INTERNATIONAL
BUSINESS
AMAZON (COUNTRY RISK AND COMPANY BASED ANALYSIS)
SECTION: OMEGA
SEPTEMBER
SUBMITTED TO: PROF.25, 2020
JOYDEEP GHOSH
SUBMITTED BY:
AMAN JAISWAL, RAHUL JAIN, SAHEJ, SHAILY GOYAL, SNEHIL SEKHAR.
NEW DELHI INSTITUTE OF MANAGEMENT
PGDM 2020-2022
PGDM (2020-2022)
EXECUTIVE SUMMARY
Amazon was founded by Jeff Bezos in Bellevue, Washington, on July 5, 1994. The company
started as an online marketplace for books but expanded to sell electronics, software, video
games, apparel, furniture, food, toys, and jewellery. In 2015, Amazon surpassed Walmart as the
most valuable retailer in the United States by market capitalization.
Amazon.com is a company that operates in the non-traditional environment of the Internet. This
gives the company both great advantages, such as visibility to potential customers and
investors, and great disadvantages - mainly large amounts of competition. Amazon uses the
advantages of being a purely online merchant excellently; where it was merely a comprehensive
bookseller at it’s founding, it now offers products in over a dozen categories and has revenues
exceeding ten billion dollars each year. They have also eliminated much of the competition by
absorbing it into the Amazon Marketplace, a virtual mall through which other vendors can use
Amazon as a broker for a small fee.
In our analysis, we will be discussing regarding Amazon and its market share, presence and
dominance of Amazon Globally & Amazon Swot analysis. We will be focusing on Amazon Inc. in
relation to Spain and analysis of Amazons progress in Spain. We provide a framework for Spain
risk analysis - Political risk, Economic risk & Financial risk, E-commerce sector analysis in
Spain. Different challenges faced by Amazon in Spain and how Amazon overcome such
challenges. The business rules of customer information, transaction and inventory
management information are also explored.
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TABLE OF CONTENT
Serial No. Content Page No.
Introduction- Amazon
3-4
1
Amazon market analysis
5-11
2
Country risk analysis -Spain
12-17
3
E-commerce market analysis -Spain
18-21
4
Challenges and benefit face by
22-24
5
Amazon in Spain
Recommendation
25
6
CONCLUSION
26
7
Reference
27
8
2
INTRODUCTION:
Amazon is an American multinational technology company based in Seattle, Washington.
Amazon was established by Jeff Bezos in Bellevue, Washington, on July 5, 1994. The
organization began as an online commercial centre for books yet extended to sell hardware,
programming, computer games, clothing, furniture, food, toys, and adornments. Amazon
focuses on e-commerce, cloud computing, digital streaming, and intelligence. It has been
referred to as "one of the most influential economic and cultural forces in the world" as well as
the world's most valuable brand. It is the second largest private employer in the United
States and one of the world's most valuable companies.
In the U.S. alone, Amazon controls 45% of the web-based business piece of the overall
industry. That is up from 34% in 2016 and expected to overshadow half by 2021.
In 2002, the corporation started Amazon Web Services (AWS), which provided data on Web site
popularity, Internet traffic patterns and other statistics for marketers and developers. In 2006,
the organization grew its AWS portfolio when Elastic Compute Cloud (EC2), which rents
computer processing power as well as Simple Storage Service (S3), that rents data storage via
the Internet, were made available..
AMAZON Management Board:
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Jeffrey P. Bezos: President, Chief Executive Officer, Chairman of the board.
Andrew R. Jassy: Chief Executive Officer, Amazon Web Services.
Shelley L. Reynolds: Vice President, Worldwide Controller.
Jeffrey A. Wilke: CEO Worldwide Consumer.
David A. Sapolsky: Senior Vice President, General Counsel and Secretary.
Presence and Dominance of Amazon globally
Amazon's presence now spans 58 countries and reaches the greatest international
online population, 1.2 billion people according to Website Builder Expert, which used
data from Amazon's Alexa Internet.
Amazon is the leading e-commerce player in North America, Western Europe and India,
but Alibaba and its many online entities — such as Taobao in China, Lazada in
Southeast Asia and Tokopedia in Indonesia — rule Asia, WBE reported. Africa and India
appear to be the two biggest e-commerce battlegrounds in the future.
