"Multibusiness Models" Please respond to the following:
From the case study, evaluate eBay’s new multibusiness model in terms of the company’s diversification strategy, levering of competencies, sharing of resources between business units, and ability to use product bundling. Provide a rationale to support your response.
eBay has tried various diversification strategies over the years. Most of these attempts at diversification were examples of related diversification, that is, "corporate-level strategy based on the goal of establishing a business unit or division in a new industry that is related to a company's existing business units by some commonality between value-chain functions of both entities" (Hill/Jones, 2013). One example of related diversification for eBay include international expansion, first in English-speaking countries like the UK and Australia, then purchasing existing competitors in non-English speaking countries like India, China, Japan, and Latin-America.
Another example of related diversification is eBay drop-off stores, where sellers who are not computer savvy can drop their goods to be listed through an established eBay seller. But probably the most successful related diversification strategy that eBay employed was acquiring the payment service companies that enabled buyers and sellers to complete their transactions through Billpoint, and eventually PayPal. The acquisitions of these companies gave eBay a bigger slice of revenue for each successful transaction that occurred on its auction site. Other related diversification efforts including expanding the successful retail format to more unusual types of goods. High-end antiques and collectibles, automobiles, and apartment rentals were areas that eBay branched into, just to name a few.
eBay has also attempted to use unrelated diversification, which is a corporate-level strategy with a goal to increase profitability through the use of general competencies in business units completely unrelated to its core business. In eBay's case, the Skype acquisition is the perfect example of unrelated diversification. eBay acquired Skype in the hope that the technologies of VOIP would be in high-demand to enhance the buyer and seller experience. In the end, the demand was not there, as most buyers and sellers were content using email and SMS text communications to transact their business. Eventually, since Skype really added nothing to the eBay experience, the acquisition was divested.
Leveraging of competencies occurs