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Amazon and Its Amazonian Success in the World
For this hub, I chose Amazon as a globally-competing company to research its global business strategy. Amazon is an online-based company that offers retail shopping services to customers in the United States and internationally via the internet. It was founded in 1994 by American entrepreneur, and current company CEO, Jeffrey P. Bezos. It is headquartered in Seattle, Washington, USA, and employs nearly 120,000 people in operations located in both North America and internationally. It has an estimated $75 billion in sales and growing. It is a publicly-traded company trading in the stock exchange under the AMZN symbol. Like one of its worthy competitors, eBay, Amazon offers sellers the opportunity to market their products on its website under their own brands. Perhaps, the company's most notable product is its e-reader, Kindle, first introduced in 2009 (Forbes, 2014).
Amazon has been able to innovate the field by developing mass-marketing, online retailing capabilities. This has catapulted and raised entrepreneurial activity with the introduction of new products and opening new markets that were not previously in existence. Ultimately, the company's founder looked to “exploit” technology in order to assist in the commercialization of products and processes on a global scale (Hill, 2014).
As a firm that revolutionized the e-book reading industry, Amazon's Kindle is rivaled by Apple's iPad and Barnes & Noble's Nook. In order for the Kindle to remain competitive, Amazon had to create a strategic plan to deliver a product that is affordable, highly functioning, highly reliable, and visually appealing to its consumers. Therefore, production outside of the United States by outsourcing the manufacturing of Kindle's certain components was Amazon's strategic plan of action by partnering with firms in three Asian countries: China, Taiwan and South Korea (Hill, 2014).
The Kindle's overall design is the brainchild of designers in a California lab, where its key research & development (R&D) experts are located. In Cambridge, Massachusetts, USA, a company called E Ink, is responsible for producing the “ink”, which is made up of “tiny micro-capsule beads”, that allow for text and images to be displayed on the Kindle's vibrant screen. In the 1990's, American companies abandoned the liquid crystal display (LCD) industry. This led to Amazon partnering with Taiwanese company Prime View International to manufacture the screens. This was Kindle's most expensive part to make before the partnership. Prime View International has helped Amazon reduce the cost of this component by producing “bistable electrophoretic display” instead of the LCD option (Hill, 2014). The second most expensive component is the wireless card that is inside of the Kindle. This is what enables its users to link to Amazon's digital bookstore and purchase the e-books that are stored on the device. Navatel Wireless, a company in South Korea, makes the manufacturing of this card economical while keeping the design of the wireless card's chip in the hands of Qualcomm folks in San Diego, California, USA. The Kindle's core processor, or brain, was designed in Texas by the Freescale Semiconductor company and produced by different firms in both China and Taiwan. Lastly, the Kindle's power source is a lithium polymer battery made in China.
It is evident that the cheap labor and low-cost manufacturing in Asia make the bulk of the Kindle affordable to bring to fruition. This makes the product inexpensive to consumers in the market for an e-reader. From a global business perspective, Amazon favored concentrated production of it various components in choosing these Asian production markets. Also, trade barriers between the United States and these countries are low for the products that serve a universal technological need. This aided Amazon in locating production facilities outside of the United States in what, so far, has been a wise business decision.
When it comes to recommendations, I would advise Amazon to maintain a positive relationship with these Asian firms. They provide manpower that is educated and cost-effective to the affordability of the Kindle. Thus, a commitment to continue to purchase parts from these Asian suppliers will solidify the trust in Amazon as a globally-respected firm. Additionally, by keeping the designs of the aforementioned Kindle parts in the United States protection of proprietary technology is conserved.
Forbes Online. (2014). World's Most Innovative Companies [Amazon.com]. Retrieved from http://www.forbes.com/companies/amazon/.
Hill, Charles W. L. (2014). Global Business Today. New York, NY: McGraw-Hill/Irwin.