Discuss about the Disruptive Technology of Amazon.
It has been said that the world has become one big global village, and people can connect with each other easily with just one click, all this has been possible with the invention of the disruptive technology “Internet”. Internet has not only made easier for people to stay in touch but have also paved a way for thousands of big and small companies which benefit from this revolutionary technology. Amazon was the result of this disruptive technology.
Jeff Bezos in the year 1994 founded Amazon at the back of his garage; he identified gaps in the current practices of the existing e-commerce companies and wanted to change the entire landscape to benefit the biggest stakeholders of a company “Customers”. Amazon started its journey as the online book seller in Seattle, and it kept on evolving its product offering, its policies and procedures to improve the way customer shop online. Presently Amazon is the one of the most valued companies on the earth and undoubtedly is sitting at the Zenith of the most successful e-commerce companies. Amazon which has its headquarters at Seattle has offices in almost 16 countries and distributes and ships its products to more than 180 countries. The success mantra for Amazon is its customer centric policies; Jeff believes that if the company takes care of its customers, the customers will take care of its shareholders. At present there are millions of people who shop millions of product on the Amazon website, the company sells product ranging from as small as a Pencil to as big as an indoor home garden. Jeff has created economies of scale and scope for the company, which is another contributing factor for its success.
The purpose of the assignment here is to use Amazon as a company and evaluate its business plan and strategies and identify the best possible option for effective development of operational planning. Using tools and techniques to identify a new product or service to be launched in the Indian market and analyse the competition existing in the industry. Towards the end of the assignment, a strategic marketing plan has to be created encompassing the channels of the promotion, their advantages and define SMART objectives for the campaign. For the purpose of the report, Indian market is being chosen to deliver grocery and fresh food vegetables in Tier 1 & 2 cities and ensure the delivery the very same day.
Amazon entered into India at a time when the Indian government was focussing on the Start-up India movement and wanted more and more start-ups to be created by Indian entrepreneurs. At that time, more than hundreds of companies were doing good in the e-commerce sector. Certain companies like Flipkart, Snap deal, Myntra, Jabong, Grofers, Big basket & urban clap had dominated the Indian online market. Amazon found India has a very interesting market because of its culture, religion and ethnic diversity and its huge population (132 Crore- 2018). Amazon wanted to make an impact in the Asian market, as the company could not do much in China, because of the local Alibaba group. Thus company wanted to keep its feet really strong and make an impact in the Indian market. The company’s new idea is to open an online fresh fruit, fresh vegetable stores, grocery store and give tough fight to the Indian players. The company already has a loyal base of more than 25 million people, out of which 9.5 million have been using its Prime services. Thus, with the brand loyalty, creating awareness and increasing the penetration of the new product makes good sense.
In order to prove the relevancy of the Indian market, macro –environmental analysis of Indian market will validate the choice of Amazon to go forward with its new product in the Indian sub-continent.
PESTLE analysis is a macro-environmental tool which is used to evaluate the external influences on business. The acronym stands for Political, economic, social, technological, legal and environmental forces which can affect the business operations and also helps to identify the attractiveness of the market chosen for the expansion of business plan and strategy.
