PAK ELECTRON LIMITED ()

Assignment:
Pak Elektron Limited

Submitted by: Submitted to:

Muhammad Imran Dr. Zeshan Zafar
Roll No. 72
MS-Management Sciences
1st Semester Fall Session 2019-21

Department of Management Sciences

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Contents
Executive Summary ..............................................................................................................................4
Company Overview...............................................................................................................................4
Organizational Profile ......................................................................................................................4
Product and service ...........................................................................................................................5
Vision ..................................................................................................................................................5
Mission ...............................................................................................................................................5
Core values .............................................................................................................................................6
External environment ...........................................................................................................................7
Political ...............................................................................................................................................7
Economic ............................................................................................................................................7
External Factor Analysis (EFE).......................................................................................................8
Competitive Analysis ........................................................................................................................9
Competitive Analysis: Porter’s Five Forces Model .........................................................................10
Potential entry of new competitors (Medium) ..............................................................................10
Rivalry among competing firms (Medium) ..................................................................................11
Bargaining power of suppliers: (Low) ..........................................................................................11
Bargaining power of consumers: (High) .......................................................................................12
Potential development of substitute products: (Low) ..................................................................12
Competition .....................................................................................................................................13
Highlight: Marketplaces Competition...........................................................................................13
Highlight: Skype Competition .......................................................................................................14
Amazon.com (AMZN) ....................................................................................................................14
Competitive Profile Matrix ................................................................................................................14
Competitive Analysis ......................................................................................................................14
Corporate Culture...........................................................................................................................16
Corporate resources of PEL Finance ................................................................................................16
Marketing ........................................................................................................................................17
Human resource management ...........................................................................................................17
Internal Challenges .........................................................................................................................17

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Internal Factor Evaluation (IFE) ......................................................................................................17

Basic Financial Ratios .........................................................................................................................19
Current Ratio ..................................................................................................................................20
Current Ratio ..................................................................................................................................20
Quick Ratio ......................................................................................................................................20
Debt-to-Total-Assets Ratio .............................................................................................................20
Debt-to-Equity Ratio.......................................................................................................................20
Total Assets Turnover ....................................................................................................................20
Operating Profit Margin ................................................................................................................21
Net Profit Margin ............................................................................................................................21
Return on Total Assets (ROA) .......................................................................................................21
Return on Equity (ROE) ................................................................................................................21
Earnings Per Share (EPS) ..............................................................................................................21
Findings: ..............................................................................................................................................21
Recommendation .................................................................................................................................22
References ............................................................................................................................................22

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Summary PEL Company

This assignment is on PEL gives clear understanding of strategic management tool and techniques
(from chapter 1 to 6 from book Strategic Management, Fred R. David) and how they help an
organization in developing its future growth strategies. It studies strategic management in reference
to PEL which is a home appliances provider in national level market place.

This assignment conducts an environmental analysis for PEL using strategic tools like SWOT
matrix analysis (external factor analysis and internal factor analysis). The outcome of SWOT
matrix analysis shows that strengths and opportunities of PEL outnumber its Weaknesses and
threats; this predicts future growth and profitability. External factor analysis for PEL analyses the
external factors that affects its operations. Porter’s five forces analysis for PEL shows that they
feel minimum pressure from competitors; substitute products and suppliers however are affected
by change in customer preferences.

Company Overview:
Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in Pakistan. In 1956,
the Company was set up by Malik Brothers in technical collaboration with M/s AEG of Germany
("AEG") to manufacture transformers, switch-gear and electric motors. Later it was acquired by
the Saigol Group of Companies in 1978 and ventured into home appliances market as a part of the
Group's long term strategy of diversification.
Other than Pak Elektron Limited, Saigol group also owns Kohinoor textile mills Saritow Spinning
Mills, Azam Textile Mills, Kohinoor Power Company Limited and Kohinoor Energy Limited.
Since its inception, the company has always been contributing towards the advancement and
development of the engineering sector in Pakistan by introducing a range of quality electrical
equipment’s and home appliances and by producing hundreds of engineers, skilled workers and
technicians through its apprenticeship schemes and training programs.
PEL contributes in your lives every day, by providing you not just appliances for a better lifestyle,
but with Power products like transformers, switch gears and energy meters. We are the pioneers of
electrical manufacturing in Pakistan and we are here to make a difference in your lives whether it
is through taking care of your home, your lifestyle, making your day to day activities easier or by
helping you save energy.
We are here to “Change your Life”.
Since its inception, PEL has been operating keeping in view the philosophy of innovation and
advancement. It has consistently contributed in the development of engineering sector in Pakistan,
keeping in mind the National interest and Consumer welfare. It has introduced a range of quality
electrical equipments and home appliances by producing hundreds of engineers, skilled workers
and technicians through its apprenticeship schemes and training programs.
Until the acquisition by Saigol Group, PEL was solely catering the power equipment market but
in 1981 the company ventured into home appliances market in 1981 as a part of Group’s long term
strategy of diversification.

