Global Business: Amazon - Assignment Example

Global Business – Amazon Global Business – Amazon Introduction Amazon specializes in electronic commerce and has its headquarters in Seattle, Washington DC. With respect to size, Amazon is America’s largest retailer operating through the Internet. The company has a long list of products that include beauty products, media, personal care products, jewelry, watches, kitchen items, and beauty products among others. These product are marketed and sold globally mainly through the Internet. Amazon operates within three main countries that incorporate India, Spain, and Mexico. These countries are members of the World Bank, the IMF, and WTO (CIA factbook, 2015). Due to the economic performance of the three countries such as Mexico having the 14th largest nominal GDP, Spain having the fifth largest economy in the EU, and India having the 11th largest economy by exchange rates, it is clear that these nations follow the guidelines of the three international institutions that include the IMF, WTO and the World Bank. Amazon was chosen for this project due to its size and especially to find out how it has managed to become a leader in the Internet based market. Foundations of Global Business The foundation of Amazon’s global business includes establishment in regimes that have transparent political institutions as well as functioning judicial systems. Within several previous decades, the three countries within which Amazon operates have exhibited tremendous economic growth. This is mostly because of the globalized nature of the trade that they engage in. The three nations have also established internal structures that favor globalization. This implies that these countries act as good markets for Amazon’s products. Mexico hosts several major automobile manufacturers that include GM, Chrysler, and Ford. This makes Mexico ideal for Amazon’s products in related fields. The booming pharmaceutical industry of India is expected, by 2020, to reach an estimated $48.5 billion. This is why Amazon has a specific interest in India. On the other hand, Spain is one of the countries where companies that include Ferrovial have achieved a global status from establishing an ideal market environment for Amazon. These factors form some of the most important foundations of Amazon’s global business. This is because of the existence of functioning judicial systems as well as strong political systems in the involved countries. On top of that, these countries support and promote globalization through the establishment of capitalist mixed economic systems. The democratic mode of governance began in 1917 in Mexico following the establishment of a presidential system. India is a constitutional republic that is constituted of three main governmental branches, which include the Judiciary, the Executive, and the Legislature. Spain culminated its constitution in 1978 and established a democratic mode of governance, which supports human rights. The existence of democratic governance systems in the three countries indicates competitive markets as well as respect for property rights. The existence of able judicial system is an indication of an ability to deal with corruption issues. Amazon’s products are subjected to various tariff and non-tariff barriers in certain destinations. The key barriers placed on the products incorporate import-licensing requirements, import charges, and standard disparities. The non-tariff barriers mostly affect the products in the categories of baby products, health products, as well as beauty and personal care products (Marcus, 2004). With respect to trading blocks, Amazon operates in a number of these blocks that include European Free Trade Agreement (EFTA), Central American Common Market (CACM), and North American Free Trade Agreement (NAFTA). This is a strategy that enables and allows the company to acquire a large market for its products. In addition, this decreases the cost of production due to the benefits that arise from mass production, allows for better competition, and increased efficiency in the market (Brandt, 2011). Global Business environment Hofstede’s ranking uses four key dimensions that include Individualism (IDV), The power Index (PDI), The Uncertainty Avoidance Index (UAI), Long Terms Orientation (LTO), and Masculinity (MAS) (The Hofstede Center, 2013). This ranking can be used on four main countries within which Amazon operates and include U.S, U.K, Australia, and China. The IDV stands for the degree to which the society is willing to recognize both individual and collective achievement. In this respect, the U.S acknowledges these achievements as compared to other countries such as China. Asian countries score high in PDI, which is the level of inequality within a society. This is in contrast to western capitalist nations due to access to capital resources. With regard to MAS or the extent to which a society is willing to accept the male model as controllers and the ones with power, the West and East have similar scores with the exception of the U.K. China scored highly according to the LTO or the capacity to overcome obstacles with time. In order to improve communication between American manager and foreign associates, the manager can learn their language as well as their cultural practices and identify areas of potential conflicts. Europeans are usually comfortable with outside set ups but Asians prefer formal set ups. For the purpose of keeping associates happy, settings would have to be modified. Some of the challenges involved in doing business in countries such as Columbia include possibilities of political and social unrests (Bureau of Western Hemisphere Affairs, 2013). Such threats affect the economic performance of the company in various vulnerable countries. Africa, too, has a possibility of unrest especially countries that include Egypt, Libya and Uganda. With regard to the legal environment, Amazon has a relationship with countries that use the common law as well as those that use the civil law. The freedom of expression established in the countries under the common law make it easy for organizations such as Amazon to enter and operate. Countries with other laws make it difficult to enter the market. Amazon has a strict policy on ethics as well as on corporate social responsibility. Being an online organization, it is easier to monitor the operations. The organization also donates portions of its sales to charitable organizations as well as disaster victim funds. Some of the countries within which Amazon operates that include Finland and Denmark have a high score on the Corruption Perception Index while those that include the Equatorial Guinea and Nigeria score very low. Such corruption threats may affect the working of Amazon negatively although it may not be functioning physically in these countries. Global business strategy and organization Whenever Amazon establishes an entry strategy, it has an exit one. This is in accordance to the fact that businesses estimate their