep everyone in the company informed about current trends that we are analyzing with our fees. This social system will also allow other segments from the company to supply us with their opinions and areas of expertise.

Current Profile
At eBay, we currently provide consumers with a way to shop and sell over the internet and also a way to pay for items and to transfer money. Our marketplace segment is the part of the company that allows consumers to shop and sell and our payment segment is the part of the company that allows consumers to pay for items and to transfer money. We operate many different sites that fall under our marketplace segment. These sites include our original auction site eBay, StubHub, shopping.com, half.com, and rent.com. We generate revenue on these sites from

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charging users service fees whenever products are listed and sold. With the current strategy that we are working to implement, these fees may decrease in the future which will attract more buyers and sellers to these ecommerce sites. A major strength that our marketplace segment possesses is the ability for consumers to find nearly anything that they can think of buying. This also means that there is the ability for sellers to find buyers for almost anything they sell. A weakness to this point has been the fees that we charge along with these services but our latest strategy should work to fix this weakness of our products. We are also working to broaden our reach globally and penetrate markets with local competitors. With lower fees it will improve customers ability and desire to use our product internationally. It is important for our company to capitalize on our opportunities and minimize our exposure to threats. As for our payment segment, we operate services such as PayPal and Bill Me Later. These services provide customers with options to pay for not only our marketplace sites but also numerous other online retailers and businesses online. The revenues that we generate from these services also come from fees that we charge customers to use them. Our current strategy will also affect the revenues that we generate from these services. However, if we an increase in business in our marketplaces we will see an increase in business for our payment services. It is our view that the decrease in revenue in fees will be more than accounted for by the increase in revenue from more consumer traffic. At eBay, we are also expanding our payments globally along with our marketplaces. A current trend for our companys services is to offer them through mobile devices. Our company has been working extensively to establish ourselves in this market. Though we have done a superior job of this so far we still have a long way to go to tap the full potential of this market. Lowering fees will also indirectly favor our move to mobile. The more customers we attract to our services via a computer or a mobile device will greatly benefit our company now and in the future.

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Appendices
Appendix A IFE Matrix
IFE Matrix Key Internal Factors Strengths 1. Current and Quick Ratios indicate we are more able to meet our current obligations than Amazon 2. We are financed little by debt which means our returns should not be outweighed by debt 3. Thorough Guidelines for Governance 4. Effective Structure for segments to report to CEO 5. Organization is diverse and socially responsible 6. Hire and develop best employees and offer competitive benefits to retain them 7. New Data Center in South Jordan, Utah 8. Users can find nearly anything with our product and are able to pay with our secure payment service 9. Extensive research at eBay labs on many new features including mobile platforms 10. Social Network for Information Systems Weaknesses 1. Decrease in Return on Assets 2. Have not declassified our Board of Directors 3. Have been streamlining positions 4. Company culture beats down employees 5. No long-term employment agreements with key personnel 6. Need to expand or improve facilities to accommodate future growth 7. Charge fees to users when a product is listed and when it's sold 8. Following innovations 9. CTO has other responsibilities than just Info System Total 0.05 0.02 0.03 0.08 0.05 0.07 0.05 0.08 0.04 1 1 2 2 1 2 1 1 1 2 0.05 0.04 0.06 0.08 0.1 0.07 0.05 0.08 0.08 2.51 0.04 0.02 0.03 0.02 0.06 0.06 0.07 0.08 0.1 0.05 3 3 3 3 3 4 4 4 4 3 0.12 0.06 0.09 0.06 0.18 0.24 0.28 0.32 0.4 0.15 Weight Rating Weighted Score

The scores for an IFE Matrix can range from a low of 1.0 to a high of 4.0. The closer the score is to the upper range the better the company is internally. With the IFE Matrix that I have constructed, at eBay we are almost exactly average internally. This indicates that we are not a weak company internally but that we also have a significant amount for our company to improve internally.

