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Amazon's emerging market entry strategies have been sensible, considering location, entry mode, and timing.. This flexibility in entry mode allows Amazon to adapt to the local market dyn

MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY NATIONAL UNIVERSITY UNIVERSITY OF LAW AND ECONOMICS

INTERNATIONAL BUSINESS

Course code : 232KD0302 Instructor : Hoang Thi Qué Huong

Trần Mỹ Linh

Group : B&B

Ho Chi Minh City, April 3, 2024

1 | Trịnh Gia Bảo K224081060 100%

2 |Nguyễn Thị Hoàng Châu K224081062 100%

3 |Lê Xuân Đạt K224081065 100%

4 |Neuyén Lit Lâm Điền K224081066 100%

5 | Võ Mạnh Hùng K224081073 100%

6 | Võ Hà Đức Minh K224081077 100%

ASSIGNMENT 2 - AMAZON

1 What challenges has Amazon encountered when entering emerging

markets?

- FDI regulations: One of the primary things to consider when it comes to market penetration must be laws related to FDI Many countries are applying strict rules toward foreign retailers to boost their domestic market strength Take India as an example, despite permissive moves from the government, overseas multi-brands such as Amazon were merely restricted to having over 50% ownership in the infancy of their Indian entrant process This leads to an invisible entry barrier for Amazon to expand on a large scale

- Infrastructure: The key proficiency of e-commerce retailers such as Amazon heavily depends on the logistics strategy of the whole system Simultaneously, Infrastructure is a core factor for building long-term logistics scale Each nation has its unique infrastructure condition Even though the foundation of the logistics framework is formulated by the retailers, the infrastructure of the nation Amazon penetrates into is a determinant of whether the cost increases or decreases in the same investment compared to the usual condition

- Demographic: Income levels vary widely within these countries, with significant income disparities between urban and rural areas, as well as among different socioeconomic groups Amazon must offer products and pricing strategies that are affordable and accessible to consumers across the income spectrum This might include offering discounts, installment payment options, and affordable product ranges

- Payment methods: Each of these countries has unique payment preferences and methods that may differ from those in the US or other Western countries For example, in India, cash

on delivery is a popular payment method due to low credit card penetration and trust issues with online payments In China, digital wallets like Alipay and WeChat Pay dominate the market In Brazil, installment payments are common due to economic factors Amazon needs to integrate these local payment methods into its platform to cater to the preferences

of consumers in each market

- Competitors: Whenever an enterprise enters a new market, fierce opponents exist in the market They had better infrastructure, greater market share, customer identification, and business strategy due to earlier entrant time In China's e-commerce market, Alibaba has taken the dominant lead throughout its development history In 2013, Its CEO, Jack Ma acquired China domestic companies and utilized a unique marketing strategy to draw attention from big merchants and major labels such as Nike and Gap This made huge competitive advantages compared to the latecomers like Amazon

- Strategy: In terms of the e-commerce field, there are more than three types of markets Amazon has to categorize when emerges to brand-new land It includes unexploited, developing, and developed e-commerce infrastructure Based on Amazon’s competitive advantages, a hybrid strategy should be customized for each nation, each religion, or each category to maximize efficiency and cost control Minor mistakes in undertaking strategies could lead to the entire failure of the whole system

2 Did Amazon make sensible choices in emerging markets? Consider location, entry model, timing of entry, and entry scale

Amazon's emerging market entry strategies have been sensible, considering location, entry mode, and timing The decision to enter new emerging markets depends on factors like market potential, competition, and operational readiness When expanding into emerging markets, Amazon has demonstrated a thoughtful approach to its entry strategies

a Location:

Amazon has made sensible choices in selecting locations for its entry into emerging markets They have focused on countries with large populations and growing e-commerce potential For example, Amazon entered India, which has a population of over 1.3 billion people and a rapidly expanding middle class Similarly, they have expanded into Brazil, which has a population of over 200 million and a growing e-commerce market

b Entry Mode:

Amazon has adopted different entry modes based on specific market conditions In some cases, they have entered through acquisitions or partnerships with local companies For instance, in India, Amazon acquired the local e-commerce company, Flipkart, to establish a strong presence In other markets, they have entered through organic growth, setting up their own operations and logistics networks This flexibility in entry mode allows Amazon

to adapt to the local market dynamics and leverage existing local expertise

c Timing of Entry:

