Introduction
Globalization has presented diverse opportunities and challenges to businesses. Digital transformation has influenced businesses, especially e-commerce companies, to operate beyond borders. The power of adaptation, agility, and the desire to learn new things have affected the effectiveness of multinationals. Amazon is Jeff Bezos’s creation that first operated as an online marketplace in 1994 (Rikap 2022). The company began as a book-selling platform and later became a multimillion-dollar company. The company’s essential innovations and acquisitions have included the Amazon Go App and the acquisition of MGM. Similarly, eBay was initiated in 1995 and made its first initial public offering in 1998 (West 2019). The company operates in about 190 countries as an e-commerce platform for selling different products and connecting consumers and sellers (El-Ebiary 2021). It has used Pricing and innovation strategies to remain relevant in the competitive online retail industry. The online retail industry is promising, with most traditional retailers going online. The opportunities in this industry include artificial intelligence, augmented reality, and the growth of social media. Amazon operates in more than 50 countries. This study assesses the challenges and opportunities companies face when internationalizing their operations.
2.0 International Development
2.1 Amazon’s Model for Internationalization
Amazon has used Uppsala Model for internationalization and reaching Canada from the United States. The model asserts that knowledge affects the expansion of businesses to new locations; the lack of it is a hindrance (Vahlne 2020). Therefore, foreign market entry is a learning process. The initial stage of new market entry is initial commitment, followed by advanced market knowledge before entry. Psychic distance affects expansion because understanding a neighboring country is more accessible than knowing what happens in faraway countries. Its expansion to Canada, UK, and Germany shows that the company’s expansion decisions were informed by market knowledge, as the Uppsala model recommends.
2.2 PESTEL Analysis for Amazon in the UK
The UK political atmosphere favors foreign investors due to limited trade regulations on foreign businesses. The political atmosphere is also favorable. Economic factors may affect Amazon, including supply chain disruption, inflation, and readjustment to Brexit. Besides, social factors such as common language and increased consumerism offer opportunities for online retailers. Technological advancements such as increased smartphone usage, reliance on phone applications, and social media marketing remain Amazon’s opportunities. Another internationalization driver is the focus on environmental sustainability. Amazon is likely to appeal to environmentalists because of its emphasis on a sustainable economy. Laws might be challenging, including the Data Protection Act 2018, which might hold Amazon liable when consumers’ information reaches the wrong hands (Carey 2018). Such policies affect Amazon.
2.3 Examining Amazon UK Using Porter Diamond Model
The model reveals factors that make companies prosper or fail in certain countries. The model considers demand conditions as a factor of success. Amazon has been successful in the UK market because of the demand conditions. The company has lived up to consumers’ expectations, making it one of the dominant firms in the online retail industry.
2.4 eBay’s Model for Internationalization
The transactional cost model guided eBay in its entry into China. The model balances internal operations costs and international needs; therefore, any international decision the company makes must consider the transaction cost (López Morales 2020). When the transaction costs in foreign markets are lower, the company invests in such countries. The company penetrates new markets in certain circumstances through joint ventures, acquisitions, or mergers. In this case, eBay Company entered China through a joint venture with TOM Online.
2.5 PESTEL Analysis for eBay in China
The political environment in China might affect American companies due to trade wars between China and the United States. However, the country has an effective strategy of maintaining the costs of raw materials to remain low. The economic factor is that the government has a higher GDP, making its market more viable for traders. Additionally, the labor costs in the country are low, and eBay pays lower operations costs. Socially, the country has a large population that offers labor and a market. Many are young and embrace technology. However, the language barrier challenge affects American employees that can be transferred to this country. Technology, China is one of the most advanced countries, and many of its population own smartphones that eBay needs for online transactions. The country also invests most of its resources in innovation and technology to make its people more technologically advanced. Environmental concern remains a central issue in China, with the country investing in green cars to reduce pollution. Laws such as the ban on certain social media affect eBay.
2.6Examining eBay China Using Porter Diamond Model
The model considers government as a factor of success in foreign countries. The Chinese government has laid out infrastructure and system that supports business prosperity. For instance, low labor costs and advanced technology are opportunities that eBay enjoys in China.
