1

E-COMMERCE






Subject: E-Commerce
Subject Code: BUS 3133
Programed: Bachelor in Business and Management
(BBM)
Student Name: Michelle Law Mei San
Student Id: SCM-014490
Intake/ Group: June 2012/ 2B

SEGi UNIVERSITY

Assignment 1
Critical Analysis on PayPal


2

Executive Summary
This assignment is about how PayPal become an innovated payment method. In the first part,
history of PayPal will be described. After that, discussion on the road of success by PayPal
will be done in the analysis part. Next, is how PayPal link into globalization market and what
effort does PayPal do to increase it globalization. Although PayPal has so successful in today,
but still there are a lot of problems or restriction make demographic such as age between 6-
to-20 years old do not want to use PayPal as they first chosen payment method.


3

Table of content
Content Pages
1.0 Introduction on PayPal History 4
2.0 Financial Analysis
2.1 Successful PayPal Operating Strategies
2.1.1 How PayPal started
2.1.2 Online Auction Fees
2.1.3 Payment Collection
2.1.4 Facebook Credit
2.1.5 Self-serve Ads on Facebook
2.1.6 Mobile Payment
2.1.7 Others (To attract New Users)
2.2 Benefits from using PayPal
2.2.1 Privacy Protection
2.2.2 Mobile Payment Application
2.2.3 Convenience
2.2.4 Easy to withdraw
5
6
6
6
6
6
7
7
7
8
8
8
8
3.0 Globalization of PayPal
3.1 Problems that limit PayPal in Globalization
3.1.1 Restrictions by Countries Law and Regulation
3.1.2 PayPal problems with eBay
3.1.2 PayPal problems with eBay
3.1.3 Fraud
3.2 How people accept globalization
3.3 Acted by PayPal to Increase Globalization
3.3.1 M-Commerce player
3.3.2 Diffused to Potential Countries
9
9
9
9
9
9-10
11-12
13
13
13-14
4.0 Authors Decision 15
5.0 References (Harvard referencing) 16-18
6.0 Appendices 19-20



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1.0 Introduction on PayPal History
In general, PayPal was wholly acquired by eBay with 65% shareholders in 2002, October 3
(Troy, 2003). PayPal actually is an e-commerce business which consists of buying, selling,
exchanging product or services throughout computer network. In the other words, PayPal
performing auction sites and also conducting electronic transactions such as money transfers
via online. For instance, PayPal headquartered held in San Jose, Calif., but PayPal
international headquarters is placing in Singapore.
PayPal most advanced proprietary fraud prevention system allowed the process of
transferring payment go through PayPal quickly, securely and easily with email address
(Colker & David, 2002). In the starting point, PayPal wishes was to do their transaction out of
government control but unfortunately became hackers target, con artist, and organized crime
group which used PayPal for scams and money laundering (Eilon & Jan, 2002).
Before acquisition with eBay, PayPal founded in December, 1998, PayPal first named Field
Link and then Confinity with acquisition of X.com Corporation. In this case, the founders of
PayPal were Peter Thiel and Max Levchin (Barkerrb & Robert, 2002). The most important
incident was eBay bring 2 million eBay listings accepted PayPal payment in July 2000 and
bring PayPal to succeed until today (Richtel & Matt, 2002).













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2.0 Financial Analysis
The latest news by PayPal press center illustrate PayPal have accumulate of 137 million
active account in 193 markets and 26 currencies around the world (About PayPal, 1999-2013).
Nowadays, PayPal can process 8 million payments in a day. In 2012, PayPal annual revenue
was $5.6 billion, increase of 26 percent compare to previous year. In the same year, PayPal
processed $97 billion in Total Payment Volume (TPQ), additional 25 percent improvement
since year 2011. Due to the extraordinary changing of lifestyle, PayPal processed $14 billion
in mobile payment section in 2012. It is triple the volume in 2011.
According to the case study given, PayPal operate in 190 markets and process more than 78
million active accounts as at 2010. Compare to the latest figure, increased approximate of 3
operating markets and 59 million active accounts from 1
st
Jan 2010-to-31
st
Dec 2012. Besides
that, PayPal had handled over $70 billion in transaction during 2009, there was an additional
$27 billion accounted TPQ in only 3 years period. Mobile evolution make PayPals mobile
transaction became the fastest moving section. PayPals mobile payment was approximately
$23.5 million in 2008 and $140 million in 2009. But go to 2012, it is $14 billion, what an
incredible improvement.












