The internet has dramatically increased global ecommerce activities. Both traditional "bricks and mortar" businesses and new dot-com businesses use the internet to meet business objectives. However, in order to continue to succeed, dot-com businesses are pressured to change their business models. For example, eBay started out as an extremely successful online auction business that was considered to be "unstoppable." However, in 2009, with the hiring of a new CEO, the company started to change its business strategy and is now no longer primarily an auction house but defines itself as an end-to-end ecommerce powerhouse. It is now in direct competition with Amazon, but unlike Amazon, eBay does not consider itself a retailer; rather it describes itself as "a partner with retailers and brands." While it still provides auction services, it now has a variety of small sellers and big stores on the site that offer fixed price selling. In order to transform itself into an ecommerce giant, it has invested considerably into a new search engine, making it easy for users to browse items they would want to buy, and guaranteeing fast delivery (in some cases within one hour).
REQUIRED
a. Identify business strategies that explain eBay's decision to offer goods for sale at fixed prices.
b. Describe three business risks related to eBay's operations. How do these risks affect your assessment of eBay's client business risk?
c. Acquisitions by eBay in recent years include PayPal (an online payment service) and Skype (an internet communications company). Discuss possible reasons why eBay made these strategic decisions.
d. Four years after acquiring Skype, eBay sold most of its interest in the company. Discuss how that impacts eBay's business risks.
e. Identify possible risks that could lead to material misstatements in the eBay financial statements if business risks related to its operations are not effectively managed.