Ebay in a league by itself

HANOI UNIVERSITY OF FOREIGN STUDIES PACULTY OF BUSINESS ADMINISTRATION AND TOURISM MANAGEMENT *** COURSE: STRETEGIC MANAGEMENT CASE STUDY REPORT: EBAY - IN A LEAGUE BY ITSELF Prepared by : Nguyen Manh Cuong BAI 02 Pham Duc Hanh BA4 02 Vu Van Thuy BA4 02 THƯ VIỆN DẠI HỌC HÀ NỊI HANOI UNIVERSin 116«*!« Hanoi 12/2005 b V eBay - /m a Leaĩiue b \ ỉísell EXECUTIVE S U M M A R Y The vvorld O n lin e auction industry has been really revolulionized by eBay - the íìrst and also the biggest C o r p o r a tio n in the industry Since its foundation in 1995 by Pierre O m idyar - a ta le n te d b u s in c s s a n vvĩth g re a t c o m m a n d o f C o m p u ter Science and b u sin e ss strategy b u ild in g , the C orporation h a s c o n tin u o u s ly e x p e rie n c e d a g g re s s iv e expansion and enjoyed both rapid developm ent and im pressive proíĩtability In 2004, it did came as a real surprise to the w hole world íìnancial coram unity w hen it announced that the goal set for the fiscal year 2005 had been already achieved N et sales revenues stood at $3.27 billion, $0.27 billion m ore than expected and 72% higher than that o f the previous íĩscal year At the same time, earnings beíbre interest and tax (EBIT) increased by 71% And, that is still not the end story In the íĩrst quarters o f the íiscal year 2005, everything has turned out to be extrem ely favorable to eBay The C o rp o tio n is well on its way to accomplishing the am bition o f further enhancing its dom inant position in the industry In spite o f the flying color achievem ents that eBay is currently enjoying, the company has to deal vvith a great num ber o f problems Top o f the list is the com plex and increased competition landscape the C o rp o tio n has put itself into w hile it has ío evolve into a general e-retailer in order to continue its cu en t rapid growth Second, honestly speaking, íraud management at eBay has still been very poor com parcd to that o f its m ajor competitors like Yahoo A uctions, Ubid or Am azon This is also highly related to the corporation’s unim pressive períorm ance level am ong the leading íìrm s in the industry The com pany’s image may be signiíicantly under fire due to high e o r rate and low consistency o f its web opcrations Last but not least, eB ay’s aggressive expansion strategy has made it stretch too thin Due to that stratcgy, eBay has had to share its sources and eBay - I n a Leaọue hv Ịỵ ẹ ịl eíĩorts among many markets, hence cannot enjoy any strong establishm ent in most o f these and thereíore is highly vuinerable to íierce com petition from local rivals The O n lin e auction industry dominated by eBay is the one in which very high growth rate intensive com petition, high entry barriers and expanding value-added services are often common characteristics to be seen Although there have been lcading firms consisting o f eBay, Amazon, Yahoo, Ubid, Bidville and ePier, com petition among them has been scorching íĩerce as the result o f really low switching cost for buyers and a great variety o f available substitutes However, competition itself is neither good nor bad Firm which can distinguish itself from competitors by giving custom ers m ore values are oíten found at a position to gain a com petitive advantage and vice versa (Ohama, K., 1999, p.35) operating in such an industry, eBay has been subject to signiílcantly negative o r positive impacts o f several extem al factors including the developm ent o f information and transportation tcchnology, thc continuous deregulation process in markets thanks lo rapid globalization and the quick changing habits o f people as the result o f changes in both the cultural and economic contexts Progress in information and transportation technology has brought the Corporation a lot o f opportunities to improve its períbrmance and enhance its capabilities while directing it to much íĩercer com petition since all com pettors in this era have the equal right to erỹoy technological advances Globalization hìs STcngly encouraged the deregulation process among markets, thus creating a ven favorable environment for e-com m erce developm ent in general and Online auction busineís in particular Finally, the im p ro v e m e n t in p e o p le liv in g Standard h as actually resnaptd th eir shopping habit Higher income has allovved them to pursue much o f heir W1 in ep sts which in turn, creates a lot o f room for the Online auction industry to deveop (n this complex landscape, m ainly featured by increasingly hard competition, eBa' rmy find following recommendations helpful in their attempls to íìnd a way out eBay - In a L ea m e by ỉtseỉi' At the íĩrst place, increasing investments in R&D to íurther enhance technological power is the key for eBay to win a competitive advantage As high