Case # 10 –eBay, Pg 143-154 Sample case

eBay External Analysis Note: This is an abbreviated version of the External Analysis we conducted in class. - This analysis utilizes only selected external factors for illustration purposes only Your actual chart will include ALL external factors identified in your analysis. - Answers should be in full sentences.

Questions 1- Evaluate the external environment of eBay (40 points total) Part A. Environmental Factors Scan – PEST + DGP analysis / OT chart (25 points) Political/ legal/ regulatory Economic Sociocultural Technological Demographic Global Physical

Opportunities Threats Political 1. Pending sales tax legislation 2. Crackdown on counterfeit product sales 3. Pending IRS income reporting legislation Economic 4. Domestic economic downturn 5. Global economic downturn 6. Increasing unemployment rates 7. Decreasing disposable income

Opportunities Threats Sociocultural 8. Consumer preference for fixed price 9. Consumer preference for fixed price 10. Consumer preference for quality assurance 11. Consumer preference for easy returns Technological 12. Availability of tech. companies to acquire 13. Anti-counterfeit technology 14. International technology standards 15. Direct communications technology 16. VOIP technology innovation

Opportunities Threats Demographic 17. Gen Y preference for technology 18. Ethnic shifts 19. Domestic Hispanic growth rate 20. Aging domestic population Global 21. Emerging middle class in developing countries 22. Global expansion - China 23. Availability of global acquisitions 24. International business culture insight 25. International consumer culture insight 26. International user preferences for certain technologies 27. Foreign competitors Physical 28. Availability of qualified technology human resources domestic 29. Availability of low cost qualified technology human resources India

Part B. Industry and Competitive Factors scan (5 points) Key industry factors list Competitor Analysis/ Key Competitor Factors list

Key Industry factors 30. High threat of new entrants 31. High threat of non-traditional new entrants 32. Fast market cycle 33. Increasing complexity in international environment

Competitor Analysis 34. Increasing foreign competition 35. Competition excels in quality and low cost 36. Competition excels in fixed cost marketplace 37. Strong international presence 38. Increasing competition from traditional retailers

Part C. Prepare an Impact Analysis/ External Factors Analysis (EFA) chart (10 points) Chart impact and probability ratings (hand draw your chart) Brief discussion of your EFA chart findings NOTE: List External Critical Issues and discussion in (Question # 3)

External Factors Analysis Chart - EFA 3 16 2 20 18 14 32 15 38 19 31 12 21 1 37 26 27 33 Probability 29 22 35 5 4 8 34 36 6 7 9 23 30 11 10 13 28 Impact

Brief EFA Discussion The EFA analysis indicates that the key impact factors revolve around several key areas: Emerging and changing demographics (GEN Y 17 and Hispanic population domestically 18 Global opportunities in the emerging middle class in developing countries (21) and China specifically (22) Global issues surrounding understanding of the business, cultural and technological climates in the global markets (24, 25, 26, 27, 33) Competitive factors surrounding new entrants into the industry (30) and the increasing competitive threat of traditional retailers into the online marketplace (31, 38)

2. Evaluate the internal environment of eBay (Organization Assessment) (40 points total) Part A – Prepare an Internal Analysis (Organization Assessment) SW Chart (30 points) Include all 6 sections of the Organization Assessment pyramid

Online retail industry leader/ 17% MS Entrepreneur market Strengths Weaknesses 1.0 Markets Domestic Market Online retail industry leader/ 17% MS Entrepreneur market 88 million active users Global marketplace presence (38 countries) Online auction segment Classified ad market Age 45 + Middle income China Failed venture in China Low price segment Global market MS Fixed price segment Ethnic Markets domestic Japan Quality Ease of use/ Return sociocultural segment

Wide product diversification Strengths Weaknesses 2.0 Products and Services Online payment system Auction Wide product diversification Used products Communications product Counterfeit products New Products Phone ordering Bartering internationally Customer service Quality Assurance

