A. B.

COMPANY A

Vision Statement (Proposed)

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

C.

Mission Statement (Actual)

We intend to achieve our mission of creating the worlds online marketplace by improving and expanding across three main areas: categories, formats, and geographies. We intend to achieve our mission of creating the worlds leading e-commerce franchise 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 leading ecommerce franchise by investing in our core Marketplaces segment and continuing 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 both customers 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. 2. 3. 4. 5. 6. 7. 8. 9. Customer Products or services Markets Technology Concern for survival, profitability, growth Philosophy Self-concept Concern for public image Concern for employees

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D.

External Audit

CPM Competitive Profile Matrix

Company A
Critical Success Factors Weigh t Ratin g Weighte d Score

Company B
Ratin g Weighte d Score

Company C
Ratin g Weighted Score

Advertising Service / Product Quality Price Competitiveness User Friendly Website Financial Position Customer Loyalty Product Lines Market Share Customer Service Technology Employees Global Expansion Total

0.05 0.08 0.08 0.07 0.10 0.12 0.08 0.10 0.08 0.12 0.05 0.07 1.00

3 3 3 3 2 4 4 4 3 4 3 3

0.15 0.24 0.24 0.21 0.20 0.48 0.32 0.40 0.24 0.48 0.15 0.21 3.32

4 4 2 4 3 3 3 3 4 3 2 4

0.20 0.32 0.16 0.28 0.30 0.36 0.24 0.30 0.32 0.36 0.10 0.28 3.22

1 2 1 2 1 2 2 2 2 2 1 2

0.05 0.16 0.08 0.14 0.10 0.24 0.16 0.20 0.16 0.24 0.05 0.14 1.72

Opportunities Opportunities to offer trade/retail across a broad range of industries and business models Strong long term growth expected in mobile technology usage and need for proprietary Skype Technology in voice and visual communications Increasing growth of online retail sales, even with declining offline retail environment and economy Increased speed and bandwidth technology Average online consumer is educated and earns income of $50,000 or more Growth opportunities in global markets in many of business lines Opportunities 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% of global e-commerce trade.
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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 be looking at substitute products at lower prices Threats Collection of sales taxes may remove consumers perceived value of services Litigious environment, such as limited Internet information sharing, tax collection, etc. Dynamically changing technology environment and market turbulence Strong online and offline competition across all business industries Growing threat of Company B Risk from Bill Me Later purchases of consumers outstanding loans from CIT Bank Retail industry subject to regional or global economic downturn Potential security breaches 1. Growing demands on Web site support with limited resources 2. Entry barrier is fairly low External Factor Evaluation (EFE) Matrix

Key External Factors

Opportunities

Weight

Rating

Weighted Score

1. Opportunities to offer trade/retail across a broad

range of industries and business models

0.08 0.05

4 4

0.32 0.2

2. Strong long term growth expected in mobile

technology usage and need for proprietary Skype Technology in voice and visual communications 3. Increasing growth of online retail sales, even with declining offline retail environment and economy

0.06 0.03 0.04 0.08 0.05 0.03

4 4 2 3 2 3

0.24 0.12 0.08 0.24 0.1 0.09

4. Increased speed and bandwidth technology 5. Average online consumer is educated and earns
income of $50,000 or more

6. Growth opportunities in global markets in many of

Company A business lines 7. Opportunities for alliances to overcome regulatory issues (tax compliance, trade in counterfeit goods)

8. Opportunities for continued growth - PayPal total

payment volume in 2008 increased 27% over 2007.

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

9. Expected 5.5% annual growth of world

communications market with U.S. web conferencing expected to grow 14.1% from 2008 through 10. Due to weak economy and high unemployment rate, consumers may be looking at substitute products at lower prices
Threats

0.04

0.08

0.07

0.28

1. Collection of sales taxes may remove consumer's

perceived value of services

0.05 0.03 0.03 0.06 0.07

2 2 3 3 2 2 3 3 2 3

0.1 0.06 0.09 0.18 0.14 0.08 0.18 0.09 0.06 0.21 2.94

2. Litigious environment, such as limited Internet

information sharing, tax collection, etc.

