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Global expansion is a challenging process that may lead to an outcome drastically different from what was expected. To avoid such a result, companies need to assess how viable such a move is for a company in the long term and come to a consensus regarding an entry plan. Managers need to evaluate the cost, barriers, and the state of the market they are about to join (Anonymous, 2020). Moreover, competition plays a vital part in this process, which means that the Otto Group will have to compete closely with Amazon. Evaluating a customer base is a fundamental goal for expansion, although regional differences put the firms efforts into question due to the strong presence of its primary competitor (Schmidt et al., 2020). The macroeconomic analysis may assist with resolving this dilemma.
There are factors in the market environment that may hinder the Otto Groups expansion efforts. As the case reveals, Amazon took the most considerable portion of the e-commerce industry and had a solid foundation in the United States, making it challenging for other firms to take hold of the local customer base (Anonymous, 2020). Since Amazon became a cultural phenomenon, social factors have been a major obstacle for the Otto Group in North America.
Political factors related to corporate taxation also differ between the United States and Europe, in which the Otto Group has the most prominent presence. The advantage in technology and logistics that Amazon possesses also makes this aspect of the macroeconomic environment essential to consider. Customer and employee protection will need to be accounted for during the revised re-entry strategy.
The traditional entry modes for global expansion can shed light on the Otto Groups direction. While exporting and franchising options may be less costly, the firm prioritizes partnership relations within its community (Anonymous, 2020; Schmidt et al., 2020). The first two options imply less control over the market and come with the potential downside of alienating ones clients, while the third demands a corporate culture with high tolerance to differences. Acquisition and creating a subsidiary are other options available for firms that seek to expand, although they require more significant investments.
The analysis of cultural, administrative, geographic, and economic (CAGE) factors is an essential part of international expansion. The CAGE model may bring valuable insight for the Otto Group, such as the adequate choice of the starting location and its potential customers availability and willingness to consider purchasing its products (Anonymous, 2020). For example, the invisibility of the Otto Group may be used in favor of its operations during international expansion. By acquiring different brands and keeping their names, a company can keep its customers relatively unaware of other divisions.
The analysis of the potential scenarios is also beneficial for the new partnership that the Otto Group seeks. The SWOT analysis gives an initial picture of possible experiences and priorities. It is necessary to input the external influences from the previous analyses and combine them with a firms objectives to establish the right path. Trying out new ideas is a key factor for the company if it wants to capture a significant portion of the e-commerce market from Amazon (Schmidt et al., 2020).
A script may test some possible trends and their influence on a companys performance. While the Otto Group already has an established framework that enables it to spread its presence across the globe, modifications to its features are essential when managers consider possible changes in trends and other uncertainties (Anonymous, 2020). A scenario that accommodates these shifts may provide a clear view of the expenses and projected returns on investment.
References
Anonymous. (2020). International business. LibreTexts. Web.
Schmidt, A. L., Petzold, N., LahmeHütig, N., & Tiemann, F. (2020). Growing with others: A longitudinal study of an evolving multisided disruptive platform. Creativity and Innovation Management, 30(1), 12-30. Web.
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