PayPal one of the biggest startup during the initial Internet boom in the 1990s has been one of the companies that everyone has their eyes on. From being founded by the PayPal mafia (Founders who then became to start new companies who later were valued in million and 7 particularly in Billions like Elon Musks Tesla), to being sold to eBay and then again separated from eBay, PayPal is one of the most interested companies whose strategy our group found the most interesting.The Presentations talks about the Origin of PayPal, Competitors of PayPal globally and in India, its competitive advantage over other, Analytical tools like PESTLE etc, Major strategy change, eBay split off, Change in strategy and future strategies.
1. “Of the six people who started
PayPal, four had built bombs in
high school.”
Peter Thiel
(Co-Founder || PayPal Mafia)
1
Strategic
Management
Group Number 11
Abhishek Malakar (PGP03003)
Masoom Modh (PGP03031)
Maulik Chaudhary (PGP03032)
Nihar Mehta (PGP03035)
Prince Sharma (PGP03045)
Vaishnavi Deshpande (PGP03060)
2. 131450000000$
That’s the amount of transaction alone in 2017
15% growth (Over 2016)
Total success!
Total
227000000 users
That’s a lot of active users
2
3. Origin and evolution of PayPal
3
1998 Peter Thiel and max Levchin launch Fieldlink later renamed Cofinity
1999 PayPal first appears as an online demo that allows people to email
payments in US dollars.
2000 Reaches 1m users after changing its payment systems to enable eBay
payments.
2001 X.Com changes its name to Paypal
2002 eBay buys PayPal for $1.5bn, just eight months after the online payment
provider’s initial public offering.
2004 PayPal becomes a payment option on the UK site of eBay, resulting in a
300 per cent jump in PayPal revenues to $1.4bn
2007 Granted an EU banking licence
2010 PayPal launches apps for the iPhone and Android-powered devices
2012 Mobile payments more than treble year-on-year, to $14bn
2014 eBay announces plans to make PayPal a separate business in 2015.
4. International Competitors
● Google wallet
● WePay
● 2Checkout
● Authorize.net
● Skrill
● Intuit
4
Indian Competitors
Payment gateways:
● CC Avenue
● CitrusPay
● PayUMoney
● InstaMojo
● DirecPay
Mobile Wallets:
● PayTM
● MobiKwik
● Oxigen Wallet
USPs of PayPal over its
competitors
● Leading in mobile
● No trouble in copying what
works
● Not wasting its time with
mobile wallets
● Not bothered about how you
use its service
5. Competitive advantage
• First mover advantage: Launched in 1998.
• Large Network: 169 million users, more than 10 million
merchants, and more than two-thirds of the 100 largest
online retailers.
• Adaptive design: user friendly.
• Global presence: As of 2017, PayPal operates in 202
markets and has 218 million active.
• Multiple currencies: PayPal allows the customer to send,
receive and hold funds in 25 currencies worldwide
4
6. SWOT Analysis
S
TRENGTHS
W
EAKNESSES
OPPORTUNITIES
T
HREATS
• Highly safe and secured system of online
transaction supported.
• Secured & protected infrastructure.
• Serves more than 193 countries and
transacts in 26 currencies.
• Huge customer base of over 230 million
member accounts.
• PayPal follow anti-phishing policies for
user data protection
• Viral marketing – anyone receiving paypal
cash has to open an account
• Highly exposed to payment frauds and
risks.
• Faces allegations related to payment
transactions controversies.
• Strict local regulation and restrictions in
Japan, China, Brazil, Taiwan and India.
• Unpopular in emerging economies as
people are conservative about e-
transactions.
• To further expand in the market
of digital exchange.
• To further expand in cashless
commerce and economies.
• To further expand in e-business
through acquisitions.
• To add further convenience and
features
• To accept payments via mobile
text messages
• Stringent business regulations
and policies globally.
• Threats of data breach, frauds
and hacking
• Illegal charging for currency
conversion – Paypal and Israel
Credit Cards – Cal Ltd. paid NIS
16 million in June 2011 to
settle the claim
Negative
Internal
factors
External
factors
Positive
6
7. Porter’s Competitive Model
Bargaining Power of
Buyers
• PayPal is the
most trusted leader
in market and
substitutes lacks in
performance too.
• Market has
competitors but
their services are
inferior
Potential New Entrant
Substitute Product
or Service
Intra-Industry Rivalry
• PayBox
• Industry is growing fast
• PayPal effectively meets
customers’ customization
demands
• Good experience causes
customers to pay willingly
• Limited information so
customers can’t negotiate easily
• Large number of customers
reduces the leverage of
bargaining and streamline
production process
• Strong base of
loyal customers
•Strong distribution
network
•Uses advance
technologies
Bargaining Power of
Suppliers
• Highly competitive
situations among suppliers
which force them to reduce
price which positively affects
PayPal to eventually reducing
its processing fee.
• Market leadership creates
low chances of switching
PayPal.
•Diverse payment modes and
channels
7
8. TechnologySocialPolitical Economic EnvironmentLegal
•Political stability
and importance of
Credit Services
sector in the
country's economy.