3.0 Business Challenges
3.1 Amazon’s Challenges and Responses
International operations come with diverse challenges, leading to some companies’ failure. Besides the need for enormous resources, global companies face numerous social and political difficulties. Amazon operating in the UK and other countries faced myriad challenges, including fewer growth opportunities, government regulations, the challenge of observing the U.S. Foreign Corrupt Practices Act, geopolitical events, and other restrictions (Rikap 2022). According to global strategic rivalry theory, multinational corporations struggle to have a higher advantage in the competitive market. The theory recommends companies operating in the international arena find alternative strategies for combating such competition. When Amazon operates in countries where English is not a common language, language, and culture barriers arise. Introducing the company require the management to find interpreters, making the cost high because of additional salaries paid to interpreters. This challenge has hindered its expansion to Asia and Africa. Geopolitical events such as terrorism have affected the company’s expansion to countries such as Somalia because of poor security systems. In certain countries, fewer growth opportunities have derailed expansion or led to the closure of businesses. The challenges of innovation and entry into new markets also affected Amazon. The challenge of decarbonization requires Amazon to be extra innovative (Amazon 2023). Shipment and logistics operations make Amazon a significant polluter; therefore, it faces the challenge of decarbonizing its operations to zero percent. Entry into new markets is characterized by challenges such as local policies on licensing, poor market knowledge, and logistical issues.
Amazon has tackled these challenges using risk management strategies. First, the company has increased its spending on technology to address cases of cybercrimes and innovation. Amazon must be innovative, think beyond competitors, and address potential technological challenges. The challenge of market entry has affected many companies. Amazon solves this problem through thorough market research and acquisition. The company has acquired companies such as Zappos and BoxOfficeMojo.com. Legal tussles require compliance, which Amazon has shown.
3.2 eBay Challenges and Responses
The success of any multinational company depends on how it handles its challenges. When operating in international markets, eBay is exposed to different principal risks and challenges. The global strategic rivalry theory states that competition is a normal part of international busies; however, it is a challenge that can lead to organizational failure if not addressed effectively. The strategic rivalry comes from international and local competitors struggling for the same market niche. The theory insists that overcoming such barriers requires international business parties to focus on controlling the global market through research and acquiring intellectual property rights. eBay Company faces numerous challenges that hinder its global operations. First, regulations in other countries affect the company’s liberty of penetration. Certain countries tax foreign firms higher than local ones, demoralizing foreign firms from accessing new markets. Global ecommerce competition is also rising, as many traditional companies are adopting technology and offering services online. Such actions are risky to eBay because it might lose its customers to such businesses. Geopolitical events and the fluctuation of foreign currencies will likely affect the company working in a new environment. The rise of terrorism and natural disasters such as coronavirus puts companies at risk. Besides, inflation is increasingly affecting the strength of currency. In international business, the company might face operations challenges because of the fluctuating currency. Innovation remains a serious challenge as the cost of the invention and the dynamics of technological changes challenge most companies.
eBay Company has initiated various measures to curb such challenges. Global strategic rivalry theory inspires the company to seek lasting solutions to its global problems. First, eBay has invested resources in technology infrastructure to comply with regulations on cybercrimes, invest in technological innovations, and improve service delivery through technological platforms. Since the company relies on its technology for operations, having an effective and reliable technical infrastructure will address most of the challenges. The company also enters new markets through acquisition. It acquired EachNet in China. Such tactics have worked for eBay Company.
4.0 Additional Factor Evaluation
4.1 Amazon and Corporate Social Responsibility as Evaluation Factor
A company’s success is not only evaluated based on the profit generated; the impact that the company has on a community is crucial in increasing consumers and expanding the market. Amazon has been at the forefront of supporting communities and sustaining humanity. First, Amazon has supported families through its disaster response program. It uses its global logistic capabilities to aid countries with natural and political disasters. The company has developed the Amazon Web Services (AWS) Disaster Response team that delivers relief food to victims in different areas (Meyer et al., 2019). For instance, it returned relief supplies to Syria and Turkey during the war in the two regions. Atlanta has been one of the places with higher risks of hurricanes. In 2022, it doubled its relief in the region. Other disaster responses that the company offered natural and war victims included 30000 medical supplies to Ukraine hospitals, blankets and water to winter victims in Mississippi, and the fight against hunger by delivering thirty million meals to American families (Amazon 2023). Since Amazon is growing globally, its corporate social responsibility has remained global, supporting countries like Syria and Ukraine.
