With the rapid growth of Internet technology, e-retailing industry faces more intense competition at home and abroad. During the internationalization of e-retailers, knowledge management and diversity management become vital in HRM. The essay aims to analyze the issue of knowledge management and diversity management in the case study of Amazon.com. Firstly, it discusses the two aspects with the implications for the industry and multinational companies. Secondly, it analyzes the success story of Amazon.com during the intense competition in the online environment in terms of the two aspects of HR. Lastly, it discusses the implications for HRM practice in relation to innovation, corporate culture and corporate strategies.
Two aspects of HR Knowledge management Commercial knowledge and its management
Commercial knowledge is knowledge created, developed and disseminated through the business firms with the purpose of creating commercial value and improving the profitability (Demarest 1997, p. 376). The commercial knowledge can be classified into three categories: technological knowledge, market knowledge and organizational knowledge (Buckley and Carter 2000, p. 58). The knowledge constitutes the intellectual capital as a source of competitive advantage for companies. The key to differentiating the products or services of a firm from other competitors lies in its unique expertise in technology or marketing or organization. It serves as the basis for innovation and a source of competitive advantage. All the firms have the “knowledge economies operating” within them, which includes construction, embodiment, dissemination and use of knowledge (Demarest 1997, p. 376). To achieve commercial knowledge management requires monitoring, measurement and intervention in the above knowledge economies within a firm. The knowledge organizing capability of firms as illustrated in the table 1 includes allocation, coordination, communication and cooperation among the knowledge specialists and other employees.(Source: Buckley and Carter 2009, p.60)
Implications for the e-retailing industry
Knowledge management becomes more important than ever before in the e-retailing industry. The industry which heavily depends on the Internet technology is faced with constant technological changes and fierce competition (Constantinides 2004, p.90). Therefore, the requirement for innovation is imperative for the e-retailing companies to keep ahead of the competitors in the marketplace. The innovation depends on various factors such as the talent of employees, corporate culture and structure, technology etc. with one common attribute-- the unique knowledge or expertise in some field such as corporate strategy making, unique product design, or new technology. As in the case of Amazon, its ascent to the position of market leader in e-retailing industry reflects its successful knowledge in strategy-making, marketing and technological innovation. The detailed analysis will be discussed later. Knowledge management will assist the companies in knowledge creation, embodiment, dissemination and use, ultimately transforming the knowledge capital into financial capital. It is a key of success for e-retailing companies to innovate, survive and thrive in the competitive market.
Diverse workforce and its management
The workforce becomes more diverse and mobile due to the development of globalization. The diverse workforce manifests its diversity in gender, sex, nationality, skin colors, religion, attitudes, perceptions, capabilities, values and the like (Childs 2005, p.75). Diverse workforce nowadays becomes a source of competitive advantage especially for multinational enterprises (Ollapally and Bhatnagar 2009, p.454). Diversity in workforce could bring more diverse perspectives and facilitate to make wise strategies and decisions. The diverse perspectives from different backgrounds will also contribute to the creation of innovative ideas. Diversity management aims to create a “level playing field” to enable each employee to have an equal opportunity to “score” regardless of nation, religion, gender or other backgrounds (Ollapally and Bhatnagar 2009, p.455). Effective diversity management will help reduce the absenteeism and lower the turnover, thus improving the work efficiency and performance. Moreover, from the perspective of HRM, diversity management could help attract and retain the competent minority employees at workplace as well as establish a reputable brand for the company in the market.
Implications for multinational companies
Multinational companies benefit a lot from diversity management if it is dealt with properly. The trend of globalization led to lots of activities across the borders which intensifies the diversity related at workplace (Ollapally and Bhatnagar 2009, p.454). The differences in geographical distances, cultures, values and religions affect the implementation of the corporate strategies and policies. Therefore, “to think globally and act locally” is the key to the success of multinational companies in foreign countries (Richard 2000, p.170). One field in need of attention in the case of Amazon.com is the relationship between the companies with the local government. Due to the protectionist policies, it is hard for a foreign company to survive in the country. In this case, the local employees familiar with local cultures and government policies will deliver right strategies and solutions to tackle the problems related in a foreign market. Moreover, the employees from the target market base will attract customers more easily than the foreign employees otherwise.
