Ebay Environmental Analysis

Topics: EBay, Electronic commerce, Online auction business model Pages: 8 (2264 words) Published: January 13, 2013
Case issues
The case point out the following issues that ebay is facing with: - How to keep the leading position as well as enhance the efficient use and effectiveness of products and services. - Develop new services, features, functions.

- Enhance brand value and image, remain core competence and competitive advantages. External analysis
Financial analysis
Total current assets 883,805 1,468,458
Total assets 1,678,529 4,124,444

Liabilities and Stockholders' Equity
Total current liabilities 180,139 386,224
Total liabilities 249,391 567,971
Total stockholders' equity 1,429,138 3,556,473
Liabilities and Stockholders' Equity 1,678,529 4,124,444
Net revenues 1,214,100 748,821 431,424
Net Income 249,891 90,448 48,294

Financial Analysis
Current ratio = CA/CL
2001 883,805/180,139 = 4.9
2002 1,468,458/386,224 = 3.8
Downward trend is good. Current ratio above 4.0 is too liquid. An excessively high ratio suggests that the company has invested too much in current assets compared to its current liabilities (this is not an efficient use of funds). With current ratio of 3.8 (year 2002), Firm is in good shape to meet short term obligations. Debt ratio = TL/TA

2001 249,391/1,678,529 = 0.1486
2002 567,971/4,124,444 = 0.1377
-eBay has a low debt ratio. It even decrease from 0.34 (year 2001) to 0.06 (year 2002). -Generally lower is better. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. -A low debt ratio may also indicate that the company has an opportunity to use leverage as a means of responsibly growing the business that it is not taking advantage of. Profit = Net Income/Total Sale

2000 48,294/431,424 = 11.19%
2001 90,448/748,821 = 12.08%
2002 249,891/1,214,100 = 20.58%
-The profit margin tells you how much profit a company makes for every $1 it generates in sales. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. -Net profit ratio of Ebay has increased from 2000 to 2002. In the year 2000, the net profit ratio of Ebay was 11.19%. It increased to 12.079% and 20.582% in the two following years respectively. It shows that eBay’s operating expenses have been managed well, and that their business is generating enough sales volume to cover minimum fixed costs and still leave an acceptable profit. Revenue trend

2000 to 2001 $748,821/$431,424 = up 74%
2001 to 2002 $1,214,100/$748,821 = up 62%
Revenue has increasing over the last 3 years. Since 2000 to 2001, revenue increased 74%, and increase 62% from 2001 to 2002. It can be said that eBay’s business is growing at high rate. Profit trend:

2000 to 2001 $90,448/$48,294 = up 87%
2001 to 2002 $249,891/$90,448 = up 176%
To match revenue increasing trends, the profits of eBay also have a significant rise from year 2000 to 2002. It has increased 87% from year 2000 to 2001, and 176% from year 2001 to 2002. It can be seen that, eBay has effective results of business. External analysis

Porter’s Five Forces
1.Bargaining power of buyers: Low
- With eBay, a well-known online auction site worldwide, buyers have the opportunity to approach millions of goods from millions of sellers listed on the site everyday with only one Internet-connected computer. - Operating 24 hours a day, 7 days a week and facilitating buyers with viewing all the items they want in a short amount of time, eBay gives option to buyers to buy anything they need at anytime from anywhere. - Ebay has kept improving its search capability to assist buyers in making 30 million searches a day on average. - Buyers...
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