eBay Inc

1.0 Company Profile Mission & Vision Statements: Mission:

“EBay’s Vision is to provide a global online trading platform where practically anyone can trade practically anything. ”

Vision:

“Our vision at eBay is to provide an online business to enable anyone to auction practically anything”

Key believes of eBay: Pierre Omidyar founded eBay on a simple idea: People are basically good. This fundamental belief created a completely new kind of marketplace, forever transforming e-commerce. The key believes of EBay are   

We create opportunities for people We care because we know people depend on us We make a difference n the world.

Case Study- EBay Inc | 1

2.0 Case Introduction: Introduction: 

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EBay was born over Labor Day weekend in 1995, when Pierre Omidyar, a computer programmer, wrote the code for an auction website that he ran from his home computer. Today, Omidyar‟s hobby is known as eBay, the world‟s largest online marketplace – where practically anyone can sell practically anything at any time. It‟s an idea that Business Week once called “nothing less than a virtual, self-regulating global economy.”

With a presence in 39 markets, including the U.S., and approximately 84 million active users worldwide, eBay has changed the face of Internet commerce. In 2007, the total value of sold items on eBay‟s trading platforms was nearly $60 billion. This means that eBay users worldwide trade more than $1,900 worth of goods on the site every second. The benefit to consumers is clear: eBay provides an open trading platform where the market determines the value of items that are sold. Over the years, the site has become a cultural barometer of sorts, providing a view into what objects consumers want most at any time. Since its initial public offering in 1998, the company has continued to innovate and connect people – and not just through its marketplaces. Two critical acquisitions have made eBay Inc. a global leader in online payments and communications as well.

PayPal enables any individual or business with an email address to securely, easily and quickly send and receive payments online. Acquired by eBay Inc. in October 2002, PayPal builds on the existing financial infrastructure of bank accounts and credit credit cards and uses the world‟s world‟s most advanced proprietary fraud prevention systems to create a safe payment solution. Case Study- EBay Inc | 2

2.0 Case Introduction: Introduction: 

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EBay was born over Labor Day weekend in 1995, when Pierre Omidyar, a computer programmer, wrote the code for an auction website that he ran from his home computer. Today, Omidyar‟s hobby is known as eBay, the world‟s largest online marketplace – where practically anyone can sell practically anything at any time. It‟s an idea that Business Week once called “nothing less than a virtual, self-regulating global economy.”

With a presence in 39 markets, including the U.S., and approximately 84 million active users worldwide, eBay has changed the face of Internet commerce. In 2007, the total value of sold items on eBay‟s trading platforms was nearly $60 billion. This means that eBay users worldwide trade more than $1,900 worth of goods on the site every second. The benefit to consumers is clear: eBay provides an open trading platform where the market determines the value of items that are sold. Over the years, the site has become a cultural barometer of sorts, providing a view into what objects consumers want most at any time. Since its initial public offering in 1998, the company has continued to innovate and connect people – and not just through its marketplaces. Two critical acquisitions have made eBay Inc. a global leader in online payments and communications as well.

PayPal enables any individual or business with an email address to securely, easily and quickly send and receive payments online. Acquired by eBay Inc. in October 2002, PayPal builds on the existing financial infrastructure of bank accounts and credit credit cards and uses the world‟s world‟s most advanced proprietary fraud prevention systems to create a safe payment solution. Case Study- EBay Inc | 2

Today, PayPal is a global leader in online payment solutions: It has 149 million registered users and is accepted by millions of merchants worldwide – on and off eBay. PayPal‟s Q1 2008 global total payment volume of $14.4 billion accounted for nearly 9 percent of worldwide e-Commerce. 

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Acquired by eBay Inc. in October 2005, Skype is the world‟s fastest growing Internet communication company that has revolutionized the way people talk online. With more than 309 million registered users as of early 2008, Skype allows people everywhere to make unlimited voice and video calls online for free using its software. Skype is available in 28 languages and is used in almost every country on Earth. This business unit generates revenue through its premium offerings, such as calls (using its software) made to and from f rom landline and mobile phones; voicemail; call forwarding; and personalization, including ringtones and avatars. In addition to its presence on eBay, Skype has relationships with a growing network of hardware and software providers. EBay Inc. pioneers communities built on commerce, sustained by trust, and inspired by opportunity. EBay brings together millions of people every day on a local, national and international basis through an array of websites that focus on commerce, payments and communications. communications.

Other key acquisitions : Other key acquisitions have strengthened eBay Inc.‟s portfolio of ecommerce companies, including    

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shopping.com, a pioneer in online comparison shopping; Stub hub, a leading online marketplace for the resale of event tickets; rent.com, the most visited online apartment listing service in the U.S.; Stumble Upon , an online solution that helps people discover and share content on the web; and Market-leading online classifieds sites including LoQUo.com, Intake, and Netherlands-based Marktplaats.nl.


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The company has also grown its classifieds business through Kijiji, which launched in the U.S. in 2007. The company also offers X.commerce platform that provides software developers access to the company‟s applications programming interfaces to develop functionality for various merchants; and Magento Connect, which allows developers to market and sell add-on functionality and solutions to merchants that use a Magento storefront.

