company a.doc

7/29/2019 Company A.doc

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A. COMPANY A

B. Vision Statement (Proposed)

Visionary online business for visionary entrepreneurs who would like to buy orsell almost anything.

C. Mission Statement (Actual)

We intend to achieve our mission of creating the worlds online marketplace byimproving and expanding across three main areas: categories, formats, andgeographies.We intend to achieve our mission of creating the worlds leading e-commercefranchise by building upon our core Marketplaces business and building our

adjacent businesses.We intend to continue to work toward our mission of creating the worlds leadingecommerce franchise by investing in our core Marketplaces segment andcontinuing to build our adjacent Marketplaces businesses.

Mission Statement (Proposed)

mission is to be the worlds (3) most utilized and profitable (5) trading post.Having bright and talented employees (9) that are dedicated to serving bothcustomers and communities (8) provides the most technologically advanced (4),reliable, and secure (7) trading platform (2) available to anyone (1), anywhere,

while always doing business in a highly ethical manner (6).

1. Customer2. Products or services3. Markets4. Technology5. Concern for survival, profitability, growth6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees

Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall.


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D. External Audit

CPM Competitive Profile Matrix

Company A Company B Company C

Critical Success FactorsWeigh

tRatin

gWeighted Score

Rating

Weighted Score

Rating

WeightedScore

Advertising 0.05 3 0.15 4 0.20 1 0.05

Service / Product Quality 0.08 3 0.24 4 0.32 2 0.16

Price Competitiveness 0.08 3 0.24 2 0.16 1 0.08

User Friendly Website 0.07 3 0.21 4 0.28 2 0.14Financial Position 0.10 2 0.20 3 0.30 1 0.10

Customer Loyalty 0.12 4 0.48 3 0.36 2 0.24

Product Lines 0.08 4 0.32 3 0.24 2 0.16

Market Share 0.10 4 0.40 3 0.30 2 0.20

Customer Service 0.08 3 0.24 4 0.32 2 0.16

Technology 0.12 4 0.48 3 0.36 2 0.24

Employees 0.05 3 0.15 2 0.10 1 0.05

Global Expansion 0.07 3 0.21 4 0.28 2 0.14

Total 1.00 3.32 3.22 1.72

Opportunities

Opportunities to offer trade/retail across a broad range of industries and businessmodels

Strong long term growth expected in mobile technology usage and need forproprietary Skype Technology in voice and visual communications

Increasing growth of online retail sales, even with declining offline retailenvironment and economy

Increased speed and bandwidth technologyAverage online consumer is educated and earns income of $50,000 or moreGrowth opportunities in global markets in many of business linesOpportunities for alliances to overcome regulatory issues (tax compliance, trade

in counterfeit goods)Opportunities for continued growth PayPal total payment volume in 2008

increased 27% over 2007. PayPal has captured 15% of U.S. and 9% ofglobal e-commercetrade.



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1. Expected 5.5% annual growth of world communications market with U.S.web conferencing expected to grow 14.1% from 2008 through

2. Due to weak economy and high unemployment rate, consumers may belooking at substitute products at lower prices

Threats

Collection of sales taxes may remove consumers perceived value of servicesLitigious environment, such as limited Internet information sharing, tax collection,

etc.Dynamically changing technology environment and market turbulenceStrong online and offline competition across all business industriesGrowing threat of Company BRisk from Bill Me Later purchases of consumers outstanding loans from CIT

BankRetail industry subject to regional or global economic downturn

Potential security breaches1. Growing demands on Web site support with limited resources

2. Entry barrier is fairly low

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating WeightedScore

Opportunities

1. Opportunities to offer trade/retail across a broadrange of industries and business models0.08 4 0.32

2. Strong long term growth expected in mobile

technology usage and need for proprietary SkypeTechnology in voice and visual communications

0.05 4 0.2

3. Increasing growth of online retail sales, even withdeclining offline retail environment and economy

0.06 4 0.24

4. Increased speed and bandwidth technology 0.03 4 0.12

5. Average online consumer is educated and earns

income of $50,000 or more

0.04 2 0.08

6. Growth opportunities in global markets in many of

Company A business lines

0.08 3 0.24

7. Opportunities for alliances to overcome regulatoryissues (tax compliance, trade in counterfeit goods)

0.05 2 0.1

8. Opportunities for continued growth - PayPal totalpayment volume in 2008 increased 27% over 2007.

0.03 3 0.09



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PayPal has captured 15% of U.S. and 9% of globale-commerce trade.