Strengths Weaknesses 3.0 Resource Management Financial Year over year revenue growth Net profit growth Strategic alliance revenue Global marketplace growth Streamlined fee structure Revenue growth through acquisition PayPal revenue growth Technological Skype/ communications technology Online payment system technology Physical 44. No physical store 45. No inventory Human Resource Research and Development 18% operation exp. allocation to R/D Innovation Reputation 50. Low fees to sellers with high ratings Craigslist acquisition Low organic/ internal growth rate Overvaluation of Skype acquisition 42. Skype performance 43. International technical competency 46. Layoffs 48. Competitors better at R/D Low growth through innovation 51. Laws suits over counterfeit goods

Strengths Weaknesses 4.0 Operations Systems Financial Charges restructure Fee restructure Production 57No distribution system required No production required No shipping systems required Marketing 60. Fixed price listings Human Resources N/A 54.Results from restructures Results from Skype acquisition Results from Craigslist acquisition 61. Change in seller fees Declining market share Declining growth/ unique visitors

Acquisition competency Alliance management competency Strengths Weaknesses 5.0 Management Systems New Leadership New leader expertise Acquisition competency Alliance management competency Growth by partnership strategy International culture competency

Aggressive growth by acquisition Innovation Diversification Strengths Weaknesses 6.0 Culture Aggressive growth by acquisition Innovation Diversification

Part B - Prepare an Internal Factors Analysis (IFA) chart (10 points) Chart weighting and rating (hand draw your chart) Brief discussion of your IFA chart findings NOTE: List Internal Critical Issues and discussion in (Question # 3)

Internal Factors Analysis Chart - IFA

Brief IFA Discussion The IFA analysis indicates that the key impact factors revolve around several key areas: Core markets (1, 2, 8, 9, 21) strengths in the domestic online auction and retail markets, with core market demographics in the 45+ age group, middle income. Acquisition, alliance and partnership competency (66, 67, 68) International opportunities and performance (43, 13, 33) Customer Service and Quality Assurance (28, 29) Low growth through internal innovation (38, 48, 49) Streamlined operations and resource requirements (44, 45, 57, 58, 59) Growth of fixed price segment and performance (14, 60) Declining growth rates (62, 63) Communications product performance (55, 23)

3. Discussion of Major Critical Issues (20 points) List and briefly discuss the key critical issues (external and internal) that eBay is currently facing. These Critical Issues will be identified in your Internal and External analysis, above. Critical issues may include problems, issues, threats, weaknesses, opportunities, and strengths, but will more likely involve the interaction among several of these factors (e.g., a firm’s current dominant position being threatened by a new competitor with access to advanced technology). These are the issues and problems that, in your judgment, must be addressed by management and for which you intend to make recommendations.

eBay Critical Issues - External How can eBay continue to expand the GEN Y consumer base, through technological innovation, product innovation and pricing? How can eBay address and capture the rapidly growing Hispanic demographic domestically? How can eBay capitalize on the emerging middle class in developing countries and specifically in China? How can eBay gain understanding of the global markets, global technology preferences and global business practices? How can eBay address the increasing competitive threat domestically of new entrants and the traditional retail competitors?

Critical Issues Assessment Identify highest impact/ probability IFA items Discuss interrelations between items Assess in context of External O/T Identify 4-5 critical issues Write as “How to” statements 25

eBay Critical Issues - Internal Ho w to continue to capitalize on the domestic online retail and auction market and appeal to a broad audience through widely diversified product offerings, while continuing to cater to the core markets of age 45 +, middle income with their changing preferences. How to continue to capitalize on our acquisition, partnership and alliance competencies while improving our growth through internal innovation. How to build upon/ improve our international market share, growth rate and revenue contributions, while improving our international cultural and technological competencies. How to address customer expectations in the areas of trust, quality and customer service? How to grow the fixed cost segment, and address our declining growth rates in unique visitors and financial performance How to continue to maintain our streamlined, low-cost operations, production and resource requirements. How to best utilize the communications technology (Skype) technology, while not cannibalizing our core business.