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Appendix B CPM Matrix

Ebay's Competitive Profile Matrix Critical Success Factors Financial Position Technology Human Resources Facilities Payments Marketing Price Competitive Customer Loyalty Market Share Total Weight 0.09 0.1 0.09 0.09 0.13 0.11 0.13 0.14 0.12 1 Ebay Amazon Google Overstock Rating Score Rating Score Rating Score Rating Score 4 0.36 3 0.27 3 0.27 2 0.18 2 0.2 2 0.2 3 0.3 2 0.2 2 0.18 3 0.27 4 0.36 2 0.18 3 0.27 3 0.27 4 0.36 3 0.27 4 0.52 1 0.13 2 0.26 1 0.13 3 0.33 3 0.33 4 0.44 3 0.33 2 0.26 2 0.26 2 0.26 3 0.39 2 0.28 4 0.56 3 0.42 2 0.28 3 0.36 4 0.48 2 0.24 3 0.36 2.76 2.77 2.91 2.32

Ebays top three competitors that were chosen to analyze in this CPM are Amazon, Google, and Overstock. When looking at the total scores for each of the companies, there is a relatively small gap among eBay, Amazon, and Google. Overstock was the only company to fall below the 2.5 average mark. These scores show that the top three companies are better able to use the resources and strengths that we feel lead to a good strategic position in their market. Of the companies that we picked, Google has the highest total score which is at 2.91, Amazon was second with a 2.77 score which is .01 higher than eBay which has a 2.76 score. The success factor that really helped to push eBay up around Amazon and Google was the fact that they have a very well established payment segment in their portfolio which is very beneficial in this market. Other than this main factor, each individual factor was scored nearly the same for each of the top three scorers. Negatives for eBay dealt with the human resources and a big negative for eBay came with the customer loyalty factor. It is very easy to switch between the brands and there has been unrest in recent years with eBay users.

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Appendix C - EFE Matrix

Key External Factors Opportunities Chinese Business Model Lower Effective Tax Rate India/Asian-Pacific Market Bargain Hunting Consumers Improve Buyer Certainty Mobile Platforms and Payments Expand Portfolio Internationally Threats Violating Laws and Regulations Illegal Use of our Products Foreign Currency Exchange Rates Current Economic Downturn Increasing Age of Population User Fraud Internet Security Risks Internet Access Strong Local Competition Many Competing Firms Total

EFE Matrix Weight Rating 0.05 3 0.03 3 0.09 4 0.08 2 0.07 3 0.12 4 0.08 3 Weighted Score 0.15 0.09 0.36 0.19 0.21 0.48 0.24

0.05 0.04 0.05 0.06 0.04 0.07 0.03 0.01 0.08 0.05 1

3 2 3 2 2 3 2 3 3 2

0.15 0.08 0.15 0.12 0.08 0.21 0.06 0.03 0.24 0.1 2.94

According to this EFE Matrix for eBay, it shows that the biggest opportunities for eBay come from extending more into mobile platforms and payments, utilizing the Indian/Asian-Pacific Market more, and expanding our portfolio even more internationally. Mobile platforms and payments are going to be the next big wave in consumer retailing and though we have been working to get ahead in this market it is still relatively untapped and expanding our products into that market can greatly benefit our company. The EFE Matrix also shows that our two biggest threats come from strong local competition and user fraud on our sites.

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Appendix D SWOT Matrix

SWOT Matrix for eBay Inc.

Strengths 1. Current and Quick Ratios indicate we are more able to meet our current obligations than Amazon 2. We are financed little by debt which means our returns should not be outweighed by debt 3. Thorough Guidelines for Governance 4. Effective Structure for segments to report to CEO 5. Organization is diverse and socially responsible 6. Hire and develop best employees and offer competitive benefits to retain them 7. New Data Center in South Jordan, Utah 9. Extensive research at eBay labs on many new features including mobile platforms 10. Social Network for Information Systems Weaknesses 1. Decrease in Return on Assets 2. Have not declassified our Board of Directors 3. Have been streamlining positions 4. Company culture beats down employees 5. No long-term employment agreements with key personnel 6. Need to expand or improve facilities to accommodate future growth 7. Charge fees to users when a product is listed and when it's sold 9. CTO has other responsibilities than just Info System

8. Users can find nearly anything with our product and are able to pay with our secure payment service 8. Following innovations

Opportunities 1. Chinese Business Model 2. Lower Effective Tax Rate 3. India/Asian-Pacific Market 4. Bargain Hunting Consumers 5. Improve Buyer Certainty 6. Mobile Platforms and Payments 7. Expand Portfolio Internationally

SO Strategies Further Establish Our Company for Mobile Platforms and Payment (S9, S6, O6) Attract more customers with better User Security Features (S8, S7, O5) Use partnerships to provide better and easier products to consumers globally (S8, O1, O7)

WO Strategies Lower our Product Fees to Users (W7, O4) Create CIO Position to Use Information Better (W9, O5) Construct more International Facilities (W6, O3, O7) Further Establish Our Company for Mobile Platforms and Payments (W8, O6)

