Analyzing foreign market entry strategies extending the internalization approach

EXPANSION INTO A FOREIGN MARKET 1

EXPANSION INTO A FOREIGN MARKET 2

Expansion into a Foreign Market, Part II

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Professor Robert Mckinley

ITB 305 – International Business Environ

08/20/15

Strayer University

Introduction

The expansion of Amazon Inc. will benefit the financial system of China and enhance employment rates in the region. As one of the largest online retail organizations globally, the company expects to transact business with a similar organization. There are numerous organizations in China that offer different services globally. The most appropriate organization that can deal with is a travel and leisure company, Air China Limited. Air China Limited has been known to one of the major airlines in China and other states globally. Amazon Company can agree with Air China to deliver their goods to clients who have purchased through online. This company will describe how the two companies can deal with one another in order to enhance the services they offer to consumers.

Air China Limited commenced its operations in the year 1988. This is a clear indication of how the company is experienced in business. Over the years, the company has been doing business in different regions globally especially in delivering goods. This approach influenced the government of China to appoint Air China the chief responsibility of international flights. The company has a good reputation that makes the company legally responsible for international flights all over the world. The company’s route network extends throughout Asia to the Middle East, North America, and Europe from the main center at Beijing International Airport. Therefore, the company is suitable to transact business with Amazon Inc. As one of the largest online retail organizations, Amazon will collaborate with Air China in order to deliver goods purchased by consumers from other states (Luo, & Tung, 2007).

It is evident that Air China has taken a number of considerable strategies over the past 2 years or so. Globally, Air China is believed to be one of the developing airlines globally as a result of its new strategies and diverse management. Based on research it is evident that one of the major factors that are highly boosting Air China is the favorable external environment which has plenty of new initiatives. Air China is one of the worldwide recognized carriers as a result of its cabin crew service. Air China has frequently had numerous advertising campaigns. However, it has been difficult for the company to differentiate its product in the media. This has differently affected the company in a number of ways. In that case, management of the company ought to consider new advertising campaigns on order to remain as the world popular airlines. Over the years, Air China has remained to be one of the most successful airlines (Luo, & Tung, 2007).

The successes and qualities of the company review the fittingness of the company to cooperate with Amazon Company in different sectors. The business profile of Air China gives it the opportunity to transact business with any organization globally. Based on research, Air China’s management has significantly enhanced the performance of the company by ensuring that quality services are delivered. This will boost Amazon services to its clients especially on the delivery of goods from China to the specified locations. Since Amazon is an online retail organization, it is evident that clients will purchase goods from the company and require a free delivery to their states. This gives Amazon the chance to work with Air China because it is an international airport that will facilitate delivery of products and services to clients in other states (Petersen, Welch, & Liesch, 2002).

There are more than a few basic approaches that the Amazon Company might take in dealing with Air China. One of the major approaches is export of Amazon products to other organizations globally. The two organizations will benefit from one another in a way that will enhance the financial system of China. This approach will assist Amazon to aim at taking advantage of less stringent trade regulations to purchase a wider range of products in the state. Import and export business has become a popular aspect globally. In that case, the idea of Amazon to incorporate with Air China is a suitable one because business is extremely exiting, lucrative, and prestigious. In that case, Amazon needs Air China in order to deliver goods to clients worldwide (Petersen, Welch, & Liesch, 2002).

Exporting goods through the aid of Air China will earn the company good profits. The idea of exporting goods from China to other states globally will boost the financial system of the China as well as increase employment rates. Two organizations ought to sign a memorandum of cooperation so as to give customers access to their product and services. The global supply chain will help small and medium enterprises globally to import products from China and sell them at a profit to other organizations globally. As a United States based business, the main Amazon Company will control ownership in the business enterprise in China through Foreign Direct Investment (FDI). Through this strategy, America growth in FDI will benefit the service sector as manufacturing in most states globally slow. In order for the two companies to full cooperate, Amazon gas to push its web services cloud computing business in China. This will specifically boost for its mainly corporate clients (Petersen, Welch, & Liesch, 2002).

Despite the expansion of Amazon to a foreign market, it is clear that the company will encounter numerous risks. These risks will mainly be associated with foreign exchange. Foreign exchange risk is a risk of an investment value changing as a result to changes in currency exchange rates. One of the major causes of foreign exchange risks is influenced by the government. In the case of Amazon and Air China, foreign exchange dealings might cross boundaries and rates move on the basis of government fiscal policies, political instability, and regulations. The kind of risk that might be associated with this cause is operational risk. In order to prevent these risks from affecting the organization, it is important for the management of the organization to implement Foreign Exchange Risk Management Policy. This policy will be used to review reports on a regular basis in order to ensure that the reports remain appropriate (Luo, & Tung, 2007).

However, the management implementing the policy should consider major points when drawing up a policy. One of the major points that the management should consider while implementing the policy is open position limits commensurate with client driven turnover and the organization’s appetite for market risk. The administration of China will require the two companies, Amazon and Air China to monitor their foreign exchange risk on a daily and timely basis. This will require the two organizations to assume any foreign exchange risk and get in a position that will influence the company to manage daily. A bank ought to have adequate procedures and systems for monitoring foreign exchange risks. Having this knowledge will help the company to manage foreign exchange risks without much effort (Buckley, & Casson, 2009).

The other approaches that the management of the companies might use are to develop a four-point plan that will assist in minimizing the risks and protect the organizations profitability. Managers for both organizations should understand their company’s exposure, the solutions, develop a strategy, and implement a plan that will mitigate the specified risks. In doing so, managers of both organizations will understand the declining exchange rate and the purchasing power that would stabilize profitability and progress. Failure to consider management policy, the exchange rate risks will influence other income factors such as inflation, interest rates, and capital losses from domestic securities. Therefore, Foreign Exchange Risk Management Policy is the best option that Amazon Company might use in order to minimize foreign exchange risks (Buckley, & Casson, 2009).

There are numerous ways in which Amazon could leverage politics and laws so as to maximize the probability of a success deal with Air China Limited. Based on research, it is evident that innovation is worth little unless it generates lasting success and gaining measurable results from novel ideas that need more than creative thinking. One of the two ways that Amazon can maximize the probability of success deal is by getting innovation right. Getting innovation right reveals how Amazon can secure real traction and growth in the global market. In that case, managers of the company should experience leading innovation initiatives at a diverse range of organizations. This will enable leaders to generate market opportunities of the company and leverage the best techniques for securing traction in a profitable new space (Luo, & Tung, 2007).

The other way in which Amazon can maximize profitability is through signing an agreement with Air China Limited. The agreement will prevent the two companies from breaking the law that bind their business. However, the agreement should be based on producing and distributing great quality content. This should be done online in order to show clients that the two organizations are working together to enhance change. This is also one of the best marketing strategies that would promise most business to create product recognition online. Therefore, the agreement by managers of both organizations should create quality content in order to influence a successful marketing strategy that will enhance the growth and development of the market. Amazon and Air China Limited should both be responsible for any damage of property delivered to clients in other states globally (Buckley, & Casson, 2009).

Conclusion

Despite the developments that the company intends to attain, it is important for the management of the company to consider key financial operations, marketing and human resource commitments. Human asset experts of Amazon should make critical strides in getting to be business accomplices; exhibiting the worth they can add to the business Executives should search for where the change procedure can best be overseen. The business needs $ 82,000,000 in order to expand. The management of the business plans to open new branch in China. In order to raise the money, the Management will use partial cash in form of equity funding from the current business accounts. In addition, part of financing will also come from the current operations of the business. The other source of capital to fund the business will come from partial leverage funding that shall be inform of a loan from any private investor. The money will be part of leverage finance used to provide the management with money to open a new Amazon branch in China. In addition, Air China Limited will earn income from delivering the company’s products to other states globally (Petersen, Welch, & Liesch, 2002).

References

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Buckley, P. J., & Casson, M. C. (2009). Analyzing foreign market entry strategies: Extending the internalization approach. Journal of international business studies, 539-561.

Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of international business studies, 38(4), 481-498.

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