Amazon

The Human Resource and the Change of Amazon’s Expansion Strategy The development of internationalisation and globalisation has promoted the establishment of global market that provide an expansion opportunity for the firms. At the same time, it also improves the competition among the markets. In this situation, several organisations have undergone changes in order to increase their competitive advantage and expend the market size. Due to the internationalisation and globalisation, the human resources have presented a significant relationship with such changes. This essay will use a case study which is the change in expansion strategy of Amazon to identify the human resources involved in this change. In more detailed, the essay will explain why and how Amazon changes its expansion strategy at the beginning. Furthermore, it will discuss how the revolution affect or be affected by the human resources and the discussion will focus on two aspects of human resources that are training and recruitment and selection. Finally, this essay will investigate the meaning of wider human resources management (HRM) practices. Although the sales of online shopping is keeping growth, the rate of return and the gross margin of online retailers are reducing and present a low level. The low margin is mainly caused by the increased competition because the selling costs for online retailers are relatively lower than for traditional retail outlets (Chakrabarti and Scholnick, 2002). Therefore, the e-retailers should maintain the operation through the expansion across product lines or the international expansion. Particularly, the volume of sales is more important for the e-retailers because of the limited margins. Therefore, the increased market size is the major success factor for e-retailers. Comparing with the diversified product line, the international expansion which improve the amount of customer though seek new geographical markets is more suitable for Amazon that is the one of the largest online book retailer in the US (The Economist, 2000), because it can attract the foreign customers through its strong brand name recognition and meanwhile it significant reduce the international transaction costs (Chakrabarti and Scholnick, 2002). The appropriate international expansion strategies for the online retailer are the directly export, foreign direct investment (FDI), and e-mediation. Although the international price comparison and shipping are easily for customer under the online environment, the direct export strategy is not an appropriate strategy for Amazon expands to the Canadian market because the market for books is not included in the North Atlantic Free Trade Agreement (NAFTA) (Chakrabarti and Scholnick, 2002). The Canadian firms have greater advantages than Amazon when they sell books online. Particularly, the key benefit for them is coming from the shipping costs. The foreign retailer cannot serve the local customer as effectively as it serves its domestic customers. The international transaction cost has been declined by the search costs, though the significant shipping cost differences is to protect the local online retailer and make Amazon fails to compete with them. Therefore, the boarder-related shipping cost disadvantage make FDI necessary in the online environment. Amazon has separated retail in many countries based on the language of the country, such as in the UK, France, German, Japan, China and many other countries (Barr, 2011). According the method of FDI, Amazon could get a better contact with the local customers based on the preferences in the specific countries. Besides, the most important advantage of FDI is to help the consumer save large amount of shipping costs and thereby increase the competitive advantage of Amazon in the local markets. Nevertheless, the FDI strategy may not operate well in Canadian market due to the national policies which set restriction on the foreign subsidiaries or FDI. Particularly, the book market is out of the NAFTA and the company in this category cannot apply the free flow of FDI from the US into Canada. Therefore, the failures of two common expansion strategies make Amazon out of the Canadian market. In this situation, the Amazon developed a new method which is called e-mediation to serve the Canadian market through the books directly from Canada and do not need any physical presence in Canada (Chakrabarti and Scholnick, 2002). In more detailed, the Canadian consumers can make order though the US website of Amazon and the books will be shipped by a Canadian source. Hence, the shipping charges will sharply reduce. This new form separates the source of the physical commodity and the source of the information about it. The strategy change from FDI to e-mediation has a remarkable impact on the human resources. In the first aspect, it has changed the features of training. When the company has operation in different countries, it should relocated employees to international assignments. More specifically, the FDI is direct investing in the Canadian market and establish or purchase a business to support the operation of Amazon in Canada. Hence, the Canadian business is operated by the local employees who better understand the needs and preferences of local customers. Meanwhile, Amazon will send staffs from headquarters to perform a specific function in the Canadian business. According to Harris (2012), the international business managers are responsible for expand across