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Amazon: Earning in India by Learning in China

CASE STUDY, STRATEGY
Institute of Management Technology, Ghaziabad, 13 Pages
AUTHOR(S) : Dr. Ashish Varma – Assistant Professor, Ram Agarwal – MBA Final Year Stueent, Sanchit Agrawal – MBA Final Year Student, Kumar Ashay – MBA Final Year Student, Institute of Management Technology, Ghaziabad

Case Preview

Amazon: Earning in India by Learning in China

In May 2018, Kshitij, Himanshu and Sharad, three students of a top ranked Indian business school based out of the National Capital Region of Delhi, and who were huge admirers of Jeff Bezos, pondered over as to what happened with Amazon.com in China? According to them, Amazon had won the admiration of the entire business world but had failed in China. On the other hand, they observed that Amazon had been successful in India since its entry in 2012. They were keen to probe into the problems that Amazon had faced, the strategy Amazon had implemented and to ascertain as to how the China experience differed from what Amazon experienced in India. The trio was famous in their institution for business strategy games during the business school festivals. They set out to probe as to why Amazon failed in China but was a huge success in India.

About Amazon

The US-based Amazon (termed as Amazon.com), established by Jeff Bezos on July 5th 1994, was headquartered at Seattle, Washington. The company was originally an online bookseller which expanded itself to be the world’s largest1 electronic commerce (e-commerce) company. It is also a prominent cloud service provider (Amazon Web Services) and manufactured electronic devices such as Kindle e-book reader, Kindle Fire tablet and Fire TV, a streaming media adapter.........

The Chinese e-Commerce Market

China is the world’s most populous country and has the world’s 2nd largest retail market after US. With increase in the disposable income of the rural and urban population, there has been an increase in the spending power of people. This increase has led China’s retail market to grow at a fast rate. In May 2018, the total retail sales of consumer goods reached 3,035.9 billion yuan ($471.46 billion5), up by 8.5% year-over-year...............

Uber: In August 2016, Uber sold its China business to rival Didi Chuxing and moved out of China despite a vast market for cab hailing services. One of the reason for the same was lack of influential relationship that could have helped Uber integrate themselves in lives of Chinese population.................

Ebay: Ebay entered China by buying an existing company “Eachnet”. In 2003, Taobao entered the market under the leadership of Jack Ma. Taobao was a local player and allowed the sellers to add their listing on the site for free................

Google: Google was perhaps the best example to show that the MNCs must follow all the rules and regulations as imposed by the communist government of China. Having a good relationship with the Chinese government was a must......

Amazon’s Strategy in China

Amazon entered the Chinese Business to Consumer (B2C) market in 2004 and subsequently rebranded itself as Amazon.cn in 2011. To make its entry into the Chinese market, one of the fastest growing e-commerce markets (the turnover of e-commerce market of China reached to RMB 323.9 billion, a growth of 76% year-over-year by the end of 2004 and accounted for 1.4% of global e-commerce turnover) (Exhibit II), Amazon acquired China’s biggest book e-retail store Joyo.com for $75 million in August 2004...............

To gain exposure in Chinese market, Amazon.cn had to open a store on Tmall in 2015, which showed the strong presence of Alibaba in China. Therefore, Alibaba’s success over Amazon could be attributed to:

• Sound business model: The business model of Alibaba provided .........

• Playing on economies of scope: Alibaba had targeted non-branded market through its site.....

• Playing on economies of scale: Alibaba had an active base of 350 million........

• Relationship building: Alibaba had maintained healthy relationship with..........

As Amazon.cn was eclipsed by its peers in China, Amazon.cn made some last moment efforts to become popular in China. In 2014, after a decade of being in China, Amazon.cn again invested $20 million in a Chinese company Yummy............

Amazon Strategy in India

The Indian retail market was considered as the 5th largest global destination in the retail space accounting for over 10% of the Indian GDP and 8% of the employment generation. The Indian market was very promising in the e-commerce segment and was expected to reach $64 billion by 2020 and $200 billion by 2026 from $38.5 billion as in 2017 showing high growth potential in the space (Exhibit IV)............

