University Strategy Essay: PayPal's Macro and Internal Analysis

This essay provides a comprehensive strategic analysis of PayPal, an online payment systems provider. The analysis begins with a PESTEL analysis, examining the political, economic, social, technological, environmental, and legal factors influencing PayPal's macro-environment. It then applies Porter's Five Forces to assess the competitive landscape, evaluating the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and rivalry among existing players. The essay also conducts an internal analysis, focusing on PayPal's bundled resources, core competencies, and strategic capabilities, including its human resources and technology. The internal analysis discusses PayPal's strategy of driving growth through customer account expansion and increased transaction frequency. The essay explores PayPal's revenue generation model, its trade margin, and its partnerships with financial institutions like Visa, Mastercard, and Citigroup, which are crucial for expanding customer reach and engagement.

Running head: STRATEGY ESSAY
Strategy Essay
Name of the student
Name of the University
Author note

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STRATEGY ESSAY
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................9
Question 3......................................................................................................................................11
Question 4......................................................................................................................................12

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STRATEGY ESSAY
Question 1
PayPal is an online payment systems provider, considered an e-commerce business
allowing payments and money transfers that are carried out over the internet. PayPal acts as an
electronic substitute of traditional paper payment methods like money and cheque orders. This
service permits members of sending money with no sharing of financial information, along with
the flexibility of paying using their bank account balances, credit cards, bank accounts or any
promotional financing. It is also an example of payment intermediary service that assists global
e-commerce. It is an eBay subsidiary company and is built from the mending of three major
online payment services: the Payflow Gateway, PayPal global payment service and Bill Me
Later. The company has an open payment platform called PayPal X, which permits developers in
building innovative payment applications on several platforms and devices.
To understand the macro environment of the company, PESTEL analysis is conducted.
PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal factors
that have an influence on the macro environment of any company. In this case, macro
environment analysis of PayPal would be carried out. Changes in these factors of the macro
environment of PayPal have the capacity of directly influencing PayPal and even the other
market players in the credit services. The macro environment elements also have the capacity of
influencing the Porter’s Five Forces of the industry that mold the strategy and competitive
landscape. These can influence the competitive advantage of PayPal or the overall profit levels
of the financial industry.
Macro Environment Analysis
PESTEL Analysis
Factors Explanation

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STRATEGY ESSAY
Political These factors have a significant role in deciding the factors that have the
capacity of influencing PayPal’s long-term profit levels within a specific
country or market.
PayPal operates in multiple countries in the credit service industry and
exposes themselves to different political environmental and system risks.
PayPal has been able to achieve success in the dynamic credit service
industry across the nations for diversifying the systematic risks of the
political environment.
 Political stability, importance of credit services sector
 Favored trading partnerships
 Tax rates and incentives
 Mandatory employee rewards and benefits
 Industrial safety regulations
 Product labeling
 Protection of intellectual property
 Risk of military raid
 Corruption levels, especially in regulation levels
 Interference and bureaucracy
 Legal structure implemented for contract enforcement
 Trade regulations and tariffs
 Anti-trust laws
 Pricing regulations
 Minimum wage and overtime
 Work week regulations
Economic Macro environmental factors for example – inflation rate, savings rate,
interest rate, foreign exchange rate and economic cycle regulate the
collective demand and collective investment in an economy. While micro
environment factors, for instance, contention principles influence the
competitive advantage of the firm. PayPal can use country's economic
factor, for instance, improvement rate, swelling and industry's economic