performance once they access the market based on mere investigation concerning the subject country and the possibility of profiting from doing business there. An entry strategy is developed when an organization identifies a market and perceives that it may be profitable to operate there. However, if the organization has been making losses or feels that it is unsure concerning profitability in specific markets or even the existence of excessive threats in the market it may decide to pull out. Such threats include the modern economic collapses, terrorism, and violence in certain countries. Political unrests and unfavorable laws may also prompt an organization to plan an exit strategy. Being an online company, it may be very easy to plan and execute an exit strategy for Amazon. This is especially in the countries that it does not have physical existence. However, the entry strategy is mostly reliant on the prior existence of an online commerce potential. This is because the customers must have some technical knowhow so as to access these services. The more the literate customers the bigger the market for Amazon and thus a potential entry point. The controls that Amazon sets up for its global business are also reliant on the existing market. This is because the organization could be vibrant in operation if the existing market is struggling (Thorpe, 2011). Amazon’s organizational structure is the hybrid one. Being an online business, it is available globally and has numerous segments within its existing operational capacity. Application of the divisional or functional organizational systems alone could mean problems for Amazon due to the diversity of the organization’s products as well as the scale of operations. Given the size and scale of Amazon’s operations, it is clear that organization’s already established structure is good since it supports the organization (Kolbaia, 2013). This is also because of the current performance of Amazon. Managing global business Many employees in this organization are represented by umbrella labor union movements known as the American Federation of Labor – Congress of Industrial Organizations and Change to Win Federation or collective bargaining agreements. Although accurate figures are not available indicating the exact number of employees represented by these labor unions, it is known that only a small number is not covered. Those represented by collective bargain agreements work overseas. Since Amazon sends expatriates to undertake various tasks overseas on its behalf, it has established guidelines on hiring of employees from other countries. These policies show the steps that must be undertaken before the hiring is done and even before they are sent abroad. One of the major resources that they receive before leaving is information concerning the areas that they would work in. The employees are also taken through the laws of the subject country. Amazon recognizes the importance of the Internet in various aspects including training of the employees. The development kits for Amazon’s employees are Internet based. In addition, the managers spend significant amount of time researching the most recent training developments for their employees. Through the Internet, HR managers are able to hold chats with managers from other branches. This mostly helps in the sharing of information ensuring that the most recent training kits are available for all employees. In addition, the managers also use the Internet to prepare presentations used to train employees or explain various situations in various locations especially those overseas. With regard to promotions, the company is also engaged in promotional activities. These include the use of discount offers for various items. Such a promotional feature is only adopted following intense research on international markets. The promotional methods used in the international arena are the same ones used on the domestic markets by the organization. The most common distribution channel that the company uses is the producer to customer channel although the producer-retailer-customer channel is also used. These distribution channels are usually shorter than others adopted by various companies are. This ensures that the final prices are not too high due to the excessive intermediaries. The company uses a global production model in that it has a production plant within a trade bloc. The organization belongs to more than one supply chain. The main stakeholders in these supply chains include customers, staff members, communities, and industries (Stefansson & Russell, 2008). The company outsources to various countries globally. The main reason behind this is to utilize the comparative advantage that different companies have with respect to production of diverse goods crucial in this industry. With the nature of the goods that the company deals with, it practices global procurement. This ensures easier and more affordable production of goods in its product line. In conclusion, Amazon is one of the largest Internet based companies that deals in a wide range of products that include beauty products, personal, care, media, jewelry among others. The business has managed to establish itself in many countries. Being an online company, establishing itself in many countries has been easier although different countries have unique challenges. India, Spain, and Mexico are the main countries where Amazon operates. When Amazon decides to establish itself in a specific country, it also establishes an exit strategy in case the outcomes do not turn out as anticipated. Its operations are mostly affected by various threats that exist in the unstable countries such as political unrest and unfavorable rules in the host countries. The entry strategy is mostly based on the literacy of the population with regard to the Internet and the existence of other struggling e-commerce businesses. This allows it to establish itself easily. The organization enjoys a hybrid organizational structure. References Brandt, R. L. (2011). One Click: Jeff Bezos and the Rise of Amazon.com. New York: Portfolio Penguin. Bureau of Western Hemisphere Affairs. (2013). Colombia. Retrieved from http://www.state.gov/r/pa/ei/bgn/35754.htm CIA factbook (2015). U.S. Relations with India. Retrieved from http://www.state.gov/r/pa/ei/bgn/3454.htm Kolbaia, G. (2013). Amazon.com Organizational Structure (Flowchart) Creately. Retrieved from http://creately.com/diagram/example/haguvble1/Amazon.com+Organizational+Structure Marcus, J. (2004). Amazonia: Five Years at the Epicenter of the Dot.Com Juggernaut. W. W. Norton. Stefansson, G., & Russell, D. (2008). Supply chain interfaces: defining attributes and attribute values for collaborative logistics management. Journal of Business Logistics, 29(1), 347-359. The Hofstede Center. (2013). United States - Geert Hofstede. Retrieved from http://geert-hofstede.com/united-states.html Thorpe, W. (2011). A Look at Amazon.com. Retrieved from http://www.valueline.com/Stocks/Highlight.aspx?id=10395 Read More