Critical Discussion on Amazon global business strategy
Question
Task: You are required to give advice based on your role as a strategic international marketing manager to Amazon.com on its strategy to enter the Dutch market in 2020-2022. Assume you are the international marketing manager of Amazon, and write a report to the management team, addressing the following areas:
- Description of Amazon and its growth strategies in an international perspective
- A plan on ‘How’ to enter the Dutch market from Amazon’s perspective. Which model (Global or Organic path from theory and literature) would you use?
- Who are the main competitors for Amazon in The Netherlands?
- What competitive reactions are to be expected and what is your competitive strategy?
- What is the entry strategy for the Netherlands (use literature)?
- What cultural and management differences can you identify (use literature)?
- What will be your operational (marketing) plan to be successful (use literature)?
Answer
Introduction
The present study is focused on discussing the Amazon global business strategy to enter in Netherlands. Globalization and Internet has transformed the world into a Global village which gives business organizations to fly high and take the advantage provided by the opportunity of International expansion. One such company, which has physical presence in over 16 countries and ships its products to over 100+ countries, has leveraged this opportunity of International expansion to next level- No points in guessing the right answer as we are talking about the largest e-commerce company in the world and the only e-commerce organization to enter into three trillion dollar club. International expansion is lucrative to large scale organization primarily due to their economies of scale & scope, and also because this way they are able to cover different parts of the world, acquiring more customers, developing strategic supply chain relationship and revenue. The report here will identify the Amazon global business strategy that the company should use in order to enter one of the most densely populated countries of Western Europe- Netherlands.
Overview of Amazon
Amazon was founded in the year 1996 much before anyone has even heard of this new technology- Innovation and Jeff Bezos (Founder & CEO) had his eyes on the future and knew how internet would reshape the world, for the better. Hence, the company which started from a small office in Seattle by selling books online, at the very present is not only the largest e-commerce organization, but it is one of the most culturally diverse, technologically advanced and 7th largest employer in the world(Sprague, 2020). In the year 2019, company made whopping revenue of over US $ 285 Billion, out of which over US$ 75 Billion came from International markets(Sprague, 2020). The numbers just go on to show how Amazon is leveraging its technology and marketing strategies to dominate the e-commerce business both globally and in its domestic market.
What is Amazon global business strategy?
One of the very first things we notice about Amazon global business strategy is “GLOCAL- Go Global and Act Local”. It implies that Amazon empowers the domestic retail industry of the country in which it expands, and not disrupts their livelihood, which makes Amazon so popular across the globe and its sellers extremely satisfied(Sprague, 2020). It is due to such vast expansion capabilities the company does not focus on deploying just one Amazon global business strategy and has been using the entire Ansoff Matrix of Growth strategy; let us briefly understand how Amazon leverages the same.
(Rousek & Haskova, 2020)
Market Development
This is the Amazon global business strategy which is extensively used. It is related to expansion of the same products into different markets, Amazon has been doing the same ever since it set up its base in the US in 1996, and until now it is into more than 16 countries, with Netherland it will get into its 17th International market(Rousek & Haskova, 2020).
Market Penetration
This is another Amazon global business strategy, where its penetrates the existing market with existing products. The strategy here is to get more buyers on the platform through its marketing & promotion strategies(Rousek & Haskova, 2020).
Product Development
Herein the company creates and develops new product for the existing market. This is another Amazon global business strategy wherein the company leverages it’s newly manufactured product such as Echo, Kindle, Firsestick, Firephone and others to acquire more customers for the business(Rousek & Haskova, 2020).
Diversification
This is another growth strategy company has been exploring to expand its business revenues by coming up with new products in new markets. For example, Amazon Web Services earns sizable business revenue for the company is a part of its diversification strategy(Rousek & Haskova, 2020).
Internal Environment Analysis
SWOT is an internal environmental analysis, wherein the strength and weakness which are internal to Amazon are identified and similarly opportunities and threats which are external to Amazon are identified. The SWOT analysis is conducted here to leverage the strength and minimize its weakness on entering the Netherlands market.