borders and cultures, control and develop the local market, and transfer their domestic knowledge to the local markets. Therefore, the required knowledge and skills for international managers are above the normal business expertise. For instance, they should understand the business environment of nations in which the organisation operates. It will lead to then change in training programme that the concern of international businesses are not normally investigated by domestic managers. The training programme for international managers should include knowledge of business practices in target country and the local market dynamics. Furthermore, the mangers also should be able to understand the legal and sociocultural traits of target market (Nordstrom and Kleiner, 1990). They can increase marketability for higher positions through these knowledge and skills and thereby help Amazon gain a competitive advantage in the Canadian market. However, the expansion strategy of e-mediation does not require the physical assets like inventory in Canada because Amazon just needs to matchmaking consumers and wholesalers. It can meet the customer orders through the inventories of book wholesalers in Canada. Thus managers are not assigned to Canada and Amazon could direct employ a Canadian employee to serve Canadian markets from the domestic base (Chakrabarti and Scholnick, 2002). Therefore, the training programme for foreign employees who need to serve foreign market is more simply because he/she is already understanding the foreign market and the relatively regulations. In this situation the objective of training is to allow the foreign employees understand the culture of organisation and provide a clear communication of job expectations in order to integrate them into the current workforce. Each organisation has different method to integrate the foreign employees into their workforces. Manteo Resort employs a collaborative approach to integrate foreign workers and Prestige Hotels use a detailed and proactive approach (Tourism HR Society, 2014). Overall, the e-mediation has significant influence on the training programme for Amazon. In another aspect, it also influences the recruitment and selection of human resources. The recruitment and selection is an important process for the human resources and company because the correct selection could satisfy the needs of organisation and thereby improve the production and performance value. Additionally, the incorrect decision on the selection process will lead to the high costs of replacing employees. The recruitment and selection establish a clear responsibility to ensure hiring, payroll and employee benefits are managed correctly in order to follow the government regulations because the regulation may not similar in different countries. More specifically, the process of recruitment is to focus on identify the need of organisation and thereby employ someone. And then the selection is the process that chooses a candidate who is the best possible match for the job duties form the applicants (Rees and French, 2010). In order to fill the particular post, the recruitment process within a business can be processed either internally though recruitment within the firm or externally by recruiting people from outside. The internal recruitment has several benefits. Particularly, the internal individuals have already understood the operation of Amazon. They just need a shorter periods of training and time for specific knowledge and thereby the training cost and time will be saved. Besides, it also can be considered as a kind of promotion that is an incentive to all staff. Finally, it will decline the risk attached to employing an outsider who not be known by the organisation. However the change in expansion strategy only allows Amazon to make external recruitment. In more detailed, the human resource policy has moved to employ Canadian people to serve the Canadian market from the domestic base. Hence, Amazon can only hire staff for the Canada project through the Canadian media. The needs of Amazon has changed that do not require the candidate simply understand the target market but require the person who can understand the reason avoid Amazon break into Canadian market and are willing to relocate to American. Due to such influences, Amazon should employ wider HRM practices because of the international work environment. Before we analyse the HRM practices, the principle of HRM should be identified. The basic concepts of HRM are synergy, fit and integration. Hence, Wood (1990) describes the HRM as a synergistic set of personnel practices. In other words, the human resource management can be described as a process that directly impact on the people who work in the organisation through many management decision and practices (Armstrong, 2006), while the HRM practices are a system that is composed by attract, retain and motive employees and thereby link the concept of HRM with the organisation’s daily operation (Schuler and Jackson, 1987). Based on the system, the organisation will achieve their objective efficiently and has a better performance. In our case, the HRM uses the a series of practices like recruitment, selection, and training to illuminate objectives and expectation for the employees in order to ensure the new employees fit the Canada project. Pfeffer (1998) finds out there are seven best practices can effectively manage people hence produce substantially enhanced economic performance. Nevertheless, Newman