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STRATEGY ESSAY
markers, for instance, credit services industry advancement rate, client
spending et cetera to guess the improvement course of cash related section
and that of the affiliation. Economic factors that PayPal should consider
while driving PESTEL examination are:
 Type of economic structure in countries of operation – what sort of
economic system there is and how stable it is.
 Government mediation in the free market and related cash related
 Exchange rates and unfaltering quality of host country money.
 Efficiency of budgetary markets
 Infrastructure quality in Credit Services industry
 Comparative advantages of host country and Financial zone in the
particular country.
 Skill level of workforce in Credit Services industry.
 Education level in the economy
 Labor costs and productivity in the economy
 Economic growth rate
 Business cycle stage (e.g. affluence, recession, repossession)
 Discretionary income
 Inflation rate
 Unemployment rate
 Interest rates
Social Society's lifestyle and strategy for doing things influence the lifestyle of a
relationship in an environment. Shared feelings and perspectives of the
people accept an unbelievable part in how marketers at PayPal will
understand the customers of a given market and how they plot the marketing
message for Credit Services industry purchasers. Social factors that
leadership of PayPal should separate for PESTEL examination are -
 Demographics and inclination level of the people
 Class structure, chain of significance and power structure in the overall
population.
 Education level and what's more education standard in the PayPal

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STRATEGY ESSAY
business
 Culture (sexual introduction parts, social conventions et cetera.)
 Entrepreneurial soul and more broad nature of the overall population. A
couple of social requests stimulate business while some don't.
 Attitudes (prosperity, environmental perception, et cetera.)
 Relaxation interests
Technological Technology is brisk exasperating distinctive organizations regardless of
what you look like at it. Transportation industry is a respectable case to
illustrate this point. Throughout the latest 5 years the business has been
changing really speedy, not by any methods offering chance to the set-up
players to adjust to the movements. Vehicle industry is fast pushing toward
automaton drove by technology firm, for instance, Google is bothered by
Tesla.
A firm should do technological examination of the business and also the
speed at which technology annoys that industry. Moderate speed will give
extra time while snappy speed of technological disruption may give a firm
little time to adjust and be helpful. Technology examination incorporates
understanding the going with impacts -
 Recent technological upgrades by PayPal contenders
 Technology's impact on product promoting
 Impact on cost structure in Credit Services industry
 Impact on value chain structure in Financial territory
 Rate of technological dispersal
Environmental Unmistakable markets have different measures or environmental gages
which can influence the productivity of a relationship in those markets.
Without a doubt, even inside a country consistently states can have
particular environmental laws and liability laws.
Before entering new markets or starting another business in existing market
the firm should meticulously evaluate the environmental rule that are

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STRATEGY ESSAY
required to operate in those markets. A segment of the environmental
components that a firm should consider as of now are -
 Weather
 Laws modifying environment pollution
 Climate change
 Air and water pollution rules in Credit Services industry
 Waste management in Financial sector
 Recycling
 Endangered species
 Attitude in the direction of “green” or environmental products
 Attitude in the direction of and sustenance for renewable energy
Legal In a number of countries, the legal framework and foundations are not
adequately energetic to secure the intellectual property rights of an
affiliation. A firm should carefully evaluate before entering such markets as
it can incite theft of affiliation's riddle sauce in like manner the general
competitive edge. A bit of the legal factors that PayPal leadership should
consider while entering another market are -
 Anti-trust law in Credit Services industry and overall in the country.
 Copyright, patents / Intellectual property law
 Discrimination law
 Consumer protection and e-commerce
 Health and safety law
 Employment law
 Data Protection
Table 1. PESTEL Analysis
INDUSTRY ANALYSIS
Porter’s Five Forces

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STRATEGY ESSAY
In the Porter’s Five Forces analysis of PayPal, five forces identified by Michael Porter
has been discussed that have a significant influence on the profit levels of the industry. The five
forces identified are:
 Threat of New Entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry Among the Existing Players
Force Effect Solution
Threat of New Entrants New hopefuls in Credit Services
brings innovation, better
methodologies for completing
things and put weight on PayPal
through lower pricing strategy,
decreasing costs, and giving
new value propositions to the
customers. PayPal needs to
manage each one of these
troubles and manufacture
fruitful hindrances to secure its
competitive edge.
By upgrading new
products and services.
By building economies
of scale.
Building points of
confinement and
consuming through
money on inventive
work.
Bargaining Power of
Suppliers
All practically every one of the
associations in the Credit
Services industry buy their
unrefined material from
different suppliers. Suppliers in
winning position can lessen the
By building compelling
supply chain with
various suppliers.
By attempting diverse
things with product