Strength
- Customer Obsessed /Customer Focused Business Strategy.
- Cost leadership owing to no or little fixed infrastructure costs.
- One of the most recognized brand names in the world.
- Excellent marketing and communication strategies
- Enormous experience of International expansion
- GLOCAL Strategy (Wadhwa, Vashisht & Phutela, 2020)
Weaknesses
- Anti-Trust Issues with the sellers in certain markets- Amazon itself competing with other competitors, hence issues regarding Amazon manipulating its platform matrix to benefit itself (Wadhwa, Vashisht & Phutela, 2020).
- Tax avoidance issues in many countries have earned it a bad reputation.
- Launched a couple of Bad Product- Firefly Smartphone being an example.
Opportunities
- Netherland being densely populated implies more potential customers for the brand, hence a very big opportunity.
- Pandemic, which has forced a lot of industries to shut down by facing severe losses, Amazon is one company which has made sizable revenues and shown profit, thus proving the e-commerce marketplace model of Amazon to be filled with plethora of opportunities(Wadhwa, Vashisht & Phutela, 2020).
Threats
- Wal-Mart focusing on its e-commerce business is a major threat to Amazon especially in Indian and US Markets.
- The foundation of Amazon business model lies on extensive use of technology, which keeps on changing every day. Hence, Amazon needs to analyze its tech environment to keep its competitive edge.
- Amazon recently signed up Climate pledge act to become 100% carbon emission free by 2025, if it fails to do, it will be in a tough spot and might have to shut its business from many countries(Wadhwa, Vashisht & Phutela, 2020).
Competitors of Amazon-Netherlands
Netherlands is one of the most densely populated countries of Western Europe with over 17 Million people residing in the country. The Dutch country has over 97% internet population which is a good number in terms of digital literacy and one of the reasons why Amazon global business strategyidentified Netherlands as its new geographic destination for creating a physical presence, despite establishing its presence through Amazon web services in 2013. Netherland is an important part of the European Union and has over 13.5 Million online shoppers, thus making it a highly significant market. Some of the main competitors along with the revenue s are:
(Fouskas, 2020)
The lacunae or the gap which can be identified here is that Amazon will be the only Global Marketplace in Netherlands, whilst all of the other players have identified different specific segments. For instance Bol.com is a Dutch Marketplace, H&M is a Swedish Marketplace, Coolblue is an electronics and household marketplace and Bol.com is a Dutch marketplace. Thus, Netherland is already warmed up to the concept of e-commerce and Amazon using its vast resources and capabilities can dominate the market(Fouskas, 2020).
Competitive Amazon global business strategy & Expected Reactions
Amazon is expected to enter the Dutch Country in 2020, and as mentioned in the reports it will be first coming up with its grocery and pantry services as the population has been found after research to have a great appetite for groceries. The company has already started its job posting of Dutch managers at its job portals. The company will be using German warehouses initially to stock up the products for Netherlands and then come up with warehouse in Netherlands(Blank & Dorf, 2020).
Bol.com will face high competition from Amazon and strong bitter reaction as the company does not has a forte in grocery but provides products in categories of baby, health, drink and beauty. The expected reaction from the competitors can lead to price war in Netherlands, however it is good for the population as the country will be able to buy higher quality products at lower prices. Amazon leveraging its GLOCAL strategy has already given a link on the website for seller registration. Keeping in mind its GLOCAL strategy to be Amazon global business strategy, some of the points which have to be kept in mind are:
Product Categories- It has already been established that Amazon global business strategywill come up with Groceries and Pantry services, before moving into other product categories. The company is also in talks to invest a sizable amount of money into Dutch Takeaway Delivery service, Deliveroo to also tap into food sales. Language- Statistically, Netherland is ranked no.1 in proficiency in speaking English Language, but it has been seen that online shopper’s likes to buy products from the platform which has content in Dutch language, hence Amazon should focus on that aspect.