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Product and service:

PEL transformed the internet and the way many of us shop and do business worldwide. PEL’s
market place is online virtual trading platform for the sell goods and services by a community of
users that comprises individual buyers and sellers. PEL provides virtual market auction where the
market determines the price of items sold.

PEL offers millions of items for trade through auction-style and fixed –price trading in 39 markets
and boasts 86.3 million active global users.

To facilitate trading with unknown partners on the Internet, PEL Inc. provides a trusted and safe
trading environment by offering the following services: Feedback Forum, Safe Harbor Program,
Verified Rights Owner Program, Customer Support, Value-Added Tools and Services, and Loyalty
Programs.

Vision:
To excel in providing engineering goods and services through continuous improvement.

Mission:
To provide quality products and services to the complete satisfaction of our customers and
maximize returns for all stakeholders through optimal use of resources. To promote good
governance, corporate values and safe working environment with strong sense of social
responsibility.
Core values
Our team is dedicated to provide GREAT Customer Service. Our main goal is to provide happiness
and satisfaction to everyone who decides to try us as their provider for everything fashion.

 DELIVER GREAT CUSTOMER SERVICE

 POSITIVE TEAM
 BE HUMBLE
 PASSION AND DETERMNATION
 PURSUE GROWTH
 RELATIONSHIPS COMMUNICATE!
 FAMILY SPIRIT
 DO MORE STRESS LESS
 BE RESPECTFUL AND GRATEFUL

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Corporate Governance:
Corporate governance is the system by which companies are directed and controlled. It involves
regularity and market mechanisms and the roles and relationships between a company
management, board, shareholders and other stakeholder and the goals for which the corporation is
governed.

As with our PEL community, PEL Inc.'s success is fundamentally based on openness, honesty,
integrity and trust. The following internal practices and policies reflect our strong commitment to
our stockholders, community and employees. We are committed to exercising the highest level of
ethical standards in everything we do.

As disclosed in our Form 8-K filed with the SEC on June 18, 2014, our board has determined that
10 of its 12 members are independent under the listing standards of the NASDAQ Global Select
Market.

Board of Directors:

 MR. M. NASEEM SAIGOL Chairmen /Non-Executive.

 MR. M. MURAD SAIGOL Chief Executive Officer
 MR. M. ZEID YOUSUF SAIGOL Executive Director
 SYED MANZAR HASSAN Executive Director & CFO
 SYED HAROON RASHID (INDEPENDENT DIRECTOR) Non-Executive Director
 MR. MUHAMMAD KAMRAN SALEEM Non-Executive Director
 OTHER DIRECTORS: Mr. Usman Shahid (NBP Nominee) 2- Mrs. Azra Nalia Shoaib (NBP Nominee)

External environment
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. Given that PEL conducts approximately 45
percent of its business outside the United States, profitability is also affected by currency exchange
rates. Specifically, PayPal uses fixed exchange rate conversions and holds assets in foreign
currency denominations. If the U.S. dollar weakens against foreign currencies, transactions
conducted in foreign currency denominations will increase and inflate revenues, operating
expenses, and net income. Alternatively, financial measures will be negatively impacted by a rise
in the value of the U.S. dollar. In response to the weak economy, PEL undertook a 10 percent
reduction in its workforce with the elimination of 1,000 jobs in 2008 and incurred $49,000 in
restructuring costs. In the same year, PEL acquired Bill Me Later and announced an anticipated
second acquisition of a vehicle classified ad site, PEL Motors.

