International management involves proper knowledge of international economies, leading changes in International Corporation for creating global business strategies (Beugelsdijk et al. 2015). The study is concerned with discussing the international business management of Amazon. Moreover, focus of the study is majorly given on United Kingdom. The study will discuss the current international performance of Amazon for demonstrating the success of internationalization. Apart from that, the study will majorly focus of the strategies adopted by Amazon towards managing the cultural differences in international market.
Amazon’s international expansion has demonstrated a rapid growth in the last several years. For the last few years, the organization has moved to more 13 countries for increasing its international revenues. Amazon has so far kept its focus on large countries having developed economic condition. With high level of international expansion, the tech giant has become the largest internet retailer in the world in terms of its revenue and market capitalization. Furthermore, the organization has been considered as the largest provider of cloud infrastructure services. The organization has separate retail websites for United State, United Kingdom, Ireland, Canada, Spain, Australia, Japan, India, China, Netherlands and Mexico (Ritala, Golnam and Wegmann 2014). Amazon has recently released its 1st quarter revenue growth of 2017. This quarter has demonstrated a stronger revenue growth. Moreover, net sales of the organization have been raised by 23% year-over-year. In the 2nd quarter, the sales volume of organization is expected to grow by 24%, which is between $35 billion and $37 billion (Clancy 2017).
Figure 1: Revenue Growth of Amazon
(Source: Ritala, Golnam and Wegmann 2014)
In the year 2014, more than 37% sales revenue of Amazon has been generated from it international business (Jeffrey Dastin 2017). In this year, the North American sales of the organization have been increased by 25%, whereas the international sales have also been increased by 12%. The operating loss of Amazon’s international business has been expanded from $699 million to $1.283 billion between the years 2015 to 2016. However, the net sales for international segment have been grown from $35.418 billion to $43.983 billion for the same period (Jeffrey Dastin 2017).
Figure 2: International Revenue Growth of Amazon
(Source: Panagiotelis, Smith and Danaher 2014)
Amazon has gained almost 43% market share in US market (Intelligence 2017). Furthermore, international market share of Amazon has also been increased by 4.6% in the recent year. Moreover, the organization has gained 13.29% market share in overall international market (BBC News 2015). While considering the international market in United Kingdom, it can be seen that Amazon has posted a strong market performance. The overall takings of Amazon in UK market have been raised by more than 14%.The UK based Amazon has recorded a profit of £34.4 million (BBC News 2015). In this way, internationalization of Amazon in United Kingdom has reached great success.
Figure 3: Global Market Share of Amazon
(Source: Jeffrey Dastin 2017)
Amazon faces tough competition in China market from the China’s retail giant Alibaba. In the year 2016, the revenue level of Alibaba has been increased by 33% (Intelligence 2017). On the other hand, revenue level of Amazon has been increased by 28.65% in the same period. However, Amazon is leading UK market having 16% market share (Clancy 2017). The sales volume of Amazon in United Market contributes significantly in the overall profit level of the international business. Moreover, the total sales of Amazon group in UK market represent sales volume of £5.3bn. On the other hand, £5.3bn UK sales volume of UK market represents 9.4% overall global sales of Amazon (Clancy 2017). The organization earns maximum of its revenue in this market from selling book through online channel. Moreover, in the last year, the organization has earned almost 45% of its total revenue in this market from selling online books (Intelligence 2017). Amazon has also gained a huge success in Indian market. Moreover, the organization has posted $35.7 billion revenue in this market (Jeffrey Dastin 2017). Moreover, it can be said that Amazon is quite success in its internationalization towards gaining high level of profit.
