Date post: | 19-Oct-2014 |
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Education |
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AmazonEntering Indian Market
Group A4
Biswo Ranjan Bal 12012
Gaurav Kumar 12017
Shashank Shekhar Goswami 12045
Siv Sagar Saha 12048
Robin Kumar Sahu 12097
Ritesh Jaiswal 12153
Sarthak Rohatgi 12182
Introduction of Amazon
American multinational company
Incorporated in 1994 by Jeff Bezos
In July 1995, sold its first book on Amazon.com
Presence across three locations in India (Bangalore, Hyderabad,
Chennai)
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Vision & Mission Statement
Vision
“To be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Mission
“To leverage technology and the expertise of invaluable employees and to provide customer with the best shopping experience on the internet.”
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Ethical issues of Amazon.com coming to India
Stakeholders: Justified returns to them has to be ensured
Suppliers: Suppliers forms an integral part for any business operations. Amazon being an online retail chain has to have good relationship with its partners.
Customers: These are the most important category for any organisation. Amazon has to make sure that it provides genuine products to its customers. Since they could not have touch feel or test facility in their type of business
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Employees: Employees should not exploited. They should be trained properly. Moreover since they are expanding in India, they should focus on giving Indians more employment. As we have seen the recent issue of Infosys in U.S.A. where allegations over racial discrimination has been raised against the company.
Competitors: They should start a healthy competition with their competitors. Price wars will be there but they have to focus more on customer satisfaction. An environment should be created where there is a win-win situation for all.
Society: They should not involve in any unfair means which harms the society or the legal structure.
As in the case of Bharti Walmart where the CFO Pankaj Madan and his entire legal team has been suspended on account of alleged bribery to the government officials for getting various licenses and permissions. (Economic Times, 2013)
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Strategic Issues
Amazon is basing its strategy on three pillars:
Vast selection
Low price
Fast delivery
Gaining market share
In India, tastes and desires change drastically in every 200kms, which
was unlikely in other countries
Flipkart which is the market leader in India, is the biggest hurdle in their
way to success as it has gained customers’ confidence over the years
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Strategic Shift
AMAZON.COM (Circa 2001)• Landlord of largest WebSupermall• Universal selection, one-stopShopping, and same day customerFulfilment = competitiveAdvantage• Revenues: $2.7 Billion (est.)• Registered Customers: 19.5 MM• Items Offered: >18 MM
AMAZON.COM (1998)Book E-tailerInvestment in brand buildingCustomer fulfilment largelyoutsourced to Ingram andBaker & TaylorRevenues: $610 MMRegistered Customers: 12 MMBooks Offered: 2.5 MM
Complex
Simple
LOW CUSTOMER FULFILLMENT AS CORE-COMPETENCE HIGH
HIGH
LOW
ONLINE
PRODUCT
ASSORTMENT
E-CUSTOMER
EXPECTATION
HIGH E-Brand as barrier to entry LESS COMPELLING
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Analysis of Strategic shift
Amazon adopted changes with time
Added new market developments
From just being an online book seller, it became an online shopping
place
Expansion of business created entry barrier for competitors
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Understanding Indian Market
Middle class in India is booming
India is the third largest publisher of English language books in the
world
E-commerce has a huge potential in India, a country of more than 1.2
billion people
52 million active Internet users, of which 40 percent have shopped
online
Indian online market is expected to grow 55% to 100 billion rupees
this year 9
What Amazon looks to achieve in India
Customer satisfaction in India
Looking for a long term business
Considers new markets where the company could enter or additional
products that could be developed
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SWOT Analysis of AmazonStrengths
Brand well known along with a strong customer base in many parts of the world.
Diverse product offerings Free home delivery above a minimum purchase Working with minimum profit and gaining from
economies of scale Strong business relationships with publishing houses,
major electronic companies etc. Experience of almost a decade in online shopping
industry
Weakness
Operates at very low margin Criticism for its working conditions ‘KINDLE’ is not up to the mark of its competitors
Opportunity Acquiring more small business enterprises, enabling them
to expand Opening physical stores so as to give the customers a feel
of touch and experience Indian retail industry is estimated to be $450 Billion Expand into more product segments Tie ups with major players of untapped market
Threats
Online security threats Regional low-cost retailers Strong online presence of Indian competitors like
Flipkart and Myntra Flexible rules against FDI enabling other major
players like Wal-Mart etc. to enter
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Competitive Profile Matrix• CPM identifies the firm’s major strength and weakness in relation to another firm’s strategic position• Critical success factors (CSF) ensure success for an organization
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Competitor Analysis
The largest competitor as of now in India is Flipkart with highest score
(3.25)
Currently, product options on Amazon are limited while competitors
has expanded
(Flipkart and eBay offer a wider range of products)
Flipkart has 80 per cent share of the online book market in India
Flipkart now has a wide reach in the Indian market and the delivery
time is just four business days
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SPACE MATRIX• Analyse capabilities in various fields and then select a strategy move with which to adapt to the changing market conditions
• Factors considered in SPACE Matrix are financial strength (FS), industry strength (IS), environment strength (ES) and competitive advantage (CA)
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Analysis of SPACE matrix
Amazon has good Financial and Industry strength
It should aggressively enter the market
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Quantitative Strategic Planning MatrixKey Internal Factors
Weights Strategic AlternativesEntering into emerging market Strengthening existing market
Strength AS TAS AS TAS
Brand Awareness 0.25 4 1 3 0.75
Experience in business
0.10 3 0.3 3 0.3
Diverse Offering 0.15 3 0.45 3 0.45
Free Home Deliveries
0.10 2 0.2 4 0.4
Weakness
New to Asian market
0.20 4 0.8 4 0.8
Low margin business
0.20 3 0.6 3 0.6
Subtotal 1.00 3.35 3.3 16
Key Internal Factors Weights Strategic AlternativesEntering into emerging market Strengthening existing market
Opportunities AS TAS AS TASOnline Payment system
0.25 2 0.5 3 0.75
Integrating private level
0.10 3 0.3 3 0.3
Growing Asian market 0.20 4 0.8 -
Expand into more product segments
0.05 3 0.15 4 0.2
Threats Online security threats 0.20 4 0.8 4 0.8
FDI rules 0.10 3 0.3 - Regional online competitors
0.10 3 0.3 3 0.3
Subtotal 1.00 3.15 2.35Total Attractiveness Score
6.5 5.6517
Analysis of Quantitative Strategic Planning Matrix
Depending on various key internal factors:
Amazon should enter emerging market (India) rather than
expanding its existing market
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Recommendations:-
Strategy Diamond
Arena- where will we be active?
Vehicle- how will be get there?
Differentiators- image,customisation,price
Staging and pacing- speed and sequence of moves
Economic logic- how are the returns obtained? Cost of revenue?
Arena
VehicleStaging &
Pacing
Differentiators
Economic Logic
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Logistic management
About 60% of online sales come from tier two cities. To reach the customers quickly company needs to have an effective logistic management. Flipkart seems to be Amazon’s only real competition. Flipkart’s quick delivery system, along with the option of cash-on-delivery has led to large Flipkart loyalists
Diversification
Diversifying into other products will help the company to check the entry of competitors which e.g. going into food, clothes etc. so that expenses are also distributed and adverse conditions in one sector can be borne by other one.
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Innovation
Only pricing cannot be taken as a differentiating factor, innovation is also needed. The company should create a total buying experience that has been missing in the Indian context. Promotion should be done through Push and Pull strategies which will include offers and advertising.
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Thank You