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Political

PEL has its operations in almost 37 countries across the globe thus is affected by different
government laws and regulations of each country.

 Tax policy,
 Employment laws
 Tariffs
 Political stability.

Economic

PEL is greatly affected by the overall world economic conditions:

They are affected by economic factors like

 Inflation,
 Unemployment,
 Rate of interest,
 Currency fluctuation
 changes in taxes

Socio-Cultural

PEL overall business if greatly affected by:

 changing customer preferences,

 changes in lifestyle trends

 consumer buying patterns

Technological

PEL’s complete business model is based on internet thus it is greatly affected by technological
factors like:

 security threats,
 Server breakdowns and changes in terms of online payments.

External Factor Analysis (EFE)

An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate
economic, social, cultural, demographic, environmental, political, governmental, legal,
technological, and competitive information.

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Assign a rating between 1 and 4 to each key external factor to indicate how effectively the firm’s
current strategies respond to the factor, where 4 = the response is superior, 3 = the response is
above average, 2 = the response is average, and 1 = the response is poor. Ratings are based on
effectiveness of the firm’s strategies. Ratings are thus company-based, whereas the weights in
Step 2 are industry-based. It is important to note that both threats and opportunities can receive a
1, 2, 3, or 4.

Regardless of the number of key opportunities and threats included in an EFE Matrix, the highest
possible total weighted score for an organization is 4.0 and the lowest possible total weighted score
is 1.0. The average total weighted score is 2.5. A total weighted score of 4.0 indicates that an
organization is responding in an outstanding way to existing opportunities and threats in its
industry.
S.L External Factor Weight Rating Weighted
Score
01 To remain competitive investments in Technology 0.10 4 0.40

and Marketing in order

02 Enjoy trading among buyers and sellers 0.09 4 0.36
a wide selection of goods
03 Currency exchange rate also effect 0.06 3 0.18
profitability
04 At a local city people meet, share ideas 0.08 4 0.18
, offer goods can take help from online classified
05 Denominations will increase and 0.07 4 0.28
inflate revenues if the U.S dollar weakens
against foreign currencies
06. Tax fulfillment will increase costs 0.07 4 0.28
07 Expected to limit revenue growth related with 0.07 4 0.28
weak global economic condition

08 Competitors economic downturn 0.08 4 0.32

because of larger competitor firms
09 In communication services change 0.05 4 0.20
technological competition
10 The economic condition declining 0.06 3 0.18

11 Amazon strong growth and satisfied 0.06 4 0.24

customer
12 The collection of taxes beginning after 0.05 3 0.15
Dec,31 that cause reduction in trading activity
13 The rising value of U.s dollars 0.06 3 0.18
negatively impact financial measure
14 With high unemployment the lingering 0.05 2 0.10
weak economy and dollar
15 For barriers to entry in this segment are low that 0.05 2 0.10
expected to increase
competition
Total 1 3.43

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Comment: As we know the highest possible total weighted score for an organization is 4.0 and
the lowest possible total weighted score is 1.0. The average total weighted score is 2.5. A total
weighted score of 4.0 indicates that an organization is responding in an outstanding way to existing
opportunities and threats in its industry.

Here we see that the total weighted score is 3.43. If score 4 means outstanding performance than
we can say 3.43 is a good score to obtain.

Competitive Analysis

There are three different categories active is PEL like 1. Market places, platforms and service, 2.
Business system 3. Communication.
There are many competitors for PEL. Electronics companies, productive of electronics companies

Competitive Analysis: Porter’s Five Forces Model

Porter’s Five-Forces Model of competitive analysis is a widely used approach for developing
strategies in many industries. The intensity of competition among firms varies widely across
industries.

Potential development
of substitute products

Bargaining power of Rivalry among Bargaining power of

suppliers: competing firms consumers

Potential entry of new

competitors

Potential entry of new competitors (Medium)

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This business is an Internet driven service industry, where there is a low barrier to entry. The main
barrier might that some products are not permitted to be sold in certain states and country. So, the
main barriers may come from government regulation thus any online auction should not violate
those laws. PEL has established blocks that take care of legislation side of the law. PEL has created
its brand name among users of its services and it is really hard to enter a market where safety and
brand recognition are this important in the industry. It is found that the barriers to entry others are
low, however it is hard to be successful in the industry where the safety and brand recognition is
essential to the users of the services.