Figure 4: UK Market Share of Amazon
(Source: Jeffrey Dastin 2017)
Identification of Cultural Difference
Hofstede’s Fifth Dimension and Value Dimension
It is the degree to which less powerful employees accept or except of the power of more powerful employees (Bartlett Christopher A. and Paul Beamish 2014). In case of USA, the organization power of Amazon is restricted only within the upper level managers. Moreover, there is unequal power distribution among the employees in USA. On the other hand, the organizational power is equally distributed among the employees of Amazon in UK subsidies. Low level employees can easily and flexibly communicate with high level employees. Therefore, managers of UK subsidiaries considers equal power distribution for managing cultural differences
It is the degree to which organizational members are more inclined to work in group (Deresky, Helen 2017). In case of USA, the management of Amazon follows individualistic culture, where individual performance is preferred over team performance. However, in case of UK, the employees are more inclined to work in groups. Therefore, the UK management Amazon follows team approach for managing cultural difference in international management.
The employees of Amazon in USA are highly inclined to embrace something new and innovative in their work. A high degree of acceptance for the new differing thoughts and ideas can be seen among the USA employees. On the other hand, UK employees are also coming out of their stiff thoughts and behavior. They are also now open enough to accept innovative ideas. Therefore, Amazon can apply same innovative thoughts for managing cultural differences.
The management of Amazon in USA provides equal power and authority to the women employees in terms of operating business. In UK business culture, women are respected enough, but they often do not get equal power as male employees. However, in recent UK culture, women are provided enough authority and power. Therefore, Amazon can apply the same strategy for women empowerment for managing cultural difference.
It is the degree to which traditional or modern ideas are honored in the organization (Rodrigues Carl 2009). In USA culture, modern valued and problem solving ideas are always accepted over traditional thoughts. However, UK organizations have somewhat preferences to honor the traditional thoughts. Therefore, Amazon should use mixture of traditional and modern thoughts in their business process for overcoming cultural differences.
Universalism versus Particularism
Amazon in USA follows Universalism culture, where standards and values are highly important and can only be departed after consultation. On the other hand, the organizations in UK follow Particularism, where application of ideas is highly dependent on current circumstances. Personal relationship and obligations are extremely important for making ethical decision (Richter et al. 2016). Therefore, Amazon considers this factor for managing cultural differences.
USA business cultural mostly follows Individualism, where individual performance is of utmost important. On the other hand, UK business culture follows Communitarianism, where the management mostly prefers teamwork in achieving organizational success. Therefore, Amazon should follow group work for managing cultural difference.
USA business cultural is mostly neutral, where the management never considers the emotional factor in taking any business decision. On the other hand, UK business cultural also restricts pen and spontaneous expression of emotion (Chidlow, Plakoyiannaki and Welch 2014). Therefore, Amazon can apply same strategy for neutral cultural for effective international management.
USA business organizations mostly follow diffusive business culture, where public space and private space tend to be interwoven. The employees have great value of formality in business relationship. On the other hand, UK organizations allow large public space and small private space for sharing with their friends and close associates (Cano-Kollmann et al. 2016). Therefore, Amazon follows an informal approach in UK subsidiaries for managing cultural differences.
USA business culture is mostly associated with achievement status, where the status of a person is demined based on his performance. However, UK business culture is mostly associated with ascribed culture, where the status of an employee is determined based on his career position. Therefore, Amazon deploys experienced and older people for dealing with UK subsidiaries.
USA business organizations follow Sequential culture, where timeliness is strictly adheres with business operation. Moreover, this culture follows the typical expression like” Time is money”. On the other hand, UK business organizations follow synchronous time, where they believe that human bodies have their own rhythm and they do no concern more about time zones. Therefore, Amazon follows synchronous time instead of sequential time for managing cultural difference.
USA business culture, the organizations mostly follow outer direction, where control the business environment as much as possible for achieving organizational success. On the other hand, UK business culture follows internal direction, where the management mostly controls the environment in harmony with the environment (Chidlow, Plakoyiannaki and Welch 2014). Therefore, Amazon follows internal direction for managing cultural difference in international business.
