Amazon’s Exit from China Essay

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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..

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