Rivalry among competing firms (Medium)

Yahoo! Auctions, Google and Overstock.com have been the most important competitors of PEL.
They have been fighting PEL for a piece of the market in the industry. Moreover, one of biggest
competitor of PEL is the drop off industry, however many drop off companies also use PEL
services. There is an immense competition because of low entry barriers. PEL continues to attract
its customers by providing best possible services at the lowest cost (Porter’s generic strategy: cost
leadership strategy at low cost competence in broad market) (4). They are also continuing to
expand horizontally into new markets. With good brand identity and recognition comes safety and
security, which is vital in this industry. There are also low exit barriers in this industry. PEL owns
35.14 % of the market as of 21st of February, 2012, which leaves room for them to grow (5). PEL
needs to keep up with consumers needs and wants along with keeping an eye on its competitors in
order to be successful.

Bargaining power of suppliers: (Low)

Every single user of internet service might be a ‘player’ of PEL. So, there are a vast number of
suppliers and everyone can sell something as a potential supplier for PEL. PEL business model
provides a service that brings the buyers and sellers together. The suppliers do not have much
power except in the case of transaction of the high-end items in other words expensive goods: real
estate or cars or equipment’s. It is obvious that both the buyers and sellers want protection for their
items.

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PEL uses PayPal in order to provide for smooth and quick payment of items where the sellers want
to get their money quickly. But it is complicated to sell expensive where the suppliers have more
power. In order to help facilitate the selling expensive items, PEL purchased Skype where to side
can easily communicate and exchange information (6). The suppliers as a whole do not have much
power unless they are dealing with high-end items.

Bargaining power of consumers: (High)

There is limitless number of buyers and that what makes PEL powerful and profitable. Anyone
around the world can see and buy the any item listed on PEL which means that the buyers don’t
have any real power in influencing PEL. However, PEL does listen to their customers, which is
why they instituted the customer feedback program. This has helped to weed out the bad sellers
and buyers. Overall, PEL’s buyers do not have much influence unless they are dealing with
expensive items.

Potential development of substitute products: (Low)

There are few substitutes to trading online. One them is to go back to trading at an auction house.
Another option is to sell the items directly instead of placing them on an auction. Placing the small
items on a traditional auction is not cost-effective approach and there would be a limited number
of buyers. This is might not be a realistic option to sellers because the Internet and PEL opens up
millions of buyer and sellers worldwide through Internet. The Internet has especially opened up
the market for specialty items such as first edition cookbooks or traditional lunchboxes with
superheroes on them. This is not possible without a service such as PEL. In brief, the threat of
substitutes is found as very low as long as PEL keeps up its positive image and appeal.
Comment: By observing the overall Factors we see that the condition is good because in Five
factors they are 2 low,2 medium threat and 1high threat. For the quarter ending July 30, 2009,
PEL’s Payments division reported $669.3 million in revenue, an increase of 11 percent year over
year. So, by this we can understand that our observation is correct.

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Competition

E-Bay competitors include: 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. However, Amazon’s strong growth and satisfied
customer base pose the greatest threat to PEL. The success of PEL and Amazon are built on similar
customer-centric entrepreneurial business models that focus on customer-driven value creation.
Examination of the strategies, business models, and customer benefits of PEL and Amazon reveals
a common emphasis on relationship value and customer-focused solutions. The focus of PEL’s
business strategy is to compete on price, product selection, and services. However, growth of PEL
has slowed and market share has declined in some segments. The Payments segment competes
against other online payment services and offline payment methods, such as cash, check, money
order, and established credit card merchants. The Communications segment faces competition from
local telephone or cable companies and other VoIP providers. Furthermore, PEL anticipates the
need for substantial resource investments in technology and marketing in order to remain
competitive.

Highlight: Marketplaces Competition

Competition is expected to increase in the future because barriers to entry in this segment are low
and new online sites can be launched at a nominal cost. Competitors include traditional department,
warehouse, discount, and general merchandise stores, emerging online retailers, online classified
services, and other offline and online home shopping networks such as Wal-
Mart, Target, Sears, Macy’s, J.C. Penney, Costco, Office Depot, Staples, OfficeMax, Sam’s Club,
Amazon.com, Buy.com, AOL.com, Yahoo! Shopping, MSN, QVC, and Home Shopping Network.
Companies such as Google Base and Microsoft Live Expo also offer similar online services and
classified ads.

