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What Is Unbundling?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 March 2014
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    2003-2014
    Conjecture Corporation
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In business, unbundling is a term that is applied to any situation where something that is somewhat integrated and complex is broken down into smaller components. The general idea behind this approach is to make the management process of various resources easier to manage, while possibly attaining greater satisfaction from those resources. Unbundling is the opposite of bundling, in which components are combined into a single package as a way of gaining additional satisfaction.

There are many different types of unbundling found in the business world. One has to do with commission unbundling. When commissions are paid using a series of formulas relevant to different products that are sold, it may be somewhat difficult to accurately calculate commissions owed for a specific period. By unbundling the process and calculating commissions owed on each type of product or service that is sold, it is much easier to determine the correct figure, and also track what products commissions were actually paid on for sales generated in a given period.

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Multinational firms are likely to use unbundling as a means of more efficiently managing their international assets. The concept can be applied to setting up fund transfers that are used for specific purposes in specific countries, rather than bundling the flow of funds from the corporate office to those branch offices in various countries. This can often make the accounting process much easier, especially in terms of keeping track of what is done with the funds and how tax laws apply to the distribution of funds in a given country.

In terms of investments, unbundled stock is sometimes attractive. This is simply stock that is sold in smaller lots than a full lot of one hundred shares. Investing in unbundled stock options can allow investors to incrementally accumulate more shares of a desirable stock, even if it is not financially feasible to purchase a full lot at one time.

Unbundling is sometimes utilized when it comes to contracting for different types of telecommunication services. Many individuals as well as corporations sometimes order bundled services with the idea that they are saving money. In situations where it is discovered that it would be more cost efficient to back out one or more services from that bundle, breaking that bundle down into individual units becomes the smartest way to manage expenses and increase overall profits.

Ultimately, unbundling is all about making things simpler to manage. Breaking down a larger component into a series of individual but still related components can aid in focusing resources to address specific needs or obligations, while also creating a better understanding of what components are and are not of value. When conducted in a responsible manner, this process can make tasks less overwhelming and easier to deal with on a daily basis, as well as make it possible to save money.

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