- Timing is crucial in emerging markets, and Amazon has generally made sensible choices

in this regard They entered markets when the e-commerce sector was experiencing significant growth and when the infrastructure and internet penetration were improving By entering at the right time, Amazon has been able to capitalize on the increasing consumer demand for online shopping and establish a strong foothold in these markets

- In general, the timing at which Amazon started its entry into the emerging markets is perfect for the company since the company has not faced many challenges in terms of local competitors since none of the competitors could offer excess products under a single roof combined with the discount model employed by Amazon

- Amazon has deep pockets which allows it to offer suitable discounts to the customers which cannot be done by the other competitors Moreover, the company kept its entry mode through online channels which means that the company collaborated with sellers and retailers in the locations where it expanded and offered all such products on its website and streamlined the supply chain as well to make the products available to the customers Hence timing, location, and entry mode preferences of Amazon had been perfect which allowed the company to expand into such territories

- In conclusion, Amazon has made sensible choices in its emerging market entry strategies They have carefully selected locations with large populations and growing e-commerce potential Their flexible approach to entry mode allows them to adapt to local market

conditions Overall, these choices have contributed to Amazon's success in expanding its presence in emerging markets

We can analyze more carefully when evaluating each country:

¢ Amazon's more detailed India entry strategy

- India's choice as an emerging market for Amazon is justified for several reasons Firstly, India has the second largest population in the world, with over 1.25 billion people, and a rapidly growing middle class, leading to increased consumer demand Additionally, India's Internet penetration has been growing rapidly, which facilitates e-commerce The Indian e- commerce industry has seen significant growth, with estimates suggesting that it could grow

61 times over the next decade However, along with these opportunities, there are also challenges for Amazon to overcome, such as limited traffic and payment infrastructure, as well as uncommon online shopping habits

- Due to the Indian government's regulations on foreign direct investment (FDI), Amazon chose a marketplace model instead of a direct retail model to comply with the regulations This allows Amazon to connect domestic sellers with buyers, reducing risk and operating costs Another reason for choosing this model is the restricted logistics in India, which makes direct retail more difficult Additionally, the Indian consumer's preference for cash- on-delivery aligns with the marketplace model, as cash payments remain dominant over non-cash payments This "cash on delivery" system is widely accepted and accounts for a significant portion of e-commerce payments in India

- Amazon entered the Indian market in 2013, after competitors like Flipkart and Snapdeal This timing can be seen as advantageous because the Indian e-commerce market is still in its early stages of development, offering many growth opportunities presence of competitors, Amazon can leverage its brand and experience to establish a strong position in the market Amazon's experience in operating in emerging markets like China also gives it

an advantage

- Amazon made a significant investment in India right from the start, including building an order processing center, developing a logistics network, and offering promotions This

approach aims to quickly seize market share and become the leading online retailer in India This strategy is justified due to the huge growth potential of the Indian e-commerce market and the heavy investments made by competitors like Flipkart, Snapdeal, and eBay

¢ Amazon's more detailed China entry strategy

- China was an attractive market for Amazon due to its potential and favorable factors such

as geography, people, economy, culture, and society China had the largest e-commerce market in the world with a high growth rate, thanks to government support and favorable business environment However, Amazon faced challenges in operating in China due to the lack of international experience and censorship regulations for foreign businesses

- China's large consumer market of 1.4 billion people, growing middle class, and high online shopping habits presented opportunities for Amazon However, China's diverse culture and regional differences in shopping habits posed challenges Amazon also faced competition from domestic players like Alibaba and JD.com, pricing competition, payment preferences, and logistics infrastructure challenges

- Amazon entered the Chinese market through an M&A entry model by acquiring Joyo.com

to gain control and reduce risk However, the management team's departure after the acquisition left Amazon without local market knowledge

- Amazon entered the Chinese market in 2004, taking advantage of being an early entrant with no foreign competition

- Initially, Amazon focused on the niche market of books, DVDs, and CDs in major Chinese cities before expanding its product offering Despite efforts, Amazon's market share in the Chinese B2C e-commerce market was only 3.5% by the end of 2012

