INTERNATIONAL

BUSINESS
AMAZON (COUNTRY RISK AND COMPANY BASED ANALYSIS)

SECTION: OMEGA
SEPTEMBER
SUBMITTED TO: PROF.25, 2020
JOYDEEP GHOSH
SUBMITTED BY:
AMAN JAISWAL, RAHUL JAIN, SAHEJ, SHAILY GOYAL, SNEHIL SEKHAR.
NEW DELHI INSTITUTE OF MANAGEMENT

PGDM 2020-2022

PGDM (2020-2022)
 EXECUTIVE SUMMARY

Amazon was founded by Jeff Bezos in Bellevue, Washington, on July 5, 1994. The company

started as an online marketplace for books but expanded to sell electronics, software, video

games, apparel, furniture, food, toys, and jewellery. In 2015, Amazon surpassed Walmart as the

most valuable retailer in the United States by market capitalization. 

Amazon.com is a company that operates in the non-traditional environment of the Internet. This

gives the company both great advantages, such as visibility to potential customers and

investors, and great disadvantages - mainly large amounts of competition. Amazon uses the

advantages of being a purely online merchant excellently; where it was merely a comprehensive

bookseller at it’s founding, it now offers products in over a dozen categories and has revenues

exceeding ten billion dollars each year. They have also eliminated much of the competition by

absorbing it into the Amazon Marketplace, a virtual mall through which other vendors can use

Amazon as a broker for a small fee.

In our analysis, we will be discussing regarding Amazon and its market share, presence and

dominance of Amazon Globally & Amazon Swot analysis. We will be focusing on Amazon Inc. in

relation to Spain and analysis of Amazons progress in Spain. We provide a framework for Spain

risk analysis - Political risk, Economic risk & Financial risk, E-commerce sector analysis in

Spain. Different challenges faced by Amazon in Spain and how Amazon overcome such

challenges. The business rules of customer information, transaction and inventory

management information are also explored.

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 TABLE OF CONTENT

Serial No. Content Page No.

Introduction- Amazon
3-4
1

Amazon market analysis

5-11
2

Country risk analysis -Spain

12-17
3

E-commerce market analysis -Spain

18-21
4

Challenges and benefit face by

22-24
5
Amazon in Spain

Recommendation
25
6

CONCLUSION
26
7

Reference
27
8

2
 INTRODUCTION:

Amazon is an American multinational technology company based in Seattle, Washington.

Amazon was established by Jeff Bezos in Bellevue, Washington, on July 5, 1994. The

organization began as an online commercial centre for books yet extended to sell hardware,

programming, computer games, clothing, furniture, food, toys, and adornments. Amazon

focuses on e-commerce, cloud computing, digital streaming, and intelligence. It has been

referred to as "one of the most influential economic and cultural forces in the world" as well as

the world's most valuable brand. It is the second largest private employer in the United

States and one of the world's most valuable companies.

In the U.S. alone, Amazon controls 45% of the web-based business piece of the overall

industry. That is up from 34% in 2016 and expected to overshadow half by 2021.

In 2002, the corporation started Amazon Web Services (AWS), which provided data on Web site

popularity, Internet traffic patterns and other statistics for marketers and developers. In 2006,

the organization grew its AWS portfolio when Elastic Compute Cloud (EC2), which rents

computer processing power as well as Simple Storage Service (S3), that rents data storage via

the Internet, were made available..

AMAZON Management Board:

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Jeffrey P. Bezos: President, Chief Executive Officer, Chairman of the board.

Andrew R. Jassy: Chief Executive Officer, Amazon Web Services.

Shelley L. Reynolds: Vice President, Worldwide Controller.

Jeffrey A. Wilke: CEO Worldwide Consumer.

David A. Sapolsky: Senior Vice President, General Counsel and Secretary.

Presence and Dominance of Amazon globally

 Amazon's presence now spans 58 countries and reaches the greatest international

online population, 1.2 billion people according to Website Builder Expert, which used

data from Amazon's Alexa Internet.

 Amazon is the leading e-commerce player in North America, Western Europe and India,

but Alibaba and its many online entities — such as Taobao in China, Lazada in

Southeast Asia and Tokopedia in Indonesia — rule Asia, WBE reported. Africa and India

appear to be the two biggest e-commerce battlegrounds in the future.

