Final Exam -- Diagnostic Review

MGT422 OM2 – Fall 2022

This review will be the final requirement for this class. You have the final exam time (1:30-3:30 pm) to
complete this assignment. The review is either an individual effort or as 2 persons in teams for those
who worked in teams throughout the semester. You should use previous coursework and any outside
websites and databases we used to support the work to complete the exam. You cannot contact any
person to assist with your specific answers to this exam.  Any new websites or resources must be cited
in the answers, preferably a hyperlink if appropriate. By your submission, you have agreed to these
terms. Submit in Word via email to dleather@stevenson.edu. It will be accepted until 3:45 pm in case
there is some last-minute issue. After that time, your submission will not be graded.
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Final Diagnostic: Case – Focus on Brazil

Right before Bezos stepped down as CEO of Amazon, he declared the 21st century as "the Indian
century". Amazon has stayed true to that statement. In late 2020, just months before Bezos stepped
down, Amazon pledged a $1 billion AWS investment towards digitizing small- and medium-sized
businesses across India, enabling them to do business more efficiently. Bezos also announced that
Amazon would be exporting India-made goods worth $10 billion by 2025, helping Amazon secure a firm
position in the country’s retail market. In July 2022, Amazon India announced the launch of Alexa
Originals, a playlist of exclusive new songs by independent Indian artists. This new feature has
reportedly driven a 37% increase of Alexa listeners requesting play of independent songs.

The current CEO of Amazon, Andy Jassy, thinks that this focused approach can already be considered
successful in India, so he wishes to duplicate it in a new country beginning mid-2023. He has formulated
a new strategic option for a special task force to consider:

“Duplicate in Brazil the AWS, Amazon retail, and Amazon music model developed for India.”

As one of the members of this newly formed task force, you have been asked to consider the following
information on the next page.
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A. FIRST – before answering the remaining questions:

What is your initial reaction to this idea based on all of the work you have done so far for this
course? [At least two paragraphs.] (10 pts.)

Expansion of AWS into countries in development should increase the amount of

exposure that Amazon and its services has on the country. Amazon’s retail services are set to
expand “exporting India-made goods worth $10 billion by 2025” (Focus on Brazil Example). In
this example, Amazon’s expansion into India is encouraging because of the ability of Amazon
to become the primary provider of all things retail in India. In addition, there expansion of
AWS into businesses in India encourage businesses to use its services to become more
efficient. More users on AWS will keep the service as the number one cloud computing
provider.

With an expansion in Brazil, similar effects would transpire as the expansion in India.
Brazil has a large population and businesses that would benefit from the use of AWS for their
businesses. In addition, the establishment of Amazon retail in Brazil would reduce reliance on
North American markets for Amazon’s retail. Establishing online retail services for Brazil
would mean that many Brazilians would rely on the use of Amazon to purchase groceries,
necessities, and other products and services. Expansion of Amazon music and retail into Brazil
will also bring more of market to Amazon prime subscription service.

Concerns for Amazon expanding would be a language barrier.

B. Provide your assessment of and answer fully whether this is a viable approach based on: 1)
Global presence of AWS, 2) Amazon’s retail market presence in South America, and 3) Amazon’s
overall operational and financial strength. (15 pts.)

This approach appears to be viable for Amazon to reduce its reliance on North American markets:

1. AWS services have large global presence in the cloud industry.

AWS is relied on by many of the largest companies in the world
including Netflix, ESPN, BBC, and Twitch.
(https://www.contino.io/insights/whos-using-aws) AWS is being
used by many business giants to improve operations and use
improve data tracking. For example, the sport industry has been
able to capitalize on AWS services to improve popular sports such as
the NFL, NHL, and F1 by elevating fan experience and turning data
into insights. (https://aws.amazon.com/sports/) Use of AWS in
smaller businesses in Brazil means that AWS continues to expand its
cloud services and remain the number one cloud service provider in the world.
2. One concern that is a worry for Amazon is that the people of Brazil speak Portuguese and Amazon’s
main market (USA) speaks English. In addition, the South American market in general typically speaks
Spanish which is also contradicting of Amazon’s main market. This is a concern because collaborating
in a different language would require Amazon to have experts who speak the language.

Another concern is that Amazon has a limited overall presence currently in South America. Amazon
mostly resides in North American markets such as USA, Canada, and Mexico. An acquisition of an
existing competitor could decrease Amazon’s reliance on North American markets.

3. The largest retail service provider is a company called Mercado Libre. The company has a 27%
market share in Brazil and the company has far less capital than Amazon does. Amazon could grow
itself into the Brazilian retail market and outgrow Mercado Libre in the South American space.
Amazon has a overall operational and financial advantage compared to Mercado Libre. One option
the Amazon could consider would be the acquisition of Mercado Libre to responsible for South
American markets since the company already has a strong presence in Brazil.

C. Evaluate the new strategy for Amazon using the 4-factor Rumelt Criteria. (15 pts.)

Consistency: Expansion into a South American market has been a very small portion of Amazon’s
overall operations. Amazon would likely need to acquire an existing business to be able to
understand the culture.

Consonance: There are already online retail businesses that operate in Brazil, with one being Mercado
Libre who have a 27% market share in Brazil already.

Feasibility: Amazon expanding into South America by itself for retail may prove to be a problem
because of language barrier. An acquisition of Mercado Libre would solve the issue of language barrier
because the company already has a strong market share in Brazil. AWS can be a strong provider in
Brazilian companies because of the lack of exposure from other cloud markets in the South America.
AWS can continue to grow its AWS market share by allowing Brazilian smaller businesses to use it to
improve operations.

