Amazon Case Questions

Individual Case Assignment

1). Did Amazon make good choices in its strategy for entering emerging markets? Comment
on the locations (countries), entry mode, and timing.

I believe Amazon did a great job at entering India. They already had employees in India handling
the non-core business work such as customer service and back office functions. Entering with
Amazon.in in 2014 was the right time because they had experience from China in their bag,
which I believe was crucial to the operation’s success in India. India’s strict laws seemed like a
problem but Amazon was able to solve it by changing the way the business model works, and
solely being a marketplace between consumers and buyers. Investing in Junglee.com and hiring
local knowledge like their Indian VP gave them a good base. Amazon’s greatest accomplishment
in India was adjusting to the distribution needs in India. Changing the address noting system by

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adding landmarks helped reach customers faster like they promised, and gave them an

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advantage over competitors. Other than that, the cash payment allowance was necessary and

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did a good job at capturing consumers that don’t use credit (like most Indians). All of these

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factors put them ahead of other competitors in India, regardless of the fact that the competitors

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had a couple years’ lead on them.

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Amazon did everything they could to emerge in China’s market. However, it did not work was
planned, but that was mainly due to the competition. China was already an e-commerce savvy
country and had various services such as EachNet, Alibaba and Jingdong Mall. Amazon’s decision
to enter in 2004 was great because of the economic situation at the time. Acquiring an existing
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company (Joyo) helped because it meant Amazon didn’t have to start from scratch. Just like
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India, they managed to work around the infrastructure and introduce hand-deliveries on
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bicycles, scooters and other popular modes of transportation. Other than the entry moves, some
of China’s greatest moves were allowing cash payments, giving free shipping and leveraging the
popularity of customer reviews in China for themselves. All efforts were great but the
competition was Amazon’s downfall – had Amazon tried harder to distinguish themselves from
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competitors (perhaps like in India), they might have ended up with a larger market share than
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3.5%.

Brazil was the perfect country to enter in terms of internet penetration and mobile use among
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the population. However, they had a complex tax system and tight regulations that made them
the 116th country for ease of doing business. Amazon was able to adjust to this by increasing the
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price of their product and drastically alter their strategy (by starting with the Kindle Store) to
make it work. Deciding to go with books and offering them in Portuguese shows Amazon’s ability
to adapt to diverse international demands. Overall, Amazon made great decisions in Brazil for
the Kindle E-Reader.
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2). What are the risks and rewards for early and late movers?

Both early movers and late movers have pros and cons. Being an early mover means an
advantage over new competitors (higher rewards) but a tougher initial path to success. On the

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 other hand, being a late mover puts a firm at a disadvantage with competition (potentially lower
rewards) while making the initial entry easier.

Early movers face a lot more challenges in the beginning. They have to do the full cycle of
research, development and deployment. This includes a lot of costly specific market research,
feasibility analysis and of course the most risk of things not ending in the firm’s favor. After the
R&D, the real risk starts when the firm needs to get the market to accept the product.
Depending on the type of technology, this process not only needs consumers to like the product,
but also to be able to use it. Take a new type of futuristic phone (as an example); a first mover
would need to educate the people that will be buying it. This means more effort, even after the
difficult research and planning is over.

The rewards for early movers might make the risks seem reasonable. Being the first one to
create a new product/technology gives a huge advantage for the market share. Until a
competitor comes out with a similar idea, you can be at the top and control the whole market.
The firm also needs to have the resources and brains to stay ahead of new competitors.

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Moreover, the first firm to do anything makes a longer lasting impression on the market and

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their perception of the particular technology they came up with.

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Being a late mover seems less risky for entry but riskier for eventual success. Since the market

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already exists, it can be difficult to penetrate it and get ahead of competitors. That’s why for late

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movers, the toughest part is to develop new ideas that will distinguish them from competitors,
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rather than the R&D efforts needed as an early mover. In my opinion, this was Amazon’s
downfall in China (at that time). The strong presence of existing firms and Amazon’s inability to
distinguish themselves from those competitors shows the risk and uncertainty that can exist
even in a well-established market.
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Late movers are at an advantage in terms of initial entry. The market already knows the product,
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eliminating the need for initial R&D. There are success stories for the product that eliminate the
risk of an idea going wrong. Any unsuccessful stories from competitors’ act as lessons to take
into account in the firm’s new development. The rewards therefore include minimal risk in
entry, a well-established market and faster product deployment/acceptance.
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3). How should companies such as Amazon measure success in emerging markets?

Emerging markets are generally developing countries that lack resources that developed nations
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like the US deem necessary, but have fast economic growth rates. While it may seem risky to
enter an emerging market, the rewards in the near future are great, due to that fast economic
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growth. That being said, success in emerging markets isn’t as straight forward as visible success
in developed markets. Companies like Amazon should use three factors in measuring success in
emerging markets: the infrastructure they set up, knowledge gained about the market and
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influence over the consumers.