 At a time when e-commerce is predicted to grow to 13% of global retail sales by 2020, or

$3.8 trillion out of the $30 trillion global retail market, marketplaces are surging.

 2017, 40% of all digital commerce sales went through a marketplace model

compared to 23% in 2013, according to Euromonitor, and Amazon Marketplace

accounted for 87% of that growth.

MARKET ANALYSIS - AMAZON

Top Ecommerce Competitors for Amazon

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1 - Walmart- Walmart is another global giant. This big-box department store

generates $514.41 billion in net sales per year. That’s more than double Amazon,

although a large percentage of Walmart’s sales obviously come from brick-and-mortar

purchases. With Walmart’s international presence and customer base, they will be a

continuous threat to Amazon in the ecommerce space.

2 - Alibaba / AliExpress- Alibaba is a China-based online retailer. This

international giant specializes in wholesale selling online, which is a differentiation factor

compared to Amazon. And some other competitors are Alibaba Group, Apple Inc.,

eBay, Inc., Facebook Inc. Alphabet (Google Inc.) Inc., International Business Machines

Corporation, Microsoft Corporation, Netflix Inc., The Walt Disney Company, Wal-Mart

Stores, Inc. and many other internet, retail, consumer electronics and video

entertainment companies.

Market Share - Amazon

In 2019, Amazon is predicted to account for 13.7% of the worldwide online retail market

sales. Moreover, the company will control over 50% of the US e-Commerce market by

2019. As of 2018, Amazon held 49% of the lucrative $252.7 billion US market.

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Amazon's global ecommerce sales will reach $416.48 billion in 2020, according to our

latest estimates, as consumers rely more heavily on ecommerce due to COVID-19. The

new figure is about $12 billion more than our pre-pandemic estimates.

--Most of Amazon's sales come from the US, but the pandemic has also fueled growth

in Germany, the UK and Japan. Amazon's US business — which represents about 65%

of its sales worldwide — will be up nearly $9 billion compared with our pre-pandemic

figure, reaching $269.41 billion in 2020.

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 Amazon SWOT analysis
Strengths

1. Brand valuation – According to Interbrand’s Global Brand Ranking 2019,

Amazon is ranked at #3 position, with a brand value of $125 Billion. With over $1 Trillion

market capitalization and above $280 billion annual revenues, Amazon is truly a market

leader in online retail industry.

2. Differentiation and Innovation – Amazon frequently brings creative ideas

and innovative additions to its product line and service offerings like ambitious drone

delivery service and Withing’s Aura Smart Sleep System. This creates a differentiation

from other companies.

3. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail

stores by selling everything online. With economies of scale, Amazon efficiently controls

its costs and lowers its inventory replenishment time. The company has formed

numerous strategic alliances with many companies like Eva Technologies, Thalamic

Labs, Shofar, The Orange Chef etc.

4. Go Global and Act Local strategy – This strategy has benefitted Amazon

the most. Amazon develops partnerships with local supply chain companies that help it

in competing against domestic e-commerce rivals. It understands the local needs and

launches its services as per the country’s culture.

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5. Large number of acquisitions – The successful acquisitions of Whole Foods,
Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have produced

significant revenues and profits for Amazon.

Weakness -

1. Easily imitable business model – Online retail businesses have become

quite common in this digital world. So imitating Amazon’s business model for rival firms

is not so difficult. A few businesses are even giving Amazon a tough time. These

include Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.

2. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has

sparked negative publicity for Amazon. President Trump has recently criticized Amazon

over taxes on social media network.

3. Declining consumer safety – As its offerings increase, it is becoming a

challenge for Amazon to vet each product and guarantee the highest level of safety.

The U.S. Environmental Protection Agency (EPA) recently had to order Amazon to

remove a wide range of pesticides and unsafe products on its platform.

4. Unfair use of third-party data – Engaging in unfair trade practices

undermines trust and increases legal risks. Amazon is facing antitrust charges in the

European Union for collecting and using data from third-party to compete against them.

If found in violation, Amazon can be fined up to 10% ($28 Billion) of its 2019 annual

revenue ($280 Billion).

