AMAZON.

COM
A FAILURE IN CHINA (BUT A SUCCESS IN INDIA)

BY : SHUBHRA JAIN
ROLL NO : 16/2337
RD
BMS 3 YEAR, RAMANUJAN COLLEGE, UNIVERSITY OF DELHI
 CERTIFICATE OF ORIGINALITY
 


This is to certify that this project has been made by Shubhra Jain, third year
student of Bachelor of Management Studies, Ramanujan College under the
guidance of Dr.Vibhash Kumar. The project submitted is my original work and
I am responsible for the content, except as specified in acknowledgements or
references. We further agree that the name typed on the line below are intended
to have, and shall have, the same validity as handwritten signature.

________________________________________________________





 SHUBHRA JAIN


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 ACKNOWLEDGEMENT

I would like to show my gratitude towards Dr. Vibhash Kumar, for giving us
this golden opportunity and guiding us on each and every step. Without his
moral support and continuous motivation, this wouldn’t have been possible. I
thank him for giving his important inputs and modification to this case study to
make it more relevant and also proving immense support to us in each and every
step while doing our project.

I would also like to take this opportunity to thank my parents and friends for
their constant guidance and support.

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 INTRODUCTION

Amazon.com, Inc., doing business as Amazon is an American electronic

commerce and cloud computing company based in Seattle, Washington, that
was founded by Jeff Bezos on July 5, 1994. The tech giant is the largest Internet
retailer in the world as measured by revenue and market capitalization, and
second largest after Alibaba Group in terms of total sales.

Amazon has come a long way since its launch.

From:

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and these offices...

to its current Seattle headquarters:

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Amazon performs exceptionally efficiently measured against revenue per
visitor, which is one of the key measures for any commercial website, whether
it's a media site, search engine, social network or a transactional retailer or
offers travel or financial services.

More recently, there have been a range of business model innovations focussed
on hardware and new services like Kindle e-readers, Fire Tablet, smartphone
and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery
delivery, Amazon Fashion and expansion to the business-oriented Amazon Web
Services (AWS). Amazon Prime, an annual membership program that includes
unlimited free shipping and then involved diversification to a media service
with access to unlimited instant streaming of thousands of movies and TV
episodes.

Amazon functions in the following countries with different domain names :

Region Sovereignty Domain name Since

September
China amazon.cn
2004
India amazon.in June 2013
Asia November
Japan amazon.co.jp
2000
amazon.com.s
Singapore July 2017
g
France amazon.fr August 2000
Germany amazon.de October 1998
November
Italy amazon.it
2010
November
Netherlands amazon.nl
Europe 2014
September
Spain amazon.es
2011
amazon.com.t September
Turkey
r 2018
United
Kingdom
amazon.co.uk October 1998
North Canada amazon.ca June 2002
America Mexico amazon.com. August 2013

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 mx
United States amazon.com July 1995
amazon.com.a November
Oceania Australia
u 2013
South amazon.com.b December
Brazil
America r 2012

AMAZON STRATEGIES

Amazon describes the vision of their business as to:

“Relentlessly focus on customer experience by offering our customers low

prices, convenience, and a wide selection of merchandise.”

Achieving customer loyalty and repeat purchases has been key to Amazon’s
success. They say:

"We work to earn repeat purchases by providing easy-to-use functionality, fast

and reliable fulfilment, timely customer service, feature-rich content, and a
trusted transaction environment.”

Key features of their websites include editorial and customer reviews;

manufacturer product information; Web pages tailored to individual
preferences, such as recommendations and notifications; 1-Click® technology;
secure payment systems; image uploads; searching on their websites as well as
the Internet; browsing; and the ability to view selected interior pages and
citations, and search the entire contents of many of the book with “ Look Inside
the Book” and “Search Inside the Book” features. Their community of online
customers also creates feature-rich content, including product reviews, online
recommendation lists, wish lists, buying guides, and wedding and baby
registries.

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In practice, as is the practice for many online retailers, the lowest prices are for
the most popular products, with less popular products commanding higher
prices and a greater margin for Amazon.