|
The Honeymoon |
· Excitement with new sights, sounds and smells · Intrigue with both the similarities and differences of host country and home country · The USA expatriates of Amazon take interest in identifying the customs, trends, fashion, foods and others of international market for cultural adjustment |
|
Irritation/Hostility |
· Primary focus is on the differences between host country and home country · The expatriates can be frustrated with the cultural differences · Misunderstanding with international culture and language is more like to happen in this stage |
|
Gradual Adjustment |
· The expatriates of Amazon from USA get more familiar with the host country’s culture · Deeper learning about the host culture and feel more comfortable with the culture |
|
Biculturalism |
· New culture of host country remains no longer new · Cultural difference no longer affect the expatriates in negative way · Appreciation for certain aspect of foreign culture |
Table: 4 Stage of Culture Shock
(Source: Paharia, Avery and Keinan 2014)
Complete Knowledge of Foreign Culture
Knowledge of foreign culture builds the foundation of international business. According to Klaus (2013), proper understanding and knowledge about foreign culture assist the organizational employees in understanding the values of the international work team. Amazon has adopted this strategy for understanding the differing cultural values of the global team members. Moreover, such complete knowledge of foreign culture facilitates the organization in acknowledging the difference in perception of the organizational members (Paharia, Avery and Keinan 2014). It ultimately facilitates the organization in setting their behavior and strategies based on cultural differences of the organizational stakeholders. On the other hand, López?Duarte, Vidal?Suárez and González?Díaz (2016) opined that complete understanding of foreign culture drives the interpretation and evaluation of social situation of the international business stakeholders. Likewise, Amazon also has gathered complete understanding of the UK culture for being accommodated with this culture. Moreover, recognition of culture of UK business partners fulfills the first condition of mutual understanding and good co-operation with them (Richter et al. 2016).
Chidlow, Plakoyiannaki and Welch (2014) pointed out that open communication is the best strategy for managing cross cultural differences in international business. Moreover, open communication helps the organizational employees in sharing their issues with management and even among each other. Therefore, they can better understand their differing value and opinions associated with differing culture. It fosters respect differing cultural values among the employees. Likewise, Amazon maintains open communication in managing the cultural differences among the employees in dealing with UK global team. Such open communication drives the diverse employee groups in sharing their common interest area (Cano-Kollmann et al. 2016). Therefore, it enhances the collaboration and cooperation among the employees having different cultural background. On the other hand, Janssens and Steyaert (2014) opined that open communication leads to personal feelings in the interaction between the diverse workgroups. Such personal feelings in the interaction foster respect and warmth among the diverse workgroup. Likewise, Amazon uses open communication strategy for maintaining cultural differences among the diverse workgroup of UK subsidiaries. Open communication strategy leads the employees towards sharing information beyond their work life. Therefore, the diverse employee groups can better understand their culture differences and take active initiatives towards minimizing those differences (Glavas and Mathews 2014). Moreover, the personal feelings in the interaction encourage the organizational members towards minimizing their cultural difference with their own initiatives.
As per Perri and Peruffo (2016), respect for international culture facilitates the organizational members in accepting the cultural differences without any judgment. Hence, Amazon has adopted the strategy of respecting cultural difference for maintain its cultural differences in international business. As per this strategy, no one can claim that certain culture is more perfect and better than another culture. In this way, such strategy has fostered a homogeneous culture in Amazon, which helps it in managing cultural differences in UK subsidiaries (Hutzschenreuter, Kleindienst and Lange 2016).
Fainshmidt, White and Cangioni (2014) pointed that cultural training is the systematic process of educating the organizational members about the values and importance of differing cultures. It fosters in-depth understanding and clear communication among the organizational members having different cultural background. Likewise, Amazon provides cultural training to the organizational members for fostering cultural bonding among the diverse workgroups in UK subsidiaries. Such training maximizes the positive result of intercultural interaction of Amazon. On the other hand, Poulis, Poulis and Plakoyiannaki (2013) opined that cultural training also trains the ways of accommodating with different cultural environment. In case of Amazon, cultural training helps the global team members in understanding different language, values, opinions, norms and customs (Glavas and Mathews 2014). Therefore, the organizational members can quickly adapt themselves with different organizational culture. In this way, Amazon manages it cultural difference in its internationalization.