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Political |
India’s political environment is extremely stable, despite a number of political parties, the collation rule still holds well in the Indian sub-continent. Under the present leadership, the government is laying emphasis on the internet start-ups and is creating favourable policies for international companies to come and operate in the Indian market. The market forces determine the level of competition, and although the government does not intervene much in the company policies, it certainly can play its card if need be. Amazon has been doing great in India, being one of the fastest developing economies; the country has shown good progress for the US e-commerce giant. The online fresh food and vegetable business though is dominated by Big Basket, Grofers, Small vegetables sellers and Big hyper stores. |
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Economical |
India’s GDP is growing at 7.4% annually and the projections seem to be really positive. India being the fastest growing Asian country is home to a number of MNC; this attracts a lot of talent in the country, as well as increases the purchasing power parity of the Indian population. The per capita income of India is 6490 USD, which is primarily due to a number of billionaires in India. However, despite all the factors, India’s economic condition is improving day in and out, hence, it becomes a strong Bastian for Amazon to further penetrate in the Indian economy and change the shopping habits of the people. |
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Social |
India is a young country, the median age in India currently is 29 years, this shows that the 132 crore population houses the maximum millennial of the entire world. The millennial are the ones who are driving the online industry all across the globe. Hence, Amazon has a great target audience, an audience which already has good awareness of the industry and is always in a look out to adopt new changes in the ecosystem. The growing technology proliferation in the Indian market and the change in the social status and increased awareness around the online industry make India a great choice for its business plan. |
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Technological |
Technology is the determining factor in the e-commerce industry. Penetration of Internet and smartphones makes it easier to access information. India is a land of inventions, and is known for its engineers, scientist and now a start-up hub, which is disrupting the business models by coming up with brilliant ideas. The Indian internet population is around 600 million and almost same is the smartphone penetration, thus presenting a good opportunity in front of Amazon. India has been investing heavily in cloud computing, data mining, big analytics, social algorithms and cyber security, all the above said points indicate that Amazon picked a great market for its new product. |
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Legal |
India has a very strict legal regulation, all the companies have to comply with the CCI (Competition commission of India), and also pay a corporate tax to the Indian government. The prices are predominantly determined by the market forces in the environment. Amazon has been a good business partner, wherever it has done business, the same will be ensured in the Indian market. |
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Environmental |
Global warming, waste pollution, non-renewable energy, CO2 pollution, greenhouse effects and many more are the elements of concern in the entire world, India is no different. The Indian government has levied strong penalties to the company who are not working towards environmental sustainability. Amazon has the same ideology, the company thorough its CSR activities contributes to the ailing environment and is very soon rolling out new packaging material which is totally recyclable(Bhatt, Patel, Chheda & Gawande,2015) |
Hence, the PESTLE analysis validates the rationale of Jeff Bezos to invest in India and further increase the market penetration with the launch of new product in tier 1 & 2 cities of the Indian market. India has been the fastest geographical market for Amazon, even in comparison to the US. Hence, the company wants to leverage on its rapid growth in the Indian market. The company has already achieved a great market penetration with its e-commerce business function, and has added more than 19 million prime members, a service which was initially launched in the US market, then Europe and is now available in India. Amazon is also making fresh content for the Indian audience; all these strategies in comprehension pave the way for the success of company. Moreover, the Indian market in terms of fresh foods, fruits, vegetables and organic produce is really disorganized, Amazon can change the same for the Indian consumers creating a wave of disruption like the way it did earlier.
Jeff Bezos, is betting his personal money for expansion in the Indian Territory, and has pledged to invest 2 billion dollars to capture the Indian audience. The pillars of success of Amazon, according to Jeff Bezos are:
All these point go down well with the shareholders of the company, they believe in the vision of Jeff are standing absolutely resolute with him at all time. More so, the company is paying good return to its shareholders and keeping them happy.
Amazon has a different outlook towards the obstacles, he sees them as the opportunity to learn, grow and invent solution which can benefit its customers, thus taking care of the obstacles. In Indian market, company has come up with the penetration pricing strategy to get deep into the heartland of India, and making people hook to the amazing fresh quality product and vegetable produce with an assured same day delivery.
Controlling such a diverse strategy is a task at hand, but the company has created a control and review team at India, whose only job will be to monitor the development of the strategies and control wherever it is going into another direction.
All the above information and PESTLE analysis speak majorly in favour of the company’s decision to move forward with the strategy of Amazon to launch its new product in the fastest growing geographical market.
Amazon was keen on investing in two platforms in the Indian market. One was to launch the Amazon prime music to compete with the existing online music players like Gaana, Savan, soon to be launched spotify, Wink and many more, the other was to give to the Indian market fresh food, vegetables, organic produce and grocery with the assured same day delivery of the product. It was a tough call to make, but the company settled on first going forward with fresh vegetables and food produce in comparison to its music channel. The reasoning for the same can be contributed to the below mentioned points:
Keeping these two points in mind, Amazon decided to go forward with the Amazon fresh model to cater to Tier 1 & 2 market. Further Porter 5 Force model will help in understanding the industry attractiveness and support the claim of Amazon.