3. Dynamically changing technology environment and

market turbulence

4. Strong online and offline competition across all

business industries

5. Growing threat of Company B 6. Risk from Bill Me Later purchases of consumer's

outstanding loans from CIT Bank
0.04 0.06 0.03

7. Retail industry subject to regional or global economic

downturn

8. Potential security breaches 9. Growing demands on Web site support with limited
resources
0.07 0.03

10. Entry barrier is fairly low

Total

1.00

E.

Internal Audit
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Strengths Value proposition encompasses a variety of exchange mediums & products Global brand recognition and strong consumer trust in a secure trade and communications environment Company A community feedback replicates WOM (Word of Mouth) advertising Large customer data base of multiple target markets in several B2B, C2C and B2C industries Proprietary Skype technology with strong long term expected growth Global presence in 39 markets with 86.3 million active global users (2008) Lower costs of international expansion due to virtual business model Use 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 2008 Stable 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 activity Litigation with potentially large financial remuneration in several areas: intellectual property and technology infringements, trading of pirated or counterfeit goods, etc. Newer management team -- changes recently made to Sr. V.P. positions Recent 10% reduction in employees indicates poor resource use and potential decline in morale prior expenditures were focused on traditional wired routes and now 50% is allocated toward wireless technology Lack 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 Bill Me Later customers Stock price fallen from $58.17 in 2004 to $17 per share in July of 2009 Declining total net revenue growth from 29% to 11% (decreases in revenue growth for the year 2007 to 2008 with reductions in revenue growth of Marketplaces and Payments businesses, and only increase in Communications segment. Reduced revenue growth accompanied by increased Web site operations costs (28% increase), payment processing (24% increase), and Skype telecommunication costs (28% increase). Financial Ratio Analysis (October 2009)
Growth Rates % Sales (Qtr vs year ago qtr) Company A Industry 5.70 18.00 S&P 500 -5.20

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Net Income (YTD vs YTD) Net Income (Qtr vs year ago qtr) Sales (5-Year Annual Avg.) Net Income (5-Year Annual Avg.) Dividends (5-Year Annual Avg.) Price Ratios Current P/E Ratio P/E Ratio 5-Year High P/E Ratio 5-Year Low Price/Sales Ratio Price/Book Value Price/Cash Flow Ratio Profit Margins % Gross Margin Pre-Tax Margin Net Profit Margin 5Yr Gross Margin (5-Year Avg.) 5Yr PreTax Margin (5-Year Avg.) 5Yr Net Profit Margin (5-Year Avg.) Financial Condition Debt/Equity Ratio Current Ratio Quick Ratio Interest Coverage Leverage Ratio Book Value/Share Avg P/E

-26.80 -28.90 31.59 31.81 NA

6.10 100.80 29.29 56.29 0.00

-8.10 24.70 12.97 12.30 11.88 S&P 500 26.6 18.4 3.4 2.10 3.43 13.10 S&P 500 38.2 9.9 6.9 38.1 16.5 11.5 S&P 500 1.11 1.5 1.2 27.2 3.5 21.58 Net Profit Margin (%)

Company A Industry 21.5 53.4 NA 169.5 NA 16.5 3.58 2.88 2.35 10.47 13.70 36.60 Company A Industry 71.5 39.9 21.0 8.9 16.7 7.0 77.7 40.7 23.9 10.5 17.1 7.8 Company A Industry 0.02 0.05 1.8 1.7 1.8 1.5 NA -0.5 1.4 1.9 9.86 9.13 Price/ Sales Price/ Book