History: table.1 Date

Event

Stock ($)

1995

Founded by Pierre Omidyar

1997

Menl Park, Calif (VC) 22% stock acquisition

1998

CEO Meg Whitman (July); IPO

1.871

1999 2000-2006

Alliance with AOL Global expansion to over 2 dozen countries

25.016 12.708

Feb 2002

20.833

Jul 2002

Withdrew from Japanese market & Hong Kong (where Yahoo! Auctions/Shopping had head start) Acquired PayPal

2005

Acquired Skype

49.500

15.13


3.0 Key players of EBay Inc. EBay inc. encompasses eBay.com, the online marketplace, PayPal, which refers to the online payments platform, and Skype, the voice over internet protocol (VoIP) offered by eBay‟s subsidiary Skype technologies S.A. Corporate revenues are earned primarily from three segments which are as follows:

1. Market places 2. Payments 3. Communication


3.1.Business segment I: the Marketplace 

The eBay Marketplace creates a powerful online platform for the sale of goods and services by a passionate community of individuals and small businesses. On any given day, there are millions of items available through auction-style and fixed-price trading. With millions of buyers and sellers worldwide, eBay offers localized sites in the following markets

Asia Pacific:

Europe:

Australia Hong Kong India Malaysia New Zealand Philippines Singapore South Korea

Austria Belgium France Germany Ireland Italy Netherlands Poland Spain Sweden Switzerland United Kingdom

North America: Canada United States

Table: 2


3.1.1.Products/Services PRODUCTS 

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Antiques Art Baby products Books Cameras Vehicles and parts Cell phones Clothing Shoes Accessories Pottery and glass Sporting goods

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Money Collectibles Computers Craft DVDs Electronics Health and beauty Home and garden Jewelry and watches Musical instruments Pet supplies Video games &Toys and hobbies

Table: 3 EBay Inc. provides a safe and trusted trading environment by offering the following services:

SERVICES      

Feedback Forum Safe Harbor Program Verified Rights Owner Program Customer Support Value-added Tools and Services Loyalty Programs

Table: 4 Case Study- EBay Inc | 7

In the Business segments presented in the case first are the Marketplaces, Platforms, and services which include eBay.com, Stud Hub, Online Classifieds, Online Advertising, Shopping.com, and Rent.com. Through a trusted online community facilitating trading with unknown partners on the Internet, eBay Inc. provides a trusted and safe trading environment by offering services which enables the consumers to be at ease in doing trading with eBay.

3.1.2. Competitors Of Marketplace Segment: 

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Amazon.com, Inc. Value Vision Media, Inc. Yahoo! Shopping Google Inc. eBay‟s Competitors includes: online and offline retailers, distributors, liquidators, import and export companies, online and offline auctioneers, catalog and mail order companies, classifieds, directories, search engines, products of search engines, virtually all online and offline commerce participants (consumer to consumer, business to consumer and business to business), and online and offline shopping channels and networks.

3.1.3.Profits and Current Trend: 

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Its Economic Climate which composes of weak global economic conditions, in addition to the mortgage and worldwide credit related financial crisis, are expected to limit revenue growth, particularly in the Marketplaces segment, which is closely tied to consumer purchase patterns. EBay Inc. has its own Political and Legal environments which include Sales Tax and other Taxes, Long tern Contractual Obligations, Pirated or Counterfeited items and Security Breach and Identity Theft. Internet value network consists of three major groups and they are users, communication service provider and suppliers. Each subgroup of these three segments is called profit sites. Here we will focus on eBay ‟s profit sites and its implications. Case Study- EBay Inc | 8

3.1.4.Business Process:

Business Process Seller Account Creation Listing an Item

No bids (Auction Type)

Reserve

Dutch

Buy-it Now

Bids Placed Completing a Sale After-sales Service

Regular

-eBay sends Outbid Notice if needed. -Seller’s feedback rating dictates bidder confidence.

Final Value Fee = 5% of the first $25 + 2.5% of remaining amount up to $1,000 + 1.25% of any portion of sale over $1,000

Typically covered by Seller, using eBay’s features.


3.1.5.Online Auction Industry Analysis with the help of Porter’s five forces of competition:

Online Auction Industry analysis Low Fixed rate mediation Large number of customer for longer period of time •

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High threats of new entrants

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New Entrants

Auction Universe Yahoo! Excite Classified 2000

Threat of New Entrants

Industry Competitors: Intense segment of Rivalry

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Suppliers

Newspaper cite on the web every Internet directory Every music & video retailer Every personal homepage

Bargaining Power of Buyers

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Bargaining Power of Suppliers

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Buyers

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Threat of Substitutes Since suppliers are large, so threat is low.

Substitutes

Few substitutes and Low threats because of strong CRM

Porter’s Five-Force Framework


3.1.6.SWOT Analysis of eBay Marketplace:

Strengths 

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eBay is the leading global brand for online auctions The company takes advantage of the benefits of Customer Relation Management (company‟s interactions with customers clients and sales prospects) eBay has become a generic term for online auctions

Weaknesses

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Opportunities 

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Acquisitions provide new business strategy opportunities Market development in new and emerging markets like China and India which they are considered as the most populated area can be a huge opportunity Market penetration/ Improve market services in current markets can make a large number of potential customers to subscribers

Open to fraudulent activities System breakdowns could affects trading activities

Threats 

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Success attracts greater competition Attacks by illegal practices might happened Some cost like credit card charges cannot be easily controlled by eBay


3.2. Business segment II: Payments: Payment segment include two sub key players which are as follows:

1. PayPal 2. Bill me later 

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PayPal is a global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders. In October 2002, PayPal was acquired by eBay for $1.5 billion. Bill Me Later is a proprietary payment method offered on the websites of many well-known merchants, including those of Wal-Mart, USPS, Best Buy, Overstock.com, American Airlines, JetBlue Airways, Jewelry Television and Hotels.com. The site, which offers consumers a line of revolving credit through Web Bank, allows purchases to be made online without using a credit card.

3.2.1. Services offered by PayPal and Bill Me Later: PayPal: 

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As of 2011 PayPal operates in 190 markets and manages more than 232 million accounts, more than 100 million of them active. PayPal allows customers to send, receive, and hold funds in 25 currencies worldwide. Residents in 194 markets can use PayPal in their local markets to send money online. In November 2009 PayPal opened its platform, allowing other services to get access to its code and to use its infrastructure in order to enable peer-topeer online transactions. PayPal Operations Centre and main office located in Omaha, NE


Bill me later: 

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Besides its flagship consumer service, Bill Me Later also offers Bill Me Later Business (seen at USPS) and Preferred Account (seen at Newegg). In Bill Me Later Business, the users are business owners who want to use the equivalent of a corporate card for buying products and services over the web. The business owner would apply for Bill Me Later Business - using data like EIN etc. The Preferred Account is similar to the concept of a charge card that can be used at a particular merchant only.

