PANORAMA OF DIGITAL MARKETING
CASE STUDY REVIEW:
[Link]’S EUROPEAN DISTRIBUTION STRATEGY
SUBMITTED TO:
PROF. ASHISH ARGADE
SUBMITTED BY:
GAJENDRA SINGH RAGHAV (X01011)
RAJEEV KUMAR SINGH (X01022)
VIKASH KUMAR SINGH (X01030)
YOGESHKUMAR HARISHANKAR JOSHI (X01031)
INSTITUTE OF RURAL MANAGEMENT, ANAND, GUJARAT
This case describes how Amazon's distribution system grows from the company's overall inception. In
2003, Amazon Europe must make a decision about how to restructure its distribution network in light of
predictable growth, products explosion, and current geographical expansion in Europe. Moreover, it also
examines how distinctiveness of customer’s and various suppliers differ across the markets, which are
actually served by Amazon in Europe. The central character must consider the degree of centralization quite
appropriate for the entire European network, where supply should be held, what fulfilment models and
solution should be used, and how to handle the risks of supply disruption which occur on a daily basis.
Tom Taylor, [Link]'s, Director of the overall European Supply Chain management has to take a call
on the modifications Amazon needs to make to maintain its growth in the European market place. Although
they were doing a good job, but Amazon Europe is faced with numerous expansion options:
To imitate the broad collection of product lines, Amazon offered in the United States
Launch new market and branding Activities.
Expand into other European territories and countries.
Tom's boss has actually set an objective for him to assist Amazon Europe catch up with Amazon US in the
next 5 years, which he be expected to do in a year or by 2004. The vital decision that Tom needed to craft
was how to put together, the distribution network strategies that would most suitably support Amazon
Europe's growth. Tom's early focal point in Europe was to look for maximum consistency and synergies
among operations procedures across the three dissimilar European countries that Amazon Europe actually
served. During this span of time, Amazon Europe pursued a decentralized fulfilment model which seemed
to offer chances for cost savings and rationalization. Tom saw an enormous potential in developing a
European Distribution Network (EDN) where the overall location of supply will be strategically, rather
than geographically determined. Intrigued by this excellent opportunity, Tom has laid out promising
payback to Amazon Europe.
Amazon international comprising of Amazon Japan and Amazon Europe gives 35% of the total revenue
earned by the Amazon. These both segments were the fastest-growing segments of the entire
company. Since the market is getting competitive, therefore the company started facing issues related to
expanding opportunities and handling of their excellent supply chain. It could somehow replicate the broad
range of product lines which is offered by Amazon in specifically U.S, can launch new activities in the
market and can expand into other European countries as well. First the Amazon Europe needs to build their
infrastructure to support their valuable vision in an optimistic manner. Mr Tom was transferred to London
back in 2002 to look after these issues effectively. The decision needs to be taken by tom that which
infrastructure should be supportive to the Amazon in Europe.
Although Amazon was making good in Europe the aspiration was high as they had the purpose to reiterate
the success of Amazon US in Europe excessively. However, they were confronted with some heavy
challenges from the European markets. These challenges could be tackled but to make that they required
some extremist alteration in the schemes that Amazon applied and adopted in US. Not merely were the
European markets culturally different from US but besides the market conditions and the consumer
behaviour, their outlook also different from a consumer in US. The challenges here were really dissimilar
to the operational challenges in US in footings of transit, carrying and distribution.
There are multiple problems in the case. The main problem Amazon faces while entering into the European
market, is the maintenance of its efficient supply chain in Europe, while remaining cost-effective. In doing
so, the company faces changes, in applying one of the three options available to the company. The options
include
Developing an integrated distribution system for all three countries
Developing a separate distribution network for each country,
Grouping the products on the basis of preferences of each region, thus reducing the inventory cost.
However, there are other secondary problems as well:
The country law of European region is rigid and does not allow the businesses to set the prices,
thus refrains amazon from reducing the prices of goods and operate through cost-leadership
strategy.
The number of suppliers is low, which creates great dependence of amazon on the suppliers for
its function and operation, thus raising the bargaining power of suppliers.