Advantage: Amazon’s reliance in retail in the USA would drop and bring in more business from a
market away from North America. In addition, competitors Walmart do not have any operations in
Brazil currently, so the market would not be share by any major companies (with the acquisition of
Mercado Libre).

D. This new approach will mean negotiations and working with managers and employees from
Brazil. Based on a Hofstede comparison, assess how hard or easy it will be for the US working
with their Brazilian counterparts. Give a full comparison of each of the six dimensions based on
the information you get from the Hofstede site. Include the graph representation of the country
comparisons as part of your answer. [20 pts.]
Power Distance:

Brazil scores higher in this aspect, meaning that Brazilians are more likely to accept the fact
that inequalities should be respected and is normal in this area.

However, the United States is a country that is more on the side of respect for equality for all
people, even lower ranking members of society.

Individualism:

Brazilian people have strong cohesive groups from birth that rely on loyalty and protection of
each other. Brazilians are group oriented.

The USA are one of the most individualistic countries in the world. With many men in the
United States finding, it difficult to develop deep friendships. This is a big negative in terms of the
clash of cultures between Brazil and the USA.

Masculinity:

Brazil is very intermediate country in terms of Masculine vs Feminine. This would mean that
Brazilians want to be the best almost as equally as liking what they do.

USA is more of a masculine country that wants to be the best at what they do but remain near
the average of masculinity and feminine. The USA have more of a winning and competitive aspect
versus Brazil slightly.

Uncertainty Avoidance:

Brazilians have a strong need for rules to keep their structure of life in order. Bureaucracy and
government are extremely important to normality.

The USA score below the average meaning that rules and government are less important to
lifestyle choices. Americans do not require lots of rules and tolerate the expression of opinions and
allow the freedom of expression. This is contradicting of Brazil’s uncertainty avoidance.
Long Term Orientation:

Brazilians reflect an intermediate score in long term orientation. Brazilians prefer to keep
tradition and neglect societal changes.

The USA rank very low in long term orientation meaning that Americans prefer to keep
traditions and norms and dislike changing of societal norms. Despite the US and Brazil being far off in
this aspect, both countries prefer to keep traditions and norms.

Indulgence:

Brazil scored a 59 in this aspect and realize their desires and impulses to enjoy life and having fun.

USA also are higher than average in indulgence and have a “Work hard play hard” attitude. Both
countries are similar in their indulgence dimension.

E. Does this strategy fall anywhere in the specific S or W and O or T information within your TOWS
matrix? If yes, where (give specific factors) and why? Or, if it does not relate to your TOWS
matrix and will not fall into any of the four quadrants in your matrix, explain why not. (10 pts.)

Expansion into Brazil relates to some of the SWOT items produced in my TOWS matrix.

A weakness noted was the continued reliance on US markets, which could be solved through an
expansion into Brazil away from North American markets.

An opportunity Amazon has is its influence on Gen Z and Millennials for retail. 34% of Brazilians are
millennials and represent 50% of the workforce. Many Brazilians millennials would use Amazon’s
services.

F. How could Microsoft compete with Amazon on this strategy? How could Walmart compete with
Amazon on this strategy? [ I am expecting a full paragraph for each company.] (15 pts.)

Microsoft could compete with Amazon in an expansion into Brazil by entering a different South
American country and expanding its Microsoft Azure into a different country to expand its cloud
capabilities. Microsoft using this service in South America is a strong way to compete with Amazon

Walmart can compete with Amazon because of its retail presence in Argentina. Walmart’s presence in
South America already becomes a competitive advantage for Walmart because its already establishing
in South America.

G. Now based on the information you presented above, how strong is this strategy for Amazon’s
future growth? Does it complement any of your top five strategies? If yes, which one(s)? If no,
why not? Would you substitute this strategy for one of the top strategies that you developed
for Amazon this semester? If yes, which strategy would you drop and why? If not, why not? [I
am expecting at least 2 paragraphs for this answer.] (15 pts.)
 Amazon’s expansion into Brazil is a risky expansion into an unfamiliar market with a language
barrier between Amazon and Brazil. One of the only ways that an expansion into Brazil would make
sense would be to acquire Mercado Libre to run its retail, if there was a retail success with Mercado
Libre, potentially it can also be used to expand AWS into small businesses in Brazil to expose Brazilians
and South America to AWS capabilities.

Expansion into Brazil does not have a strong complement to any of my top five strategies, because
many were in reference to protection of AWS services. The most relatable strategy that I used that
could world in Brazil would be the increased services to businesses and homes using AWS for smaller
businesses.

I would not swap any of my current strategies for an expansion into Brazil. Without an
acquisition of Mercado Libre, the expansion into Brazil does not make sense because of many clashes
in Hofstede’s dimensions including Individualism. In addition, I believe it is important that Amazon
gets away from retail and expand itself from its current limitations in margins in retail, so expanding
into Brazil for retail does not make sense as it counter intuitive to my overall goal for Amazon. AWS
should be the main concern and without successful relations between Amazon managers and Brazilian
businesses, AWS would not be able to thrive in such a market where relations are off. However, AWS
being integrated into medium to smaller businesses should be a goal for Amazon, but the Brazilian
market may not be the best way to expand.

Kristian Slaby