Introduction:

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.

Company Overview:

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).

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Question 1:

A)    Amazon.com expansion in the UK market, similarities, and similarities between modes of entry to the market:

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).

Organisational Behaviour

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.

Porter’s Diamond Model:

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:

1. Factor Conditions: it is a condition within a country regarding the production elements like infrastructure and knowledge. As there are pertinent elements for competitiveness in diverse industries. These elements can be clustered into material resources such as labor, costs, qualification, and commitment; infrastructure,, and knowledge resources.
2. Related and Supporting Industries: The achievement within a market also relies on the presence of suppliers and associated industries within a region. The competitive suppliers and related organizations strengthen internationalization and innovation. The success of the organization is also advantageous for the supporting and related business units. Amazon can benefit from each other’s know-how and promote each other by producing substitute products (Bakan, and Doğan, 2012).
3. Home demanding conditions: This particular determinant is comprised of certain questions such as what reasons are eminent for a thriving market. What is the size of the market? What is the nature of the market? There is a various correlations between the economies of scale, size of the home market, transportation costs, etc. If Amazon can attain adequate economies of scale, it will enable the organization to offer benefits to other businesses to service the market from the home location.
4. Strategy, structure, and Rivalry: This particular determinant is associated with how a company is arranged and managed, organizational objectives, and the number of rivals within the organizational culture. Additionally, it also emphasizes the conditions in certain countries in which the company can expand its business. As regions, nations, and countries may vary from one another, the elements like working morale, management, and dealings among the organizations are formed differently within the different cultures. If Amazon can efficiently consider this respective element it will help the company is attaining competitive advantages (Hadjikhani, Hadjikhani, and Thilenius, 2014).

Fig 1: Porter Diamond Model

The Bartlett & Ghoshal Matrix 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:

• Concentrate on efficiency through economies of scale
• Highly centralized
• Little sharing of experts locally
• Standardized product ranges (Lasserre, 2017)

Accounting Theory

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:

• multifaceted to achieve
• the motive is to maximize local responsiveness along with attaining benefits from global integration
• Excessive sharing of expertise, staff, technology, etc (Musso, and Francioni, 2012).

International Strategy: Under this strategy, both the pressure for local responsiveness and global integration is generally low. The key features of this strategy are:

• Aims to accomplish efficiency by concentrating on domestic activities
• International operations are extensively managed centrally
• Comparatively little adaption of the products according to the local needs.

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:

• Aims to maximize the advantages of meeting local needs through extensive customization
• Decision making is decentralized
• Separate business strategies for each nation or market (Brouthers, K.D., 2013).

Operations Management

B)    Suitable market entry mode for further internationalization by Amazon:

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).

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Question 2:

The generic strategy pursued by Amazon and possible issues in the strategic issues selected by Amazon:

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).

Ethics and Professionalism in computing

Conclusion:

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.

References:

Amazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more. (2018). Amazon.com. Retrieved 18 April 2018, from https://www.amazon.com/

Ang, S.H., Benischke, M.H. and Doh, J.P., 2015. The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), pp.1536-1553.

Bakan, I. and Doğan, İ.F., 2012. Competitiveness of the industries based on the porter’s diamond model: An empirical study. International Journal of Research and Reviews in Applied Sciences, 11(3), pp.441-455.

Brouthers, K.D., 2013. A retrospective on Institutional, cultural, and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 44(1), pp.14-22.

Chang, Y.C., Kao, M.S., Kuo, A. and Chiu, C.F., 2012. How cultural distance influences entry mode choice: The contingent role of host country’s governance quality. Journal of Business Research, 65(8), pp.1160-1170.

De Villa, M.A., Rajwani, T. and Lawton, T., 2015. Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), pp.419-429.

Hadjikhani, A., Hadjikhani, A.I. and Thilenius, P., 2014. The internationalization process model: a proposed view of firms’ regular incremental and irregular non-incremental behavior. International Business Review, 23(1), pp.155-168.

Hernández, V. and Nieto, M.J., 2015. The effect of the magnitude and direction of institutional distance on the choice of international entry modes. Journal of World Business, 50(1), pp.122-132.

Kubíčková, L., Votoupalová, M. and Toulová, M., 2014. Key motives for internationalization process of small and medium–sized enterprises. Procedia Economics and Finance, 12, pp.319-328.

Lasserre, P., 2017. Global strategic management. Palgrave.

Musso, F. and Francioni, B., 2012. Foreign markets entry mode decision for Italian Small and Medium-Sized Enterprises.

Vahlne, J.E. and Johanson, J., 2017. The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. In International Business (pp. 145-154). Routledge.