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2.1 Successful PayPal Operating Strategies
These are the operating strategies used by PayPal in generating income.
2.1.1 How PayPal started
During the second waves of monetary innovation by dot-com start-ups offering online fund
transfers through PayPal (email) platform. At that time, eBay were set their payment method
make through credit card charges, checks and money orders driven through the United Stated
(U.S) postal such as Beenz.com and Flooz.com. Next, Flooz.com and Beenz.com is specific
online merchant network purchase merchandize with coupon money. But the electronic
money were not widely acceptance likely metal money and paper money because public fears
about online privacy and security, and not confidence with technological infrastructure in that
time (Robert, 2003).
2.1.2 Online Auction Fees
When eBay collaborate with PayPal of its online auctions attracted 40 million auction
participants just because of the convenience payment method via email. The online vendor,
auction sites and corporation being charged a certain fees after succeed sold something. What
so attracted customers interest were the lower fees compare to Credit Card Companies.
2.1.3 Payment Collection
Another attractive point was customer no more asked to reveal credit card number to every
online merchant but only to PayPal secure account as a tool to handle payment collection
(See Online video). It can be bank account transaction or credit card transaction. It normally
used in Business-to-Business (B2B). It is quickly, securely and easily, without pending like
bank in money to different bank to clear certain amount of debt (Robert, 2002).
2.1.4 Facebook Credit
Later, PayPal has announced to expand its services into social media, for example partner
with Facebook. This particular income stream is from when people purchase virtual product
using Facebook Credit, and Facebook Credit can be bought using PayPal (Loren, 2011). This
takes an opportunity which people were crazy with their social games such as Restaurant City
and Country Story (David, 2010). Virtual goods no need to have physical product which can
touch and can feel but can selling and buying.

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2.1.5 Self-serve Ads on Facebook
Besides that, Facebook allowed advertisers to pay for self-serve ads on the right-hand-sided
of Facebook social network using PayPal. Use PayPal to pay for advertising space on
Facebook is absolutely smooth the process of send and receive payment of purchase ads.
Osama Bedier said, because PayPal provide 24 currencies and 190 markets worldwide (Mike,
2010). In addition, PayPal allowed user to send money to anyone with an email address using
send money application on Facebook.
2.1.6 Mobile Payment
Come to the latest element, PayPal run its business in mobile payment. PayPal announced as
the worlds first global mobile payment solution because it can accept probably any form of
payment. PayPal innovated new service included a free app and encrypted thumb-sized card
reader which can turn iPhone, Android, BlackBerry smartphone into mobile payment solution.
The app and card reader mention convenience seller to send invoices and receives payment.
The step of making payment either swipe credit card using card reader, scanning cheque or
cards using phone cameras or manual key in card information into the app (PayPal Press
Releases, 2012). It also was being used for pay auction fees.
2.1.7 Others (To attract New Users)
The app also provide function to request money from a group of people for pooled money for
preparing group gift to someone or collect money for an specific function (PayPal User
Agreement, 2011). Another interested element is PayPal can split the ticket using this
mobile app. For example, dinner bill, rental, movie ticket and so on. Can instantly send
payment to friend with email address and linked to friends PayPal account. Then the ticket
will be paid PayPal account or bank account. It is free of charges between friends.






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2.2 Benefits from using PayPal
A lot of people prefer using PayPal compare to other Payment method.
2.2.1 Privacy Protection
Especially for the credit card information, no need to reveal to anyone when making business
transaction with them. PayPal account used to remember the credit cards number or bank
account number that people key in during sign up. So, process payments through PayPal are
definitely safe without bear the risk of account being hack during transaction. It is same to the
bidder and buyer privacy, they can use PayPal to make online auction process with eBay
safely (PayPal, 2012).
2.2.2 Mobile Payment Application
Give benefits that everyone can settle their payment using their very own smartphone with
PayPal app offer by PayPal. They can send invoice, settle down their payment or pay auction
fees at anytime and anywhere (PayPal Press Release, 2012). For example, Malaysia Airlines
has partner with PayPal to providing faster and safer mobile payments that allowed people
purchase air flight ticket using internet-connected mobile device (PayPal, July 2012).
2.2.3 Convenience
Anyone with an email address can pay their payment via email and receive invoice via email.
Moreover, PayPal connect 193 markets and allowed payment make in 26 types of currencies,
allowed the people live in different country, manage to read different language and pay
different currency to do business. For example, European can easily settle total amount of
payment with Pound when they receive an email send from Malaysian using PayPal. But
Malaysian trader receives Ringgit Malaysia in their bank account (Robert, 2003).
2.2.4 Easy to withdraw
PayPal set a rule that once users have history on receives payment via PayPal. The funds in
PayPal account can be easily withdraw linked to bank account. Using PayPal debit card to
withdraw money from ATM machine is better because no need to wait for weekdays to
process the money withdrawn online (Ashley, 2013).


