Amazon in Emerging Markets
- Did Amazon succeed in China? What did it learn?
Expansion of Amazon in China
According to Liao (2019), in 2004, Amazon entered the China market when it acquired joyo.com with an estimated amount of $75 million. During its initial stages of operation, the company was under the domains of joyo.com, and its focus was on books and CD’s, which made a seamless transition into the China market. Three years later, the company changed the operation domains to Amazon.com and diversified its product offering to electronics and products related to babies.
The failure of Amazon in China
Statistics show that Amazon tried to replicate the experience of customers by starting from online books to a giant e-commerce company to force its way into the Chinese market (Liao, 2019). However, the company failed to reach its expansion goal, and in later stages, it struggled to gain traction in China.
Reasons for its failure in China
During the expansion of the Amazon Company into the Chinese market, it made many mistakes because it tried to fit the working culture that was used in western countries into the Chinese market (Weise, 2019). There exist cultural differences between the western business and that of China, which made consumers from China to demand something different in terms of e-commerce shopping. Another reason for the failure of the company in China is the existence of the conflict with the Chinese government that led to censorship and imposition of communist laws and regulations to the company’s operations. According to Weise (2019), the failure of the company to use social networking sites for marketing its goods, inadequate understanding of the Chinese market, and failure to deepen better working relations with the local business led to its failure. The existence of stiff competition from China-based companies like Alibaba was a big obstacle in the expansion of the company in China.
Amazon’s learning points
For Amazon to succeed in China, it was to re-apply its competitive advantages that it formerly used in the western market and use them with Chinese specifications (Weise, 2019). Amazon also learned that during its initial stages of expansion, it did not customize its products and services to the consumers in China. A good example is the payment method challenge whereby consumers were reluctant to pay for goods in advance. It was a challenge because the company used the payment method in the western market, but due to geographical disparities, it was not favorable. Also, Amazon learned that expansion success does not only rely on innovations but also other incremental advantages (Weise, 2019).
- Did Amazon make a sensible choice in its emerging markets entry strategies? Consider location, entry mode, and timing.
Amazon in India
According to Venkatesan (2014), the company did a commendable job when it expanded its business operations into India. The opportunity that favored the company was the ability to have employees in India that handled non-core businesses, for example, customer care services. It was a great thing to happen to the company in 2014 because it had a fresh experience to what it had gone through China, which contributed to its success (Govindaraja & Warren, 2016). In the beginning, strict Indian laws seemed to be an obstacle, due to the experience, it had to change its business models by being a market place between the Indian consumers and buyers. The company invested in jungle.com and hired local employees; for example, the company’s vice president gave the company a solid base to conduct its operations. Other factors that enabled the company to acquire many customers within a short time include changing the address noting system and the adoption of the cash payment allowance system.
Amazon in China
When Amazon decided to enter into the Chinese market, it had no intentions to be against the formidable Alibaba (Liao, 2019). The aim was to reach the Asian market, and the preferred market was the Chinese because many international companies were doing well in China. At the time of entry, Alibaba was not that way strong as it was in a business battle with eBay Eachnet. eBay Eachnet Company failed against Alibaba because it didn’t recognize that the Chinese market was different from that of the west (Wang, 2010). The company (eBay) had little knowledge in the local advertisement because it used the internet in a case where the TV would be most applicable. Amazon did everything to make its expansion successful in China, but the competition was a significant hindrance. Other companies had local knowledge with more significant customer experience, a case where Amazon failed.
India versus China
The lesson learned from India is that for Amazon to enter successfully into an emerging market, it must apply various strategies based on the local culture of the targeted market. It must not copy and paste the business strategies of two different geographical zones. As seen above, it used the local knowledge of acquisitions and involvement of employees. In China, the company did not have the same expertise to involve the locals.
Entry mode
The acquisitions of existing companies played a crucial part in determining how the company entered in emerging markets. In China, it acquired joyo.com while in India, it acquired jungle.com, which meant that the company did not start from scratch in these markets. According to Singh (2014), the presence of employees in India who performed customer care services also contributed to its entry mode in India. Also, the use of local knowledge by hiring local employees helped the company to have a successful entry mode in India (Singh, 2014). In China, the company was to diversify its delivery means by adapting hand delivery strategies where goods were transported on bicycles and scooters, which facilitated its entry. In Brazil, the entry mode was perfect because of the advancements made in internet use. The ability to adjust the price of the products to deal with the complex tax system and tight regulations facilitated its entry in Brazil.
Entry timing
Sources say that the entry of the company into the Indian market was the perfect timing because it had learned of the mistakes it had done in China. It had to re-evaluate its strategies so that the entry into the Indian market would not be a failure (Singh, 2014). Also, Amazon waited for Flipkart to enter the Indian market to watch the success of the strategies it used then come up with the same and improved ones to take over the market. The entry of the company in the China market was up for grabs as no company had dominated the Chinese market at that time. Had Amazon entered with appropriate strategies, it would have succeeded in its expansion goal.