Helping in Community Development
Community development is an extremely beneficial aspect of corporate social responsibility. In this strategy, organizations take active initiatives towards developing the community surrounding them. In case of internationalization, community development enhances the corporate image of the organizations in the community of international markets (Perri and Peruffo 2016). Hence, Amazon has actively engaged itself in community development for managing its internationalization. In United Kingdom, Amazon has initiated Magic Breakfast strategy, where it provides 1million breakfast in 77 schools (Amazon.co.uk 2017). It ensures that children are getting nutritious breakfast and start the day ready to learn. The organization also provides funding for educating the children and youths. The organization also helps the women in fulfilling their ambitions and career development with financial support. Such community development strategy of facilitates the organization in managing their internationalization in UK.
Empowerment to the employees ensures a significant part of corporate social responsibility in an organization. Kolk (2016) pointed out that empowerment to the employees leads to effective working culture in an organization. Such working culture ensures fair and authentic working condition for the employees, which facilitates in better managing internationalization by managing international employees. Amazon has initiated Amazon Career Choice Program in UK, where pre-pays 95% of tuitions and fees to the employees for earning certificates and associated degrees with high demand (Amazon.co.uk 2017). On other hand, the organization has also taken the strategy of empowering women employees in the workplace by setting women themes. Such themes encourage the women employees towards being bold and adopting some challenging jobs for their career development. In this way, the organization attracts talented employees in the international markets through fostering effective organizational culture.
Glavas and Mathews (2014) pointed out that investment in country’s economy fosters sustainable development of an organization in long term. Such strategy of an organization ensures contribution to the country’s economy towards overall economic growth. In case of Amazon in UK, the organization has invested almost £6.4 billion in UK economy since 2010. Moreover, the organization has created almost 24000 jobs in UK by the end of 2017, which had reduced the unemployment rate of the country (Amazon.co.uk 2017). Furthermore, 74000 individuals in UK are employed by third party sellers for supporting selling on Amazon marketplace in UK. In this way, Amazon has ensured sustainable business operation in United Kingdom.
Janssens and Steyaert (2014) stated that environmental sustainability ensures long term organizational sustainability through protecting the environment from harmful effects. Amazon is putting their scale and their inventing culture towards working on sustainability and protecting the environment. Such active initiatives of the organization help in better management of internationalization, as it ensures overall environmental protection of the globe. Moreover, the organization has adopted Clean Power Plan initiatives for using renewable energy for the purpose of business operation (Amazon.co.uk 2017). Apart from that, the organization has also initiated 100% recyclable packaging process for ensuring environment protection. Such initiatives have enhanced the corporate image of the organization in its international market, which has helped it in managing effective internationalization.
Acquisition
Lojacono, Misani and Tallman (2017) stated that acquisition indicates the market entry strategy, where an organization buys most of the stakes of another organization for getting control over it. Amazon adopted acquisition market entry strategy for entering in United Kingdom. Moreover, the organization simultaneously acquired telebuch.de and bookpages.co.uk for entering in German and UK market (Laufs and Schwens 2014). These two organizations were the leading online bookshops in these countries. These two websites later re-launched under the name like Amazon.de and Amazon.co.uk brands. Such acquisition strategy enabled Amazon towards quickly moving into these countries through getting control over local offices and distribution staffs.
Partnering or Partnership is almost a necessity for an organization for entering in foreign markets. According to Lojacono, Misani and Tallman (2017), partnership is an agreement, where two or more business partners agree to cooperate for advancing their mutual interest. While considering the marker entry choice of Amazon, it has been found that Amazon has adopted partnership strategy for building established market in United Kingdom. Moreover, the organization has made a partnership relation with Morrison for establishing themselves in Grocery market of United Kingdom. Moreover, the Amazon members can order the fresh and frozen foods of Morrison for getting them delivered only within1 hour (Kim, Min and Chaiy 2015). Such market entry strategy has assisted Amazon in quickly expanding in UK market. Moreover, such strategy also helps the organization is bettering sharing the business profit and loss with partner organization.
Greenfield Investment strategy is a form of foreign direct investment, where parent company builds it operation the international market from group up. Apart from constructing new production facilities, the organizations also build new distribution hubs, living quarters and offices. Amazon has adopted such market entry strategy in entering in Japan market. Moreover, the Amazon has adopted Greenfield marketing strategy for entering in Japan market (Perri and Peruffo 2016). Such strategy has facilitated the organization in gaining better control over the subsidiaries of Japan.
