Ebay Case Analysis

EBay Case Analysis

Step One: Read.

Step 2: Dupont Ratio and Financial Analysis

o Two year Financial Ratio

o Short Term

o Current Ratio

* 2002: 1,468,458/386,224= 3.8

* 2001= 4.9

o Long Term

o Total Debt Ratio

* Total ass. - Total equity/ Total ass.

* 2002= .1377

* 2001= .1485771

o Asset Utilization, or turnover ratios

o Total Asset Turnover

* Sales/ total assets

* 2002= .29

* 2001=

o Profitability

o Return on assets= net income/ total assets

o 2002= .0117

o 2001= .053885

o Market Value

o Price earnings ratio= price per share/ earnings per share

o Du Pont Ratio

o ROE= (Net Profit/ Sales) X (Sales/ Assets) X (Assets/ Equity)

o 2002 ROE= (48,294/1213000) X (1,213,000/ 4,124,444) X (4,124,444/ 3,556,473) .03918 X .2941 X 1.160

o ROE= .013

Step 3: External Environment

* Opportunities

1. The changing lifestyles of people can help eBay penetrate the market even further and broaden their Customer base

2. Look for acquisitions or partnerships of other online auction sites

3. Keep expanding internationally

4. Expand Community Services

5. Increasing use of the internet

* Threats

1. Continual growth of Amazon.com

2. Thievery within their own site

3. 1/3 of internet users already registered on eBay

* Comments

1. EBay should keep a close eye on threats to their company and do what they can to make them opportunities for change.

2. Move forward to create more Internet users.

Step 4: Porter's 5 forces Analysis

1. Potential Entrants

* Specialized auction sites could slowly dwindle down EBay's market share

* Already established auction sites could expand into other segments of online auction market

2. Suppliers

* EBay will always have suppliers because the consumer is the supplier. EBay needs to protect itself against thievery, so the consumer has a good experience and creates a relationship with EBay.

* Suppliers could go to other auction site if they have bad experience

3. Buyers

* EBay will always have buyers because the buyers are the suppliers and consumers, again EBay must protect itself against thievery to keep their image high.

* Buyers could go to other auction site if they have bad experience

4. Substitutes

* Flea market is the only threat of a substitute, but they do not have near the quantity or variety of products.

5. Industry Competitors

* Overstock.com, Webidz.com, Amazon.com, Epier.com, Auction.com

* Amazon and Overstock are biggest competitors

6. Comment

* We feel that EBay biggest threat is their security issues, but they are the best choice for online auction sites.

Step Five:

Corporate level strategy

EBay's corporate level strategy was to become a diversified business. They wanted to diversify not only the products they offered but also their customer base and global reach. By using the eBay service you can find virtually anything you are looking for.

Business Level Strategy

EBay competes in the online auction industry using a broad differentiation strategy. Although they may not be the most inexpensive online auction site, they have the largest variety of products offered. They also appeal to a larger group of consumers that include individual sellers, small entrepreneurs, and corporations all over the world. EBay achieves broad differentiation through their strong eBay community, a global reach not matched by any competitor, and a category span of 27,000. These aspects of the eBay service among others set their company apart from the rest. Customers see the value in using the eBay service. This is why eBay has become so successful.

Comments: EBay has done really well with there strategies and pushing forward, they have definitely captured the market for what they are doing.

Step 6:

EBay's Strengths

EBay is the leading provider of online auction and customer-to-customer trading in the world. They have many competencies, core competencies, and distinctive competencies that set them apart from their competitors. Their alliances, international dominance, and recognizable brand, name just to name a few, are some of the main reasons why eBay is a company that is hard to top.

Core Competencies:

1.Largest Online Auction Forum

2.Recognizable Brand Name

3.Publicly Traded

4.Global Reach

VRIO

The question of Value: EBay is