Assignment Questions

I What was Amazon’s strategy in China and how was it different from Amazon’s strategy in India?

II How did Amazon utilize its experience of Chinese market in implementing its Indian strategy?

III ..............

Exhibits

Exhibit I: Key Challenges Faced by Online Retailers in China

Exhibit II: Retail e-Commerce Sales in China from 2016 to 2022 ($ Million)

Exhibit III: Market Share of e-Commerce Websites in China in 2016 (% of B2C Sales)

Exhibit IV: e-Commerce Industry Growth Forecast for India ($ billion)

Exhibit V: Major Customized Initiatives of Amazon India

Teaching Note Preview

Amazon: Earning in India by Learning in China

Synopsis

In May 2018, Kshitij, Himanshu and Sharad, three students of a top ranked Indian business school based out of the National Capital Region of Delhi, were probing into the problems faced by Amazon in China. With the aim to expand globally, the US based Amazon.com had entered China in 2004 with the acquisition of Joyo.com, favoring inorganic growth. This strategy proved to be a failure since Amazon could garner only 0.8% market share by 2016.

Amazon had entered the Indian market in 2012 with the launch of Junglee.com by choosing the greenfield expansion route. While Amazon’s strategies in China proved to be a failure, the learnings from its mistakes in China enabled it to win big in India.

The three students also used this opportunity to compare and contrast the two large emerging market economies. They could appreciate the unique characterisitcs of each market and identify strategies that worked and strategies that did not work in each context. The three students were ardent admirers of Jeff Bezos and they were curious to know as to why Amazon failed in China but was a huge success in India? They also were curious to probe whether some of the learnings of the Indian experience of Amazon could be relevant to regain the Chinese market..................

Exhibits

Exhibit (TN)-I: Classroom Discussion Dashboard

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Abstract

In May 2018, Kshitij, Himanshu and Sharad, three students of a top ranked Indian business school based out of the National Capital Region of Delhi, were probing into the problems faced by Amazon in China. With the aim to expand globally, the US-based Amazon.com had entered China in 2004 with the acquisition of Joyo.com, favoring inorganic growth. This strategy proved to be a failure since Amazon could garner only 0.8% market share by 2016. This was for Amazon, a big set-back, since the company had focused on volumes growth rather than profits as a strategic choice.

Amazon had entered the Indian market in 2012 with the launch of Junglee.com by choosing the greenfield expansion route. While Amazon’s strategies in China proved to be a failure, the learnings from its mistakes in China enabled it to win big in India.

The three students also used this opportunity to compare and contrast the two large emerging market economies. They could appreciate the unique characteristics of each market and identify strategies that worked and strategies that did not work in each context. The three students were ardent admirers of Jeff Bezos and they were curious to know as to why Amazon failed in China but was a huge success in India? They also were curious to probe whether some of the learnings of the Indian experience of Amazon could be relevant to regain the Chinese market.


Pedagogical Objectives

After reading and participating in the case discussion, a student should, inter alia, be able to:

  • Assess the reasons for failure of Amazon.com in China by identifying the strategic shortcomings and the executional shortcomings of Amazon.com
  • Compare and contrast the strategic choices of Amazon.com in India vis-a-vis those in China
  • Prepare a plan of action for the future business sustainability of Amazon.com in India
  • Ascertain whether some of the learnings of India could be replicated in China

Case Positioning and Setting

The case works very well in the course “Business Strategy” for MBA or executive MBA students. The case is most effective when used in the very beginning of the course. It is suggested that the instructor should have discussed about corporate vision, strategy formation, implementation and business growth choices. A prior understanding of market entry choices available to a firm is also useful. After the discussion in the class, the instructor may provide a post session assignment to the students. The students can be instructed to come up with the strategies for firms similar to Amazon.com for increasing such firms market share and for sustaining their business in emerging markets.



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