9. Expected 5.5% annual growth of worldcommunications market with U.S. web conferencingexpected to grow 14.1% from 2008 through

0.04 2 0.08

10.Due to weak economy and high unemployment rate,consumers may be looking at substitute products atlower prices

0.07 4 0.28

Threats

1. Collection of sales taxes may remove consumer'sperceived value of services

0.05 2 0.1

2. Litigious environment, such as limited Internetinformation sharing, tax collection, etc.

0.03 2 0.06

3. Dynamically changing technology environment andmarket turbulence

0.03 3 0.09

4. Strong online and offline competition across all

business industries

0.06 3 0.18

5. Growing threat of Company B

0.07 2 0.14

6. Risk from Bill Me Later purchases of consumer'soutstanding loans from CIT Bank

0.04 2 0.08

7. Retail industry subject to regional or global economicdownturn

0.06 3 0.18

8. Potential security breaches

0.03 3 0.09

9. Growing demands on Web site support with limitedresources

0.03 2 0.06


0.07 3 0.21

Total 1.00 2.94

E. Internal Audit



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Strengths

Value proposition encompasses a variety of exchange mediums & productsGlobal brand recognition and strong consumer trust in a secure trade and

communications environment

Company A community feedback replicates WOM (Word of Mouth) advertisingLarge customer data base of multiple target markets in several B2B, C2C andB2C industries

Proprietary Skype technology with strong long term expected growthGlobal presence in 39 markets with 86.3 million active global users (2008)Lower costs of international expansion due to virtual business modelUse of Bill Me Later service by major retailers .Skype is the worlds fastest-growing Internet communication software platform

with 405.3 million registered users worldwide as of 2008Stable operating profit margins across all three business segments despite

declining economy with current ratio of 1.8 is better than industry average

Weaknesses

lack of policing trading activityLitigation with potentially large financial remuneration in several areas:

intellectual property and technology infringements, trading of pirated orcounterfeit goods, etc.

Newer management team -- changes recently made to Sr. V.P. positionsRecent 10% reduction in employees indicates poor resource use and potential

decline in moraleprior expenditures were focused on traditional wired routes and now 50% is

allocated toward wireless technologyLack of cash dividend paid to investors reduces attractiveness of a tangible,current return on the stock

Substantial risk exposure due to potential consumer defaults on loans held by BillMe Later customers

Stock price fallen from $58.17 in 2004 to $17 per share in July of 2009Declining total net revenue growth from 29% to 11% (decreases in revenue

growth for the year 2007 to 2008 with reductions in revenue growth ofMarketplaces and Payments businesses, and only increase inCommunications segment.

Reduced revenue growth accompanied by increased Web site operations costs(28% increase), payment processing (24% increase), and Skypetelecommunication costs (28% increase).

Financial Ratio Analysis (October 2009)

Growth Rates % Company A Industry S&P 500

Sales (Qtr vs year ago qtr) 5.70 18.00 -5.20



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Net Income (YTD vs YTD) -26.80 6.10 -8.10

