Int\'l Strategic Management (Case Study - Amazon in India) PDF

Preview

Summary

Group Case Study on Amazon's business performance....

Description

BMI 703 Group Assignment Group Case Analysis: Amazon in India

Team members:

Date: ________ Teacher: _______

● Discuss the opportunities and challenges of the Indian e-commerce sector Based on the case, the main challenges of the E-commerce sector in India which is considered to be a “Newly Industrialized” country are quite understandable when analyzed from a North American perspective due to the early stages such market is currently on. The main difficulties that any new contender in the e-commerce sector in such country will find are the lack of development and implementation of new technologies when contrasted to the “First World” economies and the cultural resistance to embracing the inevitable changes towards an eworld from a significant part of the population. The paper makes reference to specific challenges such as the lack of confidence from the mainstream consumers in regards to online payment options, the untrustworthy and sluggish service from the national postal office, the lack of reliable physical infrastructure such as servers, antennas and phone lines to support the volume of online-based transactions, and the relatively low GDP per capita of the average Indian which is known to be the second largest population in the world. In addition to the information on the case, it is important to quantify the reasons as to why these challenges are being presented to the reader. The main difficulty that e-commerce is currently facing in India, is that despite its large population the amount of individuals who engage into the e-economy is considered low based on Deepa opinion’s “137 million internet users… 14 Million are active online shoppers” (the case) and another constraint is the value of the rupee when compared to any other stronger currency. For the year 2013 when Amazon launched their site in the land of Gandhi, the purchase power parity (PPP) in terms of GDP per capita for India was $5,190 (Unit of measurement in 2011 international dollars) and it is estimated that for the year 2018 it will be around $6,925 (“IMF Report”), these measurements can better be used when assessing the GDP per capita of the Indian population than the one provided on the case, nevertheless these figures still reflects a relative low value when compared to other emerging economies results of 2013 for the same category such as China $11,851, Mexico $16,958 or Brazil $15,538 (“IMF Selected” ) one would argue that is mainly due to its population size, however other popular contemporary economic measurement, such as the Big Mac index created by The Economist supports the previous argument. In India for January of 2013 the Big Mac burger cost 62% less than in the US in terms of exchange rates, this means that one would have needed US$1.67 in India in

comparison to $4.37 in the US to buy the famous burger, this seems to be an indication that at that time the rupee was undervalued around 34% based on the difference between GDP per capita (“The Big Mac index”). These indicators despite showing low performances are also considered to be the source for opportunities for any new contender in the Indian e-commerce market. It is obvious that in order for India to fully develop its e-commerce capabilities, the country has to significantly improve the infrastructure of its core industries and government regulatory agencies. India is slowly doing so, a proof of this can be found in the percentage of GDP spent in total investment which accounted roughly to 34% of the total value for 2013 (“IMF Selected”).Any new contender has to strategically plan a long-term tactic to fully explore the economic potential once more Indians start gaining access to the internet. Establishing an early presence and creating brand awareness is a key component to success in this market in the future, given the fact that the profits in this market will be based in large volumes of transactions due to the relatively low value of the rupee one may encounter when repatriating the funs to one’s homeland.

● Discuss the entry strategy adopted by Amazon for the Indian Market and its effectiveness. Amazon intended to enter the Indian market with the same mission and vision they have in their domestic market, which is to provide a platform where consumers can find virtually anything they are searching for and buy with no trouble. Amazon adapted their strategy on the Indian market by sticking to online shopping rather than having both e-commerce and selling directly. They started off small by offering products like books, movies, and TV shows and had plans for further products in the future. Amazon used a cost leadership strategy by offering books at low prices, cost-free shipping to all orders, however, for a better tradeoff the company provided higher referral commissions of 10% (instead of the industry average of 5% to 6%) for the first year of usage to all retailers that wished to sell their products on the marketplace. Amazon’s idea for their platform was simple, which was to enter the market as a retailer and distributor, not a seller. The company did not own the products they were selling, rather they became a marketplace for retailers across India to support their sales operations. Also, it is significant that Amazon worked as an already established selling point for businesses wishing to enter the Indian market from abroad. Amazon would eliminate the need for entering companies

to set up a selling point following all the regulations, paying set up fees, etc. This reduced the stress or uncertainty for sellers. The convenience of using Amazon as well as a respected brand image is what makes it an attractive third party between consumers and both local and international businesses. Greg Greeley, Vice President of International Expansion at Amazon made a comment in regards to how the Indian consumer very much appreciates various products they offered at such low costs that included free delivery. The effectiveness was very much evident due to the fact that 10,000 orders were produced on the first day of operating in India. After such a huge debt and a bright future ahead of Amazon, Greg says that they will not stop their and plans on entering their already existing services to their global market.

● Discuss the future plans of the retailer for India. Indian department of Amazon plans to deliver the same customer experience in India, which is similar to those services provided in other countries: enormous selection, affordable prices, efficient and reliable delivery, and the best customer experience. Amazon.in vision is to establish a trustworthy and available marketplace for various third-party retailers. These retailer sales were of the 10,000 orders during the first day of the operation. Amazon plans on evolving their current product line, but it might be tough, considering all of the governmental regulations. The company is willing to move in that direction to overcome “anti-customer” laws, imposed by the state, and offer more solutions, to improve logistics and delivery costs, which in place would greatly decrease the prices on the Amazon, thus attracting more customers to the platform. The company plans to gain additional insights into the Indian market, and implement their own IT and fulfillment systems. By the time when the government will loosen their grip on the regulations – Amazon would be ready to expand its Indian operations. The Indian market for the e-commerce business is still evolving, so there might be no tough competitors at that time. There is, in fact, a potential partner for the Amazon, which would give them a great boost to attract even bigger customer platform. It is called Junglee platform, which shows the best possible deals on the Indian online market. Amazon should make it one of their top priorities – to remain on the radars of the Jungle. Returning to the competitors - Flipkart and Snapdeal are the only competitors worth mentioning, but their capital is so small, that it will not be hard to

overpass these market players or buy them out in the worst-case scenario.

Work Cited Ong, Li Lian. “The Economics of the Big Mac Standard.” The Big Mac Index, 2003, pp. 51–87., doi:10.1057/9780230512412_3. “Report for Selected Countries and Subjects.” IMF, www.imf.org/external/pubs/ft/weo/2018/02/weodata/weorept.aspx? sy=2012&ey=2018&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=45&pr1.y=5&c=273,22 3,924,534&s=NGDPD,NGDPRPPPPC&grp=0&a=. Tankersley, Jim. “Trump Said Amazon Was Scamming the Post Office. His Administration Disagrees.” The New York Times, The New York Times, 4 Dec. 2018, www.nytimes.com/2018/12/04/us/politics/trump-amazon-post-office.html? rref=collection/timestopic/Amazon.com

Appendix Courtesy of the interactive Data Bank of October 201

Monetary Fund...