Overview of the company and current operating position
Performing the role of the external consultant for assessing the international growth strategy for Amazon, this report will highlight some issues regarding the business’s international growth strategy and quality recommendations for the betterment of the organization. This report comprised the details off overview of the company and current operating position, company’s international competitive strategy, existing organizational design structure and control issues, entry strategies used to enter other regions/countries, operational control, production and distribution/supply chain management, management of Human Resources across borders and some related key issues or opportunities for management and suitable recommendations to management for improvement. The company that is selected for the report is Amazon, which is an American cloud computing and electronic commerce company. In recent times, the e-commerce business is provided to nation like United States, the United Kingdom, Canada, Germany, China, India, Ireland, France, Australia, Brazil, Spain, Netherlands, Mexico and Japan. This report will highlight strategies for Amazon to expand their business in other developing and developed countries.
Overview of Amazon and its current operating position
Amazon was founded in the year 1994 and is presently headquartered at United States, Washington. The main operation of the organization is to provide things that people desire to purchase from retail shops through online media. Apart from that the main products of Amazon in recent times are Amazon Appstore, Amazon Echo, Amazon Prime, Amazon Kindle, Amazon Video and ComiXology. 5,66,000 employees are working under the organization across the world to fulfill the organizational objectives. The annual revenues of the concerned organization for the years 2017 was $177.87 billion and $135.99 billion for 2016 (Statista 2018).
Image: Amazon’s Net sales revenue for 2004- 2017
(Source: Statista 2018)
Amazon’s international competitive strategy
The e-commerce website offered by Amazon provides low cost objects compared to the physical stores. People also found products of different brands and can select the products based on their price preferences, design requirements, time of delivery, lowest price offered for the variety of products. Thus, for these aspects it can be said that Amazon utilizes the concept of cost leadership and diversification that provide the company an effective international competitive strategy. Rothaermel (2015) also stated that Amazon operates their business functions with the strategy of obtaining razor thin profit margin. The prime reason for the success of Amazon is spite of thin profit margin are acquiring combination of economies of scale, constant business diversification and innovation of business processes. Ross (2015) furthermore depicted that Amazon emphasized on customer obsession and not on the competitor focus and the company also focus on long-term thinking and remained commitment to operational excellence. This can be witnessed through the development of Amazon Drones for faster delivery. In order to attain the shipping edge, Amazon also developed progressive deals with the established nation like United States Postal Service and UPS (Rothaermel 2015). Thus, the absence of any physical store helps Amazon to ship and deliver the products in time.
Amazon’s international competitive strategy
Existing organizational design structure and control issues
Leih et al. (2014) portrays that organizational design structure illustrates the management people, who are liable for operating all the business functions in order to obtain the organizational objectives. Amazon follows a functional organizational structure and considers the characteristics of Global function-based groups, global hierarchy and geographic divisions (Daft 2015). Amazon has a dedicated group for its major business function lead by a senior manager. The major function based group in Amazon are- Chief Officer Executive (CEO), business development, Amazon Web Services (AWS), finance, accounting, international consumer business, consumer business and legal and secretariat. Amazon hence follow a multidivisional structure represented in the below formulated structure. Vertical lines of command are followed in Amazon according to which senior managers’ directives facilitate managerial control to all the entire organization of Amazon.
Image: Organizational structure of Amazon
Entry strategies used to enter other regions/countries
Amazon is already operating in 185 countries and offers their premium services of delivering quality products from registered sellers through online medium. Kang and Montoya (2014) stated that there are different types of market entry strategies like- direct exporting, licensing, franchising, joint ventures, piggybacking and foreign direct investment. Raff et al. (2012) depicted that direct exporting refers to selling directly into the market and in this case, the agents and distributors work closely for obtaining the organizational goals. Ulhøi (2012) furthermore portrays that licensing on the other hand illustrates where a firm transfers the rights to be used through other organization. Franchising is a process, where a firm agrees a grant to another party for utilizing their products and services (Kumaraswamy et al. 2012). While some organization prefer to get entry in a market through joint ventures where they development partnership with another organization to form a third independent company; some prefer piggybacking where only one products is sold to other company (Laufs and Schwens 2014). The concept of piggybacking based on foreign markets and included in Host Company’s inventory for international markets. Lastly, foreign direct investment is a suitable option for an established organization to make a market entry by investing a huge capital in the host market and implement their business operation to attain profitability.
Amazon should focus on the Foreign Direct Investment (FDI), for entering into other region like Cuba an Iran. The main reason for the same is that Amazon operates as their parent company in other region and nation like Cuba, where after a huge political dilemma nation intends to enhance their economic growth through business, establishing foreign business by direct investment is welcomed by the government. Amazon can also prepare their warehouse in suitable locations for making the delivery system of their products faster.
