Amazon – Research Paper

Posted: December 22nd, 2022

Amazon – Research Paper

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Research Paper – Problem Analysis and Description

The Chinese market for e-commerce is promising and any company operating in this area would want to venture into the region. Internet users in China passed 1.53 billion individuals in 2015, a sign that online transactions are rampant. Today China is the world’s leading e-commerce market with more than 49% of the globe’s online transactions emanating from the Asia Pacific state. Hilmola et al. (2018) inform that almost 20% of all the retail sales in China were executed via the internet in 2016 with e-commerce sales contributing for 8.8% retail transactions across the world. Furthermore, the online transactions approached $1.35 trillion in 2018 and are anticipated to reach $2.1 trillion by the time 2019 comes to an end. It also happened that the number of online purchasers passed 557 million with the entire amount anticipated to reach 636 million come 2020. Hilmola et al. (2018) further predict that e-commerce transactions in China could surpass those of the UK, the U.S. France, Japan, and Germany combined come 2020. The high prevalence of internet users should be a motivating factor for Amazon to restructure its activities such that they appeal to Chinese buyers.

Other factors in the China are likely to appeal to foreign investors such as Amazon, and businesses aspiring to venture into the area should find ways of gaining from these opportunities. China, for example, has a large population of nearly 1.4 billion citizens, which makes it possible to get affordable labor (World Bank, 2019). The high population in the country is one of the reasons the nation developed its economy during the 1990s when many people got jobs in different sectors. China has a stable economy, which could be beneficial to foreign investors. China’s GDP grows by about 9% yearly, and the World Bank (2019) considers the growth the fastest in any big economy. More essentially, China’s position as the globe’s leading exporter as well as the country’s stable economy increase the consumers’ purchasing power (The World Bank, 2019), a situation that could benefit Amazon. Other factors that could be beneficial to Amazon when it operates in China include the country’s increased participation in the global market, and high household saving rate ranging between 40%-50% (The World Bank, 2019).

Despite the numerous gains a foreign investor would experience by entering China, Amazon faces considerable challenges exploring the market, and the company needs to reconsider its plans if it needs to perform well in the country. Amazon moved to China in 2004 following its acquisition of Joyo, but regardless of the efforts to stabilize its operations in the region, its market share has never surpassed 15% (Amazon, 2019). Being an American company where the cultural practices and beliefs are quite different from the Chinese, Amazon must have failed to restructure its activities such that they conform to the local requirements. As a result, more Chinese consumers opt to purchase from Alibaba and JD.com that offer what local consumers want because of their awareness of the Chinese cultural requirements.

Apart from being unable to comply with the requirements of the Chinese culture, Amazon faces considerable competition from the leading e-commerce retailers in the country. Alibaba is one of the major operators in the Chinese online sector, and the company continues to widen since its beginning in 1999. Alibaba got $39.9 billion in revenue for the 2018 financial year, and the company’s local activities accounted for about 74% of the total revenue and the global activities generated 8.6% of the entire sum (Alibaba, 2019).  Alibaba enjoys competitive advantage over other operators because of its huge market base and the capacity to satisfy customers. Operations by JD.com further make it hard for Amazon to exploit the Chinese e-commerce market. The company (JD.com) is another e-commerce retailer that makes it difficult for Amazon to perform well in China. JD.com is one of the two major B2C e-commerce sellers in China and generated about $67.18 billion in 2018 putting it ahead of Alibaba (JD.com, 2019). JD.com’s effort to meet its consumers’ needs and the application of an effective distribution network gives the company competitive advantage over other operators. JD.com, nevertheless, need to address the weaknesses that could derail its activities such as weak response to new entrants and improper relationship with consumers from other cultures.

Solutions, Evaluations and Recommendations

The problem Amazon faces in China requires the company to embrace measures that would restore its operations in the region. A suitable way to improve performance would be to rely on the teachings of Hofstede’s cultural dimensions framework to acquire insight on what the Chinese culture requires. Hofstede identifies five dimensions of culture-related value systems to elaborate the character of various cultures across the world. The initial dimension is power distance, which refers to magnitude to which less influential persons agree that power is not distributed equally (Rashed et al., 2016). The company should know that unlike the U.S. power distance is quite high in China implying that hierarchy is openly outlined or structured in the society. The second dimension Amazon must consider is individualism which Hofstede refers to as the magnitude at which a society advocates for individual or collective relationships (Rashed et al., 2016). The company should know that individualism is low in China contrary to the Americans, thus making it necessary to consider factors that would promote collectivism. The third dimension in Hofstede’s framework is masculinity which is how much the society supports or does not promote masculinity power (Rashed et al., 2016). China scores high in this area and this could help Amazon to provide more males with higher position compared to female employees as the culture demands.