3.2.2. Differences among PayPal and Bill me Later: Difference in industry: Unlike its parent company PayPal which is available to most e-commerce entities, Bill Me Later is only available to medium or large businesses. New merchants can request integration through a website operated by the company.

Difference in services: After the PayPal acquisition of Bill Me Later, Bill Me Later is offered as a payment method through PayPal at sites that both accept PayPal and Bill Me Later. PayPal balances are not accepted as payment on Bill Me Later statements.

3.2.3. Competitors of Payments Business:   

Amazon Google checkout Other small companies like Net Teller, Alert Pay.


3.2.4. Current situation of payment segment: 

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Payment‟s 2011 annual revenue was $4.4 billion, up 28 percent year over year. Payment‟s international business accounted for half of total revenue in 2011. Payment‟s revenues represented 38 percent of eBay Inc. revenues in 2011. Payment‟s net Total Payment Volume for 2011, the total value of transactions, was $118 billion, up 29 percent year over year. Merchant Services processed $78 billion in Total Payment Volume in 2011, up 36 percent year over year. Cross-border trade accounted for 25 percent of PayPal‟s Total Payment Volume. PayPal n bill me later did $4 billion in mobile payment volume in 2011 – more than 5 times the mobile payment volume it did in 2010. PayPal and Bill me later expects to process $7 billion in mobile payment volume in 2012. Active accounts are those that have had activity in the past 12 months.


3.2.5. SWOT Analysis of Payment Segment:

Strengths 

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Highly secured online Infrastructure Online growth PayPal presents anti-phishing advice on their website for identifying and reporting phishing. Loyal customers Market share leadership Strong brand equity Strong financial position

Opportunities  

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Acquisitions Emerging markets and expansion abroad Innovation Online Product and services expansion Takeovers

Weaknesses  

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High exposure to risk and frauds Not to popular in emerging economies where people are conservative for online payments Local restrictions in countries like China, Japan, Taiwan, Brazil, and India

Threats    

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Competition Cheaper technology Exchange rate fluctuations Lower cost competitors or imports Price wars Internet Hackers


3.3. Business segment III: Communications Skype: Skype is a software application that allows users to make voice calls over the Internet. Calls to other users within the Skype service are free, while calls to both traditional landline telephones and mobile phones can be made at low costs using a debit-based user account system. Skype is communication software whose purpose is to break down barriers to communication. Skype has also become popular for its additional features which include:   

instant messaging file transfer voice and video conferencing

The network is operated by a company called Skype Limited, founded in 2003, has its headquarters in Luxembourg and is partly owned by eBay in 2005. Skype is used as one of the most familiar communication paradigm in e.bay.

History of Skype: table-5 Year/Date 2003

Event 

Founded by Niklas Zennström and Janus Beta software launched publicly

2005

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eBay Inc. acquire Skype for $2.6 billion (Oct.14)

2007

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$900 million accounting write down(Oct.1)

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Friis


2009

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2010

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2011

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eBay announces a spinoff of Skype through an IPO (April 14) eBay announced it will sell 65 % stake in Skype (Sept.1) eBay sells a two-thirds stake to an investment group led by Silver Lake for roughly $2 billion – valued at $2.75 billion (Nov.19) Skype files for a U.S. IPO (Aug.9) Replaces CEO Josh Silverman with former Cisco senior VP, Tony Bates (Oct.4) Skype announces a launch of a advertising platform (March7) Microsoft Corp. agrees to buy Skype for $8.5 billion (May 10) Microsoft‟s acquisition of Skype got EU approval (Oct. 7)

3.3.1. History about growth of Skype in eBay:

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Skype is the world‟s fastest -growing Internet communication offering, allowing people everywhere to make unlimited voice and video communication for free between the users of Skype software.

Skype is available in 28 languages and is used in almost every country around the world. Skype generates revenue through its premium offerings such as making and receiving calls to and from landline and mobile phones, voicemail, call forwarding and personalization including ringtones and avatars. Case Study- EBay Inc | 17

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Skype also has relationships with a growing network of hardware and software providers. According to the Skype Business Model Revealed at eBay Analyst Event on March 2009 presented by CEO John Donahoe. “Communications is no longer just about voice; it’s now multimodal:

Mood messages, chat, voice calling, multi-party calling, video calling and online screen sharing. Where and how we communicate is expanding: laptop, mobile phone, flat panel TV’s – “any connected

computing device with the addition of software becomes a communication device.”

- EBay CEO John Donahoe (2009)

3.3.2. Skype’s Profitability and Current trends: 

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Skype‟s profitability has grown to the point where they achieve 20% “segment margin” an amount that Skype contribute to eBay‟s overall profitability.

Skype continues to add over 350,000 new account registrations per day. A year ago Skype celebrated support of over 100B cumulative calling minutes since its launch; in 2009 Skype expects to do this same number within the year. Over 8% of the world‟s international calling minutes are on Skype From December 2007 to December 2008, video calls increased from 27% to 34% of calls. Active users rose 39% in Q4 2008, engagement, defined as „calling minutes per active user‟, rose by 72% and calls under 2 minutes duration dropped from 41% to 33% comparing October 2007 to October 2008, calls in excess of 10 minutes rose from 37% of calls to 47%.


3.3.3. Skype makes profit for eBay in the ways: (i) (ii) (iii)

From user services From a partner perspective, licensing opportunities comprises of some advertising opportunities

(I) from user services: User services include Free Skype-to-Skype calling video calling Chat/IM Multi-Party calling File Transfer Paid Subscriptions (unlimited calling), SkypeOut (pay-as-you-go), Online Numbers, Voicemail and SMS.         

(ii) From a partner perspective, licensing opportunities The Skype-Nokia and the Skype-MySpace relationships are two examples. Hardware royalties are another source.

