Amazon’s Problem in China

The term “multiculturalism” refers to the way diverse cultures co-exist in one community around the world (Youssef-Morgan & Hardy, 2014). For multinational companies like Amazon, it is imperative to have multicultural teams or a multicultural workforce. For instance, the case study provided reveals how a lack in cross cultural communication led to Amazon’s decline in China. One of the major benefits of incorporating cultural diversity in the workplace and in the business strategy is that a company like Amazon would win the goodwill of both the target audience and the workforce. It helps in building respect and integrity amongst the people the company is working or interacting with. In addition, it positively impacts customer service. If Amazon is to target a global audience, it would not sit well with the customers if they were to be generalized or fit into a category. It is the company’s onus to ensure that the individual needs of each customer are met; that can be made possible only through an efficient multicultural team.

The best way to enhance revenue outcome through a multicultural team is by understanding the culture the company is catering to (DeLancey, 2013). Taking into account the case study, Amazon should have made an attempt to understand and study Chinese culture before trying to apply the same business and marketing strategies which had worked previously in America or Japan. A thorough market research, along with market segmentation and target driven marketing would have worked wonders for Amazon in China. Also, Amazon should be able to develop and nurture authentic relationships which could in turn provide long term benefits. In addition, Amazon could benefit from shared ownership in the country they are operating in. That would make the community feel included; this would reduce cross cultural barriers, paving the way for harmonious business relationships.

It must be remembered that while conducting business in different countries around the globe, it is the company’s responsibility to ensure that the cultural differences are taken into account (Fatima Oliveira, 2013). It was Amazon’s failure to do so which led to its unsuccessful stint in China. Amazon, primarily an American company, wrongly assumed that imposing the same vision and philosophy that worked remarkably well on American audiences would have the same effect on Chinese consumers. The most important disadvantage that a company as large as Amazon faces while operating globally is the cultural barrier. It is a given that no two country can have the same culture; moreover, each culture has its own set of idiosyncrasies which must be given due importance. Thus, what may appeal to an American might not attract the Chinese. Regulatory issues must also be taken into consideration; a company like Amazon would have to keep in mind the laws and regulations pertaining to taxes, import, tariff rates and even employment while carrying out business across nations.

The Two Markets in China

Without a doubt, entering into a foreign market can be a daunting endeavor, but if done properly, it can be rewarding as well. None of the above mentioned challenges should be a deal breaker – there are measures that can be taken by Amazon and other companies to counteract such obstacles. For instance, Amazon could tweak their policies or marketing strategies to suit the needs of the country they are conducting business in, namely China in this case (Liu & Hong, 2016). A detailed analysis of the employment laws, tax laws and corporate regulations would be beneficial for the company. In a foreign market, how the customer perceives the brand plays a crucial role in determining its success or failure. To appeal to a Chinese market, Amazon should have rebranded their products and services in accordance with the Chinese culture and values.

While conducting business in a foreign market, one of the most integral aspects of the business strategy should be the staffing approach. A large corporation like Amazon would need a robust staffing strategy to ensure that their workforce is performing efficiently (Brewster et al., 2016). Ideally, in international human resource management, there are three approaches to staffing that are followed. One, a home country strategy may be adopted; in this case, staff members from the home country of the company are asked to live and work in the foreign country, and they are referred to as expatriates. Recruiting expatriates has one major advantage – since they belong to the home country of the company itself, they are already aware of policies and regulations regarding the same (Nankervis et al., 2013). However, it would be an added bonus if these expatriates were to be trained in cross cultural diversity so as to develop positive professional and social relationships in the foreign country. Second, a host country strategy may be followed where natives of the country Amazon is operating in would be recruited and trained as members of the workforce. Thirdly, a third country strategy may also be utilized where citizens of an entirely different country would be employed. In the case of Amazon, a company that is very much dependent on its workforce, a combination of the first two staffing approaches would be most beneficial. For example, if Amazon had recruited Chinese employees as part of the organization while in China, it would not only have shattered cultural barriers but also made the transition process smoother.

Amazon’s Counterproductive Approach

Having discussed the three primary staffing approaches that companies like Amazon should adopt, it is equally important to examine the factors that affect the integration of local staff and expatriates in global business management. At present, Amazon has a large number of expatriates working for them in different countries – this is mainly because these employees are already acquainted with the policies and strategies of the company and would not find it hard to settle down in the new working environment. However, there are a few factors that need to be kept in mind. In the case of expatriates, language can prove to be a barrier if they are not familiar with the native tongue of the country (Piekkari, Welch & Welch, 2014). When Amazon set up shop in China, language barriers were one of the reasons why cross cultural communication failed. Moreover, it must be remembered that the personalities of people differ from country to country, culture to culture. Inability to blend in with the natives in the new country or the expatriate’s unwillingness to adapt to the new circumstances could make his or her integration a laborious process.

As far as the integration of local staff is concerned, the cultural difference can turn out to be a hindrance (Leung, Lin & Lu, 2014). Large companies like Amazon certainly take adequate measures in order to recruit and train the host country nationals so as to acclimatize them with the policies and principles of the organization; however, it must be admitted that cultural and linguistic barriers often persist. For instance, the local staff might have different ideas of how to approach an issue from that of the parent company, which could lead to conflicts within the organization.

