amazon in emerging markets
Joaquín Lobaco Parra
12 DE DICIEMBRE DE 2020
International MArketing
Profesor: Miguel Angel Caballero
Index
Did Amazon succeed in China? What did it learn?...................................2
Did Amazon make sensible choices in its emerging markets entry
strategies? Consider location, entry mode and timing............................2
How should companies and investors measure success in emerging
markets?................................................................................................ 4
Should Amazon enter additional emerging markets immediately? If so,
why and where? if not, why not and where should its focus be? More
broadly, how sustainable is Amazon´s simultaneous pursuit of
geographic, horizontal and vertical expansion?......................................4
1
Did Amazon succeed in China? What did it learn?
Amazon was not successful in China as at the end of 2012 it only had a 3.5% share of
the ecommerce market.
Reasons why Amazon was not successful in China
They wanted to offer the same services that they offered in the rest of the
countries where they already operated, but found that in China they were not used
to paying by card in advance, reason why they adopted the cash on delivery model
in the Joyo ecommerce, platform through which they operated.
They were prevented from making deliveries of goods in the cities with vans or
trucks because they had to be delivered in person by bicycles or scooters.
Presence of large competitors already established in the country such as EachNet,
Alibaba and [Link]
Limitations in their way of operating as they were in a communist country, since
the authorities controlled and regulated the content of the web.
Amazon learned several things:
The need to adapt their products and services to each country, since a product that
works in one country does not have to work in another.
Adapting payment methods to the destination country, in this case China does not
have the custom of paying in advance for a product.
Amazon learned that logistics must be adapted to that of the country in which it is
going to operate, since in this case it had to hire employees to deliver the goods at
home, as deliveries could not be made in trucks or vans.
Did Amazon make sensible choices in its emerging markets entry
strategies? Consider location, entry mode and
timing.
Yes, Amazon had to make sensitive decisions in its entry strategy into emerging
markets. Among the decisions on location, timing and entry, the following stand out:
Timing
In the case of India, Amazon decided to enter in 2013, at which time Amazon
invested in [Link] an online product review site that had more than 10
million products and thousands of employees who were already providing
customer service in the country. In addition, they were the first company to offer
same-day delivery, a strategy that was later followed by the rest of competitors.
In China, a similar strategy was followed since at the time of entry they decided not
to do it directly as Amazon, but instead invested in the purchase of [Link] an
ecommerce that already had experience in this market
In Brazil, Amazon decided to enter only with its Kindle store in 2012.
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Entry Mode:
Amazon decided to enter countries where ecommerce was on the rise, in 2013
decided to enter in India, at a time when the ecommerce industry had a projection
of 16 billion dollars
In the case of China decided to enter at the time when the gross domestic product
had a growth rate of 10.5% and the ecommerce market had a projection of 8.6
billion.
In Brazil, it entered the country in 2012, six months before entering India, at a time
when the ecommerce market projections for 2014 were 11 billion dollars.
Location:
The three locations were chosen because of the large population the countries have,
because of predictions about the growth of ecommerce as well as for the access they
had to the Internet at the time of entry.
Competitor´s entry mode:
India:
Flipkart: Founded in 2007 by two former Amazon workers in India. It succeeded in
copying part of the Amazon business model throughout the country. By 2013 they
had a 4.9% market share.
Snapdeal: The Company started competing in the ecommerce market in 2011
when irs founders decided to change the original business model from selling
coupons to developing an ecommerce.
Ebay: The company entered India in 2005 by purchasing [Link] for $50
million, which was the largest ecommerce site in the country at the time.
Brazil:
MercadoLibre: Started in 1999 as the largest e-commerce marketplace in Brazil for
buyers and sellers.
Saraiva: Saraiva started competing in the ecommerce market in 2003 with
[Link] to prevent eBay from stealing customers. Alibaba has 80% market
share of the ecommerce market in China by 2013 according to The Wall Street
Journey.
China:
EachNet: It was founded in 1999 by two Chinese students who had studied in the
United States, in 2003 Ebay acquired the company that, at that time, was the most
successful ecommerce in China.
Alibaba: Alibaba started competing in the ecommerce market in 2003 with
[Link] to prevent eBay from stealing customers. Alibaba has 80% market
share of the ecommerce market in China by 2013 according to The Wall Street
Journey.
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Jingdong Mail/ [Link]: It started competing in China in the ecommerce market in
2004. In 2012 it had a market share of 22.7%, making it the third largest
ecommerce retailer in China.
How should companies and investors measure
success in emerging markets?
In order to measure the success of a company and its investors, it has to be able to
adapt to the emerging markets in which it is going to compete, since these change very
quickly, the company has to be continuously adapting to the new needs and demands
that may rise.
In this process, the companies that were already established in these markets will have
an advantage as they are able to reallocate their resources more quickly than those
that have just entered due to the more experience they have in the market.
Another thing that companies would have to do to be successful in these markets, is to
make a study of how the market is developed and the infrastructure that the country
has, since many times these markets can be attractive because of their large size but
present great difficulties to operate in them, also within the emerging markets the
countries that make up this type of market are very different each other, which is why
it is more difficult to enter this type of market.
Should Amazon enter additional emerging markets
immediately? If so, why and where? if not, why not
and where should its focus be? More broadly, how
sustainable is Amazon´s simultaneous pursuit of
geographic, horizontal and vertical expansion?
In my opinion, Amazon should enter countries with emerging markets, since these
markets can be a great opportunity. In addition, Amazon already has experience in this
type of market after entering China, Brazil and India. In my opinion, what Amazon
should do to enter these markets would be to acquire a local company that has a great
projection and begin to commercialize their products through this company, and once
you have full knowledge of the market, change the name of the company and become
Amazon.
In the case of Amazon seeing the projection of the different markets I would enter
Russia and Thailand since in the case of Thailand is the largest emerging market for
luxury goods in Southeast Asia, with a very young population and a wealth that is
increasing, while Russia, one of the largest countries in the world, also with young
population and where many of its inhabitants already make purchases online.
In terms of horizontal and vertical expansion, Amazon has a lot of negotiating power in
relation to the rest of the companies that make up the value chain, since it has great
economic resources and experience that can be one of the determining factors when it
comes to ensuring adequate expansion.
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