Case study of Amazon.com
Crisis and changes
The last decade has seen the dramatic growth of the e-retailers with the ubiquity of Internet access. However, the profit margins has declined and diminished over time for e-retailing companies. This indicates the intense competition in the online environment. Based on Chakrabarti and Scholnik’s research (2002, p. 87), for instance, margins for online retailer Onsale.com fell from “11.2% in 1998 to 5% in 1999” while Compaq’s margins “fell by over 20% between 1997 and 1999”. Amazon.com went public in 1997 and peaked at 1999 before declined to 6.26 times its initial level by the end of 2001 (Filson 2004, p. 138). It is in this adverse and competitive situation that Amazon.com begun its international expansion. However, in the foreign expansion in Canada, despite the reputation and brand of Amazon, the e-retailer leader fails to overtake the Canadian online book-retailer--Chapters Online due to “the cross-border shipping disadvantages” (Chakrabarti and Scholnik 2002, p. 88). The remedies for the situation that Amazon adopted are the FDI-based strategy and the new technology of e-mediation (Chakrabarti and Scholnik 2002, p.85). The FDI-based strategy involves the recruitment of local talents, which from the perspective of HRM involves diversity management across the border. The introduction of the new technological remedy--e-mediation requires unique technical knowledge, which involves knowledge management in HRM. E-mediation serves as a means of matching between customers and suppliers through a website located in another country (Chakrabarti and Scholnik 2002, p. 102). In short, the new technology strategy of e-mediation and the FDI operations led to the following discussion of knowledge management and diversity management in HR. Indeed, through these radical strategic changes, Amazon.com becomes the market leader in e-retailing industry.
Strategic innovation and knowledge management in Amazon
The strategies making and implementation requires effective knowledge management. In Amazon, apart from the introduction of e-mediation, the evolutionary strategies consist of promotional alliances and advertising, offline customer service center and distribution center expansion, pricing strategy, product line expansion and service improvement, competitor strategies (Filson 2004, p.135). These strategies combined to improve the competitiveness of Amazon.com and consolidate its position of a market leader. Strategies as part of commercial knowledge should be created by the management or the marketing knowledge specialists. During its process of implementation, every employee involved should be communicated clearly about what should be conducted and expected over time. The dissemination of knowledge requires clear communication system to ensure complete understanding about the goals and policies of corporations. The process of the use of knowledge is a process of turning the knowledge into commercial value (Sparrow, 2006). In the case of e-mediation strategy, the knowledge about how to use the technology via Internet should be educated, shared and disseminated to employees related. From the perspective of HRM, it requires necessary training sessions to make sure employees involved to understand the technology and strategy. The strategy-making requires innovative ideas as well as a keen understanding of the market conditions and competition situations. HRM should create the transparent corporate culture encouraging innovation. During the implementation process, HRM should use training sessions, corporate activities, and other communication channels to disseminate the knowledge carefully. In this way, the knowledge management could deliver its effectiveness and value for the bottom line of companies.
International expansion and diversity management
The international expansion requires effective diversity management to enable the MNCs to survive in foreign countries. In Amazon’s expansion into Canada, due to the “Canada control”, the company had to run a Canada-oriented website from Seattle to get around the restriction of FDI in Canada (Chakrabarti and Scholnik 2002, p.102 ). In terms of HRM policies, it mentioned in the employment advertisement that it’s looking for “those who understand what sets Canada apart from the neighbors to the South and are interested in relocating to Seattle” (Chakrabarti and Scholnik 2002, p. 102). It is indeed innovative and effective to hire a foreign labor to serve a foreign market in the home country. Because the local employees are familiar with the local cultures and consumption habits and thus enjoy advantages in communicating with target customers. The diverse workforce involving foreign labors in the home countries entails HRM to create equal career development opportunities for the minorities. Prejudice and stereotypes against the minority at workplace should be eliminated to ensure the equality and justice of the rewards system. Only in this way can competent foreign talents be attracted and retained. It is through HR’s efforts that the foreign minority at workplace have the equal opportunity to advance upon their career ladder as the domestic counterparts.
