Based on various researches at Oak Spring University , PayPal Holdings Inc is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, technology disruption, increasing household debt because of falling income levels, increasing commodity prices, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, geopolitical disruptions, etc
Introduction to SWOT Analysis of PayPal Holdings Inc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that PayPal Holdings Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the PayPal Holdings Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which PayPal Holdings Inc operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of PayPal Holdings Inc can be done for the following purposes –
1. Strategic planning of PayPal Holdings Inc
2. Improving business portfolio management of PayPal Holdings Inc
3. Assessing feasibility of the new initiative in United States
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of PayPal Holdings Inc
Strengths of PayPal Holdings Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of PayPal Holdings Inc are -
Effective Research and Development (R&D)
– PayPal Holdings Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – PayPal Holdings Inc staying ahead in the Consumer Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Consumer Financial Services industry
– PayPal Holdings Inc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– PayPal Holdings Inc is present in almost all the verticals within the Consumer Financial Services industry. This has provided PayPal Holdings Inc a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– PayPal Holdings Inc is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Consumer Financial Services industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- PayPal Holdings Inc is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at PayPal Holdings Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at PayPal Holdings Inc emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– PayPal Holdings Inc has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Consumer Financial Services industry. Secondly the value chain collaborators of PayPal Holdings Inc have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of PayPal Holdings Inc in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– PayPal Holdings Inc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. PayPal Holdings Inc has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Consumer Financial Services
– PayPal Holdings Inc is one of the leading players in the Consumer Financial Services industry in United States. Over the years it has not only transformed the business landscape in the Consumer Financial Services industry in United States but also across the existing markets. The ability to lead change has enabled PayPal Holdings Inc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– PayPal Holdings Inc has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– PayPal Holdings Inc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled PayPal Holdings Inc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of PayPal Holdings Inc in the Financial sector have low bargaining power. PayPal Holdings Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps PayPal Holdings Inc to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of PayPal Holdings Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PayPal Holdings Inc are -
Increasing silos among functional specialists
– The organizational structure of PayPal Holdings Inc is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but PayPal Holdings Inc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help PayPal Holdings Inc to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at PayPal Holdings Inc, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. PayPal Holdings Inc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, PayPal Holdings Inc has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Consumer Financial Services industry using digital technology.
Low market penetration in new markets
– Outside its home market of United States, PayPal Holdings Inc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of PayPal Holdings Inc products
– To increase the profitability and margins on the products, PayPal Holdings Inc needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, PayPal Holdings Inc is slow explore the new channels of communication. These new channels of communication can help PayPal Holdings Inc to provide better information regarding Consumer Financial Services products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of PayPal Holdings Inc strategy
– From the outside it seems that the employees of PayPal Holdings Inc don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– From the outside it seems that PayPal Holdings Inc needs to have more collaboration between its sales team and marketing team. Sales professionals in the Consumer Financial Services industry have deep experience in developing customer relationships. Marketing department at PayPal Holdings Inc can leverage the sales team experience to cultivate customer relationships as PayPal Holdings Inc is planning to shift buying processes online.
Products dominated business model
– Even though PayPal Holdings Inc has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. PayPal Holdings Inc should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, PayPal Holdings Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Consumer Financial Services industry over the last five years. PayPal Holdings Inc even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– From the 10K / annual statement of PayPal Holdings Inc, it seems that company is thinking out the frontier risks that can impact Consumer Financial Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
PayPal Holdings Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PayPal Holdings Inc are -
Developing new processes and practices
– PayPal Holdings Inc can develop new processes and procedures in Consumer Financial Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, PayPal Holdings Inc can use these opportunities to build new business models that can help the communities that PayPal Holdings Inc operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for PayPal Holdings Inc to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for PayPal Holdings Inc to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help PayPal Holdings Inc to increase its market reach. PayPal Holdings Inc will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions in Consumer Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for PayPal Holdings Inc in the Consumer Financial Services industry. Now PayPal Holdings Inc can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, PayPal Holdings Inc can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help PayPal Holdings Inc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– PayPal Holdings Inc has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at PayPal Holdings Inc can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Consumer Financial Services industry.
Leveraging digital technologies
– PayPal Holdings Inc can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of PayPal Holdings Inc has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help PayPal Holdings Inc to build a more holistic ecosystem for PayPal Holdings Inc products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, PayPal Holdings Inc can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for PayPal Holdings Inc to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for PayPal Holdings Inc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Threats PayPal Holdings Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PayPal Holdings Inc are -
Increasing wage structure of PayPal Holdings Inc
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of PayPal Holdings Inc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of PayPal Holdings Inc.
Technology acceleration in Forth Industrial Revolution
– PayPal Holdings Inc has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, PayPal Holdings Inc needs to keep up with the evolution of technology in the Consumer Financial Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. PayPal Holdings Inc will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– PayPal Holdings Inc needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Consumer Financial Services industry regulations.
High dependence on third party suppliers
– PayPal Holdings Inc high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, PayPal Holdings Inc can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate PayPal Holdings Inc prominent markets.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. PayPal Holdings Inc needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for PayPal Holdings Inc in Consumer Financial Services industry. The Consumer Financial Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Easy access to finance
– Easy access to finance in Consumer Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. PayPal Holdings Inc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– PayPal Holdings Inc needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. PayPal Holdings Inc can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of PayPal Holdings Inc business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of PayPal Holdings Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at PayPal Holdings Inc needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of PayPal Holdings Inc is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of PayPal Holdings Inc is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of PayPal Holdings Inc to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that PayPal Holdings Inc needs to make to build a sustainable competitive advantage.