SWOT Analysis / TOWS Matrix for PayPal Holdings Inc (Germany)
Based on various researches at Oak Spring University , PayPal Holdings Inc is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , technology disruption, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, 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 Germany
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 -
Ability to recruit top talent
– PayPal Holdings Inc is one of the leading players in the Consumer Financial Services industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the PayPal Holdings Inc are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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 Germany 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.
Innovation driven organization
– PayPal Holdings Inc is one of the most innovative firm in Consumer Financial Services sector.
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.
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.
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.
Sustainable margins compare to other players in Consumer Financial Services industry
– PayPal Holdings Inc has clearly differentiated products in the market place. This has enabled PayPal Holdings Inc to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped PayPal Holdings Inc to invest into research and development (R&D) and innovation.
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 -
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.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in Germany, PayPal Holdings Inc is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Consumer Financial Services industry.
Interest costs
– Compare to the competition, PayPal Holdings Inc has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Consumer Financial Services industry, PayPal Holdings Inc needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, PayPal Holdings Inc has high operating costs in the Consumer Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract PayPal Holdings Inc lucrative customers.
High dependence on PayPal Holdings Inc ‘s star products
– The top 2 products and services of PayPal Holdings Inc still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though PayPal Holdings Inc has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of PayPal Holdings Inc is just above the Consumer Financial Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Germany, PayPal Holdings Inc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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 -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Consumer Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. PayPal Holdings Inc can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. PayPal Holdings Inc can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help PayPal Holdings Inc to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. PayPal Holdings Inc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Consumer Financial Services industry, but it has also influenced the consumer preferences. PayPal Holdings Inc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects PayPal Holdings Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– PayPal Holdings Inc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Consumer Financial Services sector. This continuous investment in analytics has enabled PayPal Holdings Inc to build a competitive advantage using analytics. The analytics driven competitive advantage can help PayPal Holdings Inc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
Buying journey improvements
– PayPal Holdings Inc can improve the customer journey of consumers in the Consumer Financial Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– PayPal Holdings Inc can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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 -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for PayPal Holdings Inc in the Consumer Financial Services sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that PayPal Holdings Inc is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, PayPal Holdings Inc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Consumer Financial Services sector.
Stagnating economy with rate increase
– PayPal Holdings Inc can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Consumer Financial Services industry.
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.