The Competitive Dynamics of MNE Market Entry on Host Country Incumbents: Word/Action Responses to Amazon’s Retail Entry Into the Australian Retail Sector

Verma, Amit
Mowatt, Simon
Hurd, Fiona
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Master of Business
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Auckland University of Technology

The primary aim of this study is to explore the competitive dynamics of the entry of an online Multinational Enterprise (MNE) into a new host economy, with a particular focus on rival responses. Competitive dynamics theory states that with the entry of a more prominent company an incumbent firm may choose to engage the competitor head-on or reposition (Wang & Shaver, 2014). Although much research has been conducted on entry strategies in international business, such as on post-entry firm performance, spillover impacts on technology transfer, and economic and employment benefits, there is scant research on the competitive response of local competitors when faced with international new entrants. In particular, the way in which the entry of online MNE affects both local brick-and-mortar and online competitors, and the way rivals respond to the entry, is not well understood. This research addresses this gap by analysing the reaction of the incumbents to new market entry, using the example of Amazon's entry into the Australian retail sector in December 2017. The research will incorporate theories of competitive dynamics and competitive response to assess how incumbents react to the new national market entrant. The research question for this study is: “How does the entry of foreign online retailer impact the incumbents in host country’s retail sector: The competitive dynamics and word/action response to Amazon’s entry into Australia’s retail sector”. The analysis of this study is based on developing and combining the approaches of Luoma, Falk, Totzek, Tikkanen and Mrozek (2018), Gao, Yu and Cannella (2017), and Wang and Shaver (2014), into a new framework, which was refined further after the analysis work was completed and new emergent themes identified. The research adopted a post-positivist paradigm and secondary qualitative approach focusing on the case study of Amazon’s entry into the Australian retail sector by focusing on the word/action responses of the incumbents. Word/action responses were systematically drawn from the data set contracted from publications such as media articles, the business press, and trade publications for the evidence of word/action responses from market incumbents to analyse the impact of Amazon on the competitive dynamics of Australia’s retail sector. The thematic analysis was used to present the findings of the research. The results of this research suggested that incumbents of the Australian retail sector were intimidated by the entry of Amazon. Incumbents reacted with a mixture of feelings to American MNE Amazon entering the market, from outright fear to defiance or stating that Amazon will have a limited effect on their business. The research identified six themes developed from the framework and four emergent themes, one of which was that some local competitors welcomed the arrival of a new entrant, which had not been identified in the previous research.

Amazon , Competitive dynamics , Australia , Retail sector , Word/Action response , Incumbents
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