Encryption Scheme of a Paypal Company - Case Study Example

Paypal Case Study Name Institution Date Table of Contents Paypal Case Study 3 PART A 3 Introduction 3 Analyses 3 Financial Analysis 3 Strategic analysis 4 Future prospects & Recommendations 5 PART B 6 Question 1 6 An Account of the number of people who have used Paypal and the largest transaction of the group 6 An Evaluation of each of Porter’s five competitive forces on this industry and a Review Paypal’s responses to the five competitive forces in the industry 6 An Evaluation of Paypal from the standpoint of the sustainability framework 8 A Review of each competitor and a description of why they might have disappeared 9 True issues that are of concern 10 A Force Field analysis for or against PayPal 11 Conclusion 12 References 12 Paypal Case Study PART A Introduction The idea of Paypal Company came into being 1998 when Max Levchin came up with an encryption scheme that supported infrared transactions between Palm Pilot and Peter Thiel, a hedge fund manager, came up with a company known as Confinity for commercialization of the invention. Thiel and Levchin developed a system of facilitating exchange of funds between Palm Pilot devices. This is where the company begun. X.com which was started Elon Musk merged with Paypal. The companies merged with sixty employees from each company. Analyses The customers of the company are individuals as well as business companies and any other party interested in money transfer service. The customer value efficiency, security, and convenience of money transfer. Revenue is made through money transfer services. The company can deliver the value at a cost below price since it has a large market share and it enjoys customer loyalty. The customer grapples with identity verification and increase cases of fraud. Financial Analysis The company valuation after the major was 100 million dollars and the figure was anticipated to rise due to booming business and steady growth. The profits witnessed a positive growth since the inception of the company. The Boston Matrix places opportunities into four categories as indicated below: Paypal Company can be categorized as a cash cow since it has realized high market share but the growth has slackened over time. The company is able to realize high profitability due to the huge market share. The number of users grew tremendously from 10,000 in the year 2000, to over seventy thousand in the decade that followed. Strategic analysis The firm possesses a pool experienced and highly qualified as well as motivated employees who are ready to propel the company to new heights. The company is in the money transfer industry and their potential competitors in the industry. The competitive advantage of the company is sustainable. The company has combination of cost leadership and differentiation focus strategy in order to remain relevant and competitive in the market. Future prospects & Recommendations The company is expected to increase sales although the growth of customer base will slacken. Diversification of services will improve the chances of the company to realize growth. Sustainability analysis has to focus of ways of meeting customer needs without breaching the law. PART B Question 1 An Account of the number of people who have used Paypal and the largest transaction of the group Paypal is a global e-commerce business which allows payments as well as money transfers to be carried out through the internet. Many people have used the services offered by Paypal of electronic money transfer. Over 70 million people use Paypal money transfer services in a fortnight. The largest transaction runs into billions of dollars. There about ten million users in 2000. This number has grown significantly. Question 2 An Evaluation of each of Porter’s five competitive forces on this industry and a Review Paypal’s responses to the five competitive forces in the industry Supplier Power Paypal has done well in using supplier services in its expansion strategy. The online auction were have been successfully used by Paypal as a large market. The company partnering with eBay helped in its growth since the company had a network of customers. The banks of clients provided the necessary verification mode for the authenticity of existing of accounts (Lynette, 2008). The supplier power for Paypal is strong considering that company has used it partnering opportunity to gain a mileage in business. Buyer Power The company has control over its customers as it provides quality and convenience to its customers. The merging with X.com with Paypal increased the customer base of the company. The company provision of reliable services makes it to have dominant control over its customers. The buyer power can be categorized as medium since the customers can be convinced by another product if it is launched in the market (Porter, 1990). Competitive Rivalry Paypal has significant done well in reducing competitive rivalry. The service was launched in the market early enough before rivals could take advantage. The competitors could not keep pace with the growth strategy of Paypal. Some of the competitors like C2it.com collapsed. The company can be rated as strong it terms of reducing rivalry. Threat of substitution The services provided by the company were unique and other electronic money transfer companies could not copy everything implemented by Paypal. The growth use of online auctions and referral bonuses has helped the company to realize tremendous growth. The transfer of money to non account holders was unique to Paypal since it is the email address that was required. Other company could not imitate some of the services offered by Paypal. Threat of new entry There are numerous new entries into market that tried to over money transfer services. The