tech is the most prominent features o f the Online a u c tio n in dustry, going ah ead o f m ain c o m p e tito rs in terms o f technology will always work Excellent technology will, for sure, will help eBay achieve bctter períbrmance than other competitors and save a lot o f administrative expense Moreover, it will also enable the C orporation to manage ữaudulent activities more effectively Second, eBay should reconsider its aggressive expansion strategy M arkets and products seen as “question m arks” m ust be taken into minute consideration to decide whether they are worth both efforts and resources the company has to spend on to gain ju st a íịothold or not At the sam e tim e, “ cashcows” should be nurtured careíiilly Next, eBay should focus on Online auction business in w hich it is currentỉy having a competitive advantage and try to tap the Online auctions m arkets more deeply through better efficiency and effectiveness Evolving into a general e- retailer merely makes it more vulnerable to com petitors and vvastes its resources as well as efforts Fourth, in order to prevent prices o f auctioned items from being too expensive, certain ways to control delivery and credit card charges m ust be íịund soon The Corporation needs to negotiate vvith its providers o f these services too keep these changes under control Hopeíully, these above main recommendations can be useful to eBay to some extent to help it deal with current problems vvell, enhance its leading position and tap into potential markets more successíully For m ore details, please have a closer look at the table o f content in the next page eBay - In a Leasue bỵ_ Ilselí ^ T A BLE F CONTENTS EXECUTIVE S U M M A R Y T A B LE OF C O N T E N T S LIST OF FIGURES AND T A B L E S BRIEF INTRODUCTION AND PR O B LEM I OPPORTUNITY STATEM ENT A S SU M PT IO N S SITUATION A N A LY S IS 10 S W O T ANALYSIS 10 3.1.1 Strengths 10 3.1.2 W eaknesses ỉ 3 ỉ O pportunities 15 3.1.4 Threats ỉ INDUSTRY AND COMPET1TION ANALYSIS 3.2.1 ỉndustry cinalysis 20 3.2.2 ỉndustry tren ds 23 3.2.3 K ey indnstry success/actors (KSFs) .25 3.2.4 Competitive anaỉysis 27 COMPANY ANALYSIS 31 3.3.1 3.3.2 3.3.3 3.3.4 Business culture analysis 31 Management philosophy analysis 32 Company strucíure anaỉysis 33 Financial analysis 34 S t a k e h o l d e r s ANALYSIS PORTFOLIO A N A LY SIS M a c r o — e n v i r o n m e n t a n a l y s i s .4 STATEM ENT OF ALTERNATIVE OPTIONS 48 R E A SO N S FO R REJECTION OF SOM E ALTERN ATIVE O PTIO N S 51 RECO M M END ATION S 53 R E F E R E N C E S 59 A PP EN D IX E S 62 APPENDIX 1: E B a Y’s INSERTION AND FINAL VALUE FE E S .6 A p p e n d i x : e B a y P l a n s In d u s t r y ' s F i r s t O n l i n e A u c t i o n S h i p p i n g S e r v i c e s w ìt h M a i l B o x e s E t c a n d i S h i p c o m 63 A p p e n d i x : e B a y ’ s F1NANCIAL s t a t e m e n t s eBay - ỉn a Leaeue bv ỉtseli' LIST F FIGURES AND T A B L E S Figure Paêe FIGURE 1: THE GROWTH F EBAY FROM 2001 TO 0 f ig u r e 2: p r o je c t e d P C s h ip m e n t s f r o m 0 TO 0 FIGURF 3: THE POWCR OF 16 FIGURE 4: PROJECTED WORLDWlDE INTERNET USERS 18 FIGURE 5: ELEMENT OF THE ONLINE AUCTION INDUSTRY 24 FIGURE 6: ORGANIZATIONAL STRUCTURE OF EBAY 34 F1GURE 7: HIGH PERFORMANCE COMPANY 35 FIGURE 8: ONE YEAR STOCK PERFORMANCE v s s & p 0 36 f ig u r e 9: r e a l g d p o f e b a y ’s m a i n m a r k e t f r o m 2001 TO 0 .41 FIGURE 10: BCG GROWTH SHARE MARKET FOR SHARE GROWTH BY REGIONS 42 FIGURE 11: BCG GROWTH SHARE MARKET FOR SHARE GROWTH BY PRODUCTS .43 eBay - ỉ n a Leasue b VItselt BRIEF INTRODUCTION AND PR O B LEM / OPPORTUNITY STATEMENT O ver the last decades, the name o f eBay has become synonymous with evolution Since 1995 when Pierre Omidyar and his wife - Pamela W esley founded eBay in San Krancisco the liistory oi' thc company has bccn closely linked witli Ihe developm ent o f the O n lin e action industry W hile still a fledgỉing íĩrm, eBay spearheaded the evolution o f eBay - commerce with the establishment o f an Online market place that would facilitate a person - to - person trading community based on a highly efficient information system New ideas are an old tradition at eBay The company that grew out o f the original eBay is today a highly innovative leader in the vvorld Online auction market Intensively engaged in intemational and domestic alliances and partnerships, the contemporary eBay organization continues to set milestones on the road o f progress ỉ " '3 53 í 43 ■5 33 ị2313 I FIGURE ỉ : THE GROWTH OF EBAY FROM 2001 TO 2003 (Source: eBay'}, Annual Reports, 2004) eBay maintained its own operation íacilities in Silicon Valley before m oving to San Joe, California With more than 94.9 million registered users in more than 150 nations by the end o f thc íĩsca! year 2004, it is one o f the largest corporations in