Porter’s 5 force model is a very popular framework which is used by the organization to determine the intensity of competition and the industry attractiveness and the same is then translated to profitability.
Amazon has to compete against a number of small and big online firms on the likes of Big basket, Grofers and even Flipkart who is soon to exploit the fresh product space for the Indian Audience. More so, the biggest fight is changing the mentality of the Indian female audience, who prefer going to the market to buy vegetables and fresh products. Another big challenge at the hand of Amazon is tackling the challenge of Wal-Mart launching in India, Wal-Mart decided to invest in Flipkart and enhance the company’s capabilities. But as Jeff always says, the company is consumer obsesses and not competitor works hugely in favour of the company and there is no stopping them from following their dreams(Allen, 2015)
The Industry is highly competitive in India and a number of players are fighting for a big market share. The numbers of external factors which are responsible for strong rivalry between the firms are:
Retail firms are extremely aggressive in their marketing strategies and their promotional campaigns, entry of new players like Wal-Mart in the Indian market and the expansion of its online model will give boast to its brick model. All the other retail players like Reliance, Hypermart, Big Bazar are also competitive with their rates, thus the competition is extremely intense. It is not like, a consumer has only one player or product provided to buy from, he has plethora of options to evaluate his options and then go forward with it, this again makes the competition strong and fierce In the Indian market. The cost of switching from one e-commerce players to other is extremely low, in terms of tangibility and price, there is hardly any difference, all the companies are trying to be cost leader, thus the low switching cost questions the brand loyalty of customers, even towards Amazon. A great competitive rivalry implies that the direction of Amazon is right and with the right marketing strategy the company can create wonders for the Indian market as well the company.
Customer is king, undoubtedly, and the same is known to every company functioning in the world. Amazon being highly customer focuses gives them leverage in understanding the taste and preference of customers and helps in building a strong brand loyalty. The above factors will help in understanding the bargaining power of the customers:
High quality of information available to the consumers or the buyers through various online and offline channels make it easier for Amazon customers to search for other better options, this may move the customers from one platform to another. It can also happen that a retail store offers better deal due to bulk buying from supplier; hence the company has strong fear of losing its customers due to Internet, thus a strong force. Another thing which plays an important role is the low switching cost; low switching cost makes it easier for the customers to move from one platform to another and in some cases from online to offline model. There are more than 10-20 players who are big and spending huge sum of money on the online and offline activities, thus high availability of substitutes makes the force strong in the market. The analysis implies for Amazon that it has to do extremely well in its customer service and support to the customers to make them loyal to the company’s product.
Suppliers have the ability to control the supply of goods in e-commerce operation and thus the online retail industry relies heavily on these suppliers. Any company offering a better price, the supplier can move to their platform. The factors to assess the influence of the suppliers on Amazon are:
Amazon has a limited but a strong supplier base in India market, the company’s strategy to find partners rather than suppliers make them highly distinguished. At the same time, if a small number of large suppliers change their price, the Amazon operations can be affected. In order to combat that Amazon has a forward integration approach, which implies the degree of control the suppliers have on the Amazon platform, thus reducing the risk for the company. Small size of suppliers in terms of numbers again limits their potential to hurt the company, thus bargaining power of suppliers is a moderate effect. Amazon is planning to launch more and more fulfilment centres and is itself want to spread its wings in organic farming to reduce its dependency on the suppliers.
The company competes directly with the substitutes in the online market, player s like big basket, Grofers and Flipkart who have undying support of its investors makes it a big threat for Amazon. The following factors further define how these substitutes can affect Amazon’s external environment:
As mentioned earlier, customer have a number of players to choose from before buying a product, also it does not hurt them moving from one platform to another. They evaluate the best possible option and without even giving a second thought can jump to a substitute player. At the same time, Start-up India movement have created a number of e-commerce companies in India which are offering product at a very low cost, because they want to penetrate in the Indian market, thus large number of substitutes and the low cost is a strong force for the company. Amazon thus, in order to move away from the cost strategy has a service focus strategy, and the synergy of both the cost leadership and excellent service quality makes them really strong in front of its competitors(Baba, 2016).