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Highlight: Skype Competition

Competition is intense in communications services and subject to rapid technological change.

Traditional communications companies offer bundled services, such as cable or satellite television,
along with internet and voice communications services. The potential also exists for Skype
technology to become obsolete. Lastly, the resources of existing competitor firms are larger and as
a result, competitors could weather an economic downturn.

Amazon.com (AMZN)

Amazon, a leading online retailer, reported net revenues of $19.2 billion as of year-end 2018. From
2017 to 2018, sales grew at a rate of 29 percent (as indicated in Exhibit 2), even in a declining
economic environment. Amazon has initiated alliances with partners

Competitive Profile Matrix

Competitive Analysis

There are three different categories active is PEL like 1. Market places, platforms and service, 2.
Business system 3. Communication. There are many competitors for PEL. Online and offline
auctioneers, catalogue and mail order companies, classified, directories, search engines, product
of search engines, virtually all online and offline commerce participants – consumer to consumer,
business to business and business to consumer and online and offline shopping channels and
networks.
The Competitive Profile Matrix (CPM)identifies a firm’s major competitors and its particular
strengths and weaknesses in relation to a sample firm’s strategic position. The weights and total
weighted scores in both a CPM and an EFE have the same meaning. However, critical success
factors in a CPM include both internal and external issues; therefore, the ratings refer to strengths
and weaknesses, where 4 = major strength, 3 = minor strength,2 = minor weakness, and 1 = major
weakness. The critical success factors in a CPM are not grouped into opportunities and threats as
they are in an EFE. In a CPM, the ratings and total weighted scores for rival firms can be compared
to the sample firm. This comparative analysis provides important internal strategic information

Since there is not a lot of data given based on the case study, we have only considered Amazon as
the only one competitor in the marketplace segment for CPM analysis.

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Key success Weight PEL Amazon

factors
Rating Score Rating Score

Providing value 0.30 3 0.90 3 0.90

to consumers

Reliability and 0.28 3 0.84 3 0.84

trustworthy

Friendly 0.18 3 0.54 3 0.54

interface
Brand image 0.14 3 0.42 3 0.42
and reputation

Financial 0.10 2 0.20 2 0.20

position
Total 1.00 2.90 2.90

Competitive Profile
4
Matrix
PEL

2 Amazo
n

0
PEL Amazo
n

Comment:
The highest possible total weighted score for an organization is 4.0 and the lowest possible total
weighted score is 1.0. The average total weighted score is 2.5. and we can see that 2.90 is the PEL
CPM value which is the same to its competitor, Amazon. Other side we can see that because of the

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lack information about the competitors, we are going to attention only just on Amazon as the main
competitor for the internal analysis which is the major threat for PEL.

Internal Environment Corporate

Structure:

Corporate Culture

PEL business culture is a little unusual. They don't build cars. Or computers. Or yo-yos. But they
build something just as important. Communities. They have created a place where people can come
together. Exchange ideas. Share experiences. And expand their own businesses. It makes their
users feel like they're part of the family. And they things that feeling goes double for their
employees. That's what's so great about PEL—they are literally changing the face of commerce
every day. And they have a question for all their customer do they have it down to a science? And
their answer is Of course not. They are learning as they go. Succeeding together and challenging
each other to constantly refine and improve their way of working.

They say their people are the reason they have come this far. And they also said the reason we'll
succeed them tomorrow. So, as they grow and they will try their dandiest to retain the fun,
community feeling that makes PEL so unique.

Corporate resources of PEL Finance

PEL holds property in the U.S. and 19 other countries. This property is used for administrative
offices, data centers, product development offices, and customer service offices. These facilities

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are vital for housing the servers, data, and people that allow PEL to exist day-to-day. The server
infrastructure has been designed around industry-standard architectures to reduce downtime in case
there should be a catastrophe.