and Nollen (1996) argue the best management practices are not exist, especially under the development of globalisation. In more detailed, the major American management theory argues the effective HRM practices in US can still have a better performance in other countries. Recently, this view has been changed and many organisations recognise that the managerial behaviour and efficacy differ across countries. Hence, the best practice approach is different in each organisation. Newman and Nollen (1996) find out that the difference is coming from the different culture, such as the different national culture and even the different organisation culture. The national culture presents the value and beliefs learned in the childhood which different from one group of people to another (Ralston, Holt and Terpstra, 1997). The organisational culture reflects the behaviour of people who are working at an organisation and the meanings that people attach to their actions (Cai and Fink, 2002). Therefore, the culture may leads to the conflicts between the working behaviour and the management style. Under the cross-cultural workplace, the organisation should employ a wider HRM practices to eliminate the negative effects of the cross-cultural environment. Hofstede (1980) consider the cross-cultural research could use the individualism-collectivism as the cultural dimension. The people from the different cultural background require the different HRM practices. For instance, the individualism considers person prioritised rather than the social institution. Hence the regulation for individualism emphasis on individual responsibility for results and the motivation also need to highlight the individual-level reward. On the contrary, the HRM practices for collectivism should show the solidarity and team-based rewards (Hofstede, 1980). The company should employ the wider HRM practices because of the different requirement of individualism and collectivism. But this may not the main reason force Amazon implement a wider HRM practices, because both of Canada and America is the individualistic cultures. The main reason encourage Amazon apply the wider HRM practices is the complexity of HRM practices may help to transfer knowledge within the multinational corporations (Minbaeva, 2005). The recent empirical studies identify that the strategic HRM has focused on the importance of the systems of HRM practices. Huselid (1995) discovers the systems of HRM practices “which simultaneously exploit the potential for complementarities or synergies among such practices and help to implement a firm’s competitive strategy” (Huselid, 1995, p.636). The study of Minbaeva (2005) presents the organisation could have a greater degree of knowledge transfer when it employ various HRM practices. The various internal mechanisms could reduce the barriers associated with the process of knowledge transfer. The study of Ichniowski et al. (1997) argues the HRM practices could have larger impact on the organisational performance if they work as a coherent system rather than the sum of the individual effects from each practices alone. Although some studies support the individual HRM practices can affect the organisational learning and internal knowledge transfer, Write et al. (2002) consider such researches directly ignore the impact of HRM systems on employees and organisations. Thus the recent studies have focused on the effect of complementarities or synergies among individual HRM practices on performance (Delaney and Huselid, 1996; Guest, 1997). They summarise that when the organisation adopt an internally consistent system of HRM practices, the firm performance will be better. In more detailed, the knowledge transfer in multinational corporations will be affected by three factors that are the nature of knowledge, the characteristics of senders and receivers, and the characteristics of the transfer process. Therefore, the whole knowledge transfer can be affected by several HRM practices. For example, the motivation of knowledge sender to transfer knowledge can be influenced by the performance-based compensation. Besides, the ability of knowledge receiver can be improved trough the extensive use of training. Finally the performance appraisal and internal communication can contribute to the transfer process (Minbaeva et al., 2003). Thus, the comprehensive HRM practices could significant impact on the knowledge transfer in Amazon and improve the efficiency of Canada project. In conclusion, the increased domestic competition make Amazon use the expansion strategies to maintain its profits. There are three main strategies for the international expansion. The first one is the direct exporting but it is not suitable for Amazon because of the shipping costs. Thus, Amazon usually uses the foreign direct investment as main strategy. However, the FDI has been restricted by the government policy when Amazon wants to break into the Canadian market. The failure of this expansion make Amazon developed the third expansion strategy which is the e- mediation. Based on this strategy, Amazon does not need any physical asset in Canada and just match the consumer with the local wholesaler. In this situation, Amazon should employ a Canadian employee to serve Canadian markets from the domestic base. The change significant impact on the training programme because Amazon does not need to send an international manager to Canada. 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