Implications for HRM practice
HRM and Innovation
The knowledge construction within firms entails innovative ideas to create knowledge with commercial value and HRM contributes to the innovation capability improvement of firms. Innovation is the key to the success of Amazon undergoing the dot com bubble crisis. The online environment is fraught with uncertainty with the constant changing technologies. The e-retailing companies are prone to the price war which would squeeze the already low margins (Constantinides 2004, p.90). Therefore, innovation in products, services or marketing is vital to the survival of the online companies. HRM in recruitment, training, promotion and reward policies making could facilitate the innovation capability of firms.
HRM and corporate culture
- Firstly, in recruitment, HR could select and recruit the candidates who demonstrate the innovative abilities in their experience or communication.
- Secondly, although it is sometimes hard to tell a candidate whether she or he possesses the innovative ability, HR could organize training sessions to hone the ability in this aspect with necessary skills and expertise education. Innovation ability could be trained and learned with the improvement of expertise in one field (Shih 2003, p.289). Therefore, the necessary training sessions should be organized to provide the knowledge needed. Besides, some training sessions offer the opportunities to interact with each other, which will improve the cooperation ability and the quality of open-mindedness. All the desired results from training programs will help breed the innovation abilities in employees.
- Thirdly, in promotion and reward policies, HR could highlight the emphasis of reward on innovative ideas. In this aspect, it is worthy to mention that employee empowerment is important to bring about the innovative ideas from employees.
Diversity management entails an open, flexible and inclusive corporate culture which is a field that HRM could contribute to. Corporate culture serves as an intangible asset for companies, which creates the feeling of identity and belonging among employees. The diverse workforce entails an open, flexible and inclusive culture to eliminate any discrimination, prejudice or stereotype against the minority employees (Jehn 1999, p.745). HRM activities and practice in recruitment, corporate activities, and promotion and remuneration systems will help formulate such corporate culture. Firstly, in recruitment and selection, the stereotypes and prejudices against foreign labors should be eliminated. The ultimate criteria of talent selection is purely based on abilities and experiences as opposed to nationalities, gender, religion and the like. In this way, the equality and justice could be ensured. Secondly, in organizing corporate activities, the foreign labor should be involved to enhance mutual understanding and eliminate stereotypes of them. However, some critics argue that some corporate activities with the focus of diversity management turned out to further enlarge the divide between the minority and the rest of employees (Shih 2003, p. 300) . Therefore, the activities related should be consulted in advance and planned thoroughly. Thirdly, in promotion and remuneration systems, every employee regardless of nations should have the equal opportunity to “score” based on their performance. It is especially significant in the case of Amazon’s e-mediation strategy where it would hire foreign labors in the home country.
HRM and corporate strategies
Either in knowledge management or diversity management, they both serve corporate strategies which entail HRM efforts in its creation and implementation. The activities of HRM should be aligned with the corporate strategy (Shih and Chiang 2003, p. 290). HR is no longer just a functional aid to the management but a strategic partner (Sparrow, 2006). Through HRM, the corporate strategy is communicated to the employees. Meanwhile, the advice and innovative ideas are gathered from employees to the management by HR. Therefore, HRM serves as a bridge between the management and employees in strategy making and implementation. More importantly, the activities of HRM should be oriented to the corporate strategy and the HRM policies should be based on the corporate strategy in order to achieve the alignment. For instance, in the case of Amazon’s service improvement strategy, HRM could manage talents to make the ease of shopping possible with such devices as I-Click payment feature through vigorous recruitment, training and appropriate motivation and reward measures. In addition, in terms of strategy making, the communication and consultation between the management and employees are important. HRM should provide adequate channels for it. In short, the activities of HRM and its mediation function between managers and employees contribute to the development of corporate strategies.
Commercial knowledge and diverse workforce are sources of competitive advantage and could be integrated in the corporate strategies. The ultimate purpose of knowledge management is to transform the knowledge into commercial value and the HRM is integral to make this possible. The core of knowledge creation and construction lies in innovation. HRM could contribute to the innovation ability improvement through recruitment, training and promotion and reward policies. Diversity management entails open and inclusive corporate culture. HRM could contribute to the establishment of such corporate culture in its activities. Both the knowledge management and diversity management with HRM efforts serve the corporate strategy. It is vital to align the HRM practice with corporate strategies to generate the optimal business performance. Many researches are needed to further explore the solutions about how to excel in the fierce competition of e-retailing industry.
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