Amazon should consider the other features of Hofstede’s framework if it aspires to record good performance in China. Uncertainty avoidance (UA) is the fourth aspect and it measures the level of tolerance for what is unknown in a society (Rashed et al., 2016). People of Chinese origin score low in this dimension suggesting that they welcome different observations and perceptions contrary to the American citizens who are more rigid. Amazon while carrying out its operations in the Asia Pacific country should take note of situation and allow workers choose from a wide range of options. The fifth and the final dimension in Hofstede’s structure is long-term orientation measuring how a society acknowledges perseverance (Rashed et al., 2016). Amazon while operating in China should know the country scores high in this aspect, thereby implying that the Chinese are pragmatic and flexible in their approach of dealing with problems. The American company, therefore, should make sure it relates with employees and stakeholders as the framework by Hofstede requires; otherwise, it may still experience the hurdles that now force it to halt its operations in the region.

More fundamentally, Amazon could increase its chances of performing well in the Chinese market by utilizing its strengths and overcoming its challenges. The company, for example, could use it large revenue base to hire professionals who shall offer advice on how to perform well in China. The company should ensure that the personnel have adequate awareness on what the Chinese culture requires in terms of quality, organizational leadership, motivation, pricing, and communication among others. Furthermore, the company could use its financial prowess to customize its operations such that they comply with the Chinese culture. The firm, for instance, may label some of its products using the Chinese language and as well as provide other directives in a language many locals can understand. However, it may be hard for the company to attract more consumers if most of the items are labeled in English or are packaged using Westernized approaches.

 Amazon should consider other ways it could utilize its abilities and overcome its weaknesses to achieve better outcome in China. Amazon could also utilize its ability to sell a wide variety of items to attract more Chinese consumers although this would require appropriate marketing approaches. Chinese buyers would be more compelled to purchase from Amazon when they can access some of the products that are not available at some of the leading retailers in the country, and this will have direct impact on organizational performance. Amazon could also attract more buyers in China by using its technological superiority to develop more products that help to solve some of the issues people encounter in their daily encounters. Also important towards helping Amazon succeed in China is utilizing the low cost strategy and enlightening buyers that the company offers items at relatively affordable prices compared with other operators. Amazon would also achieve the desired outcome if it increases its brick-and-mortar availability to allow more buyers access the products, especially if they lack the means to purchase online. Developing more stores where buyers can purchase goods would not only make it easier for the company to reach out to more buyers, but will also create room to understand what buyers need and their reaction to the products and services.

Implementation and Success Matrix

Amazon needs to settle on an effective approach for implementing the recommendations that would help it achieve the desired outcome. The company should hire a team of qualified personnel to guide it on what the Chinese market requires to find it easier to execute its operations in the region. The team appointed to adjust the company’s operations to fit into the Chinese market should continuously study the trends and suggest options that would help the e-commerce retailer gain a firmer position in the highly competitive sector. The management, however, should closely monitor the activities of the selected team to ensure they conduct their activities in accordance with the company’s policies, as well in line with the purchasers’ expectations. A suitable way to know the company is heading towards the right direction would be to monitor the revenues Amazon generates from the Chinese market. Increasing revenues would suggest that the firm is one the right path towards stabilizing its operations. More essentially, Amazon should monitor the reviews it gets from Chinese customers and assess whether they are positive or not. Positive criticism and continued encouragement would mean that Amazon is heading towards the right direction in improving its operations in China. Nonetheless, Amazon would still have to alter its approaches if it does not record growth even after implementing the recommendations.

Conclusion

Amazon is the world’s leader in e-commerce sales, but must strategize its plans to perform well in China where the company is slowly halting its services. Amazon works very hard to achieve its mission and vision, and understands the importance of maintaining close relationship with stakeholders, including the buyers, workers, shareholders, and members of the community where the company operates. Amazon has a large portfolio which makes it possible to generate high revenue, employs advanced technology, and sells a broad range of products. The company, however, needs to venture in developing countries and increase its brick-and-mortar availability. The opportunities Amazon could utilize to improve its operations include the chances of entering developing markets and growth in technology, while the threats that could disrupt its activities are stiff competition locally and globally and increased cybercrime. The stiff competition deters Amazon from performing well in China where the company is now closing some of its operations. Furthermore, the inability to adhere to Chinese culture making it difficult for the American multinational corporation to interact with local purchasers makes it hard to perform well in the Chinese market. Amazon can only increase its chances of performing well in China if it learns and applies what the Chinese culture requires, and if it utilizes its strengths and overcomes its weaknesses.

References

Alibaba. (2019). Alibaba.com. Retrieved from

www.alibaba.com/showroom/alibaba-official-website.html.

Amazon. (2019). Amazon. Retrieved from

www.amazon.com/.

Hilmola, O., & Tolli, A. (2018). Evaluation of Chinese e-commerce cost and lead-time performance to Estonia. Quality Innovation Prosperity, 22(1), 14-26.

JD.com. (2019). JD.com. Retrieved from

www.jd.com/.

The World Bank. (2019). Overview: China. Retrieved from www.worldbank.org/en/country/china/overview.