As it was mentioned in Buzz Out Loud's episode 824, Ebay, the online auction company, has decided to lay off about 10 percent of its workforce. The company also announced plans to acquire online payments business Bill Me Later for $820 million in cash and approximately $125 million in outstanding options, as well as Danish classifieds specialist Den Bla Avis and vehicle site BilBasen for approximately $390 million in cash.
While many people think that acquisition is good for any business, other people think acquisition is not a good 'growth' strategy. In this Ebay's instance, Ebay is buying those companies by sacrificing their workforce. eBay said its workforce reduction, which cuts about 1,000 jobs, will result in a pretax restructuring charge of between $70 million and $80 million, which will be taken in the fourth quarter of 2008, eBay said. The online retailer will also let go several hundred temporary workers and reduce the number of open positions.
Now, the question is, is it a good decision by Ebay? Ebay was working fine with paypal. Bill Me Later is just another payment option along with paypal. On the other hand, Den Bla Avis is a classifieds specialist and BilBasen a vehicle site. The concern here is, Ebay may lose sight of their main business (what the do best) in trying to keep up with other kind of business (whose success is yet to be proved) Another concern is, is it really worthy to cut off their (Ebay's) own employees in expense of some new business?
References:
http://news.cnet.com/8301-1001_3-10058660-92.html?tag=mncol;txt
https://www.billmelater.com/index.xhtml
http://www.dba.dk/
http://www.bilbasen.dk/
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3 comments:
This is a very big move by Ebay. They need to figure out if this is the correct strategy and if it aligns with their business mission and values. Ebay's mission is to provide a global trading platform where practically anyone can trade practically anything according to their website. Considering this mission statement then Ebay is still aligned with their mission because they are expanding the opportunity to allow anyone to trade practically anything. They are opening new doors to allow more accessibility to paying and receiving payments from people.
The big concern here is that they are cutting their own staff in the expense of some new business. These are the people that help keep the company where they are at and how they have gotten to the point that they are at even if they are lower management. We feel it is fine to cut the temporary help, but putting money in front of their own employees may not be a the best strategy. We think the idea is great, but they may be biting off more than they can handle trying to acquire Bill Me Later and the classified specialist Den Bla Avis. Maybe they should do one or the other up front and retain some of their employees. This would allow them to make another strategic move in the future while retaining their employees and opening new market opportunities.
We do not believe Ebay is sacrificing their employees at the expense of acquisition; however, Ebay is merely working on two strategies at one time. Ebay is attempting to lower their overall costs, which is the main focus of many companies in this economic environment, while also allowing themselves the ability to grow through acquisition.
While most will concentrate on the reduction in the workforce, it is important to note that Ebay is a strong enough company to take on such acquisitions as they have. The savings in employee reduction does not offset the large investments they are making in Bill Me Later, Den Bla Avis, and BilBasen. Ebay is an industry leader and is striving to stay the leader.
The Bill Me Later acquisition is a way for Ebay to give customers more options, increasing their retention rates. Classified ads align with the overall strategy of Ebay of buying and selling others goods. BilBasen brings in an expansion to automotive sales for Ebay.
While most focus on the workforce reduction, we focus on Ebay's ability to continue to expand through acquisition which shows the financial strength of a company. It is now the management's turn to show the strategy was wise. Management must bring the new acquisitions into the fold and create synergies where possible. The true verdict of these acquisitions will not be rendered until further in the future.
Group 1
The strategy of consolidation may be a good one depending on the industry and on the company. In any case, it does not mean that eBay is sacrificing its employees because of consolidation. It is just making sure that the company surfaces and stays in operation which any company would do. Sometimes to maintain the company, the firm has to lose personnel, but it is for the good of the majority, or in other words, a utilitarianism approach.
In this specific case, I believe that consolidation may not be the best option for e-bay, why? Because the company being bought is "just another payment option" as GCF Group puts it. E-bay already has a payment option, PayPal, and consolidating with bill me later may be able to bring some growth, but in our opinion the jobs lost may not be worth it.
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