12/08 12/07 12/06 12/05 12/04 12/03 12/02 12/01 12/00

18.00 133.20 41.80 51.10 74.80 72.80 69.40 167.60 370.30

2.15 5.95 7.18 13.23 24.32 19.60 16.36 25.07 21.44

1.61 3.83 3.77 6.04 11.57 8.57 5.94 12.98 8.76

20.8 4.5 18.9 23.8 23.8 20.7 20.6 12.1 11.2

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12/99
Book Value/ Share

1977.30
Debt/ Equity

76.05
Return on Equity (%)

19.21
Return on Assets (%)

4.3
Interest Coverage

12/08 12/07 12/06 12/05 12/04 12/03 12/02 12/01 12/00 12/99

$8.65 $8.67 $7.97 $7.16 $5.03 $3.77 $2.86 $1.29 $.94 $.81

0.09 0.02 0.00 0.00 0.02 0.03 0.00 0.02 0.03 0.04

16.1 3.0 10.3 10.8 11.6 9.1 7.0 6.3 4.8 1.1

11.4 2.3 8.3 9.2 9.7 7.7 6.2 5.4 4.1 NA

258.3 36.9 240.5 414.5 119.3 145.6 234.9 43.6 10.4 -1.5

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Strengths

Weight

Rating

Weighted Score

1. Value proposition encompasses a variety of

exchange mediums & products

0.06 0.07 0.03 0.06 0.07

4 4 3 4 4

0.24 0.28 0.09 0.24 0.28

2. Global brand recognition and strong consumer trust

in a secure trade and communications environment

3. community feedback replicates WOM (Word of

Mouth) advertising 4. Large customer data base of multiple target markets in several B2B, C2C and B2C industries 5. Proprietary Skype technology with strong long term expected growth

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6. Global presence in 39 markets with 86.3 million

active global users (2008)

0.07 0.06 0.07 0.06

4 4 4 4

0.28 0.24 0.28 0.24

7. Lower costs of international expansion due to

"virtual" business model 8. Use of Bill Me Later service by major retailers

9. Skype is the world's fastest-growing Internet

communication software platform with 405.3 million registered users worldwide as of 2008 10. Stable operating profit margins across all three business segments despite declining economy with current ratio of 1.8 is better than industry average
Weaknesses

0.05

0.15

1. lack of policing trading activity 2. Litigation with potentially large financial remuneration
in several areas: intellectual property and technology infringements, trading of pirated or counterfeit goods, etc. 3. Newer management team -- changes recently made to Sr. V.P. positions 4. Recent 10% reduction in employees indicates poor resource use and potential decline in morale 5. prior expenditures were focused on traditional wired routes and now 50% is allocated toward wireless technology 6. Lack of cash dividend paid to investors reduces attractiveness of a tangible, current return on the stock 7. Substantial risk exposure due to potential consumer defaults on loans held by Bill Me Later customers 8. Stock price fallen from $58.17 in 2004 to $17 per share in July of 2009 9. Declining total net revenue growth from 29% to 11% (decreases in revenue growth for the year 2007 to 2008 with reductions in revenue growth of Marketplaces and Payments businesses, and only increase in Communications segment. 10. Reduced revenue growth accompanied by increased Web site operations costs (28% increase), payment processing (24% increase), and Skype telecommunication costs (28% increase).

0.05 0.05

2 2

0.1 0.1

0.04 0.03 0.05

1 2 2

0.04 0.06 0.1

0.06

0.06

0.03 0.04 0.03

2 1 2

0.06 0.04 0.06

0.02

0.04

Total

1.00

2.98

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F.

SWOT Strategies
Strengths 1. Value proposition encompasses a variety of exchange mediums & products Global brand recognition and strong consumer trust in a secure trade and communications environment community feedback replicates WOM (Word of Mouth) advertising Large customer data base of multiple target markets in several B2B, C2C and B2C industries Proprietary Skype technology with strong long term expected growth Global presence in 39 markets with 86.3 million active global users (2008) Lower costs of international expansion due to virtual business model Use of Bill Me Later service by major retailers. Skype is the worlds fastestgrowing Internet communication software platform with 405.3 million registered users worldwide as of 2008 Stable operating profit margins across all three business segments despite declining economy with current ratio of 1.8 is better than industry average Weaknesses 1. lack of policing trading activity Litigation with potentially large financial remuneration in several areas: intellectual property and technology infringements, trading of pirated or counterfeit goods, etc. Newer management team -changes recently made to Sr. V.P. positions Recent 10% reduction in employees indicates poor resource use and potential decline in morale prior expenditures were focused on traditional wired routes and now 50% is allocated toward wireless technology Lack 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 Bill Me Later customers Stock price fallen from $58.17 in 2004 to $17 per share in July of 2009 Declining total net revenue growth from 29% to 11% (decreases in revenue growth for the year 2007 to 2008 with reductions in revenue growth of Marketplaces and Payments businesses, and only increase in

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Communications segment.
2. Reduced revenue growth

accompanied by increased Web site operations costs (28% increase), payment processing (24% increase), and Skype telecommunication costs (28% increase). last three years Opportunities S-O Strategies Expand marketing efforts into Asian markets where the economy is stronger (S1, S2, S3, O1, O3, O6) Create joint ventures with other global companies such as airlines, mass retailers, Internet based business for use of Bill Me Later service (S2, S6, S8, O1, O2, O3, O4, O6) W-O Strategies
1.