Threats 1. Violating Laws and Regulations 2. Illegal Use of our Products 4. Current Economic Downturn 5. Increasing Age of Population 6. User Fraud 7. Internet Security Risks 8. Internet Access 9. Strong Local Competition 10. Many Competing Firms

ST Strategies Use partnerships to provide better and easier products to consumers globally (S8, T9) Attract more customers with better User Security Features (S7, T2, T7, T5) Advertise the bargain capabilities of our websites (S8, T4)

WT Strategies Decrease stress in Workplace (W4, T10) Fully Train Key Personnel on Operating Countries (W5, T1) Train managers to better use the assets we possess (W1, T4, T10)

3. Foreign Currency Exchange Rates Decrease Stress in Workplace (S6, T10)

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Appendix E - BCG Matrix

BCG Matrix High 1.0 High +20

Relative Market Share Position in the Industry Medium .50

27% eBay Inc

Low 0

Industry Sales Growth (Percentage)

Medium 0

Low -20

eBay revenue = $9,156.27 Amazon revenue = $34,204.00 eBay relative market share = 27%

Overstock growth rate = 24.3% - 5.08% = 14.36% Amazon growth rate = 39.5% - 27.8% = 33.65% eBay growth rate = 4.9% - 2.18% = 7.08% Industry Growth Rate = 18.36%

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Appendix F Grand Strategy Matrix

Grand Strategy Matrix Rapid Market Growth eBay Inc. fits Quadrant 1

Weak Competitive Position

Strong Competitive Position

Slow Market Growth

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Appendix G QSPM
QSPM Matrix 1 Further Establish Our Company in Mobile Platforms and Payments Key Factors Opportunities 1. Chinese Business Model 2. Lower Effective Tax Rate 3. India/Asian-Pacific Market 4. Bargain Hunting Consumers 5. Improve Buyer Certainty 6. Mobile Platforms and Payments 7. Expand Portfolio Internationally Threats 1. Violating Laws and Regulations 2. Illegal Use of Our Products 3. Foreign Currency Exchange Rates 4. Current Economic Downturn 5. Increasing Age of Population 6. User Fraud 7. Internet Security Risks 8. Internet Access 9. Strong Local Competition 10. Many Competing Firms Strengths 1. Current and Quick Ratios indicate we are more able to meet our current obligations than Amazon 2. We are financed little by debt which means our returns should not be outweighed by debt 3. Thorough Guidelines for Governance 4. Effective Structrue for segments to report tot CEO 5. Organization is diverse and socially responsible 6. Hire and develop best employees and offer competitive benefits to retain them 7. New Data Center in South Jordan, Utah 8. Users can find nearly anything with our products and are able to pay with our secure payment service 9. Extensive research at eBay labs on many new features including mobile platforms 10. Social Network for Information Systems Weaknesses 1. Decrease in Return on Assets 2. Have not declassified our Board of Directors 3. Have been streamlining positions 4. Company culture beats down employees 5. No long-term employment agreements with key personnel 6. Need to expand or improve our facilities to accommodate future growth 7. Charge fees to users when a product is listed and when it's sold 8. Following innovations 9. CTO has other responsibilities than just Info Systems Total 0.05 0.02 0.03 0.08 0.05 0.07 0.05 0.08 0.04 1 ------1 3 -2.37 0.05 0.24 ------1 2 -2.15 0.05 0.16 ------4 2 -2.48 0.2 0.16 0.04 0.02 0.03 0.02 0.06 0.06 0.07 0.08 0.1 0.05 -------3 4 -0.24 0.4 -------4 1 -0.32 0.1 -------4 1 -0.32 0.1 0.05 0.04 0.05 0.06 0.04 0.07 0.03 0.01 0.08 0.05 1 1 1 ---2 4 0.16 0.2 0.06 0.04 3 2 ---2 3 0.16 0.15 0.18 0.08 4 2 ---3 3 0.24 0.15 0.24 0.08 ------0.05 0.03 0.09 0.08 0.07 0.12 0.08 --2 2 -4 2 0.48 0.16 0.18 0.16 --3 4 -1 3 0.12 0.24 0.27 0.32 --3 4 -2 2 0.24 0.16 0.27 0.32 Weight AS TAS AS Strategic Alternatives 2 Advertise the Bargain Capabilities of Our Websites TAS AS TAS 3 Lower Product Fees to Users

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Appendix H Organizational Chart

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