When a multinational company like Amazon expands globally to different nations, there are numerous factors that could propel its success or cause its failure. For example, when Amazon ventured into China, it encountered a large number of hurdles which were unfamiliar. One of the chief reasons for such challenges would be the cultural difference (Ferrago & Briody, 2013). Culture collisions and other influences like language and pricing regulations play a key role in the strategy implementation at Amazon. Before a new product or service is launched into the market, it is essential to gain an insight into the cultural influences (De Mooji, 2013). If the product or service in question does not appeal to the target audience in the new country, the company would incur huge losses. Linguistic differences must also be taken into account; it would be advantageous for the company to reach out to the target audience in their native language, so as to leave a long lasting positive impression. While discussing cultural influences, a sound knowledge of regulations and federal laws would be recommended. Different cultures have different laws as far as taxes, employment, investment, trademark requirements, import, currency, duties and organization practices are concerned. A business strategy should be formulated after an in depth analysis of the market before Amazon decides to enter it.

The Crucial Role of Cultural Diversity

The product life cycle theory was introduced by Raymond Vernon in 1996, to analyze the way American companies were gradually emerging into multinational corporations and the strategies being implemented for the same (Doha, Das & Pagell, 2013). Vernon considered the United States to be the most advanced market and devised an internalization model for businesses in advanced countries looking to expand into newer markets. Amazon could employ this framework while carrying out business globally since it would help demolish certain cultural barriers. The process entails three phases, namely new product, maturing product and standardized product.

First, Amazon would introduce a brand new, innovative product into their home market, targeting high income, upper class consumers who would be more willing to embrace new products. Also, obtaining funding for such ventures would be easier in developed countries. During this phase, production would be localized so as to reduce risks and uncertainties. As the product starts gaining momentum, it would gradually be introduced to newer industrial markets. In the second stage, the product begins to mature –thus grabbing the attention of markets in other countries as well, which might not be as advanced as the United States. FDI or foreign direct investment principles are applied in this phase and production is gradually expanded to other local markets as well. In this phase, companies with developing markets and lower income rates would start placing export orders. In the final stage, the home market of the product becomes saturated and the consumer is no longer receptive to the same product. The arrival of newer and more advanced technologies lead to dwindling sales in the home country; accordingly, the company has no other choice but to maximize all offshore production and attempt to invade foreign markets to generate revenues (Tavassoli, 2015). Such a strategy could be adopted by companies like Amazon so as to effectively make a mark in foreign markets instead of alienating potential new customers on grounds of cultural barriers.

The key to an internationally or globally savvy business is adequate training, preparation and practice. There is no denying the fact that the ecommerce giant, Amazon, is a global leader in terms of business practice and strategy management and has mastered the art of “global leader savviness.” To assume that leadership skills can be transferred from one marketplace to another would result in poor revenue outcome, disgruntled employees and decreasing productivity. For a brand as prominent as Amazon, it is of utmost importance to create globally savvy leaders who can navigate through the challenges and complexities that international business poses (Caldwell, 2015). In order to ensure that, a thorough analysis of labor laws and marketing and financial practices of different countries is deemed important (Dragoni et al., 2014). To take into account the case study, Amazon mistakenly applied the same practice or strategy they implemented in other countries to China – forgetting that China, like all countries, has a unique work culture of its own, which must be adhered to. Also, such global leaders need to have an intimate knowledge of the market they are operating in – the market reality, the business opportunity in the particular sector, the competition that the company could face – all these need to be taken into account. In addition, it is expected that an internationally savvy leader would also be cost conscious, and ensure optimum utilization of company resources.

Enhancing Revenue Outcome through Multicultural Teams

There are a large number of factors that determine the success or failure of multicultural teams at companies like Amazon. One of the chief reasons would have to be the ineffective business management strategies that fail to provide a solution to the problem of cultural differences. For instance, in China, if Amazon had been backed by a sturdy team of managers who respected the native culture and was willing to accommodate it, the company would have established itself as a forerunner in the Chinese ecommerce industry. There are three ways of promoting and enhancing multiculturalism in the workplace. One, the company would have to make an honest effort to create a team that abides by the cultural and traditional values of the particular community. Second, equal opportunities must be created for both expatriates and for the local community members. Thirdly, an all encompassing training module should be devised to integrate cultural diversity in the workplace (Chuang, 2013). To evaluate the success of such a multicultural team, Amazon should analyze the way the team operates – if there are conflicts and how such conflicts are resolved, the performance levels of multicultural teams as compared to others, business growth and innovation in terms of strategy and practice, return on equity, reduced ethnocentrism and inclusion policies.

Success of such teams can be understood from a healthy organizational culture which involves cultural values; it would not only improve the reputation of the company as a whole but also inculcate a sense of creativity and innovation amidst the workforce. Similarly, this results in positive brand positioning in a foreign market and appeals to the target market who would be willing to experiment with new products (Brannen & Lee, 2014). Investing in such a multicultural team would have helped Amazon establish itself in the Chinese market; understanding how the Chinese differ from the West would have prevented the massive financial loss that Amazon suffered in the country.

References:

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