1. Opportunities to offer 1. trade/retail across a broad range of industries and business models Strong long term growth 2. expected in mobile technology usage and need for proprietary Skype Technology in voice and visual communications Increasing growth of online retail sales, even with declining offline retail environment and economy Increased speed and bandwidth technology Average online consumer is educated and earns income of $50,000 or more Growth opportunities in global markets in many of business lines Opportunities 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.

Increase advertising with special promotional discounts like 10% off every auction transaction (W8, W9, W10, O1, O2, O8, O10) 2. Promote a rebate program of using profitable segments such as PayPal and Skype for a specific period of time (W5, W9, W10, O3, O4, O6, O8, O9)

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

and 9% of global ecommerce trade. 2. Expected 5.5% annual growth of world communications market with U.S. web conferencing expected to grow 14.1% from 2008 through 3. Due to weak economy and high unemployment rate, consumers may be looking at substitute products at lower prices Threats Collection of sales taxes may remove consumers perceived value of services Litigious environment, such as limited Internet information sharing, tax collection, etc. Dynamically changing technology environment and market turbulence Strong online and offline competition across all business industries Risk from Bill Me Later purchases of consumers outstanding loans from CIT Bank Retail industry subject to regional or global economic downturn Potential security breaches 2. Growing demands on Web site support with limited resources 3. Entry barrier is fairly low
1.

S-T Strategies
1.

W-T Strategies
1. Lay off workforce by 5%

Increase fraud awareness to all customers (S2, S4, T2, T3, T4, T8) 2. Develop a bundling program, utilizing one for all service offering for large / high volume customers and business partners (S1, S2, S4, S5, S6, S8, S9, T4, T5, T7, T9, T10)

and freeze raises for management to improve financial position (W3, W6, W8, W9, W10, T2)

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G.

SPACE Matrix FS
Conservative
7 6 5 4 3 2 1

Aggressive

CS

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

Defensive

Competitive

ES

Financial Stability (FS) Return on Investment Leverage Liquidity Working Capital Cash Flow Financial Stability (FS) Average Competitive Stability (CS) Market Share Product Quality Customer Loyalty Competitions Capacity Utilization Technological Know-How

4 6 6 6 5

Environmental Stability (ES) Unemployment Technological Changes Price Elasticity of Demand Competitive Pressure Barriers to Entry Environmental Stability (ES) Average Industry Stability (IS) Growth Potential Financial Stability Ease of Market Entry Resource Utilization Profit Potential

-4 -1 -3 -2 -6

-1 -1 -1 -2 -1

6 5 1 3 5

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Competitive Stability (CA) Average

Industry Stability (IS) Average

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

H.

Grand Strategy Matrix

Rapid Market Growth Quadrant II Quadrant I

Weak Competitive Position

Strong Competitive Position

Quadrant III

Slow Market Growth

Quadrant IV

1. 2. 3. 4. 5. 6. 7.

Market Development Market Penetration Product Development Forward Integration Backward Integration Horizontal Integration Related Diversification

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I.

The Internal-External (IE) Matrix

The IFE Total Weighted Score Strong 3.0 to 4.0 I Average 2.0 to 2.99 II Weak 1.0 to 1.99 III

High 3.0 to 3.99

IV

IV

VI

The EFE Total Weighted Score

Company A Medium 2.0 to 2.99

VII

VIII

IX

Low 1.0 to 1.99

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J.

