AMAZON GOES GLOBAL 2020: CASE STUDY

Brief Overview

Amazon is a multinational technology and e-commerce company headquartered in Seattle,

Washington. Founded by Jeff Bezos in 1994, Amazon began as an online bookstore but rapidly
expanded its offerings to become one of the world's largest and most diversified online retailers.
The company has grown into a global giant with a significant presence in various industries,
including e-commerce, cloud computing(AWS), digital streaming, artificial intelligence, and
more. To understand more about Amazon let’s take the help of the SWOT analysis

STRENGTH WEAKNESS
● Brand Recognition ● Dependence on third-party sellers
● Diverse Product and Service Portfolio ● Data security concerns | Regulatory
● Innovative Technology Concerns
● Global Presence ● Easy to copy business model
● Large Customer Base ● Limited Customer Loyalty
● Low-Profit Margin

OPPORTUNITY THREAT
● Expansion into new markets ● Competition
● Diversification of Services ● Regulatory Challenges
● Technological Advancements ● Supply Chain Disruptions
● Acquisitions and Partnerships ● Technological Changes
● Counterfeiting and Fraud

In 2018, Amazon remained a small player in the global retail as 90% of retail remained offline
in brick-and-mortar stores. However, with the increasing use of digital modes of transaction and
the trend of globalization, Amazon made international expansion the key driver of its growth.

Amazon is a multinational company operating in multiple parts of the globe and here’s a brief
overview of its operations in a few countries-

Country Entry Mode Competitors Market Share

UK Acquisition of Bookpages.co eBay, Tesco plc 30.8% (2018 )

Germany Acquisition of ABC eBay 48.3%
Bucherdienst/Telebuch.de

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France Launch of an online store Casino Gulchard - 16.6%
Perrachon
Japan Launch of an online store Rakuten 26.9%

China Acquisition of Joyo Ltd. Alibaba 0.2%

India Acquisition of Junglee.com Walmart 35.7%

Before entering a new market, Amazon conducts thorough due diligence, taking into account
several critical factors, including the presence of a stable political environment and pro-business
policies, economic indicators, the state of e-commerce infrastructure, the competitive landscape,
regulatory frameworks, cultural alignment, technological infrastructure, legal and labor
environments, environmental sustainability, market research, and risk assessment, among others.

It also has to consider various regulatory restrictions such as concerns about anti-competitive
practices, unfair market dominance, and stifling competition, privacy breaches and the secure
handling of personal information, challenges related to labor laws and workers' rights, with
potential repercussions for Amazon's reputation.

For this purpose let’s take the help of a pestle analysis and try to understand the environment of
the countries in which Amazon is operating

1. UK, Germany, France [ Western, Developed world]

Parameters Asset Risk Profile Weightage

Political The UK, Low Low

comprising
England, Wales,
Scotland, and
Northern Ireland, is
a powerful modern
parliamentary
democracy with
constitutional
monarchy. Political
stability is a notable
strength, yet Brexit
introduces
uncertainties and
debates (BBC, 2022).

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 Germany is a
Federal,
Parliamentary
Democratic
Republic, with the
Chancellor as head
of the government.

France, a Republic
with a
parliamentary
democracy and
presidential power,
offers a business-
friendly
environment,
featuring a large
European market
and financial
prominence in
Paris.

Economic Low High

Developed e-
commerce
infrastructure,
high purchasing
power. The strong
financial sectors in
London, Paris, and
Frankfurt, free-
market principles
and innovation
aligns with
Amazon's business
model, enabling the
company to flourish
in these thriving
European markets.

Social Widespread online Mid Mid

shopping culture,
Diverse Consumer
Preferences ( age
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 group,multi-
culturalism owing
to the presence of
immigrants)

Technological Digital Literacy, Mid High

High Connectivity
and access to
smartphones

Environmental Developed nations High High

and hence the focus
is more towards
sustainability
through strict
regulations,
renewable energy,
and public
awareness and
stress on CSR
initiatives.

Legal Mid Mid

France poses
challenges with
stringent labor laws,
the UK's business-
friendly
environment fosters
ease. Germany
strikes a balance
with strong
workers' rights, but
complexities exist.