The above mentioned force is extremely weak in the Indian landscape, one of the strong reasons can be the amount of money to be spent towards the online and offline activities to penetrate the market is excruciating high. A number of companies in the past have failed or have been sold to bigger firms due to the amount of money to be spent for the marketing activities. On the other hand, Amazon has deep pockets, and its diversification in its business strategy makes them stay ahead of any competition in terms of Price. It just have to ensure it keeps on pushing the envelope of service quality and provides good quality of products for its customers, it will definitely be successful with its expansion plan in the Indian market.
Thus, the Porter analysis implies that although competition is extremely high in the industry, the large size of the market and the ability of Amazon to exercise economies of scale and scope to replicate in the Indian market make the industry profitable for the company.
Amazon is really careful while implementing its business expansion strategies in any of its business market. The company like Alibaba focuses on the local manufacturers of the country and helps them in creating wealth for them. The company is really focussed on its small retailers, manufacturers and also gives them enough training to make their product look best to the consumers. The company has recently launched a training program in India, where it will teach the retailers and manufacturers on how to design a catalogue, determine the pricing and is also teaching them some lesson of management for increased growth. Hence, the company is doing ethically well for the suppliers and also the nation (Crane & Matten, 2016)
The other spectrum of ethical practices lies with the customers, who have always been taken care by the company. Amazon being highly customer focussed creates all policies and procedures to give maximum benefit to the customers. Also, the practices of the company are highly ethical, due to its strong values and culture in the organization (Etemad, 2017)
Amazon spends a big amount towards its CSR activity to improve the condition of nation and be a responsible citizen of that country. In India, the CSR is 2.5% of the net profits, which the company has been playing since the start and pledges to pay it through its entire tenure.
Hence, it can be said that Amazon has been doing whatever it takes to benefit the customers, community, society and the nation. It is inventing new products to ease the lives of its customers.
Integrated marketing plan is an approach to create a unified and seamless experience for consumers to interact with the brand/enterprise. The attempt of the integrated marketing plan is to combine all the possible aspects of marketing communication like advertising, sales promotion, public relation, direct marketing, web marketing and social media marketing. The underlying purpose of creating an integrated marketing plan is to ensure that the targeted message is reached to the target audience thorough one way or the other. Moreover, the plan should ensure that the objectives of the marketing plan are met and the numbers are ensured. Amazon has been extensively using the traditional and the web 2.0 tools to attract the audience in the past and the company is willing to spend heavily in the same to gain a sizeable market share and sustain its business momentum for the new product (Kahn, 2018)
SMART objectives or the SMART goals is a very prominent marketing tools which helps to define and determine the objectives of the organization in sync with factors like; Specific, Measurable, Attainable, Realistic and Time bound.