Existing organizational design structure and control issues
Operational control, production and distribution/supply chain management
Amazon utilizing the partnership strategy with effective logistic units named Logistics Plus. A customer when places their orders, the global vendor prepare the desired products through international air and ocean freight forwarding. The process is then followed with the assistance of customs brokerage and trade compliance which is then carried out by domestic ground transportation (Monczka et al. 2015). Wisner et al. (2014) mentioned that the products then stored to the Amazon’s warehouse and storage inventory management kitting. In this place, all the ordered products are stored, picked, packed and shipped including labeling with shipping documents. Ross (2015) stated that this warehouse also operate the functionality of reverse logistics. The products from warehouse after labeling sent to the users through three different ways. Firstly, through freight delivery, parcel delivery through post office services and direct fulfillment by Amazon services (Logisticsplus.net 2018).
Image: Amazon’s distribution/supply chain management
(Source: Logisticsplus.net 2018)
Since, in developing countries like Cuba, Amazon can start for delivering their items through fulfillment by Amazon services along with their inbound sortation centers, outbound sortation centers, prime hubs and delivery centers. Wang et al. (2015) stated that sortation centers are such offices and infrastructures that is used for sorting of the parcel according to the location of the residents of addressee. Amazon on having inbound sortation centers can able to segregate the order placed by the customers from all other sellers and distributors. The prime benefits of including the outbound sortation centers is that Aamzon can handle to distribute the desired objects to different sites based on their address internally. This can be operated through the existing distribution system that is freight delivery, parcel delivery and fulfilled by Amazon. The benefit that the organization can attained from prime now hubs is to give premium services to their prime users. Amazon’s Prime Now Hub delivers their prime users one-hour and two-hour deliveries within a 15-mile radius. Amazon can also utilize software system that is built on scanners and barcodes so that less mistakes in delivery is obtained.
Management of human resources across borders
Amazon has over 500,000 workers working in their organization across the world. However, Deresky (2017) stated that not all people are competent to follow the organization’s parent office’s rules and regulations. Thus, Amazon should adopt the host nation’s culture to formulate proper human resource strategies so that their operational functionalities can be obtained successfully. Some of the important aspects that should have to be considered while managing the human resources across borders are:
Entry strategies used to enter other regions/countries
De-centralizing the workplace environment- Binder (2016) stated that a company can show greater benefits if there is no communication gap among the working personnel and people in the managerial positions. Thus, Amazon needs to follow a less hierarchical de-centralized working culture so that people can easily communicate with the managers and share their concern with the seniors.
Recruitment- Amazon has to recruit the managers and staffs effectively so that can accomplish the desire job roles and responsibility for attaining organizational goals. The managers of the organization should be recruited from the home country’s culture so that they can assure that the host country’s organization maintain the culture followed in the headquarter. However, the recruitment of the employees can be made from the host country so that they can utilize their local culture and knowledge for fulfilling their job roles.
Designing effective employee benefits policies- Amazon being am established organization expected to offer an effective workplace environment to all their employees. Amazon needs to formulate the benefits according to the benefits required by the employees based on their culture and financial benefits so that employees can intends to remain associated with the organization.
Employee training session- Reiche et al. (2016) highlight that some employees lack communization due to language barrier with the managing people. In such cases, even through the employee is efficient enough to perform the destined roles and responsibilities with proficiency; the communication gap does not allow the manager to indentify the strength and weakness off that particular employee. Thus, Amazon need to conducts regular employee training sessions both for learning new technological implementation and on communication so that effective interpersonal relationship can be built up among the employees and managers or leaders.
Offering challenging roles to efficient employees- Leader should encourage employee for their effort and give constructive feedback if lack any proficiency (Vance and Paik 2014). Amazon should also implement effective performance management system to identify the strength of each employee and offer those challenging roles and responsibility that can allow the employee to enhance their performance in Amazon’s host nation’s office and also allow the concerned organization to prosper with innovation.
Key issues or opportunities for management
In terms of making the business global the risk that is faced by Amazon is keeping up with the market which includes the political aspect of the host nation. Cowling and Mailer (2013) stated that on expansion of the business, the risk for rise in competitors also become high. Thus, other online retail organizations, which are established from many years, can also take initiative to formulate online services. The opportunity in this case that can be attained by the Amazon is to innovate new ideas and technology through which they can create their monopoly in the host nation.
Operational control, production and distribution/supply chain management
The knowledge base of the staffs may be outdated if not trained properly. Jackson et al. (2014) stated that organization that deals with the technology driven operations, have to update their technology regularly so that all the employees can gain the understanding of the operational functionalities that the organization is performing utilizing the modern technology (Deresky 2017). Thus, Amazon can face the challenge to develop the knowledge base of the employees.
Amazon can also face problem in their internal operations. One such issue is to earn more users to use their prime membership. Though Amazon has the largest customer base but it struggles to increase their prime users. Amazon also do not disclose the total number of prime users but the they always reveal the percentage rise or declined in the total number of such users (Financial Times 2018).
Failure in adoption of the changes is another big issue that Amazon has to face while implementing regular changes in the technology and new business functions. Binder (2016) highlight that the main reason for the occurrence of this dissatisfaction is that employee have to follow the rules irrespective of the fact whether or not they are capable enough to performed hat changed system.
Recommendations to management for improvement
Auditing competitor’s details
Amazon can overcome the risk of competitors by regular monitoring the competitor’s details and audit their upcoming strategies. Amazon can also make partnership with the governing bodies of the host nation so that they can be aware of the political aspect that can be occurred.