the world Online auction mdustry, having a recording annual revenue o f $3,271.3 million in the 2004 íiscal year eBay - In a L e a m e bv ỉtse lf R eliable and farsig h te d m an a g e m e n t is United w ith th e y o u th fu l d y n am ism a n d zest for in n o v atio n th a t ty p iíy th e C orporation Since its early íịundation, eBay has constantly enjoyed an impressive increase in both sales and eam ings before interest and tax (EBIT) From ju st $5.7 millions in the 1997 íìscal year the com pany’s salcs soared to $3,271.3 million in 2004, 15% higher and one year earlier than expected, thus shocking the whole fmancial community This with ílying - color períbrm ance absolutely does not mean that eBay cuưently has no existing problem s In fact, it is another story A t the very fư st point, th e C orporation’s management is having great difficulties in finding out appropriate strategies to maintain its current grovvth Second, the C orporation is gradually losing its c o m p e titiv e a d v a n ta g e in the Online auction industry as it is increasingly involved in íĩxed - price sales transactions Next, its initiatives against the Online íraudulent activities are not sufficient enough to prevent more and more com plex as well as innovative thieve A nd last but not least, eBay has to deal vvith the increasing dissatisíaction from some o f its biggest corporate sellers since theỵ them selves have got into trouble while had to make a choice between selling a large volume and maintaining a sufficient profit margin (Jacob, s L., 2004, p 17) Until now, these problem s have so far have not had any signiíicant impacts on he Corporation Hovvever, in the context o f increasingly ĩiercer competition, these vvill be likely to cause eBay to call it a day if appropriate solutions are not timely íịund While having to deal w ith a great number o f problems, eBay also has no fewer opportunities to further develop and m aintain its dom inating position in the Online action industry First and íbremost, aggressive acquisition has brought eBay larger room for improvement Its acquisition o f Skype Technologies not only helps the C o rp o tio n reduce operating expenses, thus enabling it to further cut charges to customers, which in tum not only immeasurably enhances eBay’s competitive advantage but also expands thc corporatioivs categories o f services oíĩered These all are totally in line with eBay's c o m p reh en siv e strateg y o f m ain ta in in g a n d p ro m o tin g its cu rren t lead in g position Second, the prom ising economic development in Asian countries is representing eBay’s very high potential opportunity to tap this huge market deeply In these nations, the im p ro v e m e n t in th c liv in g Standard h a s been rcsh ap in g p e o p le ’s sh o p p in g hab it; therefore draws an interest o f theirs in the broad line o f services that eBay is now supplying Finally, in spite o f the fact that the W estem Europe and the USA markets have been already matured, taking into consideration the corporation’s current market share in a number o f P ro d u c ts including motors ( l e s s t h a n 1%), custom er electronics (1 - 4%), Computer (1 - 3% ), hom e and garden (less than 1%), etc., it is obviously that by the íurther enhancing its competitive advantage, eBay absolutely can set a nevv era o f its grovvth and developm ent in these demanding but proíitable markets These would be throvvn light into in following sections o f this report Pro^ctôd PCShipments 2ỈC - r- V' 233C 'CO' rỉ 'rT */r y r VT 2X2 2X3 2C-34 2£« 2Xd JT ZEĨ FIGURE : PROJECTED PC SHIPMENTS F ROM 0 TO 0 (Source: The Organization ofEconomic Cooperaíion and Development, 2004) eBay - In a Leaxue b \ ỊtseỉỊ RECOMMENDATIONS In order to successfully pursue the ambition o f consolidating its leading position, management at eBay should accomplish certain tasks and make decisions as following: Controlling some related costs such as delivery costs and credit card charges In the context o f increasing fuel costs, without an appropriate pricing strategy, the casc that auclioncd itcms priced too high will bc likely to happcn, thus dampcning the corporatioiVs competitive advantage To deal vvith this problem, eBay can cooperate w ith some main providers o f related services such as Mail Boxes Ect a big and powerful íranchisor o f packing and shipping services or iShip.com - the leading providcr o f m ulti-carrier web-based shipping services for e-commerce Hxpanding a little bit niore modcrately To avoid stretching itself too thin, eBay should give its star and cashcows priorities in terms o f resources and efforts The European Union and North American markets bring the company the most important proportion o f its annual revenues Therefore, resources and efforts must be mainly focused here íirst In