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3.0 Globalization of PayPal
Following point will discuss on what PayPal does to increase it globalization.
3.1 Problems that limit PayPal in Globalization
3.1.1 Restrictions by Countries Law and Regulation
Countries such as Iran, North Korea, Libya, Afghanistan and Pakistan were restricts to do
transaction with PayPal because PayPals mother country is U.S and U.S state that these
countries under U.S economic sanction list (U.S Department of the Treasury, 2013). In 31
st

March 2010, Japan has set new regulations that start effect in 1
st
April 2010. Firms in Japan
have to apply a license to offer personal money transfer services. This regulation makes
Japanese unable to send personal payments to individuals with PayPal send money service.
Japanese only can receive money send by outsider. Within Japan, PayPal is limited on
commercial transactions only (budnonymous, 2010). In 29
th
July 2013, PayPal set per
transaction in India limit to USD10000. Besides that, User Agreement for Indian was restrict
them in some area. Firstly, the balances payments in PayPal account cannot use to purchase
good but the money will be transfer to recipient bank account in 15 days. Secondly, must use
credit or debit cards to do payment in PayPal (Gogi, 2011).
3.1.2 PayPal problems with eBay
In 2008, eBay send out a cruel notice to sellers telling them whatever payment receive via
PayPal for item sold in eBay will be put on hold up to 21 days. The reason is to protecting
buyers from getting cheat by dishonest seller. Initial stage is only apply on the seller which
got history of complaints, but lastly when it apply to overall seller using eBay, it makes eBay
regular seller getting angry. A woman with very good attitude as a seller felt that eBay
treating her like criminal and shut-down her PayPal account. Moreover, there is a lot of
angry seller going to anti-PayPal and create website like screw-paypal.com and
paypalsucks.com to vent their resentful (Janet, 2012).
3.1.3 Fraud
International hackers hack into multiple PayPal account and transferring certain amount of
money. Hence, PayPal are suffers loss of millions dollar in this cases. Although PayPal has
develop solution to solve this problem, but PayPal user agreement have a statement of
PayPal does not have control or liability for the products or services that are paid for our

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service. We do not guarantee the identity of any user or ensure that a buyer or seller will
complete a transaction. This makes their user unsatisfied while using PayPal service and
worry about fraud happen. A lot of seller complaints that PayPal state that it will responsible
for losses in fraud but PayPal debit or freeze seller account to avoid chargebacks on PayPal
(screw-paypal.com, 2011).




















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3.2 How people accept globalization
Globalization means integration of economies throughout the world. Globalization brings
companies worldwide to enjoy communication and collaboration with fewer and fewer
barriers. When PayPal started, the world is in Globalization 2.0, which means the world
started to globalize, people keep innovating and change the trend. But the globalization
mostly based on European and Americans area.
When eBay fully acquisition of PayPal, is in the year of 2000, Globalization 3.0 began, the
changes faster until every human can felt the effect. According to Freidman, technological
and social movement changes frequently and contributed the world into flatter world. Those
important factors transform the world, more and more people accepted globalization state in
Table 1.0.