Marketing

Intellectual property is critical to the success of PEL. Trademark, copyright, patent, domain name,
trade dress, and trade secret protection are vital to PEL's business model. PEL's marketplace and
payments platforms depend on proprietary technology and services. PEL has, over its lifecycle,
developed user interfaces, customer tools, transaction processing, and database and network
applications that are core to the ability of buyers and sellers to complete transactions on any of the
PEL sites.

Human resource management

PEL's continued future performance is strongly predicated upon the ability of it's senior
management. In this category PEL is looking at some significant risks in the future since they do
not have "key person" life insurance policies. They also have some vacancies in the senior
management team. Compounding on these other issues is the fact that PEL has experienced some
difficulty in answering the principal-agent problem due to a fluctuating stock price.

Internal Challenges

Expansion of PEL both in the United States and internationally has placed a significant strain on
management, operations, and financial resources. Particular areas that are strained include the
following:

• Web Site Usability. Growth in the number of products and Web site features has caused
the site to become less user-friendly.

• Web Site Stability. Increased volume and greater complexity require additional expensive
investments in hardware, software, and personnel.

• Customer Account Billing. Transaction-processing and revenue collection becomes more

difficult as the number of transactions increase and consumers default on loans.

• Customer Support. Customer support is challenged from greater trade activity and an
increased number of users.

Internal Factor Evaluation (IFE)

A summary step in conducting an internal strategic-management audit is to construct an Internal
Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the

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major strengths and weaknesses in the functional areas of a business, and it also provides a basis
for identifying and evaluating relationships among those areas. Assign a 1-to-4 rating to each factor
to indicate whether that factor represents a major weakness (rating = 1), a minor weakness (rating
= 2), a minor strength (rating = 3),or a major strength (rating = 4)Note that strengths must receive
a 3 or 4 rating and weaknesses must receive a 1or 2 rating. Ratings are thus company based,
whereas the weights in step 2 are industry-based. Multiply each factor’s weight by its rating to
determine a weighted score for each variable. Sum the weighted scores for each variable to
determine the total weighted score for the organization. Regardless of how many factors are
included in an IFE Matrix, the total weighted score can range from a low of 1.0 to a high of 4.0,
with the average score being 2.5. Total weighted scores well below 2.5 characterize organizations
that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position.

Internal factor weight rating Weighted

score
Internal strength
PEL is the most well-known online auction company in 0.1 4 0.4
the world
Strong auction community of loyal customers 0.04 3 0.12

Excellent financial situation 0.1 3 0.3

Have a fear payment system that encourages merchant to 0.03 3 0.09

list product
Strong presence in strategic global market 0.05 3 0.15

Experienced management team 0.1 4 0.4

PEL has very little inventory since they do not actually 0.05 3 0.15
take position of items sold on their site
Strong customers service 0.03 4 0.12

Percent of revenue in international markets increasing 0.02 3 0.06

significantly
Internal weakness

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Weak promotional and marketing activities 0.1 1 0.1

PEL does not pay dividends on their stock 0.01 2 0.02

Some customers feel the website is cluttered 0.02 1 .02

PELs position in the business to business market is weak .03 1 0.03

PEL has very little debt there for the company is not 0.05 2 0.1
taking advantage of low interest rates to expand
PEL has a higher tax rate since they do not take 0.1 1 0.1
advantage of depreciation as well as other companies
The company relays too much on word of mouth 0.1 1 0.1
advertising assuming everyone already knows about PEL
The company does not do enough to convince leery 0.03 1 0.03
potential customers that internet business is financially
safe
Longer transaction times since many merchant’s will not 0.03 1 0.03
receive payment until a buyer check clears
PEL is mainly a cash business 0.01 2 0.02

Total 1 2.34

Comment:

As we know the highest possible total weighted score for an organization is 4.0 and the lowest
possible total weighted score is 1.0. The average total weighted score is 2.5. A total weighted score
of 4.0 indicates that an organization is responding in an outstanding way to existing opportunities
and threats in its industry. Here we see that the total weighted score is 2.34. If score 2.50 means
average than we can say 2.34 is an average score.

Basic Financial Ratios

Financial ratios are computed from an organization’s income statement and balance sheet.
Computing financial ratios is like taking a picture because the results reflect a situation at just one
point in time. Comparing ratios over time and to industry averages is more likely to result in
meaningful statistics that can be used to identify and evaluate strengths and weaknesses. But
industry average is not very easy to found. Its need 100 years or more historical data to make

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industry average. Also, industry average is not available for all ratios in online. So here we decide
to compare between two years. (2017 to 2018).