Asia, eBay should try to tap into the niche markets there to test the real market potentials bịre deciding to tap into the whole market to the deepest Investing more in developing nevv technologies R&D should be given more priorities Purther investments in technologies are in fact a crucial factor for all O n lin e auction firms not only because they will help them to improve períbrmance but also vvin a competitive advantage over competitors If necessary, the C orporation c a n c o o p e te w ith its m ain s u p p lie rs to c a rry o u t R&D a c tiv itie s to have proprietary technologies This is an urgent task as improvemenls in its períbrmance in terms o f consistency, reliability and efficiency Moreover, the 53 «EE=t 'rr eBay - In a Lea.aue bv ỉtseỉi' saíety ío r O n lin e tra n sa ctio n s can also be ensu re d th ro u g h a ppropriate investm ents in developing new technologies Serving the niche markets in Asian developing countries Although this huge and potential m ark e t is really a big cak e, the c u rre n t d e m an d fo r Online auctioned items is stilỉ lovv anơ mainly from the high-income class since in the next 10 years, both the economic and cultural factors will not be very favorable to it As the result, eBay should focus on this m arket’s m ost proíĩlable but small segment to test the potential for O nline auction businesses in the area These groups comprise for a very immaterial part o f the whoIe market In addition, in many Asian countries, even the high income class still has not got the habit o f Online shopping as the result o f several tradition cultural features For example, in China, as a p e rso n a l C om puter is co n sid ered an asset o f the vvholc fam ily Thereíbre, pcople there oíten prefer to have “physical contact” with this beíbre making any buying decision As the result, marketing campaigns m ust be deeply tailored to enable them to work well in the market Recruiting more talented employees Cooperating vvith several legal institutions to establish strict foundations for enforcing rules and rcgulations on O n lin e ỉraudulent activities In May 2002, the Cyber Security Enhancement A ct had come into effect This has created a fram ew o rk for m o re severe p u n ish m e n ts on C om puter h a c k ers, th u s in creasin g the secu rity o f Online tra n sa c tio n s sig n iíican tly Other s im ila r a c ts sh o u ld be w ell on the ways to come into íbrce This can be obtained through successíul negotiations with functional bodics o f international govemments Taking part in more social activities to increase community affinity This will ease pcople’s concern about security o f transactions and further popularixe the corporation’s image Recently, eBay announced that they will join together to 54 eBay - ỉ n a Lecmie bv Itselí raise funds to aid the Kosovo reíugees Together with some other participating Internet companics, it will auction o ff donated items, collectibles and m e m o r a b i l i a , and/or e n a b le a ll Online s e lle rs a n d visitors to m a k c d o n a t i o n s to the American Red Cross relief efforts to meet the emergcncy humanitarian needs of refugees íleeing írom Kosovo All proceeds raised will reportediy go dirccily to the American Red Cross (e - Commerce Times) Developing a software design team Having its own design team will íurther reduce the already weak bargaining power o f its mạịor suppliers Moreover, as self-developed software tends to be very unique and highly tailored to the corporation’s characteristics, it will create a very excellent competitive advantage for eBay over its m ajor competitors The C orporation should follow the strategy o f Amazon.com to engage severely in hcadhunting to build up its own software development team These talented men should be revvardingly compensated to retain them stay w ith the company Cooperating with BidVille and ePier Cooperation w ith its considered-asa lte rn a tiv e s w ill e n a b le the C orporation to g rab all o p p o rtu n itie s in d e v e lo p in g nations while still being able to focus its resources and strengths on Star and Cashcows This is a strategic soỉution as it helps eBay avoid stretching itself too thin, thus being able to win ju st a foothold in a num ber o f foreign market and therịre highly vulnerable to competition from local rivals 10 Eliminating the faimess policy to attract more powerfiil corporate customers This is necessary to handle the problem o f increasing dissatisfaction from them In the short term, this policy may discourage numerous small sellers but in the long run, it vvill be another story Normally, sellers o f large volume deserve deeper discounts and this should not come as an indicator o f discrimination to sellers o f 55 e b 'ĨT eBay - ì n a Leasite bv Ịíseỉi' sm aller One To h e l p th e m a d a