Net Income (Qtr vs year ago qtr) -28.90 100.80 24.70

Sales (5-Year Annual Avg.) 31.59 29.29 12.97

Net Income (5-Year Annual Avg.) 31.81 56.29 12.30

Dividends (5-Year Annual Avg.) NA 0.00 11.88

Price Ratios Company A Industry S&P 500

Current P/E Ratio 21.5 53.4 26.6

P/E Ratio 5-Year High NA 169.5 18.4

P/E Ratio 5-Year Low NA 16.5 3.4

Price/Sales Ratio 3.58 2.88 2.10

Price/Book Value 2.35 10.47 3.43

Price/Cash Flow Ratio 13.70 36.60 13.10

Profit Margins % Company A Industry S&P 500Gross Margin 71.5 39.9 38.2

Pre-Tax Margin 21.0 8.9 9.9

Net Profit Margin 16.7 7.0 6.9

5Yr Gross Margin (5-Year Avg.) 77.7 40.7 38.1

5Yr PreTax Margin (5-Year Avg.) 23.9 10.5 16.5

5Yr Net Profit Margin (5-Year Avg.) 17.1 7.8 11.5

Financial Condition Company A Industry S&P 500

Debt/Equity Ratio 0.02 0.05 1.11

Current Ratio 1.8 1.7 1.5

Quick Ratio 1.8 1.5 1.2

Interest Coverage NA -0.5 27.2

Leverage Ratio 1.4 1.9 3.5

Book Value/Share 9.86 9.13 21.58

Avg P/E Price/ Sales Price/ BookNet Profit

Margin (%)

12/08 18.00 2.15 1.61 20.8

12/07 133.20 5.95 3.83 4.5

12/06 41.80 7.18 3.77 18.912/05 51.10 13.23 6.04 23.8

12/04 74.80 24.32 11.57 23.8

12/03 72.80 19.60 8.57 20.7

12/02 69.40 16.36 5.94 20.6

12/01 167.60 25.07 12.98 12.1

12/00 370.30 21.44 8.76 11.2



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12/99 1977.30 76.05 19.21 4.3

Book Value/

Share

Debt/

Equity

Return on

Equity (%)

Return on

Assets (%)

Interest

Coverage

12/08 $8.65 0.09 16.1 11.4 258.3

12/07 $8.67 0.02 3.0 2.3 36.9

12/06 $7.97 0.00 10.3 8.3 240.5

12/05 $7.16 0.00 10.8 9.2 414.5

12/04 $5.03 0.02 11.6 9.7 119.3

12/03 $3.77 0.03 9.1 7.7 145.6

12/02 $2.86 0.00 7.0 6.2 234.9

12/01 $1.29 0.02 6.3 5.4 43.6

12/00 $.94 0.03 4.8 4.1 10.4

12/99 $.81 0.04 1.1 NA -1.5

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating WeightedScore

Strengths

1. Value proposition encompasses a variety ofexchange mediums & products

0.06 4 0.24

2. Global brand recognition and strong consumer trustin a secure trade and communications environment 0.07 4 0.28

3. community feedback replicates WOM (Word ofMouth) advertising

0.03 3 0.09

4. Large customer data base of multiple target marketsin several B2B, C2C and B2C industries

0.06 4 0.24

5. Proprietary Skype technology with strong long termexpected growth

0.07 4 0.28



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6. Global presence in 39 markets with 86.3 millionactive global users (2008)

0.07 4 0.28

7. Lower costs of international expansion due to"virtual" business model

0.06 4 0.24

8. Use of Bill Me Later service by major retailers 0.07 4 0.28

9. Skype is the world's fastest-growing Internetcommunication software platform with 405.3 millionregistered users worldwide as of 2008

0.06 4 0.24

10.Stable operating profit margins across all threebusiness segments despite declining economy withcurrent ratio of 1.8 is better than industry average

0.05 3 0.15

Weaknesses

1. lack of policing trading activity 0.05 2 0.1

2. Litigation with potentially large financial remuneration

in several areas: intellectual property andtechnology infringements, trading of pirated orcounterfeit goods, etc.

0.05 2 0.1

3. Newer management team -- changes recently madeto Sr. V.P. positions

0.04 1 0.04

4. Recent 10% reduction in employees indicates poorresource use and potential decline in morale

0.03 2 0.06

5. prior expenditures were focused on traditional wiredroutes and now 50% is allocated toward wirelesstechnology

0.05 2 0.1

6. Lack of cash dividend paid to investors reduces

attractiveness of a tangible, current return on thestock

0.06 1 0.06

7. Substantial risk exposure due to potential consumerdefaults on loans held by Bill Me Later customers

0.03 2 0.06

8. Stock price fallen from $58.17 in 2004 to $17 pershare in July of 2009

0.04 1 0.04

9. Declining total net revenue growth from 29% to 11%(decreases in revenue growth for the year 2007 to2008 with reductions in revenue growth ofMarketplaces and Payments businesses, and onlyincrease in Communications segment.