PEL’s challenges include realizing the anticipated synergistic benefits of recent acquisitions and
recouping goodwill costs that have inflated the purchase price of acquired businesses. For example,
the $1.4 billion goodwill associated with the purchase of Skype must be recouped

Current Ratio

Current Ratio = Current Assets / Current liabilities

2017 7122505 / 3099579 2.298times
2018 6286590 / 3705087 1.697times
Quick Ratio
Quick Ratio = (Current Assets- Inventories)/Current liabilities

2017 7122505 / 3099579 2.298times

2018 6286590 / 3705087 1.697times

Debt-to-Total-Assets Ratio
Debt-to-Total-Assets Ratio=Total debt/Total assets
2017 200000 / 15366037 0.0130

2018 1000000 / 15592439 0.0641

Debt-to-Equity Ratio

Debt-to-Equity Ratio=Total debt/Total stockholders ‘equity

2017 200000 / 11704602 0.0170

2018 1000000 / 11083858 0.0902

Total Assets Turnover

Total Assets Turnover= Sales/Total assets
2017 7672329 / 15366037 0.499

2018 8541261 / 15592439 0.5478

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Operating Profit Margin

Operating Profit Margin= Earnings before interest and taxes (EBIT)/Sales
2017 41 / 121 0.3389
2018 76 / 151 0.5033
Net Profit Margin
Net Profit Margin= Net income/Sales
2017 348251 / 7672329 0.0454%

2018 1779474 / 8541261 0.2083%

Return on Total Assets (ROA)

Return on Total Assets (ROA)= Net income/Total assets
2017 348251 / 15366037 0.0227 %

2018 1779474 / 15592439 0.1141%

Return on Equity (ROE)

Return on Stockholders ‘Equity (ROE)= Net income/Total stockholders ‘equity

2017 348251 / 11704602 0.0298%

2018 1779474 / 11083858 0.1605%

Earnings Per Share (EPS)

Earnings Per Share (EPS)= Net income/Number of shares of common stock outstanding
2017 348251 / 1282025 0.272%

2018 1779474 / 1282025 1.388 %

Comments Comparing ratios to 2017 to 2018 we see that in 2018 every ratio is going upper. But
PEL experienced a downward trend in revenues, ending the 2018 year with an unimpressive
performance. Total net revenue for the 2008 year increased 11 percent to $8.5 billion; however,
this is a decrease in prior revenue growth of 29 percent experienced from 2016 to 2017.

Findings:
There are two main issues faced by PEL that it is trying to address. The first and most obvious of
which is competition. Just like practically every industry, there are other players that want a slice
of that market. These competitors include Yahoo! Auctions and Overstock.com. PEL wants to have
the largest user base to try to fend off this competition, so in this market, it has to try to lure

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those customers over from its competitors. The second issue has to do with the perception of risk
in purchasing from online auctions. Because, for the most part, all the sellers are unknown to the
buyers, they cannot be completely sure that the seller is legitimate. While the option of feedback
does help to ease that fear to an extent, the feedback can also be faked relatively easily. While most
people feel relatively comfortable buying smaller to midsized items online, they tend to not be as
comfortable when buying big-ticket items.

Recommendation:
First option is a more practical, less risky and more profitable option to PEL currently considering
the external political factors that would affect the business negatively. Moreover, it can be is easily
adaptable to the company’s current structure. PEL currently facilitates online auctions, and this is
just another way to help extend their influence and control. Acquiring powerful Drop-Off markets
can increase PEL’s market share, which increase its competence in existing rivalry. In this way,
PEL can reach out to consumers who are too busy or are uncertain about selling items online,
which further differentiates PELs activities form other competitors. Because of the expansion and
increased control, PEL will be creating a stronger barrier to entry by increasing its market share.

References

1. PEL.com 15th March 2017 <http://www.ebay.com>.

2. Yahoo finance 15th March 2017 <http://www.Finance.yahoo.com >.
3. PEL, annual report,2009. 15th March 2017.

21 | P a g e Submitted by: Mr. Muhammad Nadeem MS -Management Sciences