Economic Theories
International business strategy can be defined in a simple term as the transactions that are taking place across the borders. There are businesses that export their services to different countries that are globally. The concept of international grew over last century due to the liberalization of trade and investment. There are several factors that play an important role for expanding the business globally in the international market. Some of the factors are technological development that makes global communication and transportation quick. The other major force is disappearance of substantial part that opens up the market of private businesses globally (Whitehead, et. al, 2016). One such company that is considered in this report is amazon. Amazon is an electronic commerce and cloud computing company. It is one of the larger internet retailers in the world if compared on the basis of market capitalisation and revenue (Hamid, Hengchao & Mhd-Sarif, 2017). It has expanded its place in the global market by using brick and mortar retailer. They have started with innovative services which have helped in gaining customers. In this various economic theories that are used in international marketing are discussed. The business model adopted by amazon to expand their business is also listed. The amazon business model has helped it to expand their services in the global market. While expanding its services in many countries there were risks and mitigation that were faced.
There are numerous economic theories that are used in the international business. These theories allow the company to make their mage in the international market so that they can gain advantage in term of cost and market expansion (Agola & Awange, 2014). They also enhance the trade of the company by making the company visible in the global market.
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Porter’s National competitive advantage theory- It works on the evolution of international trade barriers as the competiveness of a company is dependent on the capacity and working style of an organisation. If industry keeps on upgrading or innovating new ideas international trade could be enhanced (Agola & Awange, 2014). They linked all the local market resources with the demand condition. They also identified local firm characteristics with local suppliers. |
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Global Strategic Rivalry Theory- It is a theory that focuses on the global competition of the company so that barriers to enter the industry could be found. It is a unique business process that controls all the resources (Agola & Awange, 2014). |
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Comparative advantage theory- This offer benefit in the trade by producing goods in other countries. The opportunity cost of product is determined by understanding trade among nations (Gurieva & Dzhioev, 2015). The company can have trade with rest of the world by obtaining commodities. This theory is used when company cannot offer better product then the other country (Gurieva & Dzhioev, 2015). |
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Absolute Advantage Theory- It is a new trade theory that focuses on the ability of a country so that they can produce goods more efficiently. This theory helps to offer efficient ways so that faster and better production is offered. It is beneficial for both the countries between which trade take places(Hunt, 2016) . |
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Mercantilism- It is a theory that focuses on increasing the exports and decreasing the imports. The objective of this theory is to make sure that imports get increased |
The theory adopted by amazon just focuses on the demands and requirements of customers rather than looking at the profit margins (Hunt, 2016). In the case of Amazon, the core theory that was followed was a cost leadership rather than bricks and mortar retailers. They offer wider facilities and processing capabilities that offer physical economies of scale (Stokhof, De Vries, Bastiaens & Martens, 2017). The amazon uses online retail theories that generate profit by selling the product and services at its domestic as well as international market. Amazon earns the profit margin by offering the services in remote market. Using this economic model, the outcome is that it increases the relationship and brand image of the company in the international market which supports in increasing the customer (Ascher, Brewer, Cheema & Heffron, 2016). There are some issues associated with these economic models as they make assumptions that are not realistic.
Amazon works under a business model that has various moving parts. Amazon business model offers product to the customers through online storefront along with small mark-ups. The model makes sure that products are services are offered at the affordable price and are accessible easily (DaSilva & Trkman, 2014). Apart from that, amazon business model also offers a platform to other businesses to sell their products. This keeps a membership based business model like amazon prime membership that secures the customers yearly. The business model also creates income by offering e-books and various mobile applications (Zuckerman & Gal-Oz, 2014). Amazon makes sure that products that are sold have fewer prices than the other company. They also do not charge for retailers and accomplishes faster delivery of products (DaSilva & Trkman, 2014).