0.03 2 0.06

10.Reduced revenue growth accompanied by increased

Web site operations costs (28% increase), paymentprocessing (24% increase), and Skypetelecommunication costs (28% increase).

0.02 2 0.04

Total 1.00 2.98



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F. SWOT Strategies

Strengths Weaknesses

1. Value propositionencompasses a variety ofexchange mediums &products

Global brand recognition andstrong consumer trust ina secure trade andcommunicationsenvironment

community feedbackreplicates WOM (Wordof Mouth) advertising

Large customer data base ofmultiple target marketsin several B2B, C2Cand B2C industries

Proprietary Skype technologywith strong long termexpected growth

Global presence in 39markets with 86.3million active globalusers (2008)

Lower costs of international

expansion due tovirtual business modelUse of Bill Me Later service by

major retailers.Skype is the worlds fastest-

growing Internetcommunication softwareplatform with405.3 million registeredusers worldwide as of2008

Stable operating profitmargins across all threebusiness segmentsdespite decliningeconomy with currentratio of 1.8 is better thanindustry average

1. lack of policing tradingactivity

Litigation with potentially largefinancial remuneration inseveral areas:intellectual property andtechnologyinfringements, trading ofpirated or counterfeitgoods, etc.

Newer management team --changes recently made

to Sr. V.P. positionsRecent 10% reduction inemployees indicatespoor resource use andpotential decline inmorale

prior expenditures werefocused on traditionalwired routes and now50% is allocated towardwireless technology

Lack of cash dividend paid to

investors reducesattractiveness of atangible, current returnon the stock

Substantial risk exposure dueto potential consumerdefaults on loans heldby Bill Me Latercustomers

Stock price fallen from $58.17in 2004 to $17 per sharein July of 2009

Declining total net revenuegrowth from 29% to 11%(decreases in revenuegrowth for the year 2007to 2008 with reductionsin revenue growth ofMarketplaces andPayments businesses,and only increase in



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Communicationssegment.

2. Reduced revenue growthaccompanied by increasedWeb site operations costs(28% increase), paymentprocessing (24%increase), and Skypetelecommunication costs(28% increase). last threeyears

Opportunities S-O Strategies W-O Strategies

1. Opportunities to offertrade/retail across a broadrange of industries and

business modelsStrong long term growthexpected in mobiletechnology usage andneed for proprietarySkype Technology invoice and visualcommunications

Increasing growth of onlineretail sales, even withdeclining offline retailenvironment and

economyIncreased speed andbandwidth technology

Average online consumer iseducated and earnsincome of $50,000 ormore

Growth opportunities in globalmarkets in many ofbusiness lines

Opportunities for alliances toovercome regulatoryissues (tax compliance,trade in counterfeitgoods)

Opportunities for continuedgrowth PayPal totalpayment volume in 2008increased 27% over2007. PayPal hascaptured 15% of U.S.

1. Expand marketing effortsinto Asian markets wherethe economy is stronger

(S1, S2, S3, O1, O3, O6)2. Create joint ventures with

other global companiessuch as airlines, massretailers, Internet basedbusiness for use of Bill MeLater service (S2, S6, S8,O1, O2, O3, O4, O6)

1. Increase advertising withspecial promotionaldiscounts like 10% off

every auction transaction(W8, W9, W10, O1, O2,O8, O10)

2. Promote a rebate programof using profitablesegments such as PayPaland Skype for a specificperiod of time (W5, W9,W10, O3, O4, O6, O8, O9)



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and 9% of global e-commercetrade.

2. Expected 5.5% annualgrowth of worldcommunications marketwith U.S. web

conferencing expected togrow 14.1% from 2008through

3. Due to weak economy andhigh unemployment rate,consumers may belooking at substituteproducts at lower prices

Threats S-T Strategies W-T Strategies

1. Collection of sales taxesmay remove consumersperceived value ofservices

Litigious environment, such aslimited Internetinformation sharing, taxcollection, etc.