Flattener Event or Trend Description
1 9
th
November 1989 The fall of Berlin Wall and fall of communism.
2 9
th
August 1995 Netscape introduce the first mainstream Web Browser.
3 Work flow software De facto standards allowed computers to talk to the
program and facilitate collaboration (example: PayPal).
4 Supply chaining Horizontal collaboration between customers, retailer and
supplier (example: Wal-Mart operating system).
5 Open sourcing Online communities building software product and
continuously improve it using peer review (example:
Firefox Web Browser).
6 Outsourcing Companies hire differences countrys talent people in
telecommunications infrastructure (example: American
hire Indian engineers).
7 Offshoring Companies agreed to follow the standards of trade and fair
business practice (example: China joined WTO).
8 In-sourcing Delegate company core operations, focus on something
more important to increase competence (example:
Nike.com in-sourcing United Parcel Service to packing,
shipping and payment collection).

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Flattener Event or Trend Description
9 In-forming Every individual can access to internet to get information
(example: Access online book, not school library)
10 The steroids Lightning-fast transmission of information, digitizing
content such as book, document, photographs, song.
Allowed free PC-to-PC video or voice calls everywhere.
Table 1.0: Factors flattened the world (Freidman, 2010)



















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3.3 Acted by PayPal to Increase Globalization
PayPal enabled every individual in live in different place, play different culture, spoke
different language, use different currencies to connect. Every individual and companies with
an email able to share documents, communicate, transfer money and split their payment
easily with PayPal account.
3.3.1 M-Commerce player
Nowadays, almost every person owns a smartphones that can transfer high-speed data and
can purchase data to always-on to internet connectivity. M-Commerce is getting popular,
electronic transaction using wireless mobile devices is M-commerce. However, PayPal seize
the external environment opportunity and run their service under Mobile Platform. The
mobile marketplaces are PayPal global strategy to allow every single person like PayPal
convenience payment method (Refer to 2.1.6 & 2.1.7 in this assignment for detailed in
mobile payment).
3.3.2 Diffused to Potential Countries

Picture 1.0: Google Search Index of Regional Interest for PayPal, Year of 2004.

Picture 2.0: Google Search Index of Regional Interest for PayPal, Year of 2006.

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Picture 3.0: Google Search Index of Regional Interest for PayPal, Year of 2009.
Based on the analysis by Google Index, year 2004, PayPal has almost diffused to all of the
English-speaking nation. They are the Western Countries and Asia Countries. Picture 1.0
clearly illustrates the area covered by PayPal during year 2004 (Qxh6, 2010).
Next, PayPal pay effort into Non-English Countries to encourage their citizen to sign up an
PayPal account. Google Index analysis shows that PayPal covered the country such as
Nigeria, Russia in year 2006. Picture 2.0 illustrates the area diffused by PayPal (Qxh6, 2010).
While in 2009, the index sprang up by Iraq, and Italy and Germany was placing top ten of
PayPal users countries. Picture 3.0 illustrate how strong are PayPal in year 2009. It shows
that different country people starting connected and globalize with PayPal account(Qxh6,
2010).











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4.0 Authors Decision
No, because PayPals main function is to protect people by secure their credit card
information not reveal to anyone doing transaction with them. As a 20 years old student,
might not have a credit card on hand, therefore this benefit seems not work. Moreover,
PayPal is a very good tool to be use in business transaction to send invoice, payment or
receives payment through email. If there is a chance to having own business in future, PayPal
is a very first choice for messy business transaction.
PayPal seem not popular in Malaysia because Malaysia is a developing country. Malaysian
would prefer to use Maybank2u.com.my to do their money transfer within the country. In the
other way, if Malaysian wants to buy something online, they would choose to buy it via
Facebook account, since there is a lot of people took the social network opportunities to run
their business online, and the merchant is pricing by Ringgit Malaysia (RM). Malaysia not a
rich country, for Malaysian, the money figure set as Dollar ($) will frighten Malaysian to
shopping in eBay when they convert back the figure in $ into RM.
In Malaysia, now every utilities company provides online payment via bank account for
convenience of Malaysian to settle down their payment online using their laptop or
smartphone. It is again persuade Malaysian people not necessary to have a PayPal account if
their transaction scope is not outside this country. Not only PayPal have innovation in e-
commerce and m-commerce, but others parties also have. The others worries are PayPal is
not a bank organization, so it do not have writing laws and regulation which is protected
PayPal users benefits.
PayPal charging high fees as $0.30 for each transaction, it is definitely high from a student
point of views. Transfer money using bank is totally free for every transaction. Some more,
PayPal has their power to freeze users account with any reason at any time. It is troublesome
to take out their money in PayPal account when it is suddenly freeze. However bank will not
do that without proper reasons, because their operating are regulate by government laws and
regulations.
Moreover, purchase online without fully mutual ideology will easily being cheat by the seller
online. Most Asian people do not have mutual thinking as fast as western people. Therefore,
Asian parents with strong protective heart will also try to advice their children do not
purchase online by themselves without permission.