p t to th is c h a n g i n g p o lic y , th c C o rporatio n can popularize it through its various iníịrmation dissemination channels 11 Reducing cash holding Currently, eBay is holding too much cash, which is not prìtable Being at its growing stage o f development, the Corporation has a very strong cash balancc Therefore, holđing more inlerest bearing securities or íĩnding other more proíĩtable investments should be considered as an option 12 Developing websites in many íbreign languages This will allow the Corporation to gain an access to a greater number o f registered users Currently, customers in high-context culture nations such as China, Japan, and India have not been acquainted with searching iníịrmation related to needed Products in English due to both their insufficient command o f this language and the arrogance o f residents oí' big c o u n trie s As the resu lt, the C orporation should c o n sid e r dev elo p in g websites o f sevcral main foreign languages to gain more customers 13 Holding regular events for important and loyal customers like exchange programs, contests, etc to increase their “stickiness” to the C orporation The Corporation should hold special events to improve both the com m unity affinity and custom ers’ participation Some programs such as “The Custom er o f the M onth”, “The Customer o f the Year” and something like these will absolutely work The most important problem is how to design them professionally and attractively 14 Giving custom ers more generous discounts This will help the Corporation absolutely stand out from its major competitors The probably poor prìt margin then can be compensated through larger volum es and bigger number of transactions 15 Giving cheated customers a helpful hand Normally, cheated customers o f Online auction transactions often feel very disappointed and easily abandon the access to the c o rp o tio n ’s o ffe red Service T h e re íị re , tim e ly a c tio n s to h elp th em o r partly 56 '^ % fr _ _ eBay - In a L eim te bv líse lí support them for the loss incurred will enable them to feel at case and hence c o n tin u e to b u s in e s s w ith th e C orporation Actually, th is w ill m ak e th em th in k th a t the C o rp o tio n re a lly cares about its custom crs’ b e n c f í t s a n d the s e c u r i t y of Online transactions B esides, all Online sites are su b ject to this problem T hese, needless to say, w ili improve eB ay’s reputation im measurably 16 Cooperating with m ajor search engines such as G oogle and M SN This will make com petition less iníensive and improve eB ay’s reputation as well M oreover, these search engines, w ith an advantage in terms o f technologies, can help eBay promote its períịrm ance well 17 Entering the Japanese market This o f course vvill position eBay at direct com petition with Y ahoo Auctions H owever, this m arket has very large capacity In addition, if the differentiation stralegy can be applied appropriately thcre, the C o rp o tio n c a n to ta lly com pete well w ith Yahoo 18 The íunctional organizational structure is too sim ple and C o m m u n ic a tio n s are som etim es issues am ong different groups only M r Pierre O m idyiar and Ms M agaret W hitm an s h o u ld h a v e m o re c o n tro l o v e r th e C o rp o ratio n ’s bo d ies Imnlementation and A ction Plan W ho tption B y when Pierre Omidyar, Founder and Chairm an o f the Im m ediately Board cooperation should be adjusted timely Top management U ntil the Conditions C orporation has of well- equipped w ith sufficient resources - Lynn Reedy, C h ief Technology O ữ lcer and Senior Vice President, M arketplace Product & Technology Scott Thom pson, Senior Vice President and 57 Im m eđiately and w ith regular revievv E ị V eBay - In a Leaaue bv lỉsell' C hief Technology Officer, PayPal - M att Banrtick, President, eBay International - W illiam c Cobb, President, eBay North Currently until the next 10 years America t Beth Axelrod, Senior Vice President Human Immediately Resources ) Herưy Gomez, Senior Vice President, Corporate Immediately with constant adjustments Communications and G overnment Relations to the increasing in te rn atio n a l complexity of Online ữaudulent after successíul activities ĩ Henry Gomez, Senior Vice President, Corporate Currently Communications and Government Relations ỉ Maynard Webb, C hief Operating Offĩcer Immediately ) Meg W hitman, President and CEO Immediately negotiations w ith them 10 Immediately Rạịiv Dutta, C hief Financial Officer several after sellers Consulting thorough with intensive surveys 11 - Rajiv Dutta, C hief Financial Officer - M ichael Jacobson, Senior Vice President Imraediately and General Counsel 12 13 - John Donahoe, President, eBay Marketplace - Meg W hitman, President and CEO Henry Gomez, Senior Vice President, Corporate