Location and entry wrap-up
According to Singh (2014), the entry into the Indian market was excellent because the company had a fresh and improved experience on what it had gone through the Chinese market. The company, in this case, came with a more different and refined approach to make sure that it acquired as many customers as possible. The satisfying right approach was when it monitored the Flipkart’s operations, then it came once and took over the Indian market.
- Considering the competitive landscape in China, India, and Latin America, how can home-grown firms best defend and win against large multinational entrants?
In this case, the most appropriate comparison example is to use Flipkart and Amazon. One of the ways is through leveraging the global market at home to take advantage of globalization that favors multinational entrants to diversify it to the local market (Santos, 2016). Home-grown firms should adopt the same designs, product components, and intangible assets facilitated through globalization and sell them cheaply and competitively. The additive factor is that the local firms have a permanent local culture; therefore, they would not struggle like multinational entrants. Flipkart, in this case, should have taken advantage of the domestic policy and regulations since it was the pioneer in the Indian market and apply as well as the strategic measures that Amazon used to win a large number of customers. The other way through which local firms can defend and win against multinational entrants is through local integration (Santos, 2016). The home team in an emerging market has an added advantage because it can actively engage in the development of operational policies and co-evolve with them as the business runs. It means that these firms can set policies that favor their rapid expansion and win against multinational entrants. Flipkart could have created a proper payment system that could have favored it, just like Alibaba Company did by Alipay in the Chinese market.
- Should Amazon enter the additional emerging market immediately? If so, why and where? If not, why not, and where should it focus be? More broadly, how sustainable is Amazon’s simultaneous pursuit of geographic, horizontal, and vertical expansion?
Yes! Amazon is sustainable in the simultaneous pursuit of new markets after having a good experience in China (Tripathy, 2018). The company has been a success in India after re-evaluating its business strategies. Therefore, it must immediately seek an additional emerging market by applying the same techniques based on the culture of the targeted market. The faster transformation that is witnessed in the business world needs a multinational entrant to come up with new strategies such that it can reach and win the customers of a specific market. The ease of the company in adopting new production and manufacturing techniques is favorable for the company to enter into an emerging market immediately. According to Dawar & Ramachandran (2018), emerging markets offer a company an opportunity to reduce costs and launch innovative products because customers need new tastes.
The company can open its market in Russia because of the emerging stabilized Russian economy. Statistics show that Russians prefer online purchases, which shows that Amazon’s e-commerce business will have a successful entry mode. Also, the policies and regulations for setting up a business are not that way strict like other countries. If the company wants to establish its business in Russia, it must register as a limited liability company because it is the most form of business in Russia. In making this simpler, specialists in company formation can offer assistance using the applicable legislative assistance. More so, Amazon is sustainable when trying to find a geographical to perform its business because it is known and located in most parts of the world (Tripathy, 2018). The company can acquire other companies because it has enough financial resources so that it does not start from scratch. It was witnessed in India and China when it acquired jungle.com and joyo.com, respectively.
References
Dawar, N., & Ramachandran, J. (2018). Defending Turf: Marketing Strategies for Emerging Market Companies. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2167161
Govindaraja, V., & Warren, A. (2016). How did Amazon Adapt Its Business Model to India? Harvard Business Review. Retrieved 13 June 2020, from https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-india.
Liao, S. (2019). Amazon admits defeat against Chinese e-commerce rivals like Alibaba and JD.com. The Verge. Retrieved 13 June 2020, from https://www.theverge.com/2019/4/18/18485578/amazon-china-marketplace-alibaba-jd-e-commerce-compete.
Santos, J. (2016). Why Are Local Companies Winning in Emerging Markets? INSEAD Knowledge. Retrieved 13 June 2020, from https://knowledge.insead.edu/strategy/why-local-companies-are-winning-in-emerging-markets-4488.
Singh, S. (2014). Amazon’s strategy for India: Stick to the concept of sister site. The Economic Times. Retrieved 13 June 2020, from https://economictimes.indiatimes.com/industry/services/retail/amazons-strategy-for-india-stick-to-the-concept-of-sister-site/articleshow/44978075.cms?from=mdr.
Tripathy, W. (2018). Amazon in Emerging Markets. www.homework.com. Retrieved 13 June 2020, from https://www.homeworkmarket.com/files/amazoninemergingmarket.docx.
Venkatesan, R. (2014). Three reasons why Amazon is winning in India—and what other global retailers can do to succeed. Quartz. Retrieved 13 June 2020, from https://qz.com/262018/three-reasons-why-amazon-is-winning-in-india-and-what-other-global-retailers-can-do-to-succeed/.
Wang, H. (2010). How eBay Failed In China. Forbes. Retrieved 13 June 2020, from https://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#719ff27c5d57.
Weise, K. (2019). Amazon Gives Up on Chinese Domestic Shopping Business. Nytimes.com. Retrieved 13 June 2020, from https://www.nytimes.com/2019/04/18/technology/amazon-china.html.