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Opportunities

1. By expanding physical stores, Amazon can improve competitiveness against big

box retailers and engage customers with the brand.

2. Amazon has the opportunity to improve technological measures and

organizational policies to reduce counterfeit sales. One case of counterfeit sales came

into light when Amazon sold a fake My Critter Catcher. The product was sold for $1 less

than the original product.

3. Can do backward Integration by expanding its production of in-house

brands such as Amazon basics to differentiate its offerings and improve profit margins.

4. Self-Driving Technology – Amazon recently acquired California-based self-

driving startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous

technology to exploit the increase in demand for ride-hailing services or use it to

improve its delivery network.

5. Launch of electric rickshaws in India– Amazon pledges to make a positive impact

on the environment. With this vision in mind, Amazon plans to deploy 10,000 electric

rickshaws for delivery in India by 2025.

Threats
1. Government regulations can also threaten the business proceedings of

Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North Korea,

Sudan, and Syria.

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2. Links to exploitative labor – Amazon is one of three retail giants facing

scrutiny from the US State Department for maintaining supply chains and labor sources

associated with human rights abuses. This exposes the ecommerce giant to

reputational, economic, and legal risks.

3. Aggressive competition with big retail firms like Walmart and eBay can give

Amazon a tough time in the future. In addition, now Amazon competes with the

following companies:

• In Video Streaming Service: Apple TV+, Netflix, Disney+

• In Logistics: FexEx

• In Self Driving Technology: Tesla, Uber, Ford

4. Fake reviews – Amazon has an overwhelming amount of fake reviews, and the
problem has worsened in recent times due to the pandemic. Product reviews are a

critical indicator of quality and authenticity, and customers rely heavily on reviews to

make purchases.

According to the Financial Times investigation, Amazon has deleted over 20,000 fake 5-

star reviews from its top UK reviewers.

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 Country risk Analysis
Amazon in Europe :
Amazon is one of the biggest ecommerce companies in Europe. Even while it’s not

presents in most European markets, its influence is huge. Especially in the United

Kingdom and Germany, Amazon isn’t shy with launching new initiatives. Here’s what

Amazon is doing in Europe.

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Amazon is active in the following countries in Europe: France, Germany, Italy, the

Netherlands, Spain, Turkey, the United Kingdom. In these markets, Amazon has a

dedicated and localized ecommerce website. Amazon.nl is the latest addition, it officially

launched in March 2020.

Amazon E-Commerce in Spain

According to the International Monetary Fund, GDP based on purchasing power parity

(PPP) is 1,773,906 (millions of Current Int$) and nominal GDP is 1,313,951 (US$MM).

GDP (PPP) per capita is 38,171 Int$ and GDP (nominal) per capita is 28,359 US$. Real

GDP growth rate is 3.10%.

Spain- Country Profile :

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Population 46,397,452

Language(s) spoken Spanish

Currency Euro

GDP based on purchasing power 1,773,906

parity (PPP)

Nominal GDP 1,313,951

GDP growth rate 3.10%

Number of Internet users 37,865,104

Internet penetration 82.20%

Import and Export data in Spain

Import
In 2017, imports to Spain rose 10.5 percent from the previous year to an all-time high of

EUR 302 billion, mainly driven by a surge in domestic demand and an increase in

energy prices. Spain main imports were: capital goods; chemicals, energy products,

automotive sector, consumer goods, food, beverages and tobacco, and non-chemical

semi-manufactured products. Main import partners were: Germany, France, China,

Italy, US , the UK and Portugal, Morocco and Turkey

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Export

In 2017, Spanish exports rose 8.9 percent from the previous year to an all-time high of

EUR 277 billion. Spain main exports were: capital goods, food, beverages and tobacco,

automotive sector, chemicals, consumer goods, non-chemical semi-manufactured

products, and energy products. Main export partners were: France, Germany, Italy,

Portugal, UK, US, Morocco, China and Turkey.

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 Spain: Country Risk Assessment

Economic Risk: Moderate

• Spain has the sixth-largest economy in the EU and the fourth-largest in the Eurozone.

Main sectors of the economy include banking, financial services, international trade, and

tourism.

