Amazon.com's vision is to become "Earth's biggest selection and to be Earth's most customer centric company."
Mission of Amazon.com:
The mission on Amazon.com is to create shareholder value over the long-term which is the fundamental measure of our success. We accomplish this mission by:
Investing aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.
Making investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.
Focusing relentlessly on our customers.
Market Penetration in China
Amazon.com entered the Chinese e-commerce market in 2004 by taking over Joyo.com (China IT & Telecom Report, 2007). However, as the GE matrix indicates, Amazon.com is underperforming and has lost its position as market leader (Dean, The Wall Street Journal, 2006). Market penetration in China is a strategic option as identified by business position graph of Amazon.com due to the fact that Amazon.com has the weakest position in China.
In order to address underperformance, the options below attempt to build a stronger brand image and increase market share.
Option1: Extensive marketing through various medium e.g. TV, outdoor, Press and Radio would be done. The purpose would be to raise awareness and enhance the brand name of the organization.
Option2: Attempts would be made to increase product range and suitability through introduction of the Merchant Program. The purpose would be to increase market share and sales of Amazon.com.
The PESTLE analysis reveals a high economic growth in China and high consumer spending. Global internet trends shows that China has the second highest internet usage in the world while the GE matrix identifies China as the most attractive market for Amazon.com.
Amazon.com has the necessary resources, skills, experience and knowledge to undertake global operations successfully as demonstrated in the UK, German and Japanese markets. Moreover market penetration into China would be less capital intensive than entering a new market. Amazon.com has successfully implemented the Merchant Program in the U.S.
The organization aims to achieve the following objective with the successful implementation of market penetration strategy.
To exploit the market potentials to the fullest extent possible their by reducing financial risks
To create value for the Chinese consumers with the Merchant Program by increasing the chances of local merchants to sell specialized or local products
To create long-term benefits of market penetration in China which will ultimately increase shareholder value
Key strategic factors present within Amazon.com that would lead to successful market penetration in China:
the existence of a global brand name the presence of advanced technology diverse product and service portfolio strong logistics of the organization growing internet usage within China
Problems present within the Chinese market:
Dangdang.com's (Amazon.com's competitor) strategy in overtaking joyoamazon.com as the market leader was heavily influenced by price war
Amazon.com lacks cultural awareness of the Chinese population
China's internet regulators have made it difficult for foreigners to participate fully, giving local Chinese e-retailers an advantage from the offset.
The global-local dilemma theory relates to the extent to which products and services may be standardized across national boundaries or need to be adapted to meet the requirements of specific national markets (Johnson et al., 2006). This is a key area which needs to be resolved by Amazon.com before the identified potential advantages of operating in China can be fully realized. Amazon.com's strategy must be locally responsive.
Milestones and deadline:
Regain the status as the market leader by increasing market share from its current position of 16% to 24% within the next 2 years.
Improve knowledge and cultural awareness of the Chinese population by implementing services which best suits the Chinese market.
To secure at least ten merchants for the Merchant Program within the first year
Marketing strategy would be based on the principles of creating awareness, instilling interest, stirring desire and finally compelling consumers to buy the product. The following channels for marketing would be adopted:
Sponsorship -- Sponsorship of sports events that are popular and Chinese consumers find exciting, such as the China Tennis Open.
Advertising -- Regional Advertising by making advertisements fun and exciting.
Sales Promotion -- Short-term incentives used to encourage sales, for example discounts for a limited time only.
Amazon.com can successfully align with the Chinese consumer culture by implementing Amazon.com's Merchant Program that runs successfully in the U.S.A. External
Companies can buy square meters of warehouse space to hold their stock or they can process the orders themselves. Amazon.com can then sells the external company's stock via their website. This would help Amazon.com in overcoming the competition from domestic Chinese rivals who have the advantage of knowing the customers better and having long-established business relationships in local markets. Overall this strategy should allow Amazon to be more locally responsive.
Organizational change management strategies that would enhance successful implementation:
Changes in organization's structure:
Amazon.com's structure should be adapted to reflect the notion that globalization is the geographical expansion into local markets with special needs to be met. This would involve an integrated network (or transnational model) to structure the organization whereby country subsidiaries would have close relationships with international headquarters but would also have strong relationships with other subsidiaries. The advantage to Amazon.com of adopting such a model is to:
Balance the need for global standards and devolved decision making
Balance local independence/responsiveness with global co-ordination
Enable large flow of information, people, resources and best practices
Enable shared strategic decision making between international headquarters and local subsidiary
Tasks and task ownership:
The roles and responsibilities to support the market penetration strategy in china would be as follows:
Senior Vice Presidents in Seattle HQs would ensure that global competitiveness of Amazon.com as a retail brand continues to increase while also focusing on maintaining increased co-ordination in international operations to enable increased value and reduced cost.
Managing Directors in China would implement locally focused marketing strategies which are responsive to Chinese consumer culture while also selecting the right mix of local and international media products that can both meet local needs and Amazon.com value proposition such as free DRM Mp3's or free delivery relative to spend. They would also design local value chain activities by exploiting economies of scope.
Amazon.com is currently 68% geared. In order to implement strategies to penetrate into China, substantial investment will be required. If this finance is not available internally, then external sources may have to be established, therefore this gives financial institutions power to refuse finances or to impose higher interest rates.
Given the strong economic opportunities in China the following financial position can be estimated over the period of time. However the initial years might not show a very large net profit figure due to high operating costs. However it is expected that the company would be able to accrue increase profits within the given time scale.
Risk Associated and contingency plan:
The following risks could be associated:
Inability to raise sufficient finance: Amazon.com currently has a 68% gearing level. This may limit the amount they can spend on the marketing strategy and the number of merchant traders on the Merchant Program.
Cultural issues: The recommended strategy may require Amazon.com to increase its workforce in China and re-align their HR strategy to accommodate this increase. Conflicts may arise when integrating the two cultures and structure.
Government intervention: Amazon.com may have comply with regulations and restrictions imposed by the Chinese Government) such as promoting local e-retailers. Moreover as there are differences in regional legal advertising, this could restrict the marketing strategy.
Intense Competition: the intense competition in the market such as those from local retailers might prevent Amazon.com to fully exploit the potential of the market.…