(iii) Comprises of some advertising opportunities: The third leg of revenue generation comprises some advertising opportunities that have arisen.

3.3.4. Markets covered by the Skype: There are three markets where Skype has barely starched the surface are: 1. Core Consumer (size: $240 B) (size $603 B) 2. Mobile ($203 B) 3. Business Case Study- EBay Inc | 19

Core consumer: For consumer market Skype has four approaches: 1. Continue driving new users (by building “communities” or leveraging social networks) 2. Better promote its paid products (make it obvious, upon registration, where paid products can be found – not buried three levels deep in the “My Account” tab) 3. Increase revenue per paying user (encourage adoption of revenue services based on calling patterns; continued focus ) 4. Monetize free users via advertising (but be smart about it, do it tastefully and carefully all the while protecting the core business) Microsoft acquired Skype: Early May, 2011 there spreaded rumors that Skype would enter a joint venture, or be acquired for $3-$4 billion by either Google or Facebook but on10th May 2011, Microsoft acquired Skype at a price of $8.5 billion (cash) as Strategic partnerships and acquisitions is a part of Microsoft‟s core strategy. As we know that Time is a critical factor in this business and it takes much longer time to develop a well functioning product themselves than to acquire.

3.3.5.Benefits and synergies of the acquisition Strategic reason  

In line with Microsoft‟s growth strategy To Prevent competitors such as Google and Apple from buying

Product reason     

Skype is the perfect complement to Microsoft‟s existing products Live video chat on Windows computers and Xbox 360 Communication when working with Microsoft Office Call-back and instant messaging features in Outlook Increase competitiveness on the Windows Phone 7 mobile platform Case Study- EBay Inc | 20

Network reason  

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Leverage the network effects Direct line communication with Skype‟s large customer base (ca.700 million) Connect Skype users with Lync, Outlook, Xbox Live and other communities.

3.3.6.Overview of Skype history from 2005 to 2011:


3.3.7. SWOT Analysis of Skype: Strengths             

Cost advantage Asset leverage Effective communication High research and development Innovation as a basic strategy Online growth Loyal customers Market share leadership Strong brand equity Strong financial position Supply chain Reputation management Unique products

Opportunities   

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Acquisitions Asset leverage Financial markets (raise money through debt, etc) Emerging markets and expansion abroad Innovation Online presence Product and services expansion Takeovers

Weaknesses 

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Sometimes connectivity errors and Internet Issues Diseconomies to scale Low market share Not diversified Poor supply chain Weak management team Problems to integrate and retain customers and employees

Threats    

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Competition Cheaper technology Economic slowdown External changes (government, politics, taxes, etc) Exchange rate fluctuations Lower cost competitors or imports Maturing categories, products, or services Price wars Product substitution


4.

External Audit Of eBay Inc :

4.1 EFE Matrix Sr. No

Opportunities

Weight

Rating

1.

Current Internet usage estimated to increasing fastly Diversity in workforce. Foreign markets especially in Asia are improving Market development in new and emerging markets like China and India which they are considered as the most populated area can be a huge opportunity

0.07

4

Weighted Score 0.28

0.02 0.03

3 2

0.06 0.06

0.04

3

0.12

5.

Product and services expansion Takeovers

0.03

2

0.06

6.

Acquisitions provide new business strategy opportunities

0.07

2

0.14

7.

Improve market services in current markets can make a large number of potential customers to subscribers

0.08

4

0.32

8.

The price of personal computers continues to fall Internet sales remain tax free Some customers prefer to finance large purchases “in house”

0.04

3

0.12

0.04 0.03

3 1

0.12 0.03

2. 3. 4.

9. 10.


Sr. No

Threats

weight

Rating

1.

Online business could possibly to subject to future taxation. Medium fixed cost structure- barrier to entry not significantly high. On-going fraud issues, with merchants not sending payment or products. Many people feel the internet is an unsafe medium to conduct financial business. Many households still do not own a pc. Despite improvements, many foreign economies are still unstable. High unemployment rate in US. Transportation systems in foreign countries could be poor for delivering products. Fluctuations in currency and exchange rates, could limit international business. Possible website security Problems such as hacking.

0.04

3

Weighted Score 0.12

0.10

3

0.30

0.08

3

0.24

0.07

2

0.14

0.07 0.03

1 2

0.07 0.06

0.05 0.02

1 1

0.05 0.02

0.02

2

0.04

0.07

3

0.21

2. 3. 4.

5. 6. 7. 8.

9. 10. Total

1.00

2.56

Ratings Values:    

4= the response is superior 3=the response is above average 2=the response is below average 1= the response is poor


Explanation: The highest total weighted score that a company can gain is 4 and the lowest weighted score can be 1. EBay Inc has gained average total weighted score that is 2.56. As the scores are above average this shows that the company eBay is doing pretty well. It‟s taking the advantage of all the opportunities in an effective manner while avoiding the threats faced by it. But there is also room for improvement.

4.2.Competitive Profile Matrix (CPM) Competiti ve Profile Matrix (CPM) eBay Critical Success Factors

Advertising Market Penetration Customer Service Brand Awareness User friendly website Revenue Growth Financial Condition Customer Loyalty Market Share Product Quality Information about user Price Competitiveness Totals

Amazon

Weight Rating Score Rating Score 0.05 2 0.10 4 0.20 0.06 4 0.24 4 0.24 0.08 3 0.24 4 0.32 0.10 4 0.40 4 0.40 0.05 3 0.15 4 0.20 0.15 3 0.45 4 0.60 0.15 3 0.45 2 0.30 0.05 4 0.20 3 0.15 0.10 4 0.40 4 0.40 0.08 4 0.32 4 0.32 0.05 4 0.20 4 0.20 0.08 3 0.24 3 0.24 1.00 3.39 3.57

Yahoo! Auction Rating 1 2 2 2 2 2 2 3 1 4 3 3

Score 0.05 0.12 0.16 0.20 0.10 0.30 0.30 0.15 0.10 0.32 0.15 0.24 2.19


Rating Values: 4= Major Strength 3= Minor Strength 2= Minor Weakness 1= Major weakness Explanation:    

When comparing the company with its competitors, it show that the highest total weights are gained by eBay which represents that it has strong market position and is effectively taking advantages of its opportunities and avoiding threats.