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Strength · It offers additional benefits like key activities, value proposition, customer relationship and best cost structure. · It also helps in identifying the key revenues so that strategies could be developed accordingly (Rayna & Striukova, 2016). · Amazon business model offers fulfilment centres, faster delivery and many other benefits. · The network expansion is one of the key reasons of success. It makes sure that products are delivered at the door step with faster delivery (Ritala, Golnam & Wegmann, 2014). |
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Weakness There are various challenges that are offered by the business model of amazon. Some of eth factors that impose difficultly in expanding the business are listed below. · The business model is easily imitable. Due to this reason other companies get a chance to use their strategies (De Jong & van Dijk, 2015) . · The developing market is also limited and the penetration of services is quiet low. · The approach of brick and mortar model is limited(Rayna & Striukova, 2016) . |
Porter’s National Competitive Advantage Theory
It is recommended that amazon has various opportunities so that business can grow. It is suggested that the products should penetrate in the developing market. The wider market is captured will definitely increase the profit margin (Rayna & Striukova, 2016). The brick and mortar business should get expanded so that measures counterfeit sales could be reduced. They can diverse the services I other field also. The market is analysed and the competitor’s strategy should be noted so that products could be offered at lesser price. It is recommended, that high technological advancement should be used so that services are delivered in a faster time (Noesgaard & Ørngreen, 2015). An automated process should be used for maintaining consumer reports and product evaluation. This will help in reducing the amount of counterfeit products sold on the website. The security protection should be taken so that chances of cybercrime is mitigating. Amazon should improve the online business as nowadays customers prefer online shopping. This might loss some of the loyal customers that are comfortable with offline shopping (Lopez-Valeiras, Gomez-Conde & Naranjo-Gil, 2015). It is also suggested that company should make the online industry successful by making it high-tech efficient. The company also faces issue due to other competitors in the market. Apart from all these, it is recommended that cybercrimes should be controlled by using information technology. The company should also increase the strategic entry before entering into developing countries.
Amazon has various competitors that have been impacted by its business model. It offers sustainable competitive in the market by offering customers more reasons to choose. The factors that attract more customers are customer purchase criteria; include price, faster delivery and trustful and reliable service. The plan of action may get affected as the competitors additionally offer a similar administration on the online stage. This would make alternatives for the clients to pick one organization (Gassmann, Frankenberger & Csik, 2014). Accordingly, for this Amazon has started extra offers so that clients pick it instead of different organizations. Along these lines, it is proposed that plan of action ought to be altered by the market request. The business model makes sure that customers are increased by doing certain things. Amazon has a big revenue stream as it has created AWS so that other companies can sell their products using its services (Aversa, Furnari & Haefliger, 2015). The business model has also started new venture so that they could differentiate from other companies. While expanding the services in the global market, a complete analysis is done and services are created that are different from other companies. Amazon business model make sure that new innovation takes place regularly so that customers get attracted towards it. The business strategy of amazon helps to acquire basic principles that could be applied to any form of business (Aversa, Furnari & Haefliger, 2015). Apart from that, they have expanded their technology by bringing up various new things in the market.
There are a few nations that offer uncommon advantages and there are dangers related inside the plan of action. One such nation is United Kingdom, the GDP development is around 1.8% and populace is additionally 66M (Bitner, Patr?cio, Fisk & Gustafsson, 2015). It offers tax reductions as workers make the nation appealing from money related perspective. The other nation is Singapore that has solid work compel so it will be helpful to open up disconnected store (Chen, Xiao & Lin, 2018). It is likewise simple to enrol and new company on the web. The online store will be troublesome as the work isn’t talented. While entering in the nation like Hong Kong, new work it would be productive as the workforce is gifted and will comprehend the new pattern (Jorna, 2017). There will be different dangers that would be looked by the organization as there are different contenders. To make the place in the market by beating the officially present organizations would be an intense errand. From the reseach, it was discovered that it is anything but difficult to begin a business in Mexico as they have simple and legitimate running arrangements that enable organization to maintain their business (Licitra, Teti, Cerchiai & Bianco, 2017). They likewise offer facilitated commerce concurrence with numerous nations by enabling them to open tremendous market in the nation. Switzerland is undoubted extraordinary compared to other nations on the planet that have a profoundly gifted working environment and they are prepared to work and help the business to involve the market. There are different difficulties and hazard that are confronted while venturing in the new market. The measure of market assumes a critical job as it winds up hard to assess the deal or disappointment, if advertise is examined appropriately. There are different changes in this manner, it is critical to manage such circumstances and ensure that association have support towards hazard (Licitra, Teti, Cerchiai & Bianco, 2017).
Global Strategic Rivalry Theory
Conclusion
In this report, various business models and economic theories used in the international market is discussed. Some of the economic theories that are discussed above are like absolute advantage theory, mercantilism, comparative advantage theory and various other models. Each model has some benefit and flaws and it is used according to the situation. The manners by which plan of action of business would be affected upon the worldwide rivalry is talked about, the qualities and hazard looked by the organization when they experience in global market is examined. In this way, from this report the challenges and obstructions that are looked by the Amazon is analysed and different models are techniques are recorded. The plan of action that is adopted by amazon is discussed and the advantage it offers to clients is discussed. It enhances the client connection with the organization and furthermore enables Samsung to grow in the worldwide market.
References
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