Since emerging markets lack established infrastructure and other resources necessary for
business operations to be easy, most companies like Amazon would have to push or set up
infrastructure in the countries from scratch. Moreover, not every country will be the same so this
involves a lot of planning and research. An example would be the way Amazon set up delivery

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 infrastructure in India. The address system in India was difficult to navigate delivery times.
However, instead of admitting defeat, Amazon went ahead and created a new system to label
addresses, making their fast delivery promise feasible. This counts as Amazon creating the
infrastructure strategy and shows Amazon’s success in India. Even if a company doesn’t see as
much financial success in an emerging market, having the infrastructure set up should be
thought of a great initial investment that they can take advantage of in the future once the
market develops.

Another way to measure success in an emerging market is how much knowledge the firm has
gained about the market. If a firm comes out of a country and has enough insight into its
operation model, the effort can be considered a success. Moreover, it is important that the firm
shows the capability to use this knowledge to adapt to that country. Amazon learned that
Brazilians enjoy books and have an existing e-book market, so at the time, they decided to start
in the country with the Kindle Store. In the future (hypothetically), Amazon should remember
this when designing the Amazon website for Brazil and perhaps keep a lot of focus on books to
entice consumers.

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The final way to measure success in an emerging market is noting how much the firm has been

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able to influence the people. For example, if a firm enters an emerging market, gets consumers

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to adopt a product into their lifestyle, it’s great news for the firm. Emerging markets have the

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potential of becoming a huge market once they develop. The economic stats prove this. Seeding
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your product into the beginning of this surge will prove to be a great success in the end.
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4). Should Amazon enter additional emerging markets immediately? If so, where and why? If
not, why not, and where should its focus be?
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Given Amazon’s past success in emerging markets, I think Amazon should definitely enter
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additional emerging markets. They have enough experience entering such markets (from India,
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China and Brazil) and can apply those lessons learned to new market situations. I also think they
should do it now (immediately) because being an early mover in a market that has the potential
to have an economic boom means you are setting yourself up for success. Amazon is equipped
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with a general template for entering such markets and untapped potential in some emerging
markets. They should definitely go for additional emerging markets such as Indonesia and South
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Africa.

Amazon already has a development center in Cape Town, South Africa. They can use this
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presence in the country to pave the way for a full business model in South Africa. If they have a
development center there, chances are, they will have good basic knowledge of the country. The
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biggest advantage the existing presence gives is the local contacts (i.e., employees involved with
the development center). In the case of Coe’s in the “Play it Safe at Home, or Take a Risk Abroad”
study, Stan felt that having people from Mexico (current customers) to consult with would help
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an expansion into Mexico. Similarly, South Africa should take advantage of the locals they know,
to get a feel for aspects of the culture and consumers’ needs that can’t be studied by simply
reading books on it.

Indonesia is another emerging market that has a large population and potential for Amazon’s
success, similar to India. In 2013, 15.8% of the population used the Internet. This seems low, but
just like India’s 15.1% translated to a large population, this still means a large number of

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 potential customers. Moreover, the infrastructural challenges in Indonesia are very similar to
that of India. After doing some research, I saw that mail delivery systems in Indonesia aren’t very
reliable and people often complain about it. This was true in India, and Amazon was able to find
a solution to the problem. I am sure they can use the model that worked in India and tweak it a
little for use in Indonesia. The likeness of the market in Indonesia to India and current economic
and technological situation of the country make it a good country for Amazon to consider
entering.

5). In your opinion, how sustainable is Amazon’s simultaneous pursuit of geographic,

horizontal and vertical expansion? Why?

I believe Amazon’s expansion strategy is very sustainable, due to the benefits that come from it.
Expanding geographically has always proven to be positive for the firm. International expansion
is especially critical, as we have seen in this case. The expansion into new geographies helped
Amazon become an international firm. Horizontal expansion for Amazon consists of opening new
distribution centers or new offices in an existing market. An example would be Amazon opening

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distribution centers in different locations in India. Opening a new center helped decrease

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delivery times to most locations and balance the load of the growing market. Vertical expansion

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is when a company tries to expand different points in the supply chain. Amazon is trying to

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pursue this by having Amazon warehouses in addition to being the delivery medium between

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buyers and sellers.

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Amazon is trying to pursue all 3 types of expansion at the same time, and doing well with it so
far. The different types of expansions actually complement each other. The best example would
be Amazon’s initiatives in India. They have expanded geographically by entering the new region
of India. This has helped them capture a different geographic region and take advantage of the
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large population of people in India waiting for more innovation. They then expanded horizontally
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when they realized they need to be present in different geographic areas of India. They did this
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by having fulfillment centers in Mumbai and later opening one in Bangalore, further south. This
in turn helped geographic expansion by making it easier for the firm to meet the demands of the
new geography. Vertical expansion occurred in India through the “Fulfillment by Amazon”
centers. Instead of just being a medium between buyers and sellers, Amazon was able to set up
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a way for sellers to pay Amazon to deliver the goods. This strategy helped the other two
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expansion techniques by decreasing dependencies on external intermediate

companies/services.
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Amazon’s strategy of pursuing all three types of expansions in India worked out very well and it
is a very sustainable strategy. There are a lot more emerging markets for Amazon to capture and
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leveraging the three types of expansion will definitely help in that effort.
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