- Ultimately, Amazon failed to win in the Chinese market and withdrew

¢ Amazon's more detailed Brazil entry strategy

- Amazon chose Brazil as its market entry location for several reasons Firstly, Brazil is an emerging market with a population that extensively uses the Internet and mobile

applications for shopping, indicating the potential for e-commerce growth Secondly, Brazil has a strong and developed economy within South America and benefits from its proximity

to Amazon's parent company, as well as easy access to other South American countries Brazil also has improving transportation infrastructure, including railways, roads, and ports, which supports economic development However, Brazil faced an economic recession from late 2013 to mid-2014, leading to challenges such as low retail sales, decreased exports, and reduced production

- Despite the advantages, Amazon also encountered challenges in Brazil, including complex tax regulations, labor laws, logistics, and competition from MercadoLibre To successfully penetrate the market, Amazon needed to choose the right strategy and address these challenges effectively

- Amazon entered the Brazilian market through a greenfield venture entry mode by launching its official website and establishing a wholly-owned subsidiary The company made significant investments in logistics, collaborated with domestic publishers, offered Portuguese-language books, and provided optional payment services to enhance the customer experience This allowed Amazon to overcome price competitiveness due to high import duties and differentiate itself from competitors

- However, Amazon's timing of entry into Brazil was not ideal The company entered the market in 2012, just before Brazil's economic recession in 2014, which negatively affected consumer spending This experience highlights the importance of carefully evaluating economic conditions before entering a new market

- To overcome challenges and the economic recession, Amazon initially focused on a niche market by introducing its Kindle Store for e-books This strategic decision aligned with Brazilian consumer preferences and helped Amazon achieve success

- Overall, Amazon has the potential to further succeed and expand its presence in the Brazilian market Continued investments in infrastructure and customer service will be crucial for effectively competing with local online retailers

3 Did Amazon succeed in China? What did the company learn from the Chinese market?

3.1 Did Amazon succeed in China or not?

Introduction: This seems like a very difficult question to answer because Amazon did have some success in the Chinese market through the term “ Something that had proved successful in other Amazon markets” besides that there were so many limitations Amazon had to face when they expanded their business in China market such as really strict regulations from China’s government that restrict Amazon internet content, sale of any media-related products or services, Amazon’s website had to be operated by a Chinese- owned corporation, China’s market did not represent a consistent market, logistics, huge competitors ( Alibaba, Eachnet, ) And that’s why if we wanna answer if this company succeeds or not we have to analyze these factors below because this is an infinite game, so we'll let you decide

a) Market analysis ( Did Amazon join this market at an appropriate time ? )

Amazon was really smart when they evaluated the market very carefully and can see the potential of e-commerce in China I’ll give you some figures:

- Rapid Growth in Online Consumers:

+ In 2002: 27 million online consumers

+ By 2004: Over 80 million online consumers

+ Expected to reach 650 million by 2014

> This demonstrates a staggering increase in the number of online consumers within a relatively short period, indicating a growing appetite for online shopping among Chinese consumers so it's especially beneficial for Amazon to penetrate in this market because of huge potential customers ( E-commerce company )

- Explosive Growth in Market Value:

+ In 2002: the E-commerce market was valued at $1.3 billion

+ By 2005-2006: Surged to over $16 billion

+ At the start of 2014: Valued at over $300 billion

+ Expected to reach $540 billion by 2015

— The exponential growth in market value highlights the immense potential and attractiveness of China's e-commerce sector for businesses and investors including Amazon ( Amazon join 2007 and till 2015 it increased by nearly $520 billion and you'll Know answer whether Amazon succeeded or not )

- Dominance in Internet Usage:

+ In 2013: China had 621.7 million internet users, accounting for approximately 46% of the population

+ This figure was more than double the number of internet users in the US (266.2 million) + China's vast internet user base signifies a large and accessible market for e-commerce businesses to target

- Cultural Shift towards E-commerce:

+ Jack Ma's statement underscores the unique cultural phenomenon in China where e- commerce has transcended mere shopping to become a lifestyle

+ Extensive use of social media platforms like WeChat and Weibo for product reviews, recommendations, and advertisements reflects the integration of e-commerce into daily life

- Mobile Commerce Revolution:

+ China leads the world in mobile e-commerce transactions

+ Expected mobile purchases to reach $41.4 billion by 2015, up from $7.8 billion in 2012