cost benefit analysis
ALHAISANI
example.docxThis weighted matrix table will show three possible solutions based on various.
Criteria |
Ranking |
Solution 1 |
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Solution 2 |
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Solution 3 |
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(Add to 1 or 10 or 100) |
(1-10) |
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(1-10) |
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(1-10) |
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Security |
3.00 |
6.00 |
18 |
5.00 |
15 |
6.00 |
18 |
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Off-line purchases |
2.00 |
5.00 |
10 |
4.00 |
8 |
1.00 |
2 |
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Debt Card |
1.00 |
2.00 |
2 |
1.00 |
1 |
1.00 |
1 |
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Customer service |
3.00 |
3.00 |
9 |
5.00 |
15 |
4.00 |
12 |
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Increase in revenues |
1.00 |
4.00 |
4 |
1.00 |
1 |
4.00 |
4 |
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DECISION: |
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43 |
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40 |
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37 |
Solution 1: Open a bank, where people can have checking and saving accounts.
Solution 2: Increase the level of security.
Solution 3: Expand its sales platform.
Analyzing the weighted matrix above, the first solution is the best path for PayPal Holdings Inc. In the recent period, PayPal has gotten a lot of profits through online platform around the world. To boost these massive profits, PayPal should start to open its banks and have its own automated teller machine. Therefore, the company will increase its revenue in the soon future if it took a place to open a bank. The company is in the financial and technology industries where its dominated by the amount of online and off-line transactions.
Moreover, the other solutions may increase profits slowly but PayPal must find a new way to increase its profits faster. The second solution is very important to PayPal, but will not increase its profits and instead, it may reduce its profits to the proportion of costs of increasing the level of security. The third solution, increasing the number of sales platforms. When PayPal open its own bank, PayPal does not need to increase the number of sales platforms because customers are able to purchase the products using the debit or credit cards without the need the sales platforms. In conclusion, opening a bank is the best choice for PayPal.
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Cost Benefit Analysis
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Tangible Benefits |
Tangible Cost |
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· Increasing the number of customers. · Increasing in revenues. · Increasing profits from increased sales. |
· Liability. · Training. · Equipment expenses/ATM. · Leasing expenses. · Software.
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Intangible Benefits |
Intangible Cost |
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· Expand the business. · Customers loyalty. · Customer service. · Competitive advantage. · Stock price.
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· Risk due to change of the business. · No longer associated with sales platforms. · Employees' morale. |
The cost-benefit analysis is based on the first solution. For tangible benefits, the solution will allow PayPal to generate more revenue and increase profit, also it will help the company to increase its market share. In fact, PayPal’s current goal is to have more customers, this solution will increase the number of customers. For intangible benefits, customers loyalty is related to customers service and both of them are an important factor for success, it leads to more business. Having more customers means the business is expanding and that will lead to more profits and more market share. Additionally, the first solution will attract more investors and that will lead to increases in stock price.
Therefore, there are tangible and intangible costs. For tangible costs, these expenses can be very expensive. To open a bank, PayPal most utilizes professional technology, ATMs. and advanced equipment that meets customers satisfaction. Along with that, training could be hard to PayPal’s current and new employees because this step is a huge change in the current business way. The bank will replace the system of sales platforms with debt and credit cards, PayPal will no longer be associated with the sales platforms.
Generally speaking, any solution has low or high risks, this solution considered as low risk because PayPal has already experienced in the financial industry and have a professional system of financial management. PayPal has achieved a big number of profit in the past three years and that will help the company to accomplish the first solution.
