MASTERS IN GENERAL MANAGEMENT

2023 - 2024

AMAZON GOES GLOBAL 2020

International Management

Prof Dr Esha Mendiratta

Laure Roosen
MGM 24

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Synopsis
In summary, “Amazon Goes Global 2020” provides an overview of Amazon's journey,
describing all the milestones in its evolution from a relatively small online bookstore to
the global e-commerce giant it is today. As an introduction, the case provides some key
general information about Amazon, including its well-known direct-to-customer online
business model, the company's overall value proposition, and the long-term mission
and vision of the business. It then delves deeper into the online retail industry, exploring
aspects such as the rapid expansion of e-commerce worldwide- and the future growth
potential, the key players shaping the industry, and Amazon's position in this
competitive landscape. The focus then shifts to Amazon’s diversified portfolio of
products and services, highlighting some core features such as Amazon Kindle and
Amazon Prime. Subsequently, a comprehensive review of Amazon's extensive global
expansion is described, exploring its international expansion strategies and the complex
challenges it has faced along the way, from its entry into the UK to its subsequent
expansion into 14 countries worldwide by 2020. A detailed examination of the
company's performance in key markets, combined with the strategies it employs to
strengthen its leading position in times of the COVID-19 outbreak and a general trend
towards digital transformation, provides a nuanced understanding of Amazon's
adaptability and resilience over the years. As Amazon has faced both opportunities to
successfully grow its global brand presence and the drawbacks during its global
expansion, questions arise about Amazon's future global strategy. It contemplates
whether Amazon should prioritize further expanding its global reach or strengthening
its existing operations, forcing readers to consider what the next step should be to ensure
a successful future for the company(1).

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Why did Amazon initially consider international expansion? Is international
expansion a key success factor in Amazon’s industry?

Initially, the company’s success in the US combined with the increasing global market
potential in the e-commerce industry, served as a driving force for internationalization.
Moreover, the focus of Amazon in offering online products and services that could be
easily replicated and distributed in other countries further encouraged the company to
expand globally. In addition, this online business model enabled Amazon to avoid
substantial fixed costs, allowing them to set lower prices while maintaining a good
profit margin, therefore gaining a competitive advantage over offline book retailers in
the new markets they are entering (2).

Furthermore, by expanding its operations worldwide, Amazon was able to generate

different revenue streams, thereby mitigating the risk associated with over-reliance on
the domestic market. This strategy also allowed Amazon to leverage economies of
scale, expanding and diversifying its portfolio, and consequently attracting new
customer segments and retailers. This ultimately led to the well-known network effect,
resulting in an overall increase in brand awareness (3).

In general, internationalization has played a key role in the company's successful

growth over the years (4). This can be supported by the adoption of a similar strategy
by Amazon’s direct competitors, including eBay and Walmart.

What were the advantages and disadvantages of entering UK as the first

foreign country, as opposed to other similar countries, say, Australia and
Canada.

In general, the preference for the UK can be explained by different aspects. First of all,
The UK shares a common language and has cultural similarities with the US, where
Amazon is headquartered. This similarity can facilitate communication and
understanding of consumer preferences, which could enhance a smooth entry into the

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rules. We hereby declare that we have not engaged in any such irregularities.
UK market. Furthermore, the UK is geographically attractive as its limited distance
makes it easily accessible and well-connected, facilitating efficient logistics and supply
chain operations for Amazon. In addition, the already established online bookselling
market provides reassurance about the size and potential of the e-commerce market in
the UK. On top of that gives the UK market the opportunity to other major European
markets which is beneficial for the long-term perspective of the company.

Although most of the indicators, such as the minimal language barrier, the stability of
the economy, and the potential market size, are similar to countries such as Canada and
Australia, there are some distinct differences that make choosing the UK as a first entry
into new markets a rational decision. With regard to Australia, the most prominent
aspect is the geographical distance, which poses additional challenges in terms of
logistics and transportation. Consequently, this would require Amazon to adapt its
operations therefore increasing the risk. In addition, the e-commerce market in
Australia was less developed at that time, potentially hindering the success of Amazon’s
online business strategy. Therefore, Australia could be considered a less attractive
market as a first entry in Amazon's globalization strategy.

Although the geographical distance from Canada was limited, resulting in cultural
similarities, there were nuanced differences in consumer behaviour and preferences that
could make it difficult to meet customer needs and therefore hinder the intended
expansion of the customer base. Moreover, having French as an additional official
language alongside English would require more resources to tailor products and
services to non-English speaking citizens. Unlike the UK, where similar businesses
such as Bookpages had already demonstrated the potential of the market, there were no
such precedents in Canada, leading to considerable uncertainty about the viability of
the business model.

Targeting the UK as the first market for expansion makes sense as the more established
online bookselling industry already present in the UK gives the opportunity for Amazon

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to acquire existing retailers with valuable strategic assets, making the expansion in the
market not only more time- and cost-efficient, but also increase the change of success.
However, the downside is that the presence of competitors may make it more difficult
for Amazon to differentiate itself and really stand out in the market.