Globalization is related to just making the products and services globalized for enhancing the market expansion. According to Hutzschenreuter, Kleindienst and Lange (2016), globalization refers to economic globalization, which integrates the national economy with international economy through foreign direct investment, trades, capital flow and others. However, Laufs and Schwens (2014) opined that localization is related with acknowledging national differences and being local responsive for meeting local demands of international market. The success of internationalization is largely dependent on effective localization strategy through meeting the local demands of international markets.
Amazon perfectly manages its localization strategies for balancing tension between globalization and localization. The organization has made it UK localization strategies based on the local demand of UK people. The customers of UK are highly conscious about the delivery time of product in their online shopping. Therefore, Amazon has initiated 1 day delivery system in this country for meeting the local response of the UK people (Chidlow, Plakoyiannaki and Welch 2014). On the other hand, unlike Americans, Chinese customers care about when purchased the items will arrive and if the items will arrive. Therefore, the organization states arriving time when the items will arrive at the doorstep of the customers in China. Furthermore, the customers of United Kingdom also prefer to open various windows in their browsers and tabs for comparing the products and services (Janssens and Steyaert 2014). Amazon UK has also adjusted to suit their behavior through customizing their websites.
Harnessing the Power of Cultural Diversity
Internationalization has led to cultural difference in Amazon across the cross national borders. The organization has taken proper strategy for managing and overcoming the challenges of cultural differences. Now, Amazon should harness the power of cultural diversity towards fostering sustainable development of international business. Moreover, the organization can engage the diverse group of people, who have local knowledge of the particular international market for understanding the international culture. In this way, the organization will be able to provide customized products and services to the customers by understanding the core needs of international customers.
Amazon is already committed in community development activities for overall development of the community surrounding them both in domestic as well as international market. Moreover, the organization has initiated also every aspect of community development. However, the organization still has less major initiatives for improving the health condition of the community people. Such initiatives will touch the heart of community people in international markets. Hence, the organization can better foster sustainable development of international business through more engagement with community people and helping them in their health improvement.
Amazon has already adopted acquisition and partnership for entering in United Kingdom. However, the organization needs new insights and local expertise for understanding the international markets. It can help Amazon in providing customized products and services having complete understanding of the international market. In such case, Amazon can make joint venture relationship with any reputed organization of UK. Such strategy will help Amazon in gaining proper market insights and expertise in this international market. Furthermore, the organization can also share the profit and loss with the venture company. It can reduce the impact of risk occurred from the particular types of business, which can foster sustainable development of Amazon in international market.
Amazon should be more concerned about the localization strategy for gaining sustainable development in international market. The organization has already adopted some effective localization strategy towards enhancing their local responsiveness in international market. However, in UK, the organization should be more concentrated on its localization strategy for gaining sustainable development in international business. Moreover, the organization should be highly focused on product quality improvement for meeting the local needs of UK customers. Such localization will create unique value to the customers, which will in turn foster competitive gain towards sustainable international business development.
Conclusion
While concluding the study, it can be said that Amazon is quite successful in its internationalization. As per 2014, almost 37% of its overall revenue comes from its international business. Amazon has gained almost 43% market share in United Kingdom. On the other hand, it has gained around 13.29% market share in global market. The organization has adopted several strategies for managing various areas of international management. Internationalization has led to major issues of cultural difference. However, the organization has adopted the strategy of cultural training for fostering respect among organizational members having different cultural background. The organization has also adopted the strategy of community development, environment sustainability and economic growth of the country for sustainable international business. Apart from that, Amazon has adopted acquisition and partnership strategy for entering into UK international market. Balancing the tension between globalization and localization is of prime importance for fostering sustainable international business. In this extent, the organization has adopted the strategy of delivering products within 1 day for meeting the local needs of UK customers. However, the organization should be more engaged in community development and proper localization for sustainable international business.
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