2. Content
Introduction
Q1.Asses eBay’s expansion and diversification strategy before the addition
of Skype. How great was the degree of relatedness between the different
business?
How strong was the potential for synergies between them?
Where there any businesses in the portfolio that eBay should not have
entered?
Q2.Evaluate the strategic arguments in favour and against the Skype
acquisition. Do you agree with the people who say that eBay paid too
much for Skype?
Conclusion
Bibliography
17/10/2012 2
3. Introduction
eBay’s growth strategy through acquisitions
Skype
Craiglist.
PayPal
com
eBay
Gumtree Baazee
Offline
auction
houses
17/10/2012 3
4. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype.
Theory:
• Our definition Diversification strategy it is a strategy that takes an organization
away from its existing markets and existing product and services and brings into
new one, which provide reducing risk of investing in different industries.
• There are two level of diversification:
Business-level: on this level organization trying compete in their particular markets.
Corporate-level: organization involved in few different industries with different
success factors
Degree of relatedness between the different business depends on the similarities in
industries success factors such as: Customer, Channel, Input ,Process, Market
knowledge (Haberberg 2008)
Synergy refers to the benefits that might be gained where activities or process
complement each other such that their combined effect is greater than the sum
of the parts (Jonhson 2005)
(2+2=5)
Portfolio the range of products, services, or brand offered by diversified corporation
17/10/2012 4
5. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype.
Corporate level (Synergy of eBay and PayPal)
Business level (acquisition of new
markets and their relatedness,
ex: Baazee.com and EachNet)
eBay
17/10/2012 5
6. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. How great was the degree of
relatedness between the different business?
Theory Application
Category of success factor Online auction listing online Classifieds
shopping Ads
Customer (brand –building and customer Sellers & buyers Sellers & Sellers &
relationship by building loyalty) around the buyers buyers in the
globe around the global
globe market
Channel (building loyalty and relation, Negotiation Negotiations Newspaper,
carrying out negotiations with dealers between seller between magazines,
and retailers,) and buyer (eBay and internet,
(bidding) PayPal, eBay.com
Postal
services)
17/10/2012 6
7. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. How great was the degree of
relatedness between the different business?
Theory Application
Category of success Online auction listing online Classifieds Ads
factor shopping
Input (finance, Fees, sellers, user Fees (cash/card), Fees, seller’s ads.
supplier, managing id/ profiles sellers, user id/
knowledge) profiles
Process (technical IT applications and IT applications and developing their
aspects, patents & software software brand and products
trademarks)
Market knowledge Profiles (seller and Profiles (seller and developing their
(data collection and buyer, and product) buyer, and product) brand and products
understanding the
market )
17/10/2012 7
8. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. How great was the degree of
relatedness between the different business?
Success factors of eBay business
eBay businesses
Technologies
Customers
Brand & Reputation
Conclusion: The degree of relatedness between the different business are HIGH,
as they encompass same success factors.
17/10/2012 8
9. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. How strong was the potential for
synergies between them?
Forms of Synergies eBay + PayPal
Sharing tangible resources Working in internet and using the same IT
resources.
Pooling negotiation power Development and betterment of
businesses.
Coordinating strategies A common goal to generate revenue.
Creating combine businesses Payments made safer and easier,
increasing customer base.
Sharing intangible resources Reputation of both brands, managing
talents, customer loyalty and security.
Conclusion: Based on the above table, the potential for synergy between eBay and PayPal
was strong and successful as a result it simplified global payments in ecommerce increasing
customer base.
17/10/2012 9
10. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. Were there any business in the portfolio
that eBay should not have entered?
eBay's Growth Profit
3000
2000
1000
0
1998 1999 2000 2001 2002 2003 2004
* All figures in $ million
Conclusion: NO there were no such business in the portfolio that eBay shouldn’t
have entered, as during its expansion and diversification the growth profit of the
company were constantly increasing.
17/10/2012 10
11. Q1.Asses eBay’s expansion and diversification strategy before
the addition of Skype. Were there any business in the portfolio
that eBay should not have entered?
17/10/2012 11
12. Conclusion
eBay's expansion and diversification strategy
was highly successful because:
• The businesses it acquired have simmilar
success factors, so they are related to each
other.
• Sinergy affect (PayPay and Skype) was strong
and successful .
17/10/2012 12
18. Conclusion
• For a company to be successful it is vital for it
to recognize and understand the segment
where the company is operating.
• With knowing the needs and the wants of its
customers in particular segment, companies
could sustain its competitive advantages.
17/10/2012 18
19. Bibliography
Haberberg A and Rieple A.,(2008), Strategic Management, Oxford university Press NY
Henry, A. (2008), Understanding Strategic Management, Oxford university Press Inc., NY, p. 127
Henry A., (2005) ‘A Demographic and Psychographic Profile of Heavy Internet Users and Users by
Type of Internet Usage’, Journal of Advertising Research, 1(45) , p93-123, 31p
Johnson G., Whittington R., Scholes K. ‘Exploring Strategy Text & Cases’, Prentice Hall Press,
Martin G, (2011)‘The importance of marketing segmentation’ , Kaplan University: USA, 4 (6), p.57
Porter, M. E., (2001),’ Strategy and the Internet’, Harvard Business Review
investor.ebayinc.com (Accessed: 13 October 2011)
www.ebay.com (Accessed: 13 October 2011)
http://www.ebayinc.com/who (Accessed: 13 October 2011)