As the advantages outweigh the disadvantages, it can be concluded that the choice of
the UK as Amazon's first step into globalization was a strategically sound decision.

Why did Amazon fail in China?

Amazon adopted a similar entry strategy in China as it has in other countries,

specifically acquiring a prominent online book retailer (e.g. Joyo) to combine their
experience of the country’s market with Amazon's expertise in the online retail
industry. Despite its clear strategy to gain access to one of the biggest internet markets
worldwide, Amazon encountered significant challenges and was unable to overcome
all of them successfully. The CAGE framework can provide a better understanding of
why Amazon didn’t succeed in establishing dominance in the Chinese e-commerce
market.

Cultural
One of the most prominent reasons why Amazon has not been able to generate profit in
China is due to the significant cultural differences between Amazon's Western-centric
business model and China. Apart from the fact that there is a major language barrier
that complicates doing business, there is also a significant difference in terms of
communication. Specifically, the US is considered a low-context country, with an
emphasis on direct and open communication, while China has a more high-context
communication style, where context, non-verbal cues, and mutual relationships are
keyv(5). In addition, these countries are opposites in terms of traditional values.
Because of all these cultural and linguistic differences, Amazon struggled to align its
products and services with the preferences of Chinese customers, resulting in limited
interest in the books Amazon offered (6).

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Administrative
As with culture, the administrative policies of the US and China are fundamentally
different and have consequently played a crucial role in Amazon's journey. The
democratic and free-market conditions in the US created a favorable environment in
which Amazon's business strategy could thrive. On the contrary, China's communist
economy, characterized by significant state intervention, made it difficult for Amazon
to reach its full potential as it struggled to comply with these strict regulatory barriers.
In addition, the historical tensions between the two countries and the resulting trade
sanctions further complicate Amazon's ability to successfully enter the Chinese market
(7).

Geographical
On top of the subjective distance between the two countries, there is also a considerable
physical distance between China and the US, where Amazon's headquarters are located.
The statement in the case “To really do business in China, you need to be on the
ground”, underlines the additional hurdle that arises from this geographical distance.
Although Amazon has tried to overcome this distance with its logistics network, direct
competitors such as Alibaba and JD have gained the upper hand in meeting the delivery
needs of Chinese consumers. On top of this, the more aggressive marketing strategy of
these competitors further weakened Amazon’s position in the market.

Economic
The data provided by the exhibits in the case are in favor of Amazon, as there is a
forecast growth of 15% in the e-commerce industry in the Asia-Pacific region and
there is a considerable estimated growth in GDP in China. These economic data
imply an improved standard of living, technological advancements, etc., making
China an interesting market. However, Amazon has not been able to translate these
economic indicators into profitability. Another reason for Amazon's underwhelming
success in China could be the general preference for using cash instead of online
payment methods.

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In conclusion, the CAGE analysis provided a better understanding of the challenges
Amazon faced when entering the Chinese market, as it highlighted the various distinct
differences between the two markets.

Given Amazon’s performance domestically and globally, what should it do next?

Should Amazon take a break from its global expansion and focus on strengthening
its existing operations? Or should Amazon continue to explore new opportunities?
If so, where should it go next? Evaluate the pros and cons of each approach.

To gain a deeper understanding of the optimal strategy for Amazon to achieve future
success, it is useful to perform a SWOT analysis (8).

Strengths
In general, Amazon’s success is attributed to its strategic emphasis on convenience,
competitive pricing, and a diverse product range, all centered around customer needs
and data utilization. Over the years, the company has not only expanded globally,
resulting in a leading position in the e-commerce market but has also significantly
increased its product portfolio, offering a wide range of products and services that fulfill
the needs of a broad customer base. Furthermore, Amazon has a strong focus on
innovation, investing in technologies such as Alexa, which increases customer
engagement and loyalty. In addition, Amazon's stable financial performance has been
an important factor in establishing a strong brand reputation, positioning the company
as a trustworthy and reliable business. In conclusion, the customer-centric approach,
combined with its strong value proposition, gives Amazon a competitive advantage that
differentiates it from other competitors (9).

Weaknesses
Due to its strategy and the highly competitive nature of the market, Amazon is forced
to operate on thin margins. This, combined with the use of third-party sellers, can lead
to lower-quality products, which in turn reduces customer satisfaction and damages the

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rules. We hereby declare that we have not engaged in any such irregularities.
company's reputation. On top of that, the case highlighted that compliance with national
regulations and general trends in different countries can be an obstacle for Amazon.