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S-Smart |
The strategy is clear; the company wants to create a name in the fresh food market of India in the Tier 1 & 2 cities. Hence the specific goal for the same are: · Increase the traffic on the website by 1.5X · Increase the Social media like on the pages and the followers by 2X · Ensure the delivery in tier 1 and tier 2 cities in same day or within 4-6 working hours. · Open up two fulfilment centres for stacking up the inventory. · Tie-up with producers for the farm produce product (At least 20) · Increase the engagement and conversation around the Fresh food product. · Sustain in the competitive market by increasing the GMV sales to that of Big basket and Grofers |
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M-Measurable |
The above mentioned goals are mentioned with the help of following tools: · Big data analytics · Traffic on the website · Sales numbers · Supplier increase · Fulfilment centres being opened · Social listening |
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A-Attainable |
The specific goals are defined strategically, although the attainment of the goals is not a smooth task, but Amazon likes to pick up difficult challenges to bring out the best out of its people. |
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R-Realistic |
The goals defined are difficult to achieve but are highly realistic, the reason being, the market attractiveness and India being the fastest geographical market for growth |
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T-Time based |
Amazon likes to take steps one at a time to ensure the attainability of the goals defined. The timeline for the goals in 18 months. |
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Channel |
Advantages |
Disadvantages |
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Social Media |
· Biggest advantage being its reach to the consumers. · Data analytics makes easy targeting for the campaign. · Highly influencer and based on the concept of community development and growth. · Easily accessible · Less time consumption · Social listening · Customer profiling · Strong targeted content can be pushed to the audience. · Reasonable in terms of price. · Social penetration In India, and the growth of the channel among the millennial |
· Inability to address the concern the moment it arises. · Open platform makes the channel open to severe criticism. · Duplication of data · Fake accounts · Recent criticism of the social media to leak the data to the third party application creators. · Dynamic in nature |
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Online |
· Can use other websites to push traffic on the Amazon website. · Affiliate marketing helps to push the sales. · Increased awareness and promotion according to behaviour targeting |
· The drawback of click bait. · Duplication of data · Difficulty in tracking analytics |
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TV advertisement |
· Still one of the popular media for the Indian audience. · Usability for the family audience and kids. · Greatest reach. · Ability to create impact and score high on emotions with the people |
· Extremely expensive mode of marketing. · Difficult to target the audience. · Limited targeting approach. · Difficulty to control and monitor the data. |
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Billboards |
· Enhanced visibility · Good penetration · High brand recall |
· No way to measure the results of the marketing strategy. · Score high on the pricing side. · Static in nature |
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Web Series |
The company’s new product targeting is family and the millennial, which can be reached through social media. Another way to reach them is to use the exclusive platform of Amazon prime and create a fresh Web series as a brand integration of Amazon with the popular AIB content team to increase the reach and the visibility of the new product |
· Limited reach, as of now only 19 million prime subscribers. |
The plan can be evaluated by the following metrics:
TRP rating for the commercial- The broadcasting of the advertisement on the television can be measured by the TV. It helps in giving information about the following:
Knowing all these information makes the marketer understand the reach and success of the marketing campaign.
Big Data Analytics- Big data analytics will help in analysing the data of the consumers engaging with the content of Amazon, what was the action taken on it, behaviour of the consumers, and what further actions they take after engaging with the content. All these elements in the analysis matrix give marketers a good data to further remarket the campaign on the people who engaged with the content.
These tools will help in controlling and monitoring the success of the ad campaigns, and will also be a good factor to predetermine sales projections
Conclusion
Amazon is the largest e-commerce player and India is the fastest geographical market of the company, the company after conducting macro and micro environmental research including PESTLE and Porter 5 forces model decided that launch of its online store providing fresh farm produce product will be excellent for the Indian market. Indian market is extremely young and a median age of 29 makes it all the more a great market for Amazon to launch its new product. In order to make the product success in the highly competitive market, the company is leaving no stone unturned and leveraging the tools of online media with the traditional media to create a comprehensive strategy to target the customers. The integrated marketing plan is the cohesive plan to reach 132 crore population of India and fulfils the goals Amazon has in store for the Indian market. The company has pledged to take good care of the ethical standards and invest in the CSR activities to fulfil its responsibility towards the society, community and the people
References
Allen, T.J.H. (2015) Competition in E-Commerce: A Competitive Dynamics Perspective. California: Sage Publication.
Baba, M.C. (2016) Cost reduction analysis in the online retail as compared to the classic retail. Bulletin of the Transilvania University of Brasov. Economic Sciences. Series V, 8(1), p.141.
Bhatt, A., Patel, A., Chheda, H. and Gawande, K. (2015) Amazon Review Classification and Sentiment Analysis. International Journal of Computer Science and Information Technologies, 6(6), pp.5107-5110.
Crane, A. and Matten, D (2016) Business ethics: Managing corporate citizenship and sustainability in the age of globalization. London: Oxford University Press
Etemad, H. (2017) The emergence of online global market place and the multilayered view of international entrepreneurship. Journal of International Entrepreneurship, pp.1-13.
Kahn, M. (2018) Prospects for Cooperation in Science, Technology and Innovation among the BRICS Members. BRICS and Global Governance, p.168.
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