Provision of Training
The training related to the modern technology can help Amazon to overcome the problem of outdate knowledge base of the employees. However, the company needs to consider the fact that as technology is changing so fast, allocating time in regular training might result in low productivity and higher staff dissatisfaction. Thus, Amazon can opt for on-job training and paid training sessions so that employee can get satisfaction for learning about new technologies.
Innovating the business operations
Amazon can enhance their prime memberships of they offer certain discount and benefits like cash coupons for the next purchase once registered to the prime accounts. Moreover, Amazon should also have to bring unique features in their operations that can attract the users being the subscribers for the Prime Account. Strategies like online gaming shows, visualization of 3D view of the projects and virtual trial of the products can be incorporated in the Amazon Prime subscription for attracting more customers.
Management of Human Resources across borders
Developing two-way communication
The best suitable way to cope up with the change management is developing active two way communication with the employees where the leaders communicate each planned changes with the working personnel with proper justification and benefits that the company as well as the employee will get once implemented in the organizational operations. Amazon can also develop an organizational online social chat field where all the employees can share their suggestions and concern regarding products, technology, training sessions and other things in an informal way.
Conclusion
The company that is selected for the report is Amazon and in the overview of Amazon and it is found that Amazon was established in the years 1994 and their main products are Amazon Appstore, Amazon Echo, Amazon Prime, Amazon Kindle, Amazon Video and ComiXology. Total of 5,66,000 employees are working and $177.87 billion was their sales revenue for the year 2017. In Amazon’s international competitive strategy it is found that they use cost leadership and diversification strategies. It is also found that Amazon emphasized on customer obsession and not on the competitor and the existing organizational design structure have Chief Officer Executive (CEO), business development, Amazon Web Services (AWS), finance, accounting, international consumer business, consumer business and legal and secretariat. The entry strategies used to enter other regions/countries is found to be Foreign Direct Investment (FDI) and the distribution/supply chain management Amazon can use inbound sortation centers, outbound sortation centers, prime hubs and delivery centers. The management of human resources across borders that Amazon can use are de-centralizing the workplace environment, recruitment, designing effective employee benefits policies, employee training session and offering challenging roles to efficient employees. The key issues or opportunities for management found in this report are keeping up with the market, outdated knowledge base of the staffs, earning more users to use their prime membership, failure in adoption of the changes. The recommendations suggested are auditing competitor’s details, provision of training, innovating the business operations and developing two-way communication.
Reference List
Binder, J., 2016. Global project management: communication, collaboration and management across borders. Routledge.
Cowling, A. and Mailer, C., 2013. Managing human resources. Routledge.
Daft, R.L., 2015. Organization theory and design. Cengage learning.
Deresky, H., 2017. International management: Managing across borders and cultures. Pearson Education India.
Financial Times., 2018 Available at: https://www.ft.com/content/6486476a-e122-11e5-8d9b-e88a2a889797 [Accessed 20 May 2018].
Jackson, S.E., Schuler, R.S. and Jiang, K., 2014. An aspirational framework for strategic human resource management. The Academy of Management Annals, 8(1), pp.1-56.
Kang, W. and Montoya, M., 2014. The impact of product portfolio strategy on financial performance: The roles of product development and market entry decisions. Journal of Product Innovation Management, 31(3), pp.516-534.
Kumaraswamy, A., Mudambi, R., Saranga, H. and Tripathy, A., 2012. Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization. Journal of International Business Studies, 43(4), pp.368-395.
Laufs, K. and Schwens, C., 2014. Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda. International Business Review, 23(6), pp.1109-1126.
Leih, S., Linden, G. and Teece, D., 2014. Business model innovation and organizational design: a dynamic capabilities perspective.
Logisticsplus.net., 2018. [online] Available at: https://www.logisticsplus.net/wp-content/uploads/2016/05/The-Amazon-Global-Selling-S.jpg [Accessed 20 May 2018].
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.
Raff, H., Ryan, M. and Stähler, F., 2012. Firm Productivity and the Foreign?Market Entry Decision. Journal of Economics & Management Strategy, 21(3), pp.849-871.
Reiche, B.S., Stahl, G.K., Mendenhall, M.E. and Oddou, G.R. eds., 2016. Readings and cases in international human resource management. Taylor & Francis.
Ross, D.F., 2015. Distribution Planning and control: managing in the era of supply chain management. Springer.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Statista., 2018. Amazon: annual revenue 2017 | Statista. [online] Available at: https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom/ [Accessed 20 May 2018].
Ulhøi, J.P., 2012. Modes and orders of market entry: revisiting innovation and imitation strategies. Technology Analysis & Strategic Management, 24(1), pp.37-50.
Vance, C.M. and Paik, Y., 2014. Managing a global workforce: challenges and opportunities in international human resource management. Routledge.
Wang, Y., Wallace, S.W., Shen, B. and Choi, T.M., 2015. Service supply chain management: A review of operational models. European Journal of Operational Research, 247(3), pp.685-698.
Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A balanced approach. Cengage Learning.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