At a time when e-commerce is predicted to grow to 13% of global retail sales by 2020, or
$3.8 trillion out of the $30 trillion global retail market, marketplaces are surging.
2017, 40% of all digital commerce sales went through a marketplace model
compared to 23% in 2013, according to Euromonitor, and Amazon Marketplace
accounted for 87% of that growth.
MARKET ANALYSIS - AMAZON
Top Ecommerce Competitors for Amazon
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1 - Walmart- Walmart is another global giant. This big-box department store
generates $514.41 billion in net sales per year. That’s more than double Amazon,
although a large percentage of Walmart’s sales obviously come from brick-and-mortar
purchases. With Walmart’s international presence and customer base, they will be a
continuous threat to Amazon in the ecommerce space.
2 - Alibaba / AliExpress- Alibaba is a China-based online retailer. This
international giant specializes in wholesale selling online, which is a differentiation factor
compared to Amazon. And some other competitors are Alibaba Group, Apple Inc.,
eBay, Inc., Facebook Inc. Alphabet (Google Inc.) Inc., International Business Machines
Corporation, Microsoft Corporation, Netflix Inc., The Walt Disney Company, Wal-Mart
Stores, Inc. and many other internet, retail, consumer electronics and video
entertainment companies.
Market Share - Amazon
In 2019, Amazon is predicted to account for 13.7% of the worldwide online retail market
sales. Moreover, the company will control over 50% of the US e-Commerce market by
2019. As of 2018, Amazon held 49% of the lucrative $252.7 billion US market.
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Amazon's global ecommerce sales will reach $416.48 billion in 2020, according to our
latest estimates, as consumers rely more heavily on ecommerce due to COVID-19. The
new figure is about $12 billion more than our pre-pandemic estimates.
--Most of Amazon's sales come from the US, but the pandemic has also fueled growth
in Germany, the UK and Japan. Amazon's US business — which represents about 65%
of its sales worldwide — will be up nearly $9 billion compared with our pre-pandemic
figure, reaching $269.41 billion in 2020.
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Amazon SWOT analysis
Strengths
1. Brand valuation – According to Interbrand’s Global Brand Ranking 2019,
Amazon is ranked at #3 position, with a brand value of $125 Billion. With over $1 Trillion
market capitalization and above $280 billion annual revenues, Amazon is truly a market
leader in online retail industry.
2. Differentiation and Innovation – Amazon frequently brings creative ideas
and innovative additions to its product line and service offerings like ambitious drone
delivery service and Withing’s Aura Smart Sleep System. This creates a differentiation
from other companies.
3. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail
stores by selling everything online. With economies of scale, Amazon efficiently controls
its costs and lowers its inventory replenishment time. The company has formed
numerous strategic alliances with many companies like Eva Technologies, Thalamic
Labs, Shofar, The Orange Chef etc.
4. Go Global and Act Local strategy – This strategy has benefitted Amazon
the most. Amazon develops partnerships with local supply chain companies that help it
in competing against domestic e-commerce rivals. It understands the local needs and
launches its services as per the country’s culture.
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5. Large number of acquisitions – The successful acquisitions of Whole Foods,
Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have produced
significant revenues and profits for Amazon.
Weakness -
1. Easily imitable business model – Online retail businesses have become
quite common in this digital world. So imitating Amazon’s business model for rival firms
is not so difficult. A few businesses are even giving Amazon a tough time. These
include Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.
2. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has
sparked negative publicity for Amazon. President Trump has recently criticized Amazon
over taxes on social media network.
3. Declining consumer safety – As its offerings increase, it is becoming a
challenge for Amazon to vet each product and guarantee the highest level of safety.
The U.S. Environmental Protection Agency (EPA) recently had to order Amazon to
remove a wide range of pesticides and unsafe products on its platform.
4. Unfair use of third-party data – Engaging in unfair trade practices
undermines trust and increases legal risks. Amazon is facing antitrust charges in the
European Union for collecting and using data from third-party to compete against them.
If found in violation, Amazon can be fined up to 10% ($28 Billion) of its 2019 annual
revenue ($280 Billion).