diversification by the company and its quick reaction to market trends ensured that it is a market leader. The company has no limit to sending money and therefore, offering unique competitive edge to small start-ups such as C2it.com. The company has kept off many would be competitors through acquiring more of the market share. Threat to new entry came rated as strong considering the position of the company in the market as a market leader. Question 3 An Evaluation of Paypal from the standpoint of the sustainability framework The company staked out new territory for growth and looks forward on encroaching on the market share of banks. As banks try to catch up through reduction of check and cash transaction, Paypal had already exploited their laxity. The team of workers at Paypal will enable the company to realize sustainability over a long period of time. Innovation and product differentiation has sustained the growth of the company to tremendous bounds. The advancement in technology and having the required expertise in the sector offers the company with an opportunity to grow through expansion (Stajano, 2008). The referral bonuses offered are important for the company growth despite reduced appeal for its application. The company will realize sustainability through diversification and service differentiation that has already been realized through premier and business account. On account of sustainability, Paypal has a formidable base in terms of resources and acceptability in the market. Question 4 A Review of each competitor and a description of why they might have disappeared Paypal had several competitors who introduced the same money transfer services as Paypal. Some of these companies were not sustainable and could not much up to the quality, efficiency, and convenience standards set by Paypal. Billpoint Billpoint did not charge any fee on the side of buyers but there was a fee for non-US transaction. The limit per transaction was $200. The customers who were recipient had their money deposited into in a bank account within 2 to 5 days and a $5 fee charged. The demise of the company was enhanced by increased competition and the numerous hidden charged that left customers to feel defrauded. The numerous limitations and checkpoints were cumbersome to clients and hence slowing down the rate of transaction. eCount.com The company offered free service of sending and receiving money. Adding money to account using CC attracted a charge of $1. Withdrawals were made through ATMs and Checks. Around $5 was charged for debit card and the company reserved the right to adjust the fee without consulting the client. Before verification a maximum of $500 was allowed while a maximum of $1000 was allowed after verification. The company was based in the US and needed street confirmation. The company requirement for transaction made it unpopular and hence its demise. Yahoo! Pay direct Minimum sum of money to be transacted was $5 while the maximum was $200 within a period of six month until the mailing address was verified. After verification a sum of $1000 could be sent. Credit cards used are Visa, Discover, MC, and debit cards. The payment mode was through ACH funding and the transaction could delay up to a week. There was limit to the amount one could withdraw at ago which was $10,000 over a period of 180 days. The company had many limitations that could sustain fast business transactions. C2it.com The services offered were free for the first three months of use. The fee of $2 was paid by the sender. Minimum amount to be sent was five dollars while the maximum amount was $500 per day. The maximum amount to be received was $2000 within for days or $1000 within two days. Payment mode was through citi accounts. The company was only based in the US and it best served Citi bank account holders. The limit on sending and receiving was a limitation on the company. The company could not sustain huge amount business transaction. Few opportunities for growth led to the collapse of the company. Question 5 True issues that are of concern The true issue of concern could be on the conversion of the currency where one client was lost money through conversation mishap. The company has to investigate and found out the truth behind the in lost the money. A client also had his account hijacked and he is being treated like a criminal. The company has to establish the authenticity of this claim. Question 6 A Force Field analysis for or against PayPal Force Field analysis for or against Paypal Forces for change Forces against change Threat of substitution Paypal competitor’s Buyer power Threat of entry Issues of concern Competitive rivalry Supplier power sustainability The company has to improve on reducing the bargaining power of buyers and waging off the chances of any other entrants into the market of electronic money transfer. The other forces support the current growth strategy of the company strongly. The company has to investigate and act on issues raised by clients (D'Angelo, 2009). Conclusion Paypal represents a strong case of a company that commenced and grew tremendously to attain the status of a market leader. However, this growth has not been without challenges and the company has to work on its current strategies in order to ensure growth and profitability in future. Innovation and meeting client’s needs is one way of attaining sustainability in the market. References Porter, M E. (1990). The Competitive Advantage of Nations. London: Macmillan Stajano, A. (2008). Research, Quality, Competitiveness. EU Technology Policy for the Knowledge-based Society. New Mexico: Springer. Lynette, R. (2008). How to Deal with Competitiveness. Melbourne: The Rosen Publishing Group. D'Angelo, J. (2009). Spa Business Strategies: A Plan for Success. New York: Cengage Learning. Read More