• Tourism, which accounts for 15% of GDP and employs 15% of the total workforce, has

collapsed owing to the COVID-19 pandemic. The country’s retail and service sectors

have also been hit hard as a result of a reduced inflow of foreign visitors.

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• The government has adopted extensive fiscal measures to mitigate the economic

impact of the pandemic, including increased unemployment benefits, additional

healthcare expenditures, and financial support for affected households and businesses.

• Spain has one of the highest unemployment rates in the EU, 14.1% in 2019.

Unemployment is expected to increase significantly, as struggling businesses are likely

to not renew temporary contracts.

Political Risk: Low

• To pass legislation, the coalition government will have to negotiate with opposition

parties. Current policy-making will focus on the response to public health and the

economic crisis.

• Negotiations regarding the sovereignty of Gibraltar in light of Brexit continue. Spain is

backed by all members of the EU, which has given the country power to exclude

Gibraltar from any trade deal.

• The government’s relationship with the Catalonian region remains under pressure.

Catalan independence protests in Barcelona and Madrid are likely to increase as

lockdown measures are lifted.

Financial System Risk: Low

• The General Directorate of Insurance and Pension Funds, an agency of the Ministry of

Economy and Finance, regulates the country’s insurance industry.

• Spain’s banking and financial sectors have developed significantly after a period of

reform. The banking system is well capitalized, and banks have improved their real
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estate asset quality. The country is also set to receive substantial economic relief from

the European Commission’s Economic Recovery package.

• The public debt ratio is likely to increase over 100% by the end of 2020 due to fiscal

measures to stimulate the economy. Spain’s insurance industry remains strong and well

capitalized, reporting USD73 billion in written premiums in 2018.

Sector Analysis – Ecommerce in Spain

Spain had to deal with a big financial crisis, but that was barely visible in the

ecommerce sector. In fact, the ecommerce industry was one of the few sectors that

experienced a double digit-growth in 2011 and 2012, something that also happened in

the years after. Ecommerce in Spain was worth almost 28 billion euros in 2018, a report

from the Ecommerce Foundation shows. Spain is the 13th largest market for

eCommerce with a revenue of US$17 billion in 2019, placing it ahead of Brazil and

behind Russia.

In 2018, more than 24 million people have already used e-commerce in Spain. It is

estimated that in 2022 the number of purchasers on the e-commerce market in Spain

will increase to 31 million people. The graph below shows the estimations of e-

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commerce beginning in 2017, the graph shows that the number of online purchasers will

increase every year

The growth in e-commerce in Spain is largely due to the age group between 16 and 30

years old. This can also be seen on the graph below which has been taken from IAB. Due

to the fact that the age group between 16 and 30 years old will continue to impact e-

commerce, this will be the consumer target group of this research.

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Number of online purchases per age group in Spain for 2016, 2017 and 2018, IAB, 2019

Fashion is one of the largest sectors in the e-commerce market (IAB, 2019). In 2019, the

revenue of fashion sales from e-commerce is estimated at €5.2 million in Spain (Statista,

2019). The graph of Statista shows the estimated growth for both online food and fashion

sales for upcoming years. By 2023, these two sectors are expected to yield €8 million for

the fashion sector and €6.5 million for food and personal care sector (Statista, 2019).

Predictions of sectors in the e-commerce market (in millions), Statista, 2019

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 According to the Statista graph below, Spanish citizens prefer paying via PayPal when buying

products online. Over one year, the percentage of using PayPal as a payment method increased

with 7%. For 43% of online sales in 2018 Spaniards used debit and credit cards. (Statista, 2019).

The graph below of Statista shows the payment methods and differences in use for 2017 and

2018.

Preference of payment methods in Spain in 2017 and 2018, Statista, 2019

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 Challenges faced by Amazon in Spain
Amazon Spain was launched in 2011 and since then, has made its way as Spain’s

largest eCommerce websites, superseding eBay Spain. The European crisis in 2008 did

leave some marks on the Spanish economy; however, it is recovering fast in recent

years. Amazon’s declared revenue in Spain in 2016 almost doubled from €59 million

2015 to €106 million, which is a very clear indicator that the economy is recovering.

Spain’s location in the European Union also allows for cross-border business

with Amazon France, and other European countries.