Opportunities
Further diversification into new industries and markets, such as healthcare or finance,
provides opportunities to attract new customers and increase sales, and ultimately
profits. An effective approach to achieve this is through acquisitions, leveraging the
knowledge and expertise already acquired in this domain. Other opportunities lie in
exploiting emerging technologies such as artificial intelligence and robotics to improve
services and operations. In addition, the forecasted growth of the e-commerce industry
offers opportunities for further global expansion in different regions worldwide(10).

Threats
The most prominent threat to Amazon is intense competition from other major players
in the e-commerce market, such as Alibaba and JD. As outlined in the case, external
factors such as natural disasters, geopolitical tensions, or global events (e.g.,
pandemics) can disrupt Amazon's daily operations. Finally, there is a general trend
towards stricter data protection regulations, which could pose a threat as Amazon's
business model is focused on exploiting valuable customer data to elevate customer’s
experiences.

Global Expansion
As mentioned earlier, the e-commerce industry is growing worldwide, creating an
opportunity for Amazon to further internationalize into new emerging markets. This
strategy would allow Amazon to attract new customers, increase revenues, and
diversify its operations (11). Moreover, the data provided by the case indicates that
the regions with the greatest potential, such as the Middle East and Africa, are
regions where Amazon's presence is still limited, indicating immense growth
potential. As indicated in Exhibit 9, South Korea stands out as one of the major e-
commerce markets where Amazon has yet to establish a presence. Nevertheless,

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rules. We hereby declare that we have not engaged in any such irregularities.
Amazon's domestic competitor, eBay, seems to be performing well in this market,
suggesting the potential for Amazon to also succeed in this region. Over the years,
Amazon proved to have the necessary knowledge and skills to successfully enter a
new market. In addition, due to the highly competitive nature of the industry,
geographic expansion may be necessary to maintain a leading global market
position. Nevertheless, it is important to recognize that further global expansion
carries an inherent risk, as there is no guarantee of success. Considering Amazon's
challenging journey in China, it is clear that there is no standard "golden entry
strategy" that can be applied to all countries, forcing companies to adapt strategies
to effectively meet the specific preferences of customers in each country. However,
this requires a significant financial investment and, if not successful, could damage
the financial stability of the company. Amazon’s ability to manage external factors
including legal, geographical, and, cultural differences, will play a crucial role in
determining its success in entering new countries (12).

Strengthening existing operations

Given the substantial challenges faced during globalization, another strategic move
could be to take a break from global expansion and instead focus on strengthening its
operations in existing markets. This approach allows Amazon to critically assess its
current markets in terms of profitability and growth potential as well as explore the
opportunities to expand its product and service portfolio (13). In this perspective,
Amazon can further enhance its leading position in markets where it already has a
significant presence, such as Europe and Japan, and seek to consolidate a more stable
position and greater brand recognition in high-potential markets such as Mexico and
Brazil. In addition, by leveraging its existing infrastructure and resources, Amazon can
increase efficiency and reduce costs, which could improve its overall performance in
more challenging markets such as China. However, it should be noted that this strategy
may limit Amazon's growth potential, making them more vulnerable to new
competitors entering the market and existing competitors seeking to increase their

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rules. We hereby declare that we have not engaged in any such irregularities.
market share, ultimately threatening Amazon's position as a global leader in the e-
commerce industry.

References
1. Li J, Li Y. Amazon Goes Global 2020
Available from: www.iveycases.com.
2. Amazon Global Business Strategy: Model & Growth
Available from: https://www.studysmarter.co.uk
3. How Leaders Can Diversify Revenue Streams To Reduce Business
Risk
Available from:https://www.forbes.com
4. Inkpen A, Ramaswamy K. Global Strategy: Creating and sustaining
Advantage across Borders.
Available from: https://academic.oup.com
5. Yee NW, Hakimey A, Wae, Y, Yazdanifard R. High and Low
context culture impacts on international retailing: consumer
behaviour, customer services 2012
Available from: https://www.researchgate.net
6. American Vs. Chinese Business Culture
Available from: https://smallbusiness.chron.com
7. Timeline: U.S.-China Relations
Available from: https://www.cfr.org
8. Amazon SWOT Analysis (2024)
Available from: https://businessmodelanalyst.com
9. Amazon Business Model | How Does Amazon Make Money
Available from: https://boardmix.com
10. The Evolution of E-commerce: Past, Present, and Future
Available from: https://blog.emb.global
11. Localization Strategies for Global E-Business - Nitish Singh
Available from: https://books.google.be
12. What Is The Amazon Global Strategy And Why Is It Successful
Available from: https://www.markercontent.com
13. The Role of Localization in Your Growth Strategy
Available from: https://www.atltranslate.com

ChatGPT and AI
For this assignment, ChatGPT was used to review and refine certain paragraphs,
ensuring coherent and structured answers or finding alternative phrasing opportunities.
However, there was no active involvement of chatGPT context-wise.

Engaging in irregularities is severely sanctioned in correspondence with article 64 of the Examination

rules. We hereby declare that we have not engaged in any such irregularities.