SCORE = 27

2. Japan, China [ Asian Countries ]

Parameters Asset Risk Profile Weightage

Political Japan - Mid High

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 constitutional
monarchy with a
parliamentary
government, Stable,
pro-business
policies, Bilateral
Relations with USA

China - one-party
system led by the
Communist Party,
Nationalism, Govt.
actively intervenes
in the economy

Economic Japan - Strong Mid high

Industrial Base,
Global Trade
Relations, stagnant
growth

China - Cheap
labor,
manufacturing hub,
state-led capitalism,
large consumer
market

Social Aging population, Mid high

sense of
collectivism and
strongly tied to
their culture acting
as a barrier to
foreign product
acceptance rate.

Technological Japan - tech-savvy High high

population yet a
dominated
economy, leads in
areas like robotics,
electronics, and
automotive
technology

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 China - rapid
technological
advancements,
particularly in e-
commerce,
telecommunications
and AI.

Environmental Japan - prone to Mid Mid

earthquakes,
stringent rules
relating to water
and air pollution

China - Air
pollution due to
industrial
emissions, rapid
expansion in the
renewable sector

Legal Japan - Strict High Low

Business
Regulations,
Labor Lawstrong
intellectual
property
protection, vital
for tech-based
companies

China - significant
government control,
impacting business,
IPR is challenging
owing to massive
counterfeiting and
infringement

SCORE = 34

3. India
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Parameters Asset Risk Profile Weightage

Political Democratic ethos, low low

bureaucratic
intricacies and
corruption
concerns.

Economic Growing Middle low high

Class (Increase in
Yd), Presence of
Skilled manpower,
existence of
required infra
like roads and
delivery systems,
high corporate tax
rates

Social diverse and high high

youthful
society,digital
literacy, and a rising
middle class for
widespread
acceptance and
market dominance.

Technological India's tech high high

landscape, fueled
by smartphone use,
digital payments,
vibrant startup
ecosystem.
Advancements in
AI, data analytics,
and improving
connectivity.

Environmental Regulations on mid mid

noise and waste
control drive
sustainability,
impacting

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 businesses.
However the rules
and regulations in
India are not much
of concern owing to
the developing
nature of the
country and the
presence of
widespread
corruption and red
tape

Legal Stringent laws do high low

pose a challenge.
However the
Judicial system of
India is not very
strong making it
easier to bypass
certain laws but it
does present a risky
scenario

SCORE = 29

Countries with lower scores signify lower risk and thus have performed better[ France, UK,
Germany] in comparison to Asian Countries like China and Japan where the risk factor is
significantly high.

Understanding the Strategies adopted in different countries

The world is so diverse and huge and every economy has its intricate dynamics at play - so the
question arises why did Amazon enter these countries and what strategies were adopted to ensure
that it captures the market?

➔ UK, Germany, France, Japan, Europe - In these countries, Amazon had been able to
emerge as a substantial market shareholder owing to its strategies which included
acquiring its probable competitors, localizing the sites as per their culture (using the

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 German and the Japenese language, forming alliances and acquisitions, relief efforts
(Japan)

➔ China - Amazon had a track record of being successful in implementing its strategies and
capturing the market even after they face initial resistance as in the case of Japan (where
avg. paperback costed just $4.50 ) where it could not leverage the competitive pricing.
However, China had been an anomaly in this regard as even after putting in numerous
efforts like acquiring Joyo.com Ltd., improving the logistics to ensure faster delivery.
However it could not put up with the stiff competition that it faced from Alibaba and
somewhere along the lines it also failed to understand the chinese culture - the absence of
features like group buying, customers not using credit cards, use of COD service and thus
they had to ultimately let go of China’s long term opportunity and accept that it is a lost
game.

➔ India - Indian customers are touted as one of the most spoilt customers in the sense that
they want the cheapest product, more features and the best quality all at the same time,
and yet Amazon has been successful in catering to the needs of the customers. The major
competition that Amazon is facing in India is from Flipkart and by 2018 Alibaba had also
entered the Indian market with capital infusion into Paytm and Big Basket. However, it
has been tackling it well and has a 35.7% market share only behind Walmart having 44%
share but surely it has not yielded disappointment as in the case of China.

Amazon's strategic entry into countries with open, pro-business economies showcases its
preference for stability and global integration. Unlike leveraging the "first mover advantage,"
Amazon strategically waits for other players to establish a market presence before making
calculated moves. The emphasis on mergers and acquisitions aligns with Amazon's financial
strength, allowing it to invest in established entities, mitigating initial market risks. This
approach, while requiring substantial upfront capital, enables Amazon to navigate established
markets with a reduced risk profile, contributing to its sustained global growth.

