The American multinational corporation eBay has recently announced that it is going to split PayPal and itself into two separate companies. From the perspective of eBay’s CEO, John Donahoe confirms this breaking news and strongly believes in both companies’ future after their separation.

Looking back at the past record for two companies’ cooperation, “PayPal’s revenue are growing at 19% a year, twice as quickly as eBay’s”, this fact suggests PayPal’s rapid economic growth and better revenue earned than eBay. Here are some of the thoughts I have regards to their separation.

First, as for PayPal, after separating from eBay, it still generates most of the capital flows and at the same time, the company will have more opportunities for profit growth that will help the business develop its unlimited potentials. The company can specialize on their business operations, which eventually becomes a competitive advantage in the field. The company can be more strategically in making business plans individually as well to earn as much profits as possible.

Also, as for eBay on the other hand, the separation of two companies would directly affect eBay’s overall benefits. According to Porter’s framework in class prep 10 materials; the separation increases the exit barriers for eBay because the competition between eBay and PayPal raises, representing the competition between the field of online shopping and the online payment service field is merging into the market.