Immediately Immediately and regularly Communications and G overnment Relations Pieưe Omidyar, Founder and Chairman o f the Imm ediately after intensive discussions Board w ith the BOD 15 Jeff Jordan, President, PayPal Immediately 16 Alex Kazim, Senior Vice President, N ew Ventures Immediately 17 Matt Đannick, President, eBay International Immediately after careíul preparations 14 and market research 18 Pierre Omidyar, Founder and Chairman o f the Immediately after intensive discussions Board with the BOD 58 « e tlì ~%F\ eBay - Iri a L ea m e bv Itselí R EFER EN C ES [Online] Available at URL: http://www.Bidville.com, [Accessed at 12 Novem ber, 2005] [Online] Available at URI,: http://wwvv.ePier.com, [Accessed at 12 Novem ber, 2005] [Online] Available at URL: http://www.Ubid.com , [Accessed at 12 Novem ber, 2005] [O nline] Available at URL: htlp://vAvw Yahoo.Auctions, [Accessed at 12 November, 2005] A m azon, Annuaỉ Reports, 2000, [online] Available at URL: http://ww w.Amazon.com [Accessed at 12 November, 2005] The Organization o f Economic Cooperation and Development, A nnual Reporís, 2004 Bartoỉ, K.M , M artin, D.C., Mathrevv, G & Tein, M 1998, M anagem entA Pacifìc R im Focus, 2nd edn, M cG raw Hill, Sydney Corporate Reports, Lehm an Brothers E stim aíes, 2004, [online] Available at http://www.lehman.com [Accessed at 10 Novem ber, 2005] David Jarvis o f Hiram Walker, “The Way to Be on Fire”, The Wall Street Journaỉ, VOL 451, 2004 Dcans, c p., and Kane, M J., International D ỉm ensions o f Information System s and Technologies, Boston, 2002 Dunbar, E., and Katcher, A., “Preparing M anagers for Foreign Assignments”, Traỉning and Developm ent Journal, September, 2002 59 «SEE2fcfc 12 eBay - ỉn a Leasite bv Ịỵ ẹ Ị[ Em pirix, Benchm ark Study o f Online A uction Per/ormance, August Septem ber 2003, [Online] Available at URL: http://www.emDirix.com [Accessed at 10 November, 2005] 13 Hurđy L., ‘■International Management Developm ent in ihe 21 Century”, Juurnitl tí/L uropcu n ỉndustritil Traúng, 2003 14 Herley Simpson, “Who Speaks the Loudest Voice?”, The Asian N ewsw eek, VOL 38, January 2003 15 Hofstede, G., “C uỉture’s Consequences”, Culturaỉ Strains in Management Theories, Beverly Hills, 2003 16 Investor Reỉations, 2004 [online] Available at http://www.eBay.com [Accessed at 10 November, 2005] 17 Jackson, J 2000, 21797 - Sírategy Formulation and Iniíiatives - Stuíly Guide, Central Queensland ưniversity, Rockhampton, Queensland 18 Jacob, s L., “Online Businesses Start to Fire Something up”, The Wall Street Journal, VOL 156, M arch, 2004 19 Jonathan sprague, “Reheating Cool Red C hips”, The A sian Newsweek, VOL 451, February 2004 20 M onroe Elast, “The E o f Internet Revolution H as Come”, 2004, Mc Grav/hill, Sydney 21 N ick W ingfield, “As eBay Grows, Site Disappoints Some Big Vendors”, The W aỉỉ Street Journai, VOL 317, February 26lh, 2004 22 Ohama, K., “W hat is Behind the Boom at eBay?”, Business Week Online, May 21, 1999 23 Pearce, J.A Iỉ & Robinson, R.B Jr., 1988, Sírategic Management: Straíegy ĩo rm u la tio n and Im plementation, Irvvin, Illinois 60 eBay - In a L ea m e b ỵ ỉtsell 24 Perry, G., Gibson, B & Dudurovic, R 1992, Strategic Management Processes, Longman Cheshire, Melboume 25 Petcrson Hargue, “Who Comes There First”, The Economist, VOL.26, M arch, 2003 26 Portcr M E., 1980, “Competitive Strategies: Techniques fo r Anatyzing Industries and Competitors", The Free Press, N ew York 27 Quetin Hardy, “The Radical Philanthropist”, Forbes, May 1SI, 2000 28 Rovvland, M., “Thriving in a Foreign Environment”, The New York Times, Sect.3.17, December, 2004 29 Shellenbager, s , “Spouses m ust Pass Tests beíbre Global Transfers”, The W allStreet Journal, B l, September, 2002 30 Stoner, J.A.F., Yetton, p w , Craig, J.F & Johnson M anagem ent, 2nd edn, Prentice Hall, Australia, Sydney 61 K.D., 1994, eBay - In a Leaiỉite bv Itselí APPENDIXES A p p e n d ix 1: e B a y ’s in se rtio n and fin al va lu e fe es Opening Value Insertion Fee $0.01 -$9.9 $ S I0 0 - $24.99 $0.55 $25.00 - $49.99 $1.10 $50.00 - 199.99 $2.20 $200.00 and up $3.30 C losing V alue F inal V alue Fec $0 - $25 5.0% o f the closing value $ -$ ,0 0 5.0% o f the initial $25 ($1.25), plus 2.5% o f the remaining closing value balances O ver $1,000 5.0% o f the initial $25 ($1.25), plus 2.5% o f the initial $ -$ l000 ($24.38), plus 1.25% o f the remaining closing value balance (Source: The Company 's Anmiaỉ Reporís, 2004) 62 « S E = S Ị& T r eBay - In a Leatỉue bv ỉtselí A p p e n d ix 2: e B a y P la n s ln d u s try 's F irs t O n lin e A u c tio n S h ip p in g S e rv ic e s w ith M a il B o x e s Etc and iS h ip co m By James Hollander & Andy Wang E-Commercc Times 04/12/99 12:00 AM PT M ove to R ackspace a n d Save! 