Strategic Management and Strategic Competitiveness
Gone are the days of carrying around loads of cash, or having to transfer them by hand from bank to bank, thanks in part to the advent of credit cards. The cashless payment solutions industry has significantly changed over the years, with technological advances, we have become more sophisticated and done away with the need to use cash to buy products. Contactless payment solutions help organizations and individuals to ensure secure payments with increased convenience while enhancing operational efficiency. The industry has gained a much wider customer base and according to a recent research by MarketsandMarkets, the contactless payment market is estimated to grow from USD 6.70 Billion in 2016 to USD 17.56 Billion by 2021 (FinancialBuzz.com, 2017). Companies like Payment Data Systems, PayPal Holdings, Visa, MasterCard, and Discover cards are at the forefront of the market; bringing evolution on how we purchase the products, we want. PayPal has stood out from the bunch with its ability to partner with its competitors, provide the latest cellphone payment tech, and expanding into the currency exchange market surpassing Western Union and MoneyGram. In this report, we will review the impact of globalization and technology on PayPal Inc.; then utilize either industrial organization model and/or resource-based model to ascertain above-average returns; discuss the vision and mission statements on influence for success, and finally evaluate stakeholder impact on PayPal’s corporate success.
Globalization and Technology
PayPal has been a leader in the field of online payments systems, and through its acquisitions of other companies, PayPal has revolutionized this market through innovative payment solutions to its clients. The company has evolved since 1998, through mergers, partnerships, and acquisitions in which it took advantage of the technology from companies to better position themselves and place a strong foothold in the market. Elon Musk was the CEO after the merger between Confinity and X.com, which they were renamed PayPal, and shortly after eBay acquired that in 2002. Under eBay, PayPal functioned as a subsidiary and was the principal payment method for eBay auctions, preferred by users, having 70% of transactions completed through PayPal. They partnered with MasterCard and provided PayPal Secure Card service, which allowed customers, who did not have access to credit cards, the ability to make payments online on websites that accept PayPal directly, by creating a single-use MasterCard number for checkouts. This led the company to outperform other contactless payment solutions eBay used, like Billpoint, Citibank’s c2it, Yahoo’s PayDirect, Google Checkout, Western Union’s BidPay and need the company 1.8 billion in revenue. PayPal acquired VeriSign to expand its e-commerce business and improve its technology for online security for its transactions. With the increased security risk and fraud within the industry, PayPal acquired Fraud Services, an Israeli start-up that has expertise in online risk tools, and improve PayPal’s fraud management systems. PayPal went on to buy Bill Me Later, allowing the company to then offer transactional credit at over 9000 online merchants in the US, and repeatedly utilizing the new technology to improve its services. With a spin-off from eBay and a firm foothold on the domestic side of contactless payment solutions, PayPal expanded to over 200 countries and acquired xoom.com, a digital money transfer company, putting it at the top of the international fund transfer market. They are a model company in the integration of technology to expand their services into the global market.
Industrial Organization Model VS Resource-based Model
As a company moves from its initial stages into a well-developed business, it will utilize either an Industrial-Organizational model or a Resource-based model to implement their strategies and determine how to earn above-average returns. In the case of PayPal, it could be said that they started out with the I/O model, but quickly found themselves as the top contactless payment service desired to attend to eBay’s customers need. Having found a niche in their service, they then changed their strategy to one of a Resource-based model.
I. They studied their strength and weaknesses, compared to their competitors, and provided a service that made it easier for eBay sellers to accept credit cards. This increased their volume, within eBay, and made them stand out.
II. PayPal observed that they had a unique capability and moved forward to utilize its advantage. Since not everyone could qualify for a credit card, they facilitated funding by accepting credit card and bank deposits into PayPal accounts, which in turn paid the sellers.
III. They determined that their potential did not have to end there. They restructured their earning structure from earning interest in their accounts to just charging usage fees; this stabilized their income flow, and then they gave their clients security by establishing firm reimbursement policies. This gave them a competitive advantage because none of the other forms of payments gave clients peace of mind once funds were exchanged.
IV. PayPal did not stay idle at the top as eBay’s contactless payment service provider; they explored the many opportunities by strategically acquiring, and collaborating with other businesses to make their services unique.
V. Over the years, PayPal introduced a variety of services to its repertoire, fine-tuning PayPal’s business model and increasing its international and domestic penetration on eBay, PayPal began its off-eBay strategy. They built a new business unit, which created Merchant Services, to service e-commerce merchants outside of eBay. They also assisted their international members by acquiring xoom.com for international remittances. They spun off eBay and became their own company.
VI. Their strategy has paid off, as PayPal is already the world’s leading financial technology company. Solving pain points for customers is always the right thing; it is both a competitive advantage and a legacy of which the company can be proud. That is facilitating life for the poor.