Amazon strategically enters economies that share common aspects favorable for its business
model. The company's global expansion has been marked by careful considerations, aligning
with specific economic, social, technological, and legal conditions. Here's an in-depth
exploration of the commonalities observed in the economies where Amazon has made significant
entries.

1. Robust E-commerce Infrastructure:

One recurring theme in Amazon's global expansion is its preference for economies with a robust
e-commerce infrastructure. The presence of reliable online payment systems, digital platforms,
and established logistics networks facilitates seamless operations. Countries like the UK,
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Germany, France, China, and India have witnessed substantial investments in their e-commerce
ecosystems, providing Amazon with a solid foundation to thrive.

2. High Purchasing Power and Developed Markets:

Amazon tends to enter economies with high purchasing power and well-developed markets. The
UK, Germany, and France are part of the Western, developed world, characterized by affluent
consumers with disposable income. These markets are attractive for Amazon, offering the
potential for higher transaction values and a diverse range of products and services. While
countries like India and China’s population was a lucrative feature attracting Amazon to enter
these countries.

3. Technological Advancements:
The technological landscape plays a crucial role in Amazon's expansion strategy. The company
thrives in environments where digital literacy is high, and access to smartphones and the internet
is widespread. Whether it's the tech-savvy population in Japan, China's rapid technological
advancements, or India's growing digital ecosystem, Amazon capitalizes on societies embracing
technology for commerce.

4. Stable Political Environments:

Political stability is a common denominator in the economies Amazon chooses to enter. Stable
governments in the UK, Germany, France, Japan, China, and India create a conducive
environment for business operations. This stability ensures that Amazon can navigate regulatory
landscapes without significant political disruptions.

5. Connectivity and Access to Smartphones:

Connectivity and access to smartphones are critical factors for Amazon's success. Whether it's
the tech-savvy population in Japan, the rapid adoption of smartphones in China, or India's
increasing smartphone penetration, these markets provide the necessary infrastructure for
Amazon's online retail and digital services.

And if focus on Cultural Commonalities then - Amazon has strategically identified and leveraged
several cultural commonalities that transcend geographical boundaries. These commonalities
have contributed to Amazon's success in both Western developed economies (such as the UK,
Germany, and France) and Asian countries (including Japan, China, and India).

1. Diversity and Inclusivity: - Across all the markets diversity and inclusivity are key
cultural commonalities that Amazon has leveraged. These societies embrace
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 multiculturalism, with people from various backgrounds coexisting. Amazon's approach
to inclusivity in its workforce and customer base aligns well with the cultural values of
these countries. In advertising and marketing, Amazon showcases diversity, reflecting the
inclusive nature of the societies it operates in.

2. Digital Literacy and Tech-Savvy Consumers: The economies share a common cultural
thread of high digital literacy and a tech-savvy population. Consumers in the UK,
Germany, and France are accustomed to online shopping, making these markets ripe for
Amazon's e-commerce platform. The cultural acceptance of technology and digital
platforms facilitates the seamless integration of e-commerce into the daily lives of
consumers of India and China.

3. Consumerism and Online Shopping Culture: Consumerism is getting deeply

ingrained in the cultural fabric of these economies. The prevalence of an online shopping
culture aligns with Amazon's core business model. The convenience, variety, and
efficiency offered by Amazon resonate well with consumers who value time and choice.
This cultural affinity with consumerism has played a significant role in Amazon's success
in these markets.

4. Innovation and Entrepreneurial Spirit: These economies have a cultural inclination

towards innovation and an entrepreneurial spirit. Amazon's roots as a tech-driven,
customer-centric company align with the cultural ethos of these economies. The openness
to new ideas and a willingness to embrace innovation in business models have
contributed to Amazon's ability to introduce and expand diverse services beyond e-
commerce, such as Amazon Web Services (AWS) and Prime Video.

Business Dilemma

The digital transition that happened in recent years along with the covid 19 outbreak had
redefined the new normals and the world has not been the same since then - The global economy
fell into a recession ( GDP contracting by 5.2% in 2020 which by the way was worse than the
financial crisis of 2007-2008). But this situation proved to be an opportunity for Amazon as
lockdown restrictions forced people to order online instead of buying from brick-and-mortar
stores. Also, the shift to remote work accelerated the move to the cloud giving a further boost to
AWS and the content subscription segment of Amazon.