5. Internal Audit of eBay: 5.1. Strengths: 1. 2. 3. 4. 5. 6. 7.

eBay is the most well known online auction company in the world Strong auction community of loyal customers Excellent financial situation Have a fair payment system that encourages merchants to list products Strong presence in strategic global markets Experienced management team EBay has very little inventory since they do not actually take position of items sold on their site. 8. Strong customer service 9. Percent of revenue in international markets increasing significantly.


5.2. Weaknesses: 1. Weak promotional and marketing activities 2. EBay does not pay dividends on their stock. 3. Some customers feel the website is cluttered 4. EBay‟s position in the business to business (B2B) market is weak. 5. EBay has very little debt; therefore the company is not taking advantage of low interest rates to expand. 6. EBay has a higher tax rate since they do not take advantage of depreciation as well as other companies. 7. The company relies too much on word of mouth advertising, assuming everyone already knows about eBay. 8. The company does not do enough to convince leery potential customers that Internet business is financially safe. 9. Longer transaction times, since many merchants will not receive payment until a buyers check clears. 10. EBay is mainly a cash business.


5.3. IFE Matrix:

Key Internal Factors Internal Strengths eBay is the most well known online auction company in the world Strong auction community of loyal customers. Excellent financial situation Have a fair payment system that encourages merchants to list products. Strong presence in strategic global markets Experienced management team eBay has very little inventory since they do not actually take position of items sold on their site. Strong customer service. Percent of revenue in international markets increasing significantly. Internal Weaknesses Weak promotional and marketing activities eBay does not pay dividends on their stock Some customers feel the website is cluttered eBay’s position in the business to business (B2B) market is weak. eBay has very little debt, therefore the company is not taking advantage of low interest rates to expand. eBay has a higher tax rate since they do not take advantage of depreciation as well as other companies. The company relies too much on word of mouth advertising, assuming everyone already knows about eBay. The company does not do enough to convince leery potential customers that Internet business is financially safe. Longer transaction times, since many merchants will not receive payment until a buyers check clears. eBay is mainly a cash business Totals

Weights 0.0 to 1.0

Weighted Score

Rating 1 to 4

0.1 0.04 0.1 0.03 0.05 0.1

4 3 3 3 3 4

0.4 0.12 0.3 0.09 0.15 0.4

0.05 0.03 0.02

3 4 3

0.15 0.12 0.06 0

0.1 0.01 0.02 0.03

1 2 1 1

0.1 0.02 0.02 0.03

0.05

2

0.1

0.1

1

0.1

0.1

1

0.1

0.03

1

0.03

0.03 0.01

1 2

0.03 0.02 0 2.34

1


6.0 Financial Ratios:

Financial Analysis: 

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eBay‟s fourth quarter 2011 earnings per share (:EPS) of 60 cents (excluding one-time items and stock-based compensation) were better than the Estimate of 55 cents, thanks to healthy demand and the positive impact of recent acquisitions. The Payments segment and mobile platforms were the high points in the quarter. EBay has gained enough profit margins till 2011 which was 27.72% but it has fallen in the current year for which eBay has to look for this downturn. ROA/ROI Ratio of eBay shows a variance over the period, in 2008 and 2009; its amount is higher and shows the better condition that the brand has efficiently utilized its resources. Else in 2012 it again decreased, means the brand earn less profit on its assets Case Study- EBay Inc | 29

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ROE in 2011 was 18% that the investor‟s money has efficiently utilized in that year. Hence in 2012 the ROE value decreased dramatically and approached to the 14.03%, which clearly demonstrate that the investors get a less return of their investment. Price/Sales of eBay have also gone down this year in contrast to Price/Earnings and Price/Book both of them has increased in the current year. As the debt-to-equity ratio increases, the rate of risk also increases. So in the case of eBay, the debt-to equity ratio has lowered in 2012 than the previous year means it‟s the fall in debt-to-equity ratio which shows that it implies greater opportunity to expand through the use of debt financing. Book Value of the eBay has increased in 2012 which is a positive sign for the investors. Global commerce platform and payments leader eBay Inc. reported that revenue for the first quarter ended March 31, 2012, increased 29% to $3.3 billion, compared to the same period of 2011. The company reported first quarter net income on a GAAP basis of $570 million, or $0.44 per diluted share, and non-GAAP net income of $725 million, or $0.55 per diluted share. The year-over-year increase in first quarter GAAP and non-GAAP earnings per diluted share was driven primarily by strong top-line growth, partially offset by increased investment in the shopping experience and the impact of acquisitions.


7.0 BCG Matrix

eBay.com Skype Pay Pal

Shopping.com

Value added tools and services Auctions

Bill Me Later

Explanation: 

  



Putting together eBay and its competition, the online auction industry shows different company types. eBay.com, Skype and Pay Pal as a dominated market share and growth Shopping.com as has dominated a high market share but a little growth Value added tools and services and Auctions as to low market share which only caters the wealthy people but high growth Bill Me Later as otherwise liquidate but delivers cash


8.0 Issues and Sub Issues: 

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EBay‟s challenges expansion of both in the United States and internationally has placed a significant strain on management, operations, and financial resources. Particular areas that are strained include Website Usability were in growth in the number of products and Web site features has caused the site to become less user friendly, Website Stability were in increased volume and greater complexity requires additional expensive investments in hardware, software and personnel. Customer Account Billing were in transaction processing and revenue collection becomes more difficult as the number of transactions increase and consumers default on loans and lastly Customer Support were in it is challenges from greater trade activity and an increased number of users and provide good after service. EBay‟s Future is anything but certain. It may need further analysis and needs a clear and well clear strategic place to achieve its mission and vision to become the world‟s number one marketplace.

