Due to the tremendous growth in the globalization and internationalization of the businesses, contemporary business organizations are accomplishing tremendous growth and development. The business organization wanting to expand and enter the international market must adopt a suitable entry mode to succeed in the market. In this context, this respective report is commissioned to provide detailed comprehension regarding the international business strategies and mode of entry for Amazon.com which is also considered the e-commerce giant in its respective industry. This respective report will emphasize Amazon’s expansion in the UK markets and its appropriate market entry strategies, similarities, and dissimilarities of different entry modes, issues, and challenges in the international expansion of the business, etc.
Amazon.com is one of the leading American e-commerce giants which has changed the notion of traditional business concepts. This company was founded by Jeff Bezos in 1995, when he first started to sell books online presently, the company is considered a market leader in the e-commerce industry which offers various products and services in different parts of the world such as apparel, computers, mobile devices, toys, furniture, electronic devices, home decors, etc. The company allows its customers to explore a wide range of products that they wish to buy at fair and affordable price ranges. The total employee strength of Amazon.com is 5, 66,000 as of 2017. Amazon.com is highly assumed to be a customer-oriented company and therefore, the business culture of the concerned organization significantly emphasizes innovation in every aspect of efficiently accomplishing the customer’s needs (“Amazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more”, 2018).
Amazon’s expansion in the UK market:
Amazon.com has always considered the UK market as one of the lucrative markets for its business. A wide number of studies have stated that Amazon has invested almost 850 million pounds in the UK market from 2010 to 2016. Amazon has 16 distribution centers in Britain and the upcoming centers will be assisted by modern robotics technology to facilitate easy movement of its products around the plant. It is also planning to employ 1,200 new full-time permanent employees to carry out the operations. As the company has extensively expanded its online business in Britain in the recent past, now the company is highly emphasizing establishing new distribution plants to enlarge its product selection and allowing more medium and small enterprises to sell their products via the Amazon marketplace. Not only that, but the company is also deploying a dedicated research and development group that will concentrate on machine learning to re-enforce the retail group’s long-term investment within the United Kingdom (Hadjikhani, Hadjikhani, and Thilenius, 2014).
Modes of Entry:
The modes of entry are considered as the different channels which a company adopts to enter a new international market. As there are various types of modes of entry, the business organization selects the most appropriate modes of entry according to their size, business operation, and nature of the business. The selection of the right market entry mode has a huge influence on international operations and can be considered the vital edge of international marketing (Vahlne, and Johanson, 2017). Thus, it is essential for Amazon to carefully decide which entry mode to utilize and frame vital strategies accordingly. Some of the major modes of international market entry are licensing, exporting, joint venture, and sole venture. According to the research by Dunning, the selection of the entry mode for a potential market is highly influenced by three major elements known as location advantages of a market, ownership advantages of a firm, and internalization advantages of incorporating the transaction within the company (Kubíčková, Votoupalová, and Toulová, 2014).
Different Entry Modes:
There are various similarities and dissimilarities among the different entry modes for international markets. The entry modes are subject to vary among the business organizations due to the nature of business operations and potential markets.
This particular model is very essential in understanding the different factors which are vital in global business competition resembling the points of a diamond. By utilizing this model, the company ensures how they can translate regional advantages into international advantages (Bakan, and Doğan, 2012). The major determinations of the models are:
Fig 1: Porter Diamond Model
Barlett and Ghoshal recognized the four different types of multinational corporations and their strategy, as shown in the figure below. This respective model depicts the strategic outlook of those MNCs towards administrating the subsidiaries and how they evaluate the prospective needs of global differentiation and global integration. Thus MNCs like Amazon must efficiently select the appropriate strategic model which can meet the requirements of the environment and select the strategic model which will establish global competitiveness (Lasserre, 2017).
Fig 2: The Bartlett & Ghoshal Matrix
Global Strategy: Under this strategy, the pressure for local responsiveness is generally low but the pressure of global integration is generally high. The key features of this strategy are:
Transnational Strategy: Under this strategy, the pressure for local responsiveness as well as global integration is generally high. The key features of this strategy are:
International Strategy: Under this strategy, both the pressure for local responsiveness and global integration is generally low. The key features of this strategy are:
Multi-domestic strategy: Under this strategy, the pressure for local responsiveness is high but the pressure for global integration is low. The key features of this strategy are:
The intense competition among the rival firms, market saturation, etc is compelling the business organizations to expand their business operations in multiple nations. If the business organizations are successful in international markets, they may accomplish a high level of scalability and liquidity which enable them to attain sustainable competitive advantages. The most prominent market entry mode for Amaon.com is the acquisition. The acquisition is the process in which a company gains control of another organization by purchasing its stock or exchanging the stocks for its own. In this era of globalization, cross-border acquisition has increased drastically. As e-commerce is a growing industry, the acquisition will enable the organization to penetrate the international market as well as reduce the number of players within the market. The acquisition entry mode is appealing for Amazon because it will provide the organization promptly and established access to a new market (Hernández, and Nieto, 2015).
Moreover, this mode of entry is generally expensive and may lead to excessive capital drainage for the organization. In the past few decades, the different currencies have extensively strengthened which makes the acquisition of the company more expensive. If the acquiring company is in a nation that has a strong currency, then the acquisition is relatively cheaper to make. The acquisition is considered an effective entry strategy when the scale is needed by the company which is particularly in the case of Amazon. The limitation of acquisition is less compared to the benefits of the same, thus acquisition as an entry mode is suitable for the concerned organization (De Villa, Rajwani, and Lawton, 2015).
Amazon is one of the most innovative companies in the world. It emphasizes continuously evolving its strategy according to the demand of its customers. Due to the fact, that Amazon is highly centric on its customer; the management focuses on the strategy of “Growth now, profit later”. Moreover, Amazon always endeavored to enhance its customer service in every market in which it is operating. The success of its business model is highly inclined toward customer service (Chang, Kao, Kuo, A. and Chiu, 2012). The generic strategy of Amazon also includes providing maximum convenience to its target customers. The company offered customers hassle-free anytime, anywhere ordering by utilizing modern technology and ensuring that any product could be delivered cheaply and reliably through a simple order process accessible from customers’ homes or offices. Such initiatives help Amazon to strengthen its strategy within the market (Ang, Benischke, and Doh, 2015).
However, there are certain issues that may arise for Amazon within its selected strategic route. The tough competition from the rival brands like Wal-Mart in USA & UK, Alibaba Group in China, Flipkart in India, etc is one of the major issues. Consequently, the challenge to keep the price as the business grows is also a major issue especially when entering a new market is significant (Chang, Kao, Kuo, A. and Chiu, 2012). Similarly, Amazon’s shipping carriers such as US Postal Services, FedEx, UPS, etc are gradually increasing the shipping rates which are becoming a major threat that can affect the business operation of the organization. It is also essential for the organization to perform detailed research of the international market before the investment, but the in-depth analysis is not practical due to the cultural and social divergence, and thus, fulfilling the demands of the customers in the international market sometime becomes tedious (Ang, Benischke, and Doh, 2015).
From the above-mentioned compression, it can be stated that selecting the most appropriate entry mode for internationalization is essential for the organization to maintain its leadership position, sustainability, and profitability of the organization. This particular report has successfully discussed all the related theories, concepts,, and models of internationalization and its entry modes. Amazon.com is a customer-centric business organization and it must adopt an appropriate entry strategy to deliver valued services at reasonable prices. This cannot be achieved without an efficient entry mode and strategy in the potential market.
Amazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more. (2018). Amazon.com. Retrieved 18 April 2018, from https://www.amazon.com/
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