Amazon now has a few dilemmas while strategizing its move ahead
● What should Amazon do with its less successful operations?
● Should it take a break from global expansion and strengthen its current holding?

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 ● If expand then what countries should Amazon aim to penetrate?
● What opportunities and challenges did the Global pandemic pose?
● How can Amazon maintain its global dominance with Alibaba increasing its global
market share?

The Next Step

Amazon should focus on integrating its probable competitors and rope them in before they can
pose a threat to the company - as for standing against the competitors Amazon should focus more
on strengthening partnerships and alliances with local players in key markets where Alibaba is
dominant. To dominate the Indian market Amazon can introduce the concept of group buying as
Indian Customers are very price sensitive, this will lead to an increase in overall sales, a lower
profit margin but overall more revenue and thus more gross profit

Taking a break for a short while to solidify would lead to late entry into markets like South
Korea which shows promising signs of Amazon’s success owing to the already existing tech-
savvy population, robust infrastructure, and high disposable income available to the masses.
Thus Amazon should opt for more of a balanced approach to this i.e strengthening its current
hold while exploring new markets like SouthEast Asia and Latin America

The global pandemic has undoubtedly led to an unprecedented surge in e-commerce, but
simultaneous disruptions in the global supply chain and a downward trend in the economy have
resulted in a decrease in the disposable income of the general public. Notably, Amazon
experienced remarkable success during the crisis, significantly boosting the wealth of its founder,
Jeff Bezos, already the world's richest man. Between March 18th and June 17th, his wealth
surged from $113.0 billion to $156.8 billion, reaching $182.6 billion in early July as Amazon's
stock hit record highs, solidifying his position as the wealthiest person on earth by an even wider
margin.

However, amid this prosperity, concerns arise regarding Amazon's treatment of its workforce.
Workers, who play a crucial role in the company's operations, felt their safety concerns were not
adequately addressed during the pandemic. In the United States, Amazon terminated both tech
and warehouse employees who spoke up about safety issues. In Europe, workers in Spain, Italy,
and France had to resort to approaching government authorities or engaging in strikes to compel
Amazon to prioritize their safety. This situation underscores a clear message: Amazon is willing
to take corrective action, but it often requires organized efforts from workers, government
intervention, and civil society pressure. The call is for Amazon to improve its practices and
prioritize the well-being of its workforce otherwise it is putting its reputation at risk which would
ultimately pose as a threat to the company.

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Conclusion

In conclusion, Amazon's global expansion has been marked by strategic initiatives tailored to
each country's unique market dynamics. The company has successfully penetrated several
markets by adopting various strategies such as acquisitions, localizations, forming alliances, and
understanding local consumer preferences.

However, challenges, particularly in China, showcase the importance of cultural understanding

and adaptability. Amazon's decision to exit the Chinese market highlights the significance of
recognizing and adapting to local business practices and consumer behaviors.

The business dilemma presented by the global pandemic has turned into an opportunity for
Amazon. The surge in e-commerce and increased reliance on digital services, combined with the
acceleration of remote work, has played to Amazon's strengths in online retail and cloud
computing. Yet, the company faces dilemmas regarding less successful operations, the choice
between global expansion and consolidating current holdings, and the challenges posed by
competitors like Alibaba.

To navigate these challenges, Amazon should focus on integrating probable competitors,

strengthen partnerships with local players in key markets dominated by Alibaba, and maintain a
balanced approach by consolidating its current position while exploring opportunities in
promising markets like South Korea, Southeast Asia, and Latin America. Also, it was worth
noting that Alibaba earns more profit than Amazon which is because Alibaba’s business model
does not require them to hold inventories thus saving on the cost.

The concerns raised about Amazon's treatment of its workforce during the pandemic highlight
the importance of addressing employee welfare and safety. The company should prioritize
improving its practices and fostering a positive working environment to mitigate potential risks
to its reputation. It has to tackle other environmental challenges like the California Water Crisis
which was aggravated primarily because of the cooling system of Amazon, making the water
unfit.

In summary, Amazon's success in global expansion requires a nuanced approach, considering the
diverse market landscapes and adapting strategies accordingly. The company's ability to balance
consolidation, expansion, and address workforce concerns will play a crucial role in maintaining
its global dominance in the ever-evolving business landscape.

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