8.1.0 Analysis: Strategic actions: 

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Maintain global growth initiative 

Acquisitions (develop new markets)

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New markets

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New products

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Adopt into different cultures

Technological development 

Rapid application development

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Selling new applications/programs Case Study- EBay Inc | 32

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Creating standards for the industry

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Program interface and developers program

Security 

Backup systems

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Online verifications

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Enhance trustee services

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Online banking improvements

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Enhance after sales services

Reinforcing the Marketing department 

Improve image through advertising

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Global branding to make eBay a generic brand

EBay Marketplace: 

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EBay offers the largest sole on-line marketplace operating on a global scale. The company is a giant marketplace used by more than 100 million people to buy and sell all manner of things to each other. EBay is very popular with consumers, term becoming more common like Google. The diversity of product category within the marketplace provides product choice and caters for multiple demographic groups within the marketing mix. EBay have demonstrated a use of technology to innovate the on-line retailing function. From first developing the on-line auction idea to challenging the status quo and use of technology within consumer transactions in order to make the EBay experience a customer focused and friendly one, this is to be introduced with the use of Skype technology to introduce a new interface between buyer and seller relationships. Case Study- EBay Inc | 33

EBay Payments: PayPal was one of the first online payment services available and has become one of the top-ranking e-commerce companies in the United States. However, increasing customer dissatisfaction with PayPal's fee structure has inspired other e-commerce corporations to launch their own online payment services. As of 2009, PayPal's biggest competitors are Google Checkout and Checkout by Amazon. PayPal also faces a host of smaller competitors that may be attractive to buyers and sellers. While its sub issues include 

Fraud and hacking

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Exchange rate fluctuations

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Price wars

EBay Communication: Early May in 2011 rumors aroused that Skype would enter in a joint venture, or be acquired for $3-$4 billion by either Google or Facebook but on  10th May 2011, Microsoft acquired Skype at a price of $8.5 billion (cash). Now Skype is not the part of eBay business so no issues regarding Skype shall be considered in current context.


9.0 SWOT OF EBAY Inc (As a whole) SWOT Analysis is a strategic planning tool used to evaluate the Strengths and Weaknesses considered internal and Opportunities and Threats which are considered external. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

9.1. Strengths: •

•

•

•

•

EBay is the world‟s largest online auction website. It is a giant marketplace used by millions of people all over the world to buy and sell all things one can possibly think of. It is capable of attracting vast audiences with diverse needs. The company uses the power of customer relationship management by collecting data of buyers and sellers registered with the company. This is a big strength of the company as the data collected can generate reports and statistics that can make the company better and address its weaknesses a nd threats. EBay gives a whole new meaning to the word middle man business. It does this by providing extra ordinary tools to sellers which, lets the seller target their products to the buyers. It also provides buyers with wonderful search tools, to get to the products they are looking for. EBay has made a very powerful platform for both sellers and buyers by being seamless and invisible but at the same time facilitating Customer to Customer relationship. Diversifying has been a key policy of eBay. It does this by not only diversifying its products but also its market, by branching and localizing in countries like India, Pakistan, China and U.K. Staying ahead of the competition has always been a focus of eBay. Affine example was acquisition of PayPal to support its online auction with a robust payment method. The combination of these two has been knockout as it has given opportunities new small startup businesses and helped facilitate enterprise businesses. Case Study- EBay Inc | 35

9.2. Weaknesses •

•

•

•

•

•

EBay does a very bad job of controlling faker illegal auctions. There are numerous auctions still out there whose main purposes to scam the buyers or are illegal auctions. A good example would be scammers trying to sell just the packaging box of the product and claiming it to be the real product. These sellers save themselves by claiming that the information about the product being just the packaging box is stated in the auction description, which is true. Butte statement is in a very fine print. The company uses the power of customer relationship management by collecting data of buyers and sellers registered with the company. This is a big strength of the company as the data collected can generate reports and statistics that can make the company better and address its weaknesses and threats. One of the weaknesses of eBay is the sellers being able to enforce the payment method of their choice. This is a big favorite among the scammers as they choose payment method like money transfers which does not protect the buyers from losing their money and buyers not retuning back to eBay. Shipping has been one of the biggest problems while shopping one Bay. Sellers to make their production top of the search list practice lowering the price of the product while increasing the cost of the shipping as much as twice the price of the product. This has lead to buyers fleeing away to retail stores for better deal. Another weakness of eBay is its inability to control the contents of the auction and auction items. Most of the content is checked only after th e content or the auction has been posted. Due to this inability it facilitates large sale of copyrighted and not for resale items Open to fraudulent activities is also one so the weaknesses and System breakdowns could affects trading activities


9.3. Opportunities: •

•

•

•

•

One opportunity that eBay saw was, how to sell product like a normal website, an auction takes three to fifteen days to end. This is a long time and buyers tend to lose their interest. EBay saw weakness and an opportunity at the same time, thus the Buy it now button was created where, sellers can offer their product with a static price and offer it on buy it now. Buyers then can straightaway buy the product without having to wait for the auction to end. Furthermore a new tool Make an Offer is now available which gives buyers the power to offer a price to the seller for a product, if the seller agrees the transaction goes forward or the buyer just deny the offer. Acquisitions provide new business strategy opportunities to every business and industry. Same is the case with eBay. Although when eBay acquired Skype it did not have any VoIP technologies but after that they became master of it. EBay has many opportunities that can be availed through acquisitions. Market development in new and emerging markets like China and India which they are considered as the most populated area can be a huge opportunity for eBay Market penetration/ Improve market services in current markets can make a large number of potential customers to subscribers. EBay has always believed in diversifying in every possible way so using its diversifying techniques, eBay has now started localizing its website all over the world. A good example would be personalized eBay website for different countries like UK even developing countries like India and China. This is a big opportunity, as the outsourcing booms in these countries have significantly increased the spending limit of the consumer


9.4. Threats:

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EBay as it is expanding and diversifying on foreign soil, it may be threatened by local competitors in the domestic market as the auction trends and the way they do transaction might differ locally. One of the biggest threats to eBay is the scammers and the phishers which use eBay‟s name to scam people. For example name of eBay and PayPal in scam email asking user to update their account information has been in high numbers. This has lead to many eBay and PayPal users distrusting the services provided by these companies and never coming back. EBay has lots of tools for the sellers and buyers but there is no seamless integration of eBay seller store. The eBay seller store still looks like eBay. A recent threat that has appeared as competition to eBay is Google. Google has introduced Google Checkout a rival toe Bay's PayPal. Google has always been threat to other IT companies and with Google Checkout it has targeted PayPal. Are cent aggressive strategy being used by Google is giving huge discounts on products all over the internet to attract buyers. Google has gone to a extend on setting up conference and a party for significant eBay and PayPal users, the main goal of the party was inviting people to switchover. This was not well taken by eBay. Success attracts greater competition and Attacks by illegal practices might happen which can be threats for the company. Some cost like credit card charges cannot be easily controlled by eBay


9.5.SWOT MATRIX SWOT Matrix

Strengths  

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Opportunities 

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SO 

Acquisitions provide new business strategic opportunities Market Development Market Penetration/ Diversification

Threats Attracts competition Illegal Practices Credit Card charges not controllable by eBay

Leading Global Brand for auctions Customer Relations Management Known Generic Brand for ecommerce

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Weaknesses  

Fraudulent Activities System Breakdown on trading activities

WO Global Expansions Maintain simplicity of interaction with the online community‟s capability

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ST

Online Banking Diversify products Systems for Online verification of products Strategic alliance with courier companies Penetration of all types of market

WT 

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Acquisition strategy – global expansion Use online security options for verification and authentication Reinforce marketing management and systems

 

Alliance to postal services Authentication of consumers identity


10. Recommendations: Maintaining global growth initiative as a strategy to motivate consumers, by making Acquisitions (develop new markets), new products and adopt into different cultures. It has an advantage of a wide range of promotion because it will encourage consumers to do e-retailing and also catch the attention of consumers. And it can also provide convenience for the consumers because they are introduced to new products. Moreover, the following recommendations are advance; 

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eBay must develop their strategies to ensure great demand, high profit return and to meet their target market, put up securities to ensure no fraudulent activities may happened through authentication and verifications EBay must reinforce the marketing department to improve image in through advertising and by global branding to make eBay a generic brand for consumers. EBay needs to do a better job in controlling the content, it needs to block certain illegal and fake auctions and at the same time be able to protect copyrighted material on eBay. EBay is doing this to counter all the scammers however we can still find auction that are fake, illegal and other copyrighted materials... Shipping Calculator is must have for eBay, due to huge number of sellers exploiting this weakness of eBay buyers have flocked to other website where the price might be higher on eBay but with shipping price, it is cheaper than eBay's price. This tool would really bring more buyers to the site and can trust on the prices of the products. Standardize Payment method is a must for eBay tube more reliable to the buyers. Everyday hundreds of buyers are being scammed by sellers using an alternate payment method like money order which has no fund security. By using PayPal as the standard payment method the buyers can use both their checking account and credit card to pay the sellers with some peace in their Case Study- EBay Inc | 40



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minds. EBay still need to provide alternate methods to its sellers assume countries do not allow PayPal transfers. However, eBay should devise a strict plan or certification for sellers to offer alternate method of payment. This method will filter out all the sellers with bad intentions that just take the money and leave the buyers hanging. A trust factor is increased between the buyers and sellers. Also buyers can be assured of sellers that offer alternate payment as they are all eBay certified. Localization is a keyword, just imagine being able to find an item in the city you live in and not have to deal with the hassle of shipping or waiting for the items to arrive for days. This feature can be favorite among all as it can attract furniture sellers and garage sale items. EBay currently has a half of this option but is located in a very hard to see location. Making this feature full-fledged feature and using it as one of the primary option can help a whole new set of buyers and sellers A good way to get away from the email scam would be using some kind of digital signature, so a user can just push a button to verify the validity of the email. The advantage of the solutions is no more fake email to scam people.

The right path would be to first take care of the email scams that are using eBay names and scaring all the buyers off. Next would be to filter the content of eBay shunning away all the scammers and illegal auctions, then build shipping calculator of various delivery companies that a seller can use to put the right price of the shipping rather than sellers using this flaw to filthier pockets. Further down the road implementing standard method of payment and certified alternate method would be a best bet as this would give the buyers a break and keep more scammers away like the foreign sellers where abuser cannot take any action. Localization tab will help draw more buyers and sellers to the websites it connects them within their city limits. It‟s just like having a garage sale on eBay all week long. They should advertise themselves like in many emerging economy people don‟t know about pay pal.


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They should come with innovation in their technology to compete with their competitors with time to time.

11. Fungibility of ecommerce in Pakistan: 11.1.Trends 

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E-commerce is an information technology trend developing fast in the business world. The corporate and the business world, aptly supported by the IT industry, already stands transferred, which by recent estimate will exceed $400 billion this year. As we start warming up to global e-commerce in Pakistan, we must understand that almost 78 per cent of the e-commerce activity takes place in the USA, obviously driven by the use of internet in that country. As the January 2000, over 110 million people have internet access there compared to 279 million the world over. The amount of internet users are speeding up day by day all over the world and same is the trend with Pakistan. In 1995, the number of internet users in the world was almost 16 Millions but now in 2010 it fly high to almost 1600 Million. This shows that the internet usage is increasing with the passing minute and this will grow more rapidly. In 1995, almost .01% of Pakistan population use internet but in 2010 this rate goes high and now it's almost 15.1% of the total population. The people in Pakistan are slowly getting aware of the fact that business on the internet is less costly and are more beneficial. Nevertheless, Pakistan can make good use of this opportunity with proper planning and execution. To begin with, let us focus on the domestic front before going all out for the global market. Case Study- EBay Inc | 42