Making the right connections and utilizing the resources that the company has, PayPal has morphed itself into a company that is poised to make a difference in the world. As its CEO, Dan Schulman, stated “We’ve opened up our platform and partnered with a variety of companies, including Facebook and Visa. As the explosion in mobile devices continues, partnerships become more important. And we’re working closely with governments, regulators, the International Monetary Fund, and the World Bank. Digitizing money requires an ecosystem — you can’t do it alone” (Schulman, 2016). They have analyzed all the resources that make them unique, and that of up and coming businesses, and either acquired it, collaborated with it or developed it with the focus of bringing that which their customers need most. These values have made the company unique and brought on the question of; is PayPal a tech company or a financial services company?
Vision and Mission Statements and Influence for Success
PayPal has been in the fortunate situation to provide a service, where its vision and mission has been part of its structural practice from the get-go. Today PayPal announces that its vision is “Introducing New money,” and how technology applied to contactless payment will change how we do our finances. From the beginning, PayPal provided a service that helped those who were less fortunate in accessing funds for e-commerce, by either credit or bank accounts and facilitated it through their service. They helped online merchants, via eBay, had stable e-businesses and gave them the ability to receive credit card payments. On the consumer side, they made it easy for those that could not get credit cards, to be able to spend online, where credit cards were required, by generating instant card numbers, through a partnership with MasterCard, to be used on any website. Functioning as a type of prepaid card, PayPal accounts began being used in other forms like money transfers. All of this has made it easier for the general public to transact funds. They were the beginning of what we now call digital banking. As PayPal puts it, “For too long, our financial system hasn’t leveraged technology in ways that make it more seamless and secure to connect with the things and people we love. For too long, our financial system has served the few that can afford it at the expense of everyone else. It’s now time for a transformation across our industry.” Their vision and mission are to revolutionize the financial world, by utilizing New money in all of its forms, and make it simpler and cheaper for individuals to transact financially, 24/7, with all its resources and technology that it has at its disposal. Their mission is to help the little people, and they have. They can take on Bitcoin, and the comparisons have already made.
When we look at the impact that PayPal has to its stakeholders, we look mostly at win-win situations, but not everything is all flowers. PayPal was the first company to provide an infrastructure to store private data such as bank and credit card details securely over the Internet. To its client stakeholders, this opened a completely new world of purchasing possibilities, win. For eBay, it brought an accounting and payment service that made it possible its auctioneers to operate their businesses securely and honestly, win. It also brought a lucrative stream of revenue for eBay despite its decline over the years. In July 2015, PayPal spun away from eBay into a separate public entity after critical investors such as Carl Icahn pushed for a PayPal–eBay split. These investors felt that both firms needed to focus on their core businesses in the face of increasing competition from startups and technology giants alike. The move proved to be a very profitable venture for PayPal, and its investors as its growth has maintained steady, despite the split. About 73 percent of the adults in the United States with access to the Internet have PayPal accounts. PayPal remains a powerhouse globally too; it processed about $235 billion through about 4 billion transactions made by over 173 million users worldwide.
With the technological evolution, the only thing that did not go PayPal’s way was its vulnerability to hackers. Like most companies in the digital age, in 2010, PayPal’s services came under attack by a group of hackers. Through their best effort to fortify its security features, they invested heavily in advanced encryption software and was the first to introduce identity-screening methods such as the Gausebeck-Levchin test. This technology required users to type in a word displayed within a boxed image, which only a human eye could capture, thus detecting the presence of malware bots attempting to gain access to individuals accounts. Despite the hacking blemish, PayPal has helped many with its social programs that help people with innovative method way to fund assistance for those less fortunate both in the US and worldwide.
Therefore, in this report, we reviewed how PayPal has impacted globalization and technology through its services; how they utilize a resource-based model to get above-average returns; how their vision and mission statements are integral to the company; and how PayPal’s success impacts their stakeholders. We looked at how PayPal has evolved with technology and its service to become a global company and has spread its function to over 200 countries. That though the company started operations utilizing an I/O model, they would quickly change to a resource-based model having gotten to the top of their market. Looking at their vision and mission statement, we see that PayPal follows through by providing a service that genuinely helps its clients just as they say they want to. In the process of following through with their vision and mission statements, they have managed to take care of their stakeholders and keep a balance on each side’s needs. Overall, the future looks good for PayPal, but competition has a new face. Though Bitcoin does not provide the same services like PayPal, the world market has already been using the digital currency to buy products in the international market. Is PayPal going to trade in it? They had gotten into the forex market when they purchased xoom.com, but the Federal Reserve as an official currency has not yet accepted bitcoin. So far, it is still cheaper and more advantageous to exchange funds anywhere in the world through PayPal.