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Opportunities
1. By expanding physical stores, Amazon can improve competitiveness against big
box retailers and engage customers with the brand.
2. Amazon has the opportunity to improve technological measures and
organizational policies to reduce counterfeit sales. One case of counterfeit sales came
into light when Amazon sold a fake My Critter Catcher. The product was sold for $1 less
than the original product.
3. Can do backward Integration by expanding its production of in-house
brands such as Amazon basics to differentiate its offerings and improve profit margins.
4. Self-Driving Technology – Amazon recently acquired California-based self-
driving startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous
technology to exploit the increase in demand for ride-hailing services or use it to
improve its delivery network.
5. Launch of electric rickshaws in India– Amazon pledges to make a positive impact
on the environment. With this vision in mind, Amazon plans to deploy 10,000 electric
rickshaws for delivery in India by 2025.
Threats
1. Government regulations can also threaten the business proceedings of
Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North Korea,
Sudan, and Syria.
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2. Links to exploitative labor – Amazon is one of three retail giants facing
scrutiny from the US State Department for maintaining supply chains and labor sources
associated with human rights abuses. This exposes the ecommerce giant to
reputational, economic, and legal risks.
3. Aggressive competition with big retail firms like Walmart and eBay can give
Amazon a tough time in the future. In addition, now Amazon competes with the
following companies:
• In Video Streaming Service: Apple TV+, Netflix, Disney+
• In Logistics: FexEx
• In Self Driving Technology: Tesla, Uber, Ford
4. Fake reviews – Amazon has an overwhelming amount of fake reviews, and the
problem has worsened in recent times due to the pandemic. Product reviews are a
critical indicator of quality and authenticity, and customers rely heavily on reviews to
make purchases.
According to the Financial Times investigation, Amazon has deleted over 20,000 fake 5-
star reviews from its top UK reviewers.
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Country risk Analysis
Amazon in Europe :
Amazon is one of the biggest ecommerce companies in Europe. Even while it’s not
presents in most European markets, its influence is huge. Especially in the United
Kingdom and Germany, Amazon isn’t shy with launching new initiatives. Here’s what
Amazon is doing in Europe.
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Amazon is active in the following countries in Europe: France, Germany, Italy, the
Netherlands, Spain, Turkey, the United Kingdom. In these markets, Amazon has a
dedicated and localized ecommerce website. Amazon.nl is the latest addition, it officially
launched in March 2020.
Amazon E-Commerce in Spain
According to the International Monetary Fund, GDP based on purchasing power parity
(PPP) is 1,773,906 (millions of Current Int$) and nominal GDP is 1,313,951 (US$MM).
GDP (PPP) per capita is 38,171 Int$ and GDP (nominal) per capita is 28,359 US$. Real
GDP growth rate is 3.10%.
Spain- Country Profile :
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Population 46,397,452
Language(s) spoken Spanish
Currency Euro
GDP based on purchasing power 1,773,906
parity (PPP)
Nominal GDP 1,313,951
GDP growth rate 3.10%
Number of Internet users 37,865,104
Internet penetration 82.20%
Import and Export data in Spain
Import
In 2017, imports to Spain rose 10.5 percent from the previous year to an all-time high of
EUR 302 billion, mainly driven by a surge in domestic demand and an increase in
energy prices. Spain main imports were: capital goods; chemicals, energy products,
automotive sector, consumer goods, food, beverages and tobacco, and non-chemical
semi-manufactured products. Main import partners were: Germany, France, China,
Italy, US , the UK and Portugal, Morocco and Turkey
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Export
In 2017, Spanish exports rose 8.9 percent from the previous year to an all-time high of
EUR 277 billion. Spain main exports were: capital goods, food, beverages and tobacco,
automotive sector, chemicals, consumer goods, non-chemical semi-manufactured
products, and energy products. Main export partners were: France, Germany, Italy,
Portugal, UK, US, Morocco, China and Turkey.
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Spain: Country Risk Assessment
Economic Risk: Moderate
• Spain has the sixth-largest economy in the EU and the fourth-largest in the Eurozone.
Main sectors of the economy include banking, financial services, international trade, and
tourism.
• Tourism, which accounts for 15% of GDP and employs 15% of the total workforce, has
collapsed owing to the COVID-19 pