Research Market Opportunities, develop a ‘Country/Product Opportunity Brief’ highlighting the Opportunities and Challenges that exist for Product entry into a given Country.
Background to the report
This report is premised on Amazon, the cloud computing and largest e-commerce company, planning to venture into retail market in Australia. For this purpose, a detailed analysis has been presented in this report that includes alignment with international marketing and detailed analysis of Australian market environment, in terms of economic, political, social, technological, legal and environmental factors. Founded by Jeff Bezos on July 5, 1994, Amazon operates in 16 different countries and is the largest internet company in the world in terms of revenue (Amazon.com, 2017). The company is planning to enter Australian online market for cementing their foothold in retail industry.
Theory of international marketing
The theory of country size is applicable for Australian market given the context Amazon is aiming to enter its retail market. This theory proposes that size of a country determines the volume and nature of product. Currently, Amazon’s website, maintained from US, converts 49% of Australian shoppers into sales, and this statistics clearly states that Amazon could be highly benefitted by entering Australian retail market, given the large size (7.692 million sq. km.) of the country. However, as Al?Khatib et al. (2016) has contradicted, the large territorial size of the country can cost higher in terms of transportations and logistics.
Similarly, the product life cycle (PLC) theory is also applicable in this context. As Amazon’s online marketplace in Australia currently offers limited products (Amazon Prime, Kindle Books, Kindle and Kindle Fire devices, Audible Audiobooks and Android apps), there is high potential for introducing other products in the retail market. New products such as Amazon Web Services, Amazon Video can provide significant economic return to the company while they traverse through the initial two phases of product life-cycle (that is introduction and growth).
Country where product is being taken
As per this report, Amazon is ventured to enter into Australian retail market, taking their products such as Amazon Echo, Amazon Kindle and other products.
Brief overview of company product
Currently, Amazon a wide range of products and services that is variedly available in different countries. Major products and services of this company includes Amazon Prime, Echo, Alexa, Kindle Fire tablets and TV, Amazon Appstore, Amazon Web Service, Amazon Studio and Amazon Drive (Amazon.com, 2017). In addition, the company also had 368 million products available for sale in December 2016.
Reasons for entering the country
Business environment – (PESTLE)
Political
The stable political condition in Australia is highly favourable for foreign companies as they could smoothly run their business operations in the country. Furthermore, Australian government favours foreign direct investment (FDI), as the total stock of FDI valued at AUD$735.5 billion in 2015. Naturally, this favourable political environment would be beneficial for Amazon. As per Al?Khatib et al. (2016), in addition to this the governmental activities based on certain rules and laws are also followed by Amazon Company in order to establish their business in Australian market. Henceforth, Australian market also highlights the commercial service provinces for organisations to help them to extend their business productivity and customer rates. Hence, due to these uncommon factors of Australian market Amazon Company is trying their best to start their new business in Australia (Balabanis & Siamagka, 2014).
Economical
As of 2016, Australian GDP was valued at AUD$ 1.189 trillion and the purchasing power parity (PPP) was AUD$1.2 trillion. The country is one of the largest mixed economic powers in the world, having a net wealth of AUD$ 8.9 trillion as of June 2016 (Abs.gov.au, 2017). In addition, the country is also the 25th largest exporter and 20th largest importer in the world – signifying the massive economic strength of the country. Australian economy is largely dominated by service sector, contributing 73% of total GDP (Abs.gov.au, 2017). Given the highly developed infrastructure, business in Australian encounters very little friction and therefore no such major trading blocs will be encountered by Amazon.
According to Chiva, Ghauri & Alegre (2014), the economical factors of Australia focus on various rules and regulations such as Rule of Law that includes property rights, government integrity and judicial effectiveness. In addition to this, companies also focus on Australian market such as trade freedom, investment freedom and financial freedom for ensuring better or provisions for business organisations like Amazon Company (Clarke, Owens & Ford, 2015). Hence, for all these economical factors Amazon Company is trying to establish its business operations in Australian market for more profit and productivity.
Figure 1: PESTLE ANALYSIS
(Source: Al?Khatib et al. 2016, p.180)
Social
With the rapid development of e-commerce activities in Australian market, users are spending more time in online retail stores – a trend that can be highly favourable for Amazon. A survey reports that only 21% of shoppers shop through brick-and-mortar stores, while 396% of people aged over 50 spends more time in online stores (Gizmodo.com.au, 2017). Given the greater availability of resources and choices, people prefer to purchase through online stores.
De Mooij (2013) stated that on the other hand, more consumerism and developed social statues would help Amazon Company to increase their profitability and productivity. In Australian market, increasing wealth disparity improves potential stagnation and helps in renovating current market standard and for that Amazon Company tries to enter into this Country (Export.gov, 2017).
Technological
Innovative practices in telecommunication, media and information technologies have significantly minimised cost for infrastructure setup. In addition, abundant energy supply at comparatively low cost has attracted foreign companies to expand their business in Australia as they would not have to worry about energy resources required for managing the technology. According to Hill, Cronk & Wickramasekera (2013), moreover, the increasing IT efficiency of Australian market will also help Amazon Company to increase their opportunity for exploring their business. Due to its telecommunication factors and media information, Amazon would be benefitted for developing business operations (Heritage.org, 2017).
Legal
Rising productivity and popularity helps in innovating business operations and market facilities. However, in case of Amazon Company, it has focused on the legal factors such as Corporations Act 2001 of Australian market such as popularity, regulations and legislations in order to improve their business and explore their market analysis (Jehanzeb, Rasheed & Rasheed, 2013).
Environmental
Australia focuses on environmental sustainability factors. Therefore, Amazon can focus on organic fabrics, organic food products to fetch the customer attention. Australian society emphasises on calculated use of ecological resources such as water and energy. As Australia has abundant source of both renewable (solar, wind, marine) and non-renewable (fossil fuel) energy, industries planning to set up business in this country gains significant benefit. Furthermore, Amazon being an internet-based company, they will not add extra burden in the resource reserve of Australia.
Infrastructure
The strong infrastructure rate of Australia is 89% and it provides better opportunities to the retail organisations in order to increase their growth. As per Korschun, Bhattacharya & Swain (2014), the infrastructure of the rural sector is poor which may act as hindrance to further extension. Thereby, in this case Amazon may face some difficulties for improving their market analysis. In contrast, the urban sector would provide them immense opportunities to innovate and present new products such as Echo dot, FB products and vacuum cleaner.
Demographic trends
The demographic trends of Australian market highlight the need of the customers based on their sex and age. According to Li et al. (2014), it has been found that in Australian market, it has $ 80,704 number of young people those who are focusing on retail organisations for fulfilling their needs..
Market Analysis –
Definition of the Market
Market is a place that enhances high productivity and profitability through low investments. Market facilities should always be calm and attractive in order to increase large number of customers. For example, Australian market fulfils all the criteria for enabling business organisations to improve their success (Lu et al. 2014).
Market size, outlook product service and trends
In this context, it is necessary for the business organisations like Amazon Company to focus on their market trends from where they are achieving success for their future development.
Figure 2: Market share
(Source: Export.gov, 2017)
Market size of Australian market value is $ 32.56 billion due to the factors of e-commerce growth and high internet usage (Export.gov, 2017). It also enhances stronger economy as the GDP rate is $88 thousand. Trends of Australian market focuses on young generation and their needs. The trend is to provide them full success by delivering their products.
Figure 3: Market Analysis
(Source: Spring, 2014, p.42)
Market characteristics
Market characteristic focuses on its products and services in order to overcome the barriers for entering into new market provisions. However, the pricing rates and practices should also be authentic and reasonable in order to satisfy the customers. As per Pike & Page (2014), the infrastructures of Australian market should be more attractive in order to affect the behaviour of the customers. Government rules and regulations on reasonable price rates, safety acts and healthy food are the provisions for maintaining government controls of the organisation (Spring, 2014).
Target market behaviour
Target market behaviour for Amazon Company in this case will focus on the young generation mostly. However, young people focus on fast food whereas on the other hand, middle aged people prefer sophisticated food items. In this context, Williams, Mummalaneni & Erramilli (2015) stated that the market behaviour of retail organisations like Amazon In this way the market behaviour for organisations to people varies specifically. Amazon Company should enhance their market by focusing on target market provisions such as more innovative food items, distinctive dresses such as coastal and traditional in order to attract customers (Yeung & Coe, 2015).
Competitive Analysis
Primary competitors of Amazon in the Australian market would be-
Existing and potential competitor
In this context, the competitive analysis of Australian market focuses on its own industries like Woolworth. In this case, Lu et al. (2014) opined that the probability of increasing competition level in the market clashes between retail organisations which are trying to enter into Australian market with the remaining organisations of Australian market such as Woolsworth which holds around 70% of the market in case of groceries. However, competitive analysis draws the attention of the readers towards the productivity, profitability, product quality and behaviour of the organisation (Heritage.org, 2017). The strength of this company highlights the marketing rates such as in the year 2016 its growth rate was 27.1% and it has successfully enhanced its products as per the need of the customers.
Figure 4: Market portion
(Source: Spring, 2014, p.78)
International competitors
As Amazon Company is a retail organisation, it focuses on the strategies of retail organisations of Australia market such as John Lewis in order to seek their proficiency and functions for attracting large number of customers (Clarke, Owens & Ford, 2015). The existing and potential Australian competitors include John Lewis and Tesco who have the tendency to compete with Amazon Company by their products, services and quality.
Figure 5: Competitive analysis
(Source: Al?Khatib et al. 2016, p.183)
Amazon Company highlights its specific infrastructures such as low price rates with high quality products. However, it also focuses on online selling facilities that help in increasing large number of young customers those who feel comfortable in buying products online (Balabanis & Siamagka, 2014). According to Li et al. (2014), the strategy of Amazon Company is to minimize the cost structure and maximize their productivity in order to increase profitability.
Organisational Analysis –
Previous Experiences
Amazon has no previous experience in Australia. They have expanded in many other European and Asian countries where they have experienced growth and progress in their business.
Challenges and solution
Amazon may face issues in understanding the local culture and trends. Since the country also consists of Aboriginal culture, the organisation needs to have a basic knowledge of the preferences of the customers around the country. Moreover, Balabanis & Siamagka (2014) have pointed out entering a new country requires accessing partnership with domestic brands.
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Strength |
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Weakness |
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Opportunity |
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Threat |
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Table 1: SWOT analysis
(Source: Balabanis & Siamagka, 2014)
Based on the SWOT table provided above, it can be surmised that Amazon has several positive aspects such as comparative low price of their products, online selling facilities, effective customer service and practice of cost-leadership pricing policy. On the other hand, competition with major retailers such as Woolworths, Coles may provide obstacle for Amazon as a new entrant in retail market. However, state-of-the-art e-commerce infrastructure and global presence can help Amazon to counter such obstacles. Again, it should be noted that the governmental laws and legislations, along with low entry barriers could pose serious threat to the business of the company in Australian soil.
Conclusion
From the above analysis, it has been found that Amazon Company is trying to establish their business operations in Australian market for increasing their productivity and market provisions. However, from above discussion it has also been analysed that Amazon Company have many innovative features and infrastructures that they want to establish in their new business place in Australia. Whereas Australian market also enhances good specifications and better environmental provinces for organisations like Amazon Company to enhance their business. In addition to this, this present report also draws the attention of the readers towards the competitive analysis of existing companies of Australian market and Amazon Company in order to specify their job profiles.