Currency- When in Rome act like Romans, hence it is required that Amazon lists all the price in Euros for the easy understanding of Dutch population, as well as it will help company to build better domestic relations.
Delivery-Delivery has been one of the key strength and Forte of Amazon, it is already in talks with Dutch’s Deliveroo and exploring its logistic services.
Payment Platform- besides Amazon Pay, Amazon global business strategyshould leverage all the existing Dutch payment platforms and other standard online tools to not lose out any category of its audience. 2020 is the era of digital age, hence besides offering one comprehensive payment platform, the people do prefer more options as well(Blank & Dorf, 2020).
Entry Strategy
In this section we will identify the literature on the Market entry strategies deployed by Amazon, and which are most significant to the Dutch Market.
Acquisition Strategy
Amazon is known for its acquisition strategy and the company has acquired a couple of companies when it enters the domestic market. This Amazon global business strategy helps the company to not only build good relations with the Local government, but it also enhances the capability of the acquired organization. Amazon is already in talks to invest in Dutch Based Deliveroo(Kaushik, 2020).
Securing and Building an efficient supply chain logistics
Netherlands is a highly developed market when it comes to technology; it has two big players when it comes to delivery services. Amazon has to either tie up (Already in talks with Deliveroo) or buy a logistic company to ensure smooth flow of supply chain, and customers receives their goods on time(Kaushik, 2020).
Building relationships with local businesses
Amazon global business strategy has always been to focus on empowering domestic businesses so that both can benefit from each other. The company has to deploy the similar Amazon global business strategy in Netherlands, in fact Amazon has already asked for small sellers to register on its platform. The company also creates fund for training of such small sellers(Kaushik, 2020).
Amazon Prime holds the key to easy entry
Amazon Prime ensures free delivery of product within a time frame of 24 hours and in some countries for 48 Hours. However, it is the free shipping with other benefits the company offers during its market entry which attracts the customers. Hence, this proven Amazon global business strategy is to be applied in the Dutch Market as well(Kaushik, 2020).
Hofstede Model-Identifying Cultural & Management Differences
Hofstede model is an ideal and the most significant framework to understand the culture of a country. This model uses 6 cultural dimensions to reflect the culture of the country
(Hofstede, 2020)
Power Distance-Netherlands has a Power Distance of 38, which is an indication that the people in the country like decentralization of power. Control is disliked, employees prefer to be consulted and the managers rely on the team members. This relates strongly with the culture Amazon follows in its organization.
Individualism-Netherlands has a score of 80, which implies that Netherlands is a highly individualistic society. Implication here being that member in the community either take care of themselves or their immediate family members.
Masculinity-Netherlands has a score of 14, which implies it being Feminine in nature. The implication here is that people like work life balance and quality of life. Herein the effective manager involves in the decision making process, which leads to empowerment of individuals.
Uncertainty Avoidance-Netherlands here has a score of 53 which is slightly towards preferring uncertainty avoidance. In these kinds of cultures time is money, innovation is resisted and security is given high priority. Long Term Orientation-Netherlands has a high score of 67; the implication here is that the culture is pragmatic in nature. Hence, the individuals are adaptive in nature, thus Amazon can easily involve the employees and adapt them to the culture and values of the organization.
Indulgence-With a high score of 68, the implication is that Dutch people love to enjoy life, engage in fun and leisure activities and are motivated with their inherent desires.
Marketing Plan
Amazon’s Marketing plan should ideally cater to the following areas:
- Ensuring timely and smooth deliver of its product to the Dutch consumers
- Deploying an amazing customer service experience to its customers
- Replication of the same UI/UX in both website and mobile application as it does for the US Market(Sousa & Horta, 2020).
- Ability to implement economies of scope and scale in the Dutch region
Marketing Mix
4P or Marketing mix is focused on specific Amazon global business strategy with respect to product, pricing, place and positioning of Amazon’s product and services.