QSPM
Create joint ventures with other global companies such as airlines, mass retailers, Internet based business for use of Bill Me Later service AS TAS 4 3 --4 2 3 --4 0.32 0.15 --0.12 0.08 0.24 --0.12

Key Factors Opportunities 1. Opportunities to offer trade/retail across a broad range of industries and business models 2. Strong long term growth expected in mobile technology usage and need for proprietary Skype Technology in voice and visual communications 3. Increasing growth of online retail sales, even with declining offline retail environment and economy 4. Increased speed and bandwidth technology 5. Average online consumer is educated and earns income of $50,000 or more 6. Growth opportunities in global markets in many of business lines 7. Opportunities for alliances to overcome regulatory issues (tax compliance, trade in counterfeit goods) 8. Opportunities for continued growth - PayPal total payment volume in 2008 increased 27% over 2007. PayPal has captured 15% of U.S. and 9% of global e-commerce trade. 9. Expected 5.5% annual growth of world communications market with U.S. web conferencing expected to grow 14.1% from 2008 through 10. Due to weak economy and high unemployment rate, consumers may be looking at substitute products at lower prices Threats 1. Collection of sales taxes may remove consumer's perceived value of services

Weight
0.08 0.05

Develop a bundling program, utilizing one for all service offering for large / high volume customers and business partners AS TAS 3 4 --3 4 4 --3 0.24 0.2 --0.09 0.16 0.32 --0.09

0.06 0.03 0.04 0.08 0.05 0.03

0.04

0.04

0.16

0.07

0.14

0.28

0.05

0.15

0.10

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2. Litigious environment, such as limited Internet

information sharing, tax collection, etc.

0.03 0.03 0.06 0.07 0.04 0.06 0.03 0.03 0.07

1 3 3 --1 2 4 -----

0.03 0.09 0.18 --0.04 0.12 0.12 ----1.94

2 4 4 --2 3 2 -----

0.06 0.12 0.24 --0.08 0.18 0.06 ----2.38

3. Dynamically changing technology environment

and market turbulence 4. Strong online and offline competition across all business industries 5. Growing threat of Company B 6. Risk from Bill Me Later purchases of consumer's outstanding loans from CIT Bank 7. Retail industry subject to regional or global economic downturn 8. Potential security breaches 9. Growing demands on Web site support with limited resources 10. Entry barrier is fairly low TOTAL Strengths 1. Value proposition encompasses a variety of exchange mediums & products 2. Global brand recognition and strong consumer trust in a secure trade and communications environment 3. community feedback replicates WOM (Word of Mouth) advertising 4. Large customer data base of multiple target markets in several B2B, C2C and B2C industries 5. Proprietary Skype technology with strong long term expected growth 6. Global presence in 39 markets with 86.3 million active global users (2008) 7. Lower costs of international expansion due to "virtual" business model 8. Use of Bill Me Later service by major retailers 9. Skype is the world's fastest-growing Internet communication software platform with 405.3 million registered users worldwide as of 2008 10. Stable operating profit margins across all three business segments despite declining economy with current ratio of 1.8 is better than industry average Weaknesses 1. lack of policing trading activity 2. Litigation with potentially large financial remuneration in several areas: intellectual property and technology infringements, trading of pirated or counterfeit goods, etc. 3. Newer management team -- changes recently made to Sr. V.P. positions

1.00
0.06 0.07

2 4 4 3 1 3 --4 1 3

0.12 0.28 0.12 0.18 0.07 0.21 --0.28 0.06 0.15

4 3 3 4 3 4 --2 3 1

0.24 0.21 0.09 0.24 0.21 0.28 --0.14 0.18 0.05

0.03 0.06 0.07 0.07 0.06 0.07 0.06

0.05

0.05 0.05

-----

-----

-----

-----

0.04

---

---

---

---

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4. Recent 10% reduction in employees indicates poor

resource use and potential decline in morale

0.03 0.05

1 ----2 2 1

0.03 ----0.06 0.08 0.03

2 ----1 1 2

0.06 ----0.03 0.04 0.06

5. prior expenditures were focused on traditional

wired routes and now 50% is allocated toward wireless technology 6. Lack of cash dividend paid to investors reduces attractiveness of a tangible, current return on the stock 7. Substantial risk exposure due to potential consumer defaults on loans held by Bill Me Later customers 8. Stock price fallen from $58.17 in 2004 to $17 per share in July of 2009 9. Declining total net revenue growth from 29% to 11% (decreases in revenue growth for the year 2007 to 2008 with reductions in revenue growth of Marketplaces and Payments businesses, and only increase in Communications segment. 10. Reduced revenue growth accompanied by increased Web site operations costs (28% increase), payment processing (24% increase), and Skype telecommunication costs (28% increase). SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE

0.06

0.03

0.04 0.03

0.02

0.02

0.04

1.00

1.69 3.63

1.87 4.25

K.

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

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

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