Free shipping offers are used to encourage increase in basket size since
customers have to spend over a certain amount to receive free shipping. The
level at which free-shipping is set is critical to profitability and Amazon has
changed it as competition has changed and for promotional reasons.

Amazon communicate the fulfilment promise in several ways including

presentation of latest inventory availability information, delivery date estimates,
and options for expedited delivery, as well as delivery shipment notifications
and update facilities.

AMAZON’S MISSION AND VISION

When it first launched, Amazon’s had a clear and ambitious mission. To offer:

“Earth’s biggest selection and to be Earth’s most customer-centric company.”

Today, with business users of its Amazon Web Service representing a new type
of customer, Amazon says:

“This goal continues today, but Amazon’s customers are worldwide now and
have grown to include millions of Consumers, Sellers, Content Creators,
Developers, and Enterprises. Each of these groups has different needs, and we
always work to meet those needs, by innovating new solutions to make things
easier, faster, better, and more cost-effective.”

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WHY AMAZON FAILED IN CHINA (BUT IS SUCCESSFUL IN INDIA)

China is the world’s most populous country with more than 1.3 billion people.
In recent times, China has seen high economic growth and has maintained its
position as the world’s manufacturing powerhouse.

Consequently, Western tech giants have targeted China for its growing middle-
class population with rising incomes. However, companies with a strong global
foothold, such as Amazon, have been unable to expand into China.

The main reasons being :

1. CONSUMERS

As Yi Shi, CEO of Chinese startup Avazu, has said, “For a large market like
China, you will need 100 percent localization to compete with local players.”
Chinese consumers are so distinctly different from their American counterparts
that localizing in China has either been too difficult or too costly for American
companies.

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When Amazon entered China, Chinese users, like American users, could only
view seller reviews. The problem was that Chinese users wanted to talk to the
seller, develop a relationship, and haggle – similar to an in-person shopping
experience. Amazon failed to meet this need, perhaps because they wanted
consistency with their American product, while Alibaba understood the Chinese
consumer and incorporated a chat feature in their product, Taobao marketplace.
Amazon’s failure in China and Alibaba’s success are rooted in their underlying
philosophy.

Jeff Bezos has long claimed he wishes to build the most customer-centric
company in the world. Jack Ma, instead, says “Our proposition is simple: we
want to help small businesses grow by solving their problems through Internet
technology. We fight for the little guy.” Amazon provides a great buyer
experience via centralized control akin to the Chinese government. Alibaba
provides a great seller experience and then lets the free market run as wild as
the Wild West. Amazon has only two million sellers worldwide. Alibaba has
8.5 million sellers.

As a result, seller competition is fierce on Taobao – with small businesses

differentiating themselves by service quality, delivery speeds, price, etc. There
is the usual risk of fakes and scams that one often won’t find on TMall or even
Amazon Marketplace – but that’s the point: Price-sensitive Chinese consumers
are willing to invest the time to find the right product in exchange for a wider
range of potential consumer experiences.

Whereas companies have to do less and less to spend to woo the Indian
consumer than the Chinese consumer. Localization is easier and cheaper in
India. At the outset, the prevalence of English in urban India means that often
the American version of a company’s online product is already viable – which
is not true for China.

Unlike Chinese consumers, Indians are yet to be pampered to ordering a book

and having it delivered to your door in two hours, or the joys of personal QR
codes, or an infinitude of impossibly cheap products on Taobao.

Which is to say, unlike Chinese consumers, Indians don’t know what they want,
and develop a truly distinct consumer identity in terms of both user experience
and user interface.

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2. THE NEW MARKET

China opened up its borders to international businesses in the 1970s and US

companies since then have tried, failed and in some unique cases been able to
withstand the trials of the Chinese market. One of the main limitations in China
is the inability of businesses to adapt their strategies. Companies’ “one-size fits
all” business models are inflexible and unable to take into account Chinese
preferences and tastes. The other constraint is the usual strong local competitor.

As local companies are usually built on Chinese consumer preferences, foreign

companies are unable to compete with them, as seen in the case of Amazon.
Chinese consumers also prefer products from native companies over those from
abroad. Additionally, the government provides incentives to domestic firms,
which makes disrupting the local market extremely difficult.