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STRATEGY ESSAY
edges PayPal can pick up in the
market. Powerful suppliers in
Financial division use their
orchestrating power to separate
higher prices from the firms in
Credit Services field. The
general impact of higher
supplier bargaining power is
that it cuts down the general
productivity of Credit Services.
designs using particular
materials
Making submitted
suppliers
Bargaining Power of Buyers Buyers are every now and again
an asking for distribute. They
have to buy the best offerings
available by paying the base
price as could sensibly be
normal. This put weight on
PayPal advantage as time goes
on. The more diminutive and
more powerful the customer
base is of PayPal the higher the
bargaining power of the
customers and higher their
ability to search for growing
discounts and offers.
By building a huge base
of customers.
By rapidly progressing
new products.
New products will
similarly decrease the
forsaking of existing
customers
Threat from Substitute
Products
Exactly when another product
or service meets a practically
identical customer needs in
different ways, industry benefit
perseveres. The danger of a
substitute product or service is
high if it offers a value
By being service
arranged instead of
essentially product
orchestrated.
By understanding the
inside need of the

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STRATEGY ESSAY
proposition that is outstandingly
not the same as present
offerings of the business.
customer instead of what
the customer is buying.
By extending the trading
cost for the customers.
Rivalry Among the Existing
Players
If the opposition among the
present players in an industry is
outstanding then it will drive
down prices and reduction the
general productivity of the
business. PayPal operates in an
astoundingly competitive Credit
Services industry. This
restriction takes toll on the
general whole deal productivity
of the affiliation.
By building a sustainable
differentiation
By building scale with
the objective that it can
battle better
Cooperating with
contenders
Table 2. Porter’s Five Forces
Question 2 a)
Internal Analysis
Bundled
Resources
Competences Strategic Capability
Human Resource PayPal's strategy is clear and
organization is totally based
on driving growth. When they
increment the growth in
customer accounts with the
growth in trades per account,
they get a result that is for all
intents and purposes
PayPal generates wage by a
trade cost - normally 2.9% -
on each trade made on its
payments platform. In the
wake of paying trade costs
and costs, PayPal is left with
a trade edge of 58.7%, as of
the 2016 second from last

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STRATEGY ESSAY
comparable to the growth in
total trades dealt with. In each
of the last two quarters,
dynamic customer accounts
grew 11%, and trades per
account grew 13%.
Expanding these growth rates
together gives a 25% growth
rate, which is about undefined
to the growth in total trades
arranged all through the last
two quarters. Total trades
took care of drives growth in
total payment volume (TPV),
which grew 28% to $87
billion on a cash impartial
commence in the second from
last quarter of 2016.
quarter. This suggests PayPal
is left with $0.587 for every
dollar of salary to take care of
other working costs like
customer support, marketing,
and product development. In
the end, PayPal needs to grow
free salary. Everything
considered, the estimation of
every business is managed by
the present estimation of its
future free cash streams.
Organization makes a
respectable appearing as to of
controlling working costs, so
free wage will manage itself
as long as organization
executes its strategy. PayPal's
strategy is facilitated toward
driving higher customer
apportionment, measured by
unique customer account
growth, and extending
customer engagement,
measured by trades per
account. Since PayPal was
spun off from a year earlier,
uniting with banks and credit
card issuers, for instance,
Visa (NYSE: V), Mastercard
(NYSE: MA), and Citigroup