 Amazon Spain faces a serious challenge from a similar online marketplace

AliExpress owned by Chinese company Alibaba.com. Due to this competition the

projected net sales of Amazon.es might decline in 2021.

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 An increasing number of sellers not based in Spain are coming to Amazon Spain,

it came as strategy from Amazon Spain but turned out to be serious challenge as

many Chinese retail sellers entered the online retail market space and started

selling. Lots of fake and copy of original products were being sold which caused

a lot of problem to the customers as well as Amazon Spain when they received

the complaints. Amazon Spain: 28% Chinese Sellers.

 Keeping up with the E commerce growth in Spain. As noted in a recent report

from by Evercore ISI's Anthony DiClemente, growth in Amazon's legacy, first-

party e-commerce business has lost some of its steam, with Amazon posting

10% growth year-over-year in the segment "While other higher margin business

lines have taken over the growth mainly from the Online Stores unit, this

operating segment still makes up >50% of revenue, and a more substantial

slowdown would weigh on consolidated revenue growth," he wrote.

Benefits faced by Amazon Spain

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 As seen in the above picture, which was a part of research done by Algopix, it

states that Amazon Spain enjoys better product sales performance than most of

its close substitute competitors.

 All permanent Amazon employees, whether working in Spanish fulfilment centres

or corporate offices, receive competitive pay and a comprehensive benefits

package, including private medical insurance from day one, life insurance, an

employee discount on Amazon.es, and a company pension plan.  Amazon offers

fulfilment centre associates a minimum yearly salary of over € 19.300, in both

Madrid and Barcelona, the two regions where the majority of its associates are

based.

 In the Electronics & Media market in Spain, amazon.es is ranked #1 with >

US$1,000m in 2019. Therefore, amazon.es accounts for 30% - 35% of

eCommerce net sales in this category. The top stores are amazon.es,

pccomponetes.com and apple.com

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 RECOMMENDATIONS
As a leader in the global online trade, company has all the resources and wealth to

continue and develop its online dominance in the modern world. At the moment

company has a little portion of business in developing and some emerging countries.

This is vital for the company to extent their business in those countries this is because

the change of life styles of peoples due to globalization. Due to technology and

innovation such as internet and various mobile apps bring countries together and

reducing barriers between territories. Company like Amazon, they have invested and

develop their business model with help of technology to boost bigger market opportunity

on those countries. Their successful business strategies such as technology and

innovation are big boost for the company to extent their businesses on those new

markets with the low-cost strategy. This strategy also helping company to offer

customers low price product and service with the help of technology and its

developments on those countries.

The bigger disadvantages for the company to extent their online trade on those

countries are legal systems and control over internet and mobile app usage.  In most of

the developing countries government have direct control over internet and online use.

This is biggest challenge for company to deal those markets according to those

countries legal system. To address those issues and close competition, company must

have strategy to develop its brick and mortar stores. This is very vital for them to play a

leading role and brand popularity in the multinational trade.

CONCLUSION
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Amazon has adopted several strategies like blue ocean strategy approach in order to

survive this competitive world. This low switching costs models and approach on online

trade help them to offer low cost product service to their customers worldwide. This is

necessary for them to using technology to expand their business infrastructure.

Amazon’s another approach call considers consumer buying hierarchy lead them to

develop low cost products and service through technology and innovation. These types

of approach help their customers, before making decision to buy go through various

process regarding product and service’s price quality and reliability. These types of

approach create a customer bases model and confident to deliver better low-cost

product and service for the customer around the world. One of the positive aspects for

Amazon online trade is high cost brand development for new entries; help them to

merge with world leading brand to become online trade leader. This mechanism and

approach make them as a   one and only global reliable search engine for products and

service

REFERENCES

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 https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_
studies/2019-Spanje-Entering%20the%20e-commerce%20market%20in%20Spain%20website.pdf

https://www.aboutamazon.eu/press-release/amazon-created-over-3-200-new-permanent-
jobs-across-spain-in-2018-and-has-now-more-than-4-800-permanent-employees-across-the-
country#:~:text=All%20permanent%20Amazon%20employees%2C%20whether,and%20a
%20company%20pension%20plan.
https://www.webinterpret.com/us/sell-online/spain/

https://algopix.com/amazon/spain

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