The region has intense local competition that has the competitive advantage of high
understanding of the customer preferences and market behaviour
In add-on to the challenges mentioned above, there were other challenges excessively. Amazon relied
comprehensively on the national postal services in the several states of Europe where they were running.
This created a challenge for Amazon because they had a batch of cargos which were cross-state cargos.
With these challenges in mind there was a certain figure of options for Amazon, which could work out as
they go forward and spread out more and more into the European market.
Currently, Amazon is using the strategy of having three different distribution centres to facilitate the
customers by shipping the orders from the centre near their location. Three distribution centres are located
in United Kingdom, Germany and France with a decentralized system. Amazon is planning to build a
European Distribution Network (EDN) to carry out all the shipping business from one centralized location.
This strategy could benefit the employee as well as Amazon in a long-term process.
Europe as a whole is treated as an individual entity by Amazon. Although they have separate units for
separate states, the parent company, Amazon, thinks of it as an individual market. Therefore, they intend
to hold an EDN (European Distribution Network). As per this construct, full Europe will hold an individual
distribution web, not separate distribution webs of single states. This is a monolithic measure because
Europe as a market is immense in size and really disconnected. But we suggest that an individual EDN will
be much better and the grounds for that are mentioned in the points below:
Operating independent units is much more expensive than an individual unit
EDN execution ensures unvarying merchandise offerings in each state which in bend will assist in
the consolidation of the concern across the full continent
EDN execution ensures procurement section centralizes purchases and avails higher volume price
reductions as this is the premier scheme on which Amazon grows and thrives
In the instance of system failures, EDN execution reduces hazard of trusting on individual DCs,
doing certain that the program B for every failure is in topographic point
At the start, the customer’s order may get delay and they might get frustrated but Amazon needs
to educate its customer that this strategy would benefit in the long run as after implementing this
strategy customers would get better experience, better service, and it will be more convenient for
them to place the order.
EDN would help the inventory planning at a global level, it will make it easy for Amazon to set
some forecasting parameters of the stocks and help customers to have their products in stocks. It
will help in forecasting the product and avoid the limitation of goods in-store.
Customers’ experience will improve by implementing EDN as Amazon can easily check out the
product availability at all the stores and select the appropriate DCs to reduce the shipping time.
When the customer will get their order within the desired time period or at the exact time allocated
by the company it will increase their satisfaction level.
For Amazon, it will be beneficial in a way that centralized system allows them to check out the
feasible DCs location and fulfil the order with the best nearby centre from the customer’s location
to reduce the shipping cost
By the implementation of the European distribution network (EDN), there would be a massive impact on
transportation. This would for sure reduce the delivery service level and moreover the issues related to the
customer's satisfaction. Hence execution of EDN is a logical pick.
A major drawback for EDN is that this will do a serious impact on client satisfaction degrees. This is chiefly
because the clients who are used to acquiring their orders delivered free of cost in really less time due to
the distribution Centre being in that state itself will now hold to either pay to get the order delivered in less
time or get the order delivered in a long time. All in all, the lead time for bringing will increase and merely
extra cost for the client can diminish that.
The lone manner to do certain that the stock list degrees in a distribution Centre are at an optimal level is
through better prediction. Making certain that the refilling in a warehouse is done at proper interval in equal
measures is by holding accurate information about the demand in future. Demand appraisal is the anchor
for any supply chain management system. Proper execution and information processing through ERP are
the method used by the most successful companies in the universe. ERP helps better the planning for the
supply concatenation, both inbound and outward facet of it. Besides that, money saved through the cost-
cutting enterprises should be invested to develop the supply concatenation, logistics and distribution
features of the EDN. In add-on to that, it is really critical for Amazon to hold standardisation and construct
synergisms across the divisions in Europe.
Another major job for Amazon is to calculate out whether or not to hold multiple single DCs or hold merely
an individual incorporate Distribution Centre at a strategic location. This job is in line with the scheme for
the execution of EDN in Europe. We suggest that they should incorporate Amazon’s European operations
as a whole and accept it as an individual market.
