How will you reduce Paypal's operating costs by 50% ?
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in Strategy by (22 points) | 311 views

1 Answer

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Goal is to reduce the OpEx by 50%.

OpEx--> (1) Fixed Costs (2) Variable costs

1) Fixed Cost--> IT infrastructure--> Where is it hosted? on premise? Cloud? If on premise, any cost decrese if hosted on cloud?

2) Variable Cost--> (2a) Salaries (2b) 3rd party transaction costs (2c) Advertisements

(2a) Salaries--> Automate some of the tasks and cut some of the redudencies?--> How much to invest to automate some of the tasks? what is the $$ benfit? Check if this option is feasible.

(2b) 3rd party transaction costs: Leverage the market leader position and negotiate with the 3rd party (such as Visa, Amex, banks etc.,) to reduce the transaction costs.

(2c) Advertisements-->How much is the spend? What is the elasticity? (% decrease in Revenue for % decrease in spend in advertisements). How much of the Revenue are we willing to forgo if we decrease spend in this area.

I would compile each of the benefits ($$) for each of the above areas and see the trade offs/opportunities.
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