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STRATEGY ESSAY
(NYSE: C), has transformed
into a middle bit of PayPal's
strategy.
Technology These affiliations go far
toward extending customer
allocation and engagement in
perspective of the amount of
territories that will recognize
PayPal. Offering customers
more choices and developing
the amount of ways
customers can use their
PayPal accounts is a not too
bad way to deal with attract
more customers and drive
higher repeat of usage per
customer. Affiliations are
vital to PayPal's strategy,
however correspondingly
fundamental is the consistent
stream of new features and
additional services PayPal
familiarizes with encourage
customers to use PayPal more
frequently, and furthermore
making it not so much
requesting but rather more
advantageous for customers
to send money. PayPal needs
a strong competitive
Past helping PayPal drive
growth briefly, new changes
and affiliations are extending
PayPal's inescapability. The
more all inclusive PayPal
transforms into, the more
customers twist up evidently
aware of the PayPal check.
PayPal is attempting deft
moves in its attempts to
quickly develop and scale an
overall payments platform.
From picking the right
relationship to managing
security and developer
threats, the association has,
up until this indicate, made
sense of how rebuff any
moving toward fire. PayPal
elucidated that the game
plans with Mastercard and
Visa even the chances, and
the growth in payments
volume for PayPal will more
than make up for any
abatements in pay per trade.
PayPal in like manner

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STRATEGY ESSAY
advantage to oversee growth
over various years to be a not
too bad wander.
predicts that dealers should
pay for PayPal in light of the
way that it is a reliable
payments process. PayPal's
distinctive services, Braintree
and Venmo, will in like
manner benefit by the Visa
and Mastercard
arrangements; working
together with the two
powerhouse acquirers allows
more clients to use PayPal.
Physical Resource These affiliations go far
toward extending customer
allocation and engagement in
perspective of the amount of
territories that will recognize
PayPal. Offering customers
more choices and developing
the amount of ways
customers can use their
PayPal accounts is a not too
bad way to deal with attract
more customers and drive
higher repeat of usage per
customer. Affiliations are
vital to PayPal's strategy,
however correspondingly
fundamental is the consistent
stream of new features and
The more all inclusive PayPal
transforms into, the more
customers twist up evidently
aware of the PayPal check.
PayPal is attempting deft
moves in its attempts to
quickly develop and scale an
overall payments platform.
From picking the right
relationship to managing
security and developer
threats, the association has,
up until this indicate, made
sense of how rebuff any
moving toward fire. PayPal
elucidated that the game
plans with Mastercard and
Visa even the chances, and

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STRATEGY ESSAY
additional services PayPal
familiarizes with encourage
customers to use PayPal more
frequently, and furthermore
making it not so much
requesting but rather more
advantageous for customers
to send money. PayPal needs
a strong competitive
advantage to oversee growth
over various years to be a not
too bad wander. Past helping
PayPal drive growth briefly,
new changes and affiliations
are extending PayPal's
inescapability
the growth in payments
volume for PayPal will more
than make up for any
abatements in pay per trade.
PayPal in like manner
predicts that dealers should
pay for PayPal in light of the
way that it is a reliable
payments process. PayPal's
distinctive services, Braintree
and Venmo, will in like
manner benefit by the Visa
and Mastercard
arrangements; working
together with the two
powerhouse acquirers allows
more clients to use PayPal.
Table 3- Internal Analysis
Question 3
Micro Environmental Analysis
Strength
PayPal is the greatest player in the convenient
payment industry. It has expanded itself
quickly in the creating business segment and
is setting its impression wherever all through
the world. It has one of the greatest customer
base in the business with a wide services base
which interfaces with a varied grouping of
customers and merchants. PayPal is definitely
Weaknesses
PayPal has high getting ready costs over
trades, overall cards, Chargebacks and Card
endorsement. This can separate expected
customers and along these lines it is a
deficiency. PayPal has been rebuked for
Withheld resources, freezing and end of
PayPal accounts. This impacts the brand
picture of PayPal. PayPal is liable to web