IB Assignment

Introduction
International Business is the study of transactions taking place across national

borders for the purpose of satisfying the needs of individuals and
organisations. The ‘international’ in international business is surplus because
globalization has meant that all business is to some extent international. Today
it is almost difficult to find a product or service that does not have
international aspect to its customer base, as well as at least one element of its
supply chain. By supply chain, we mention to the chain inputs that come from
other sources, including the raw materials, components and equipment used
to produce, store and package the product or service.
The chosen MNE is PayPal, is an American Multinational Financial Technology

company. It is an electronic commerce company that facilitates payments
between groups through online transfers. PayPal allows customers to establish
an account in its App, which is connected to user’s credit card or bank account.
Once identification and proof of funds are confirmed, users can begin sending
or receiving payments to and from other PayPal account holders. It was
established in 1998 by a software company Confinity, PayPal went public
through an IPO in 2002. It became a fully owned subsidiary of eBay. In 2015
PayPal was sold to eBay’s shareholders and it became an independent
company. PayPal ranked 134th in Fortune 500 in 2021. PayPal is operating in
many countries but not yet in Pakistan.
MNEs play an important role in International Business. Richard Caves defined

the MNE as a multi-plant firm that controls and cordinates operations in
atleast two countries. Most of the MNEs manage their foreign companies and
these companies are subsidaries to their parent firm, this means that these
subsidaries are dependent on their parent firm for all important and prime
decisions. The foreign company will only do what it is told to do by the parent
firm. Until the 1990s, Foreign Direct Investment(FDI) and MNE were
considered identical becuase managing a subsidiary across borders and impose
contracts across distances was considered difficult to achieve.
There is a little doubt that we live in a world defined by globalization.
Globalization has cleared itself through certain very clear outcomes. There has
been a greater interdependence of locations and an interdependence of firm.
The interdependence of locations is an especially complex issue, and is
associated with the growth of the international firm. The growth of trade has
reduced distances, and the simultaneous growth of MNEs has highlighted this
trend. In general, the early twentieth century saw a growing economic
interdependence between nations, as well as early cross-border
interdependence between enterprises, both inside and across countries.
Although international trade is not new, the emergence of FDI and the
multinational corporation around the turn of the twentieth century marked a
significant shift in international business.
Description
The chosen country where MNE may want to move in is Pakistan. Pakistan
recently made a huge progress in e-commerce. The E-commerce sectors in
Pakistan grew over 35% in value in the first quarter of 2021 to 96 billion
Pakistani rupees ($548.89 million dollar) compared to 71 billion ($405.95
million dollar) over the same period of last year, according to commerce
ministry data (Anon., 2021). According to a report Pakistan could increase 25%
in the exportation of information technology in 2022 (Anon., 2021). E-
Commerce would provide the country with a sector that would assist
individuals in achieving a national concept of wealth, and with its development
opportunities, it would be beneficial to the people. Here are some reasons why
Pakistan could be in line to become the next e-commerce leader of the world.
Pakistan is trying its best to empower the youth through its education to help
them become great successful future entrepreneurs. Pakistani buyers are
increasingly turning to social media and online shopping platforms that offer
many options. E commerce stores in Pakistan have seen a huge increase in
traffic. The Government of Pakistan has committed to introduce more friendly
policies for online payment methods such as PayPal, in order to encourage
their use in the country’s e-commerce sectors. According to this it would be
really beneficial for PayPal to move in to Pakistan, because recently Pakistan
has been boosted a lot in e-commerce. Many people in Pakistan are working
on Amazon and now Pakistan has been officially added to Amazon sellers’ list.
After Pakistan being added into Amazon sellers’ list, working on amazon has
increased a lot. Not only working on amazon, but also working on daraz, eBay,
etc.
There has been a rapid increase in working online in Pakistan especially after
the Pandemic. After the Corona Virus many people worldwide have shifted
their business from physical stores to virtual online stores. In 2019, a
Payoneer index reported that Pakistan has the fourth largest freelancer
community in the world and in 2020 Pakistan was the world’s eighth
fastest growing freelancing economy. There are already over one million
freelancers in Pakistan, however they do not have any secure payment
methods. The coronavirus pandemic has caused a lot of people to lose
their jobs, which is one of the main reasons for this increase. Around 20.6
million Pakistanis have lost their jobs as a result of the Covid-19
outbreak. Many people have resorted to online platforms to make
money. People in undeveloped countries will have little choice but to try
their luck in the online market. As a result, PayPal will play a significant
role in the future. Once a company like PayPal joins the market, the
number of freelancers might increase even further. Pakistani freelancing
community’s biggest problem was the lack of PayPal. Almost all online
job platforms provide PayPal as a payment option. Some only take
PayPal. Payoneer, Wise, and UnionPay are some of the other PayPal
competitors, but PayPal provides the best service which make it remain
best out of all these. The fees charged by other payment methods are
high till 30% of transaction value whereas PayPal only charges 2.9% of
transaction value. It benefits the seller since they are able to receive the
most for their services or products. Many good international companies,
clients refuse to work with Pakistani sellers because they only trust
PayPal for international banking.
Pakistan requested PayPal's services in the country for the first time in
2015. The Ministry of Information Technology and Telecommunications
made another effort in 2019. However, the authorities have taken no
more steps to bring PayPal to Pakistan. In 2019, According to Sunny Ali,
the founder of Extreme Commerce, the government of Pakistan had
been unable to fulfil the demands of PayPal regarding the banking
system of Pakistan. Pakistan lacks a central system or a platform through
which customers can transfer money to any bank in the country. PayPal
must acquire a license to work in Pakistan which itself is a hurdle for a
fintech company. The license fee for PayPal is $2 million dollar which is
opposed by the State Bank of Pakistan (SBP). In order to bring PayPal to
Pakistan the SBP should reduce its licensing fee for PayPal. If the
government of Pakistan continues to ignore need for digitalization,
potential businesses and individuals will begin to invest in other
countries, which will not benefit Pakistan financially and economically.
But recently Pakistan has been improving its banking system a lot, which
makes a better opportunity to help freelancers and online businesses by
bringing PayPal to Pakistan. If the banking system keeps improving
PayPal would not have any excuses on not starting its business in
Pakistan.

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Introduction

International Business is the study of transactions taking place across national

The chosen MNE is PayPal, is an American Multinational Financial Technology

MNEs play an important role in International Business. Richard Caves defined

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