Whereas Indian regulators have on the rare occasion stood their ground against
foreign tech companies, they have been far more hospitable, welcoming – and
most crucially – detached.

3. THE STRUCTURE

Amazon has been present in China for ten years, but only controls a meagre
share of 2% of the country’s rapidly booming e-commerce market. The first
strategic move by Amazon to acquire Joyo.com, the largest online bookstore in
China, in 2004, did not seem to reap any rewards for the company. Being
stricken by privacy issues and the lack of local knowledge, Amazon was
deemed more expensive than the market leader, Alibaba.

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Alibaba controls a staggering 80% market share in a price-sensitive Chinese
market. Amazon and Alibaba operate different business models. Alibaba runs
its well-known Tmall platform which acts as a web-based shopping centre.

In contrast, Amazon’s business model has been the one it holds worldwide.
Amazon is an established online store operator that purchases goods and
services from various suppliers in bulk and sells them directly to customers via
its online site. Amazon’s existing strategy of operating as an independent online
store was not successful in China as Alibaba’s market dominance deterred any
new players in this consumer space. Hence, Amazon decided to open a store on
Alibaba’s Tmall platform as a way to gain more exposure to the mass market
and the huge clientele of shoppers. However, Amazon’s existence in the
Chinese market is still in doubt as Tmall is a very saturated platform with
thousands of retailers and the biggest brand names.

Whereas Indian startups, even the unicorns, are still too small to fight as long
and as hard as Chinese startups. In June of this year, Jeff Bezos announced that
Amazon plans to invest an additional US$3 billion in India, which brings
Amazon’s total investment to US$5 billion in the last 2 years.

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4. TWITCH

Amazon’s move to buy Twitch last year for $970m is part of the company’s
extensive strategy to diversify and leverage the popularity of e-sports which has
134 million viewers and a market worth $612m. Specifically, Asia includes the
largest population of gamers and e-sports fanatics. Moreover, Asia houses the
world’s top players in this field and with Twitch being the world’s leading
platform for watching e-sports, it seemed like the appropriate purchase for
Amazon to attract such players and viewers alike. However, this move was also
contested by businessman Wang, who announced that he will be launching
Panda TV, a Chinese e-sports streaming platform that will compete directly
with Twitch. Wang Sicong’s popularity in China is second to none. As the son
of China’s richest man, he has been a successful entrepreneur, and he is also a
gamer himself. Equipped with boundless resources and knowledge of the local
Chinese gaming culture, Wang Sicong has positioned himself in an
advantageous position to take on Twitch.

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 CONCLUSION

Amazon’s failures in China were not due to one specific factor, but rather to the
cumulative effects of multiple factors over time which mainly include : (1) poor
understanding of the business environment, (2) ineffective strategy making and
communication, and (3) underperformance in operation and execution.

They have failed to understand the complex business environment there, adapt
their strategies and business models to the Chinese market, and develop new
technologies and services to cater to the preferences of Chinese users. They
have underestimated the strength and resilience of Chinese competitors and the
enormous challenges involved when trying to dominate the largest digital
market in the world. Their successes in other international markets have given
them a false sense of safety and invincibility in their perceived competitive
advantages. While Western multinationals from other sectors benefit from
advanced technologies, established product lines, and global supply chains that
may take Chinese firms years of investment to catch up to, digital firms do not.
They operate in an environment where the barriers to entry are relatively low
and the focus of competition is on product and business model innovations and
service delivery, rather than the most advanced technologies.

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 REFERENCES

• Aboutamazon.com
• ALIBABA, TENCENT, AMAZON, UBER TO BECOME ALLIES OF INDIA’S
DIGITAL ENTREPREAUNERS by Madhab Chanchani, ET
• How Amazon Adapted Its Business Model to India,Vijay Govindarajan & Anita
Warren, Harvard Business Review
• Why Amazon Isn't Ready for Prime Time in China , By Liza Lin in Shanghai and
Laura Stevens in San Francisco, Fox Business
• Amazon is still getting dominated in China , By Jeff Dunn, BusinessInsider
• Why Amazon thinks differently of India and China, By Vishrut Shah, Yourstory
• Amazon ramps up Seattle growth target despite plans for HQ, Seattle.com

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