Product- theCompany after obtaining success from its grocery and pantry offering should quickly get into offering large range of product and services it offers to other markets.
Price-
Amazon should ideally go for Penetration pricing strategy in the start and after it has given the taste of its services to the customers, it should move into competitive pricing(Goel & Tyagi, 2020).
Place- Netherlands is a highly digitally literate market hence the company should aim for both of its Urban and rural markets.
Promotions- Amazon is a big spender when it comes to marketing and promotions, in this case here Amazon should rely mostly on digital advertising tools more in comparison to traditional tools such as TV, Print and other due to high digital literacy in the region(Cateora, 2020).
USP & Value Proposition
Below is the unique selling and value propositions which are to be leveraged in the marketing and communication plan for Amazon global business strategy:
- Offering wide range of product in all possible categories and selling anything to everything that can be bought online(Cateora, 2020).
- Delivering timely and great quality product to its customers with easy refund policy
- Ensuring the company communicates its customer obsessed company polices to build a strong trust with tits audience(Samiee, 2020).
- Amazon should also make sure that the feedback and complaints of the customers are handled well using its online reputation management and complaint handling customer service team.
IMC Strategy
The company should ideally keep a ratio of spend on media vehicles to 70:30, wherein 70 percent of the marketing budget is allocated to digital activities and promotions and the reaming 30% towards traditional media vehicle. The company should follow an AIDA (Awareness, Interest, Desire & Call to Action) approach in its IMC strategy. The idea here is to pass on the price benefits to the customers and not spending recklessly on marketing and leveraging the brand name in the initial few years(Wang & Miller, 2020).
Conclusion
Netherlands is a great market for Amazon keeping in mind its digital literacy and the densely populated country. Although competition does have a significant role to play here, but Amazon global business strategy has proven time again its competitive edge over its competitors leveraging its resources and capabilities. Thus, the 17th Market for Amazon, which is Netherlands in this case, is touted to deliver significant revenue to the largest e-commerce organization.
References
Blank, S. and Dorf, B., 2020. The startup owner's manual: The step-by-step guide for building a great company.Amazon global business strategy John Wiley & Sons.
Cateora, P.R.,2020. International marketing. McGraw-Hill Education.
Fouskas, K., 2020. A Systematic Literature Review on E-Commerce Success Factors. In Strategic Innovative Marketing and Tourism (pp. 687-694). Springer, Cham.
Goel, P and Tyagi, S., 2020. Customer Experiences, Expectations and Satisfaction Level Towards Services Provided by Amazon. International journal of Tourism and hospitality in Asia Pasific, 3(1), pp.89-101.
Hofstede, 2020. Netherlands. [online] Available at:
Kaushik, A., 2020. SWOT Analysis of Internet of Things in the Library and Information Science Environment. In Handbook of Research on Emerging Trends and Technologies in Library and Information Science (pp. 1-12). Amazon global business strategyIGI Global.
Rousek, P. and Hašková, S., 2020. The Methodology of Simple Comparisons as a Replacement for Comprehensive Benchmarking in Controlling. In SHS Web of Conferences (Vol. 73, p. 01023). EDP Sciences.
Samiee, S., 2020. International marketing and the internet: a research overview and the path forward. International Marketing Review.
Sousa, R & Horta, C., 2020. How to serve online consumers in rural markets: Evidence-based recommendations. Business Horizons.
Sprague, R., 2020. It’sa Jungle Out There: Public Policy Considerations Arising from a Liability-Free Amazon. com. Santa Clara Law Review, 60.
Wadhwa, B., Vashisht, A. and Phutela, N., 2020. Business model of amazon India-A case study. South Asian Journal of Marketing & Management Research, 10(1), pp.32-40.
Wang, R.D. and Miller, C.D., 2020. Complementors' engagement in an ecosystem: A study of publishers'e?book offerings on Amazon Kindle. Amazon global business strategyStrategic Management Journal, 41(1), pp.3-26.
