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Amazon’s Exit from China Essayreadessay.com/amazon-exit-from-china-essay

Eclectic Paradigm

The paradigm offers a unique pattern for unifying foreign-owned activities. The model

suggests that three types of activities drive multinational activities. These include

internalization, location, and ownership. This model is also termed as OLI model. O refers

to ownership advantages in this model, L refers to location advantages, and I refers to

internalization of advantages (Dunning, 2015).

The essence of this business assignment essay is that it explains how ownership

advantages didn’t support a firm to overcome challenges in the host market (O→L) in

case of Amazon’s exit from China.

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The cause of Amazon’s Exit from China

Amazon is not having robust relationship with its host country China and the primary

reason behind this fact is that the market share of the company fell from 15% to 6% in in

the last decade (Li, 2019). The major reason that the country has its own online shopping

website like Alibaba and jd.com. These are the local online shopping websites in the

country and they accumulate more than 75% market share in the country (Zeng, 2016). In

the same manner, another online shopping website eBay decided to move out of China

and the major reason behind this fact was that the company was not making significant

profit in China (Dunning, 2015). Therefore, Amazon has decided to follow a similar model

and it has decided to move out of China. However, the ownership advantages are not

supporting the company in its exit from China.

Various ownership advantages are creating issues or challenges for Amazon in China.

Assets of the company are the most significant ownership advantages in this regard. The

company has various assets in the company such as its logistic services, cloud platforms,

employees of the company, and its market shares. Amazon has highly skilled IT staff in

China managing its online services. These assets have a direct impact on its success in

China as they are helping the company to improve its market position using advanced

technologies and the company has to take care of its stakeholders in this regard for

preventing its assets. In the same manner, the ownership advantages of the company are

not supporting it to overcome its challenges or issues in China (Zeng, 2016). The most

significant ownership advantage for a company is to its competitive power that comes

from combining various business units in different nations. For instance, Toyota and

other companies are using this strategy for using their ownership advantages in the best

manner for overcoming significant challenges or issues. The strategy is helping them

improve their number of customers. However, Amazon is unable to do that in China and

it is the major reason that the company is facing issue of reduced sales and profit in the

market and it is unable to become successful in China.

Organizational culture of a company is a significant ownership advantage and it can help

a company in becoming successful (Zeng, 2016). However, the organizational culture of

Amazon in China is not supporting the company to tackle its significant issues or

challenges as the company lacks innovation and it is unable to manage its workplace

diversity in the best manner. The primary reason behind this context is that working in

China is different from working in USA and other nations around the globe as language,

culture, and market conditions of China are different from the USA. The major barrier in

this regard is Chinese language (Li, 2019). The company has people from different parts

of the world and it is unable to handle its workplace diversity in the best manner in order

to take advantage from skills and abilities of its staff members. Moreover, the company is

unable to use skills and experience of its staff for dealing with managerial issues or

challenges in China. The strategy that the company used in this regard was to offer its

services in local as well as in the international language.

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Amazon’s Exit from China will be a huge loss for both Amazon and China. Therefore, it is

right to say that the ownership advantages of Amazon in China are not helping the

company in deal with its issues or challenges in the host nation. Leadership is another

ownership advantage and the company is unable to have robust management or

leadership for tackling its issues or challenges in the best manner. For instance,

leadership can help a company deal with its managerial issues and in the same manner, it

can help Amazon by providing a direction for it to work in the country.

Conclusion

It is important for Amazon to understand its external-internal interplay because both

internal and external factors are adding to challenges of the company and making it

difficult for becoming successful in the host country. Therefore, the company has to deal

with its challenges or issues in this regard by conducting a SWOT analysis for targeting its

internal issues and using PESTEL analysis for resolving its external challenges. Amazon’s

exit from China may happen soon if these issues are not dealt with in the right manner.

The interplay of external and internal factors or environments of the company can make it

successful in surviving its current challenges if its management is sincere with the

company.

References

Dunning, J., 2015. The eclectic paradigm of international production: a restatement and

some possible extensions.. The Eclectic Paradigm (pp. 50-84). Palgrave Macmillan,

London..

Li, S. E.-S. M. &. H. J. F., 2019. Towards an understanding of the nature of dynamic

capabilities in high-velocity markets of China.. Journal of Business Research, 97, pp. 212-

226..

Zeng, J. a. G. K., 2016. Competitive dynamics between multinational enterprises and local

internet platform companies in the virtual market in China.. British Journal of

Management, 27(3), pp. 479-496..