Dynamically changingtechnology environmentand market turbulence

Strong online and offlinecompetition across allbusiness industries

Risk from Bill Me Laterpurchases ofconsumers outstandingloans from CIT Bank

Retail industry subject toregional or globaleconomic downturn

Potential security breaches2. Growing demands on Web

site support with limitedresources


1. Increase fraud awarenessto all customers (S2, S4,T2, T3, T4, T8)

2. Develop a bundlingprogram, utilizing one forall service offering forlarge / high volumecustomers and businesspartners (S1, S2, S4, S5,S6, S8, S9, T4, T5, T7,T9, T10)

1. Lay off workforce by 5%and freeze raises formanagement to improvefinancial position (W3, W6,W8, W9, W10, T2)



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G. SPACE Matrix

Financial Stability (FS) Environmental Stability (ES)

Return on Investment 4 Unemployment -4

Leverage 6 Technological Changes -1

Liquidity 6 Price Elasticity of Demand -3

Working Capital 6 Competitive Pressure -2

Cash Flow 5 Barriers to Entry -6

Financial Stability (FS) Average Environmental Stability (ES) Average

Competitive Stability (CS) Industry Stability (IS)Market Share -1 Growth Potential 6Product Quality -1 Financial Stability 5Customer Loyalty -1 Ease of Market Entry 1Competitions Capacity Utilization -2 Resource Utilization 3Technological Know-How -1 Profit Potential 5


FS

CS

ES

IS654321

Conservative Aggressive

CompetitiveDefensive

1

2

3

4

5

6

7-2-3-4-5-7 -1-6

7

-7

-6

-5

-4

-3

-2

-1


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Competitive Stability (CA) Average Industry Stability (IS) Average

Y-axis: FS + ES = 5.4 + (-3.2) = 2.2X-axis: CA + IS = (-1.2) + (4.) = 2.8

H. Grand Strategy Matrix

1. Market Development2. Market Penetration3. Product Development4. Forward Integration5. Backward Integration6. Horizontal Integration7. Related Diversification


WeakCompetitive

Position

Quadrant IIQuadrant I

Quadrant IVQuadrant III

StrongCompetitive

Position

Rapid Market Growth

Slow Market Growth


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I. The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong3.0 to 4.0

Average2.0 to 2.99

Weak1.0 to 1.99

High3.0 to 3.99

I II III

Medium2.0 to 2.99

IV IV

Company A

VI

Low1.0 to 1.99

VII VIII IX


The EFE TotalWeighted

Score


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J. QSPM

Create joint

ventures withother globalcompanies

such asairlines, mass

retailers,Internetbased

business foruse of BillMe Laterservice

Develop abundlingprogram,

utilizing onefor all serviceoffering forlarge / high

volumecustomers

and businesspartners

Key Factors Weight AS TAS AS TASOpportunities

1. Opportunities to offer trade/retail across a broadrange of industries and business models

0.08 4 0.32 3 0.24

2. Strong long term growth expected in mobiletechnology usage and need for proprietary SkypeTechnology in voice and visual communications

0.05 3 0.15 4 0.2

3. Increasing growth of online retail sales, even withdeclining offline retail environment and economy

0.06 --- --- --- ---

4. Increased speed and bandwidth technology 0.03 4 0.12 3 0.09

5. Average online consumer is educated and earns

income of $50,000 or more

0.04 2 0.08 4 0.16

6. Growth opportunities in global markets in many ofbusiness lines

0.08 3 0.24 4 0.32

7. Opportunities for alliances to overcome regulatoryissues (tax compliance, trade in counterfeit goods)

0.05 --- --- --- ---

8. Opportunities for continued growth - PayPal totalpayment volume in 2008 increased 27% over2007. PayPal has captured 15% of U.S. and 9% ofglobal e-commerce trade.