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There was good news for O nline auction buyers and sellers on M onday, as eBay (Nasdaq: EBAY) announced plans for two new deals which will integrate product shipping capabilities directly into eBay's popular Internet-based auction W eb site eBay chose Mail Boxes Etc (MBE), vvhich is reportedly the world's largest ữanchisor o f packing and shipping services, and iShip.com, a leading provider o f m ulti-caưier W eb-based shipping services for e-commerce, to provide eBay members with a first-of-its-kind, integrated system for e-commerce shipping The new alliance plans on developing a system to inform buyers o f the shipping costs associated with their purchases, even bịre they place their bids The network of participating M BE centcrs nationwide will provide convenient drop-off and pick-up locations for e-commerce shipments, vvhile instant package status iníịrm ation will enable sellers and buyers to track the exact location o f the goods during transit Industry Impact This announcement is signiíĩcant because it could foreshadow a trend tovvards end-to-end integration o f e-com m erce services in the O nline auction industry, which has seen rem arkable user and investm ent growth in the past year "As the volume o f e-commerce increases, shipping solutions that bridge the Web and the physical world become critical," said James Amos, M BE president and CEO Despite its legal troubles, eBay is arguably the Internet's top O n lin e auction site This arrangem ent with M BE and iship could raise the bar in the industry even higher, in terms o f providing value-added services to auction participants For this reason, we expect to h e a r s i m i l a r a n n o u n c e m e n t s in the near future f r o m o t h e r m ajor O n l in e auction p l a y e r s like Bid.com, Yahoo! Actions and nevvcomer Amazon.com Auctions "The g ro w th o f eBay's p e rso n -to -p e rso n Online tra d in g h as c re a te d a dem and for im proved shipping solutions for our community o f 2.1 m illion users," said Meg Whitman, president and chief exccutive offícer o f eBay U nder the planned agrecment, iShip.com will provide information to eBay sellers and buyers regarding shipping costs and o p tio n s , helping rcduce the need for írequent e-mails 63 " ì/ eBay - ỉn a Leasue b\' Useỉf to vvork out terms o f shipping M BE will offer eBay sellers and buyers the brick-andmortar inírastruclure for packing and shipping In addition, eBay and MBE expect to implement a "hold for inspection" program where M BE ữanchisees will provide a place for delivery and inspection o f goods About M ail Boxes Etc and iShip.com Mail Boxes F.tc a whollv owned suhsiđiarv o f U.S Offíce Products (Nasdaq: OFIS), is th e w o rid 's ỉarg c st tra n c h is e r o f retail business, C o m m u n ic a tio n s an d p o sta l Service centers M ail Boxes Etc operates 3,700 shipping centers worldwide Parent company U.S Offíce Products is a N orth American provider o f office supplies, office fumilure, and o ffic c coffce and b rea k ro o m P roducts iShip.com is a privately held company that helps buyers and sellers price and ship Products Founded in 1997, iShip.com now operates a W eb site that provides shipping rates for Airborne Express, Federal Express, United Parcel Service, and the United States Postal Service Based in Bellevue, W ashington, the company has an impressive list o f in v esto rs in c lu d in g Intel (Nasdaq: INTC), United Parcel Service, and th e v e n tu re Capital íìrm o f Draper, Fisher, Jurvetson Stock Impact Shares o f U.S Office Products (Nasdaq: OFIS) were on a tear in early trading today aíter the news, climbing more than 50 percent, up two points to 5-7/8 eBay stock, meanvvhile, has regained all the losses that began w hen Amazon.com recently announccd the launch o f its ncw auction site Shares o f eB ay w ere up as m uch as 1011/16 to 194-1/6 in early trading today, hovering around an all-time high The highest the stock has ever closed is 191 It's been quite a two-day run for eBay stock, which closed up 11-5/8 to 183-3/8 on Friday Related News In related news on Monday, Yahoo! Auctions, eBay, LiveBid.com, Amazon.com Auctions, and other Internet auction sites announced that they will jo in together to raise funds to aiđ the K osovo rìigees The participating Internet com panies will auction off donated items, collectibles an d memorabilia, a n d /o r enable all Online sellers and visito rs to make donations to the American Red Cross re lie í efforts to meet the emergency hum anitarian needs o f reíiigees íleeing from Kosovo All proceeds raised will reportedly go directly to the American Red Cross "W e applaud the collective eíTorts o f these Internet com panies to work together to help the American Red Cross reach the refugees who are suffering in this crisis," said Steve Bullock, acting