References
Abc.net.au (2017) Amazon’s $12b raid on Australian retail: Who’ll feel the pain and why consumers won’t gain (too much), Retrieved on 16 Aug 2017 from https://www.abc.net.au/news/2017-06-02/amazon-massive-raid-on-australian-retail/8580544
Abs.gov.au (2017) Key Economic Indicators, 2017, Retrieved on 16 Aug 2017 from https://www.abs.gov.au/AUSSTATS/[email protected]/mf/1345.0?opendocument
Al?Khatib, J. A., Al?Habib, M. I., Bogari, N., & Salamah, N. (2016). The ethical profile of global marketing negotiators. Business Ethics: A European Review, 25(2), pp.172-186.
Amazon.com.au: Shop for Kindle Paperwhite, Kindle Fire HDX, Kindle Books, Apps for Android, Cloud Drive, and Audible Audiobooks.. (2017). Amazon.com.au. Retrieved 14 August 2017, from https://www.amazon.com.au/
Balabanis, G., & Siamagka, N. T. (2014, July). THE BEHAVIORAL EFFECTS OF CONSUMER ETHNOCENTRISM: THE ROLE OF BRAND, PRODUCT CATEGORY AND COUNTRY OF ORIGIN. In 2014 (pp. 587-588).
Chiva, R., Ghauri, P., & Alegre, J. (2014). Organizational learning, innovation and internationalization: A complex system model. British Journal of Management, 25(4), 687-705.
Clarke, I., Owens, M., & Ford, J. B. (2015). Integrating Country of Origin into Global Marketing Strategy: A Review of US Marking Statutes. In Global Perspectives in Marketing for the 21st Century (pp. 373-373)
De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. London: Sage Publications.
De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. London: Sage Publications.
Export.gov (2017) Economic Statues Of Australia 2017, Retrieved on 16 Aug 2017 from https://www.export.gov/article?id=Australia-political-environment
Gizmodo.com.au (2017) Yep, Amazon Australia Is Going To Be Huge, Retrieved on 16 Aug 2017 from https://www.gizmodo.com.au/2017/06/yep-amazon-is-going-to-be-huge/
Heritage.org (2017) Status of Auatralian Market 2017, Retrieved on 16 Aug 2017 from https://www.heritage.org/index/country/australia
Hill, C. W., Cronk, T., & Wickramasekera, R. (2013). Global business today. Sydney: McGraw-Hill Education
Jehanzeb, K., Rasheed, A., & Rasheed, M. F. (2013). Organizational commitment and turnover intentions: Impact of employee’s training in private sector of Saudi Arabia. International Journal of Business and Management, 8(8), 79.
Korschun, D., Bhattacharya, C. B., & Swain, S. D. (2014). Corporate social responsibility, customer orientation, and the job performance of frontline employees. Journal of Marketing, 78(3), 20-37.
Li, Y., Chen, H., Liu, Y., & Peng, M. W. (2014). Managerial ties, organizational learning, and opportunity capture: A social capital perspective. Asia Pacific Journal of Management, 31(1), 271-291.
Lu, J., Liu, X., Wright, M., & Filatotchev, I. (2014). International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions. Journal of International Business Studies, 45(4), 428-449.
Pike, S., & Page, S. J. (2014). Destination Marketing Organizations and destination marketing: A narrative analysis of the literature. Tourism management, 41, 202-227.
Spring, J. (2014). How educational ideologies are shaping global society: Intergovernmental organizations, NGOs, and the decline of the nation-state. London: Routledge.
Williams, J. D., Mummalaneni, V., & Erramilli, M. K. (2015). An Innovative Classroom Approach to Analyzing the Role of Culture on Business Relationships using the Global View International Business Simulation., 130-132.
Yeung, H. W. C., & Coe, N. (2015). Toward a dynamic theory of global production networks. Economic Geography, 91(1), 29-58.
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