•Bureaucracy and
interference in
Credit Services
industry by
government.
•Legal framework
for contract
enforcement
•Intellectual
property protection
•Trade regulations
& tariffs related to
Financial
•Pricing regulations
–Taxation - tax
rates and incentives
•Government
intervention in
the industry
•Exchange rates &
stability of host
country currency.
•Infrastructure
quality in Credit
Services industry
•Comparative
advantages of
host country
•Skill level of
workforce in
Credit Services
industry.
•Inflation rate
•Interest rates
•Demographics
and skill level of
the population
•Education level
•Culture
•Entrepreneurial
spirit and broader
nature of the
society.
•Attitudes
•Leisure interests
•Recent
technological
developments
by PayPal
Holdings, Inc.
competitors
•Technology's
impact on
product
offering
•Impact on cost
structure in
Credit Services
industry
•Impact on
value chain
structure in
Financial
sector
•Credit Services
industry
•Attitudes
toward and
support for
renewable
energy
•Anti-trust law in
Credit Services
industry and
overall in the
country.
•Copyright,
patents /
Intellectual
property law
•Consumer
protection and e-
commerce
•Data Protection
8
9. Fruitful Strategies
× Merger of Confinity and X.com.
× Acquisiton by eBay
× Partnership with MasterCard in
2007
× Series of acquisitions to enhance
security and expand its consumer
base.
Strategies before 2009
Missed Opportunities
× Early days of powering
payments through
mobile-phones.
× No branching-out or
innovations
9
11. 11
Major Strategic Change
× Stronghold in Peer to Peer segment
× Increase in Number of Acquisitions
× Making new friends
× Customer choice
× Doing the smart thing
12. “It doesn't make sense that a
global payment system is a
subsidiary of an auction
website… It’s as if
Target owned Visa or
something.”
Elon Musk
(Co-Founder || PayPal Mafia)
12
13. PayPal & EBay Split
× Proposed in 2009 but idea dropped
× In 2014, PayPal Split up
× Increase competition in Mobile payment
× Shareholder pressure
× Overnight increase in value
× Different strategic priorities
× Stocks plunged by 8.1 per cent on that announcement
× After effect
13
15. 15
PayPal’s Future Strategy
× PayPal's reach
× Small features increase engagement
× Build a brand
× Continue with Innovation
× Enter new markets with all services
× Grow organically
Financial Performance
× During 2017, Net revenue grew by 21%
× Increase in Goodwill amount by $280
Million
× Acquired 6 Firms including Xoom Corp.
× EPS 0.52 in Q4 of 2017, defying
expectations
× Valuation more than parent company, Ebay
× Spent $132 Millions in Restructuring
(2017)
PayPal’s Current Strategy
× Always at the Centre of the Next
Innovation
× Bridging Digital and Physical Commerce
× From Digital Wallet to Mobile Wallet to
No Wallet
× Re-Imagined Consumer Shopping
Experience
- Source: SEC Filing 2017
http://www.ecommerce-digest.com/paypal-case-study.html
New Israeli Sheqel
http://fernfortuniversity.com/term-papers/porter5/analysis/951-paypal-holdings--inc-.php
https://www.ijmrnd.com/assets/pdf/Educational-Leadership/PayPal-Industry-Analysis.pdf
Threats of New Entrants
New entrants in Credit Services brings innovation, new ways of doing things and put pressure on PayPal Holdings, Inc. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. PayPal Holdings, Inc. has to manage all these challenges and build effective barriers to safeguard its competitive edge.
How PayPal Holdings, Inc. can tackle the Threats of New Entrants
By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy PayPal Holdings, Inc. ‘s products.
By building economies of scale so that it can lower the fixed cost per unit.
Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as PayPal Holdings, Inc. keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.
http://fernfortuniversity.com/term-papers/pestel/nyse4/951-paypal-holdings--inc-.php
Political stability and importance of Credit Services sector in the country's economy.
Risk of military invasion
Level of corruption
Bureaucracy and interference in Credit Services industry by government.
Legal framework for contract enforcement
Intellectual property protection
Trade regulations & tariffs related to Financial
Favored trading partners
Anti-trust laws related to Credit Services
Pricing regulations –Taxation - tax rates and incentives
Wage legislation - minimum wage and overtime
Work week regulations in Credit Services
Mandatory employee benefits
Industrial safety regulations in the Financial sector.
Product labeling and other requirements in Credit Services
Type of economic system in countries of operation – what type of economic system there is and how stable it is.
Government intervention in the free market and related Financial
Exchange rates & stability of host country currency.
Efficiency of financial markets – Does PayPal Holdings, Inc. needs to raise capital in local market?
Infrastructure quality in Credit Services industry
Comparative advantages of host country and Financial sector in the particular country.
Skill level of workforce in Credit Services industry.
Education level in the economy
Labor costs and productivity in the economy
Business cycle stage (e.g. prosperity, recession, recovery)
Economic growth rate
Discretionary income
Unemployment rate
Inflation rate
Interest rates