president o f the American Red Cross "These Internet companies are providing a tremendous vehicle to bring people together and raise awareness and needed funds It's thanks to donations like these that the Red Cross can be Ihere for these families, providing them with the food, shelter, and comfort they so desperately need." Hum anitarian gesture or pure publicity? You decide 64 «E t o eBay - ỉn a Leaeite b ỵ ỉtse lf A p p e n d ix 3: e B a y ’s íin a n c ia l sta te m e n ts Consolidated incom e statem cnt for the fiscal years 2002, 2003 and 2004 P K R IO l) END1NG 31-Dec-04 31-Đcc-03 31-DCC-02 T o ta l Revcniii- 3,271,309 2,165.0% 1.21-4.10« Cost oỉ Kevenuc 614,415 416,058 213,876 Gross Proíit 2,656,894 1,749,038 1,000,224 Research D evelopm ent 240,647 159,315 104,636 Selling General and A dm inistrative 1,291,078 879,858 525,450 Non Recurring - 29,965 - Others 65,927 50,659 15,941 Total O perating Expenses - 1,119,797 - 1,059,242 629,241 354,197 Total O ther Incom e/Expenses Net 77,867 36,573 45,428 Eamings Beíore Interest A nd Taxes 1,137,109 665,814 399,625 Interest Expense 8,879 4,314 1,492 Income Before Tax 1,128,230 661,500 398,133 Income Tax Expense 343,885 206,738 145,946 M inority Interest (6,122) (7,578) (2,296) Net Incom e From C ontinuing Ops 778,223 447,184 249,891 Discontinued Operations - - - Extraordinary Items - - - Effect O f A ccounting Changes - (5,413) - Other Items - - - N et Income 778,223 441,771 249,891 Preferred Stock A nd O ther A djustm ents - - - N et Incom e A pplicable T o C om m on Shares $778,223 $441,771 $249,891 Operating Expenses O perating Incom e or Loss Income from C ontinuing Operations Non-recurring Events 65 eBay - ỉn a L e a m e bv Ịtseỉf Consolidated balaocesheet for the fiscal years 2002, 2003 and 2004 P E R IO D EN D IN G 31-Dec-04 31-D ec-03 31-Dec-02 Cash And C ash Equivalents 1,756,368 1.381,513 1,109.313 Short Tcrm Investments 682.004 340.576 89.690 Net Receivables 374,707 305.764 172,467 Inventory - - - O ther Current A ssets 98,070 118,029 96,988 T o tal C u rre n t A ssets 2,911,149 2,145,882 1,468,458 Long Term Investm ents 1,266,289 934,171 470,227 Property Plant and Equipm ent 709,773 601,785 218,028 Goodwill 2,709,794 1,719,311 1,456,024 Intangible Assets 362,909 274,057 279,465 Accumuiated A m ortization - - - Other Assets 31,137 144,928 148,024 Deĩerred Long Tcrm A sset Charges - - 84,218 T o tal Assets 7,991,051 5,820,134 4,124,444 Accounts Payable 754,007 615,562 205,560 Short/Current Long Term Debt 124,272 2,840 2,970 O ther C uư ent Liabilities 206,591 28,874 177,694 T o tal C u rre n t L iab ilities 1,084,870 647,276 386,224 Long Term Debt 75 124,476 13,798 O ther Liabilities 37,698 33,494 22,874 D eíerred Long Term Liability Charges 135,971 79,238 111,843 M inority Interest 4,096 39,408 33,232 Negative Goodwill - - - T o íal L iabiiitics 1,262,710 923,892 567,971 M isc Stocks Options W arrants - - - Ređeem able Preferred Stock - - - Preferred Stock - - - Assets Cuưent Assets Liabilities Current Liabilities S ío c k h o ld e rs' E q u ity Com m on Stock 1,339 649 311 Retained Earnings 1,634,468 856,245 414,474 Treasury Stock - - - Capital Surplus 4,855,717 3,937,160 3,108,443 66 eBay - In a L ea m e bv Itselt Other Stockholder Equity 236,817 102,188 33,245 T otal Stockholder Equity 6,728,341 4,896,242 3,556,473 Net T angible Assets $3,655,638 $2,902,874 $1,820,984 (Financiaỉ data in U.S dolỉars) Incom c sta te m e n t - 10-Year Sum m ary (in Millions) Sales E B IT D epreciation T otal Net Incom e EPS T ax R ate (% ) 12/04 3271.3 1137.2 259.5 778.2 0.57 30.50 12/03 2165.1 665.8 159.0 447.2 0.34 31.20 12/02 1214.1 399.7 76.6 249.9 0.21 36.60 12/01 748.8 165.8 89.7 90.4 0.08 NA 12/00 431.4 81.2 45.2 48.3 0.04 42.00 12/99 224.7 22.3 25.4 10.8 0.01 NA 12/98 47.4 7.1 5.4 2.4 NA NA 12/97 5.7 1.5 0.1 0.9 NA NA B alance Sheet - 10-Y ear S um m ary (in MiIIions) C u rre n t Liabilitỉes Long T erm D ebt S h ares O utstanding 12/04 2911.1 1084.9 0.1 1.3 Bil 12/03 2145.9 647.3 124.5 1.3 Bil 12/02 1468.5 386.2 13.8 1.2 Bil 12/01 883.8 180.1 12.0 1.1 Bil 12/00 675.5 137.4 11.4 1.1 Bil 12/99 459.8 88.8 15.0 1.0 Bil 12/98 83.4 8.0 NA 966.1 Mil 12/97 5.0 1.1 0.3 490.1 Mil C u rre n t Assets 67 ... rivals • Inadequate qualiíy control procedures ve beett a? ??so an ìncreasing concern f o r managentení at eBay According to a recent research by Empirix involving leading Online auction sites, eBay? ??... American Free Trade Area) is already expanding trade among the U nited States, Canada and M exico The General Agreement on T ariff and Trade (GATT), which was ratiíĩed by more than 120 nations in. .. backbone by the whoIe organization She wants to be in business just for herself and with drive, imagination, innovation, salesm anship, and a good head for staying in the back - manages her way in a