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5.0 References (Harvard Referencing Style)
Online Article
About PayPal (1999-2013) PayPal is the faster, safer way to pay and get paid online, via a
mobile device and in store. [Online] Available from: https://www.paypal-media.com/about
[Accessed: 6
th
Nov 2013].
Budnonymous (2010). New regs force PayPal to stop Japanese personal payments. [Online]
30
th
March 2010. Available from: http://78886.activeboard.com/t34966969/new-regs-force-
paypal-to-stop-japanese-personal-payments/ [Accessed: 6
th
Nov 2013].
Caltlin, K. (2013) eBay aims for globalization, mobilization and more growth in 2013.
Reports Chicago. [Online] 6th March 2013. Available from:
http://news.medill.northwestern.edu/chicago/news.aspx?id=217827 [Accessed: 7th Nov 2013]
David, G. (2010) Facebook to use PayPal. [Online] 18
th
Feb 2010. Available from:
http://www.ft.com/intl/cms/s/0/2133fe24-1cd1-11df-8d8e-
00144feab49a.html#axzz2jqQlXqJJ [Accessed: 6
th
Nov 2013].
Freidman (2010). Chapter2: Fueling Globalization through Information Systems. [Online]
Upper saddle River: Prentice Hall. Available from:
http://www.prenhall.com/behindthebook/0132335069/pdf/Jessup_CH02.pdf [Accessed: 7th
Nov 2013]
Janet, M. (2012). eBay's got a PayPal problem. CNNMoney. [Online] 24th Feb 2012.
Available from: http://tech.fortune.cnn.com/2012/02/24/ebays-got-a-paypal-problem/
[Accessed: 6
th
Nov 2013].
Mike, S. (2010) Buy Facebook Credits And Ads Using PayPal. Web Pro News/ Social Media.
[Online] 20
th
Feb 2010. Available from: http://www.webpronews.com/buy-facebook-credits-
and-ads-using-paypal-2010-02 [Accessed: 6
th
Nov 2013].
PayPal (2011). PayPal User Agreement. (5)Account Balance [Online] 12
th
Dec 2011.
Available from: https://cms.paypal.com/cgi-bin/marketingweb?cmd=_render-
content&content_ID=ua/ClosingAcct_popup&locale.x=en_US [Accessed: 6
th
Nov 2013].

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PayPal (2012) About-Payments.com PayPal partners Malaysia Airlines for mobile
payments.[Online] 9
th
July 2012. Available from: http://www.about-payments.com/payment-
news/paypal-partners-malaysia-airlines-mobile-payments/
PayPal Press Releases (2012). PayPal Unveils PayPal Here: the First Global Mobile
Payment Solution for Small Businesses. [Online] 15
th
March 2012. Available from:
https://www.paypal-media.com/press-releases/paypal-unveils-paypal-here [Accessed: 6
th
Nov
2013].
PayPal. (2012) Privacy policy. [Online] Available from:
https://www.paypal.com/webapps/mpp/ua/privacy-full [Accessed: 5
th
Nov 2013].
Robert, G. (2003) CYBERCASH: The Coming Era of Electronic Money. [Online] April 2003.
Available from: http://webcom.upmf-
grenoble.fr/regulation/Issue_Regulation_theory/LR44english.pdf [Accessed: 6
th
Nov 2013].
Screw-paypal.com (2011) A typical PayPal scam. [Online] http://www.screw-
paypal.com/paypal_fraud/paypal_high_fraud.html [Accessed: 6
th
Nov 2013]
Troy, W. (2003) It's official: eBay weds PayPal. CNET New. [Online] 3
rd
October. Available
from: http://news.cnet.com/Its-official-eBay-weds-PayPal/2100-1017_3-960658.html
[Accessed 5
th
Nov 2013].
U.S Department of The Treasury (2013). Sanctions Programs and Country Information.
[Online] 31
st
Oct 2013. Available from: http://www.treasury.gov/resource-
center/sanctions/Programs/Pages/Programs.aspx [Accessed: 6
th
Nov 2013].
Blogs Article
Ashley, P. (2013) Advantages and Disadvantages of Using PayPal. Demand Media. [Online]
Available from: http://smallbusiness.chron.com/advantages-disadvantages-using-paypal-
55073.html [Accessed: 7th Nov 2013]
Gogi, R. (2011). The new PayPal user agreement is in effect for Indian users, what now?
[Online] 4
th
March 2011. Available from: http://www.gogi.in/paypal-user-agreement-effect-
indian-users.html [Accessed: 6
th
Nov 2013].
Loren, C. (2011). PayPal Payouts with Facebook Credits. [Online] 26th May 2011.
Available from: https://developers.facebook.com/blog/post/508/ [Accessed: 6th Nov 2013].