0.03 4 0.12 3 0.09

9. Expected 5.5% annual growth of worldcommunications market with U.S. webconferencing expected to grow 14.1% from 2008through

0.04 1 0.04 4 0.16

10.Due to weak economy and high unemploymentrate, consumers may be looking at substituteproducts at lower prices

0.07 2 0.14 4 0.28

Threats

1. Collection of sales taxes may remove consumer'sperceived value of services

0.05 3 0.15 2 0.10



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2. Litigious environment, such as limited Internetinformation sharing, tax collection, etc.

0.03 1 0.03 2 0.06

3. Dynamically changing technology environmentand market turbulence

0.03 3 0.09 4 0.12

4. Strong online and offline competition across allbusiness industries

0.06 3 0.18 4 0.24

5. Growing threat of Company B 0.07 --- --- --- ---

6. Risk from Bill Me Later purchases of consumer'soutstanding loans from CIT Bank

0.04 1 0.04 2 0.08

7. Retail industry subject to regional or globaleconomic downturn

0.06 2 0.12 3 0.18

8. Potential security breaches 0.03 4 0.12 2 0.06

9. Growing demands on Web site support with limitedresources

0.03 --- --- --- ---

10. Entry barrier is fairly low 0.07 --- --- --- ---

TOTAL 1.00 1.94 2.38

Strengths 1. Value proposition encompasses a variety ofexchange mediums & products

0.06 2 0.12 4 0.24

2. Global brand recognition and strong consumertrust in a secure trade and communicationsenvironment

0.07 4 0.28 3 0.21

3. community feedback replicates WOM (Word ofMouth) advertising

0.03 4 0.12 3 0.09

4. Large customer data base of multiple targetmarkets in several B2B, C2C and B2C industries

0.06 3 0.18 4 0.24

5. Proprietary Skype technology with strong long termexpected growth

0.07 1 0.07 3 0.21

6. Global presence in 39 markets with 86.3 millionactive global users (2008)

0.07 3 0.21 4 0.28

7. Lower costs of international expansion due to"virtual" business model

0.06 --- --- --- ---

8. Use of Bill Me Later service by major retailers 0.07 4 0.28 2 0.14

9. Skype is the world's fastest-growing Internetcommunication software platform with 405.3 millionregistered users worldwide as of 2008

0.06 1 0.06 3 0.18

10.Stable operating profit margins across all threebusiness segments despite declining economy withcurrent ratio of 1.8 is better than industry average

0.05 3 0.15 1 0.05

Weaknesses1. lack of policing trading activity 0.05 --- --- --- ---

2. Litigation with potentially large financialremuneration in several areas: intellectualproperty and technology infringements, trading ofpirated or counterfeit goods, etc.

0.05 --- --- --- ---

3. Newer management team -- changes recentlymade to Sr. V.P. positions

0.04 --- --- --- ---



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4. Recent 10% reduction in employees indicates poorresource use and potential decline in morale

0.03 1 0.03 2 0.06

5. prior expenditures were focused on traditionalwired routes and now 50% is allocated towardwireless technology

0.05 --- --- --- ---

6. Lack of cash dividend paid to investors reducesattractiveness of a tangible, current return on thestock

0.06 --- --- --- ---

7. Substantial risk exposure due to potentialconsumer defaults on loans held by Bill Me Latercustomers

0.03 2 0.06 1 0.03

8. Stock price fallen from $58.17 in 2004 to $17 pershare in July of 2009

0.04 2 0.08 1 0.04

9. Declining total net revenue growth from 29% to11% (decreases in revenue growth for the year2007 to 2008 with reductions in revenue growth ofMarketplaces and Payments businesses, and only

increase in Communications segment.

0.03 1 0.03 2 0.06

10.Reduced revenue growth accompanied byincreased Web site operations costs (28%increase), payment processing (24% increase),and Skype telecommunication costs (28%increase).

0.02 1 0.02 2 0.04

SUBTOTAL 1.00 1.69 1.87

SUM TOTAL ATTRACTIVENESS SCORE 3.63 4.25

K. Recommendations

Develop a bundling program, utilizing one for all service offering for large / highvolume customers and business partners. This would be programs such as BillMe Late, Skype, auction at reduced price for B2B, B2C and C2C customers.Free bundling can expire in 90 days.



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Copyright 2011 Pearson Education Inc publishing as Prentice Hall

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