Organizational levels approach issues differently. Organizational levels are divided into strategic, tactical, and operational levels. The strategic levels are top management or owners that make administrative decisions, the tactical levels are middle-level managers who monitor employees’ operations, and the operational levels are workers. Engaging operational levels (employees) in CSR is vital for the organization’s success. Employees will feel motivated because they recognize themselves with change in their community.
4.2.eBay and Corporate Social Responsibility as Evaluation Factor
This company aims to empower people and ensure they create economic opportunities through technology that would help the community. The platform that eBay makes helps people build businesses and become economically stable. The company has invested some of its resources in charity. The eBay Foundation has donated various products to the American Red Cross and Nova Ukraine (eBay 2023). Besides, eBay has supported entrepreneurs and activities focused on sustainability. In 2022, eBay Foundation gave entrepreneurs $23 million in historical support through a support program (eBay 2023). The company has also been focused on sustainability as a way of reducing environmental degradation. Since the company uses transportation for logistics, its pollution levels need radical measures to alleviate the effects. Therefore, the company is focused on reducing its carbon footprint and saving energy. The company’s impact report showed that it had supported various social issues such as gender equality, responsible consumption, and decent economic growth.
An organizational level that would approach corporate social responsibility differently is the tactical level. The level comprises decision implementers who oversee the employee’s operations. Although junior managers are the experts in decision implementation, the ideas are from the top. When given opportunities to be part of the initiative, they would recommend appropriate changes that meet uncompromised standards. Besides, including them in corporate social responsibility would consist of implementing social responsibilities such as protecting organizational resources, linking employees and customers through regular CSR activities, and ensuring precautionary measures when dealing with sensitive matters. Companies handling CSR meet sensitive issues; however, organizational policies do not allow employees to take positions contrary to the organization. Middle-level members would ensure compliance with corporate ethics for all participants.
Conclusion
Amazon has been critical in advancing its operations globally. Using the Uppsala model of internationalization reveals why Amazon has a low international presence compared to other companies, such as eBay. The company only introduces its operations in an environment it understands, allowing it to assess risks before project initiation. Although Amazon has faced different challenges operating in foreign countries, it has developed effective survival strategies. The company has invested in technology and innovation, acquired other companies, and emphasized the need for research. Since Amazon operates in an environment with advanced technology dependency, investing in research and innovation will help develop new skills and competition management strategies.
Additionally, eBay has successfully penetrated new markets in Asia and Europe. Its operations in China have been due to market penetration and sustenance strategies. eBay’s main challenges have been market penetration, customer sustenance, innovation, geopolitical factors, and foreign policies. Technological innovation and mergers when penetrating new markets are two applicable measures for addressing the challenges. Technology will boost innovation and increase the possibility of withstanding competition. Mergers are the most appropriate way of understanding the business context, especially the culture and the customer needs. eBay has survived in different countries because it uses local firms to penetrate new markets in those regions.
References
Amazon. 2023. 2022 annual report. https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2022-Annual-Report.pdf [Accessed 1 July 2023]
Carey, P., 2018. Data protection: a practical guide to UK and EU law. Oxford University Press, Inc.
eBay. 2023. 2022 annual report. https://ebay.q4cdn.com/610426115/files/doc_financials/2022/ar/2022-annual-report.pdf [Accessed 1 July 2023]
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Meyer, F.J., Ajadi, O.A., Schultz, L., Bell, J., Arnoult, K.M., Gens, R., Molthan, A.L., Nicoll, J.B. and Hogenson, K., 2019, July. Applications of a SAR-based flood monitoring service during disaster response and recovery. In IGARSS 2019-2019 IEEE International Geoscience and Remote Sensing Symposium (pp. 4649-4652). IEEE.
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Vahlne, J.E., 2020. Development of the Uppsala model of internationalization process: From internationalization to evolution. Global Strategy Journal, 10(2), pp.239-250.
West, E., 2019. Amazon: Surveillance as a Service. Surveillance & Society, 17(1/2), pp.27-33.
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