11.2.Domestic activity 

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Offer for improving and productivity to bring it to the excellent level. It also allows our entrepreneur to test their web business and marketing skills before taking on the international markets. E-commerce is not for all but for those who understand it. Yet, e-commerce is not a technology. The issue at the individual level, it is purely a business matter. At the govt. level, it is a matter of providing infrastructure for transactions on internet. Ecommerce or business through internet is becoming very popular mode of trading around the world particularly in the developed world. E-commerce is a broad term used to quantify the trading taking place on the internet. Most studies, however, suggest that e-commerce runs through four steps. The very first step is, to build a website to let the world know about your existence. The website contains information about the company, product/services and other related information, which can help visitors to learn more about the hosts. The second step involves asking customers to lose their pockets and buy on line. This step requires adopting advance level of software capable of handling orders. In the third stage inventory, management adds to the system and lastly, providing provisions of payments through online banking partnership between buyers and sellers, the most difficult and complex part of ecommerce. The most common and popular forms of e-commerce are business-toconsumers (B2C) and business-to-business (B2B). Business-to-government (B2G) and government-to-citizens (G2C) are other forms, running on the internet but with low steam. However, the use of former two still dominates the internet. However, Pakistan is still far behind in chasing the west in this regard. Entrepreneurs in Pakistan are of the opinion that e- commerce means being Case Study- EBay Inc | 43

able to make and receive payments through internet and any other activity through internet is not considered as e-commerce. This low level of understanding has led many Pakistani firms to give low priority to ecommerce due to unavailability of proper framework for the internet in the country. Some activities that are being performed by the Government of Pakistan are:

11.3.Foreign Investment: Foreign investors are allowed to invest up to 100% in software companies, and foreign interest in Pakistan's technology sector has been increasing. Local entrepreneurs have set up around 100 call centers in recent years in Pakistan; one of the first was a call-centre that Align Technologies (US) set up in 2000.

11.4.Intellectual Property: According to an August 2006 report from the government, the Electronic Data Protection Act 2005, the revised Electronic Crimes Act 2004 and a law relating to electronic payments had been drafted and were ready for legislation, although there is no schedule to present them. The Electronic Data Protection Act would provide protection and safety to foreign data regarding the processing of such data in Pakistan; details for the other two acts were not yet available by August 2006.

11.5.Consumer Protection: The president passed the Electronic Transactions and Governance Ordinance 2002 in September 2002. It extends the coverage of laws concerned with physical contracts or documents to their electronic forms.


11.6.Basis of Tax: No rules have been established on how to tax e-commerce or determine "electronic residence" in Pakistan.

11.7.E-Commerce as a course: After the government realizes the importance of e-Commerce, they asked all the universities to make e-Commerce the part of their syllabus.

11.8.Barriers to Face: In Pakistan, e-commerce is still in its infancy and faces many barriers to grow. The notable barriers are: 

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Misconception of e-Commerce in Pakistan Mistrust Low Literacy Rate Access to Technology is late Policies of Government unavailability of proper infrastructure [telephone line of stem lines of steam age, frequent failures of power] limited user of internet hardly one per cent of the entire population have access to the internet] the issue of security of transactions on the internet high bandwidth rates The rigid and monopoly role of the PTCL.

However, the Government has recently put a crack on the barriers when it approved the merchant ID accounts to facilitate online transactions. But there is still a long way to go and requires government to continue to grease the wheels of e-commerce to speed up the process.


11.9.Predictions: 

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Those who create, distribute, and sell goods and services to consumers also have reason to look forward to this new mechanism. All enterprises, including the small and medium sized can reach customers throughout the world instantly and comparatively inexpensively. Many vendors can sell globally without the costly infrastructure of worldwide retail stores, sales offices, distributors, or warehouses. Pakistan is still an under developing country and is in a process of making their way towards the road of technology. The internet is prevailing like dark cloud on Pakistan and it will hit the Pakistan economy positively in the near future. People are getting aware of the importance of business on the internet rapidly and this will prove good in the favor of Pakistan. Pakistan Government is taking bold steps when it came to the concern of eCommerce. Calling FDI, making laws so that they could be able to invest more in Pakistan in the field of Technology. The policies of decreasing the rigidity and monopoly of PTCL will help in this regard. These steps will lead to more investment in the field and towards a bright future of eCommerce in Pakistan.

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Banks are playing an important role in increasing the awareness of eCommerce in Pakistan. The banks start e-Banking and also the availability of merchant account that will help the investors to invest in the internet business. 

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The literacy rate of the country is a big block when we thought of the future of e-Commerce in Pakistan. It will take a lot of time in increasing the literacy rate of the country and more time will be required to give awareness to the people about the e-Commerce. Pakistan became a member of AFACT in September 2000 at Taipei, Taiwan and was nominated its Chairman last month at AFACT 2002 held in Kuala Case Study- EBay Inc | 46

Lumpur, Malaysia. Which surely reflects that e-Commerce got a very bright future in Pakistan. 

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The young entrepreneurs can also play an important role in making the ecommerce a bright activity in the business field. Fresh students who know about the internet and the business over it will focus on the internet business as it requires fewer budgets and it pays more. Freelance software designers and developers can also earn a handsome amount as foreign currency reserves for Pakistan by providing online services worldwide.


12. Conclusion It can be concluded that there is a lot of scope of e-commerce in Pakistan, and most companies are eager to going to the digital world, but at present E-commerce is not expected to increase in near future due to low PC and internet penetration. Industry, businesses and trade people prefer to use traditional ways of business enjoying personal contacts and mode of payments. We think that companies have started realizing the potential of ecommerce and electronic data interchange In Pakistan, especially in the Banking sector. So the future of Ecommerce in Pakistan is bright. We will embrace ecommerce by desire or by force as more and more international transactions are undertaken electronically.


eBay Inc

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