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Qxh6 (2010) PayPal's Online Payment System Globalization. [Online] 9th Apr 2010.
Available from: http://qxh6.blogspot.com/2010/04/paypals-online-payment-system.html
[Accessed: 7th Nov 2013]
Tapviva (2010). Best Websites and Apps to Split the Dinner Bill with Friends. [Online] 4
th

Apr 2010. Available from: http://www.tapviva.com/blog/2011/04/04/websites-apps-split-
dinner-bill-friends/ [Accessed: 6
th
Nov 2013].
Printed Article
Barkerrb & Robert (2002) Why PayPal Might Not Pay Off. Business Week. 4
th
Feb 2002, p.
100.
Brien, O. & Chris (2002) PayPal Acquisition Could Give EBay Some New Headaches. San
Jose Mercury News. 9
th
July 2002.
Colker & David (2002) EBay to Acquire Online Payment Service PayPal. Los Angeles Times.
9
th
July 2002.
Eilon & Jan J. (2002) PayPal Plays It Safe. Bank Technology News. 3
rd
May 2002.
Richtel & Matt (2002) EBay to Buy PayPal, a Rival in Online Payments. New York Times. 9
th

July 2002, p. C2.
Robert, G (2002). Money and credit in regulation theory, in Boyer, R. and Sailard, Y. (ed.).
Regulation Theory. The state of art. London and New York, Routledge. p.57-64.
Robert, G. (2003). Cybercash: The Coming Era of Electronic Money. Basingtoke, UK,
Palgrave Macmillan.
Journal Article
International Directory of Company Histories. (2004) Vol. 58. St. James Press.
Online Video
PayPalMerchant. PayPal Email Payments. Available from:
http://www.youtube.com/watch?v=g82isTyFjSM [Online video] [Accessed: 6
th
Nov 2013]


19

6.0 Appendices
Appendix 1
Flattener Event or Trend Description
1 9
th
November 1989 The fall of Berlin Wall and fall of communism.
2 9
th
August 1995 Netscape introduce the first mainstream Web Browser.
3 Work flow software De facto standards allowed computers to talk to the
program and facilitate collaboration (example: PayPal).
4 Supply chaining Horizontal collaboration between customers, retailer and
supplier (example: Wal-Mart operating system).
5 Open sourcing Online communities building software product and
continuously improve it using peer review (example:
Firefox Web Browser).
6 Outsourcing Companies hire differences countrys talent people in
telecommunications infrastructure (example: American
hire Indian engineers).
7 Offshoring Companies agreed to follow the standards of trade and fair
business practice (example: China joined WTO).
8 In-sourcing Delegate company core operations, focus on something
more important to increase competence (example:
Nike.com in-sourcing United Parcel Service to packing,
shipping and payment collection).
Flattener Event or Trend Description
9 In-forming Every individual can access to internet to get information
(example: Access online book, not school library)
10 The steroids Lightning-fast transmission of information, digitizing
content such as book, document, photographs, song.
Allowed free PC-to-PC video or voice calls everywhere.
Table 1.0: Factors flattened the world (Freidman, 2010)




20

Appendix 2

Picture 1.0: Google Search Index of Regional Interest for PayPal, Year of 2004.
Appendix 3

Picture 2.0: Google Search Index of Regional Interest for PayPal, Year of 2006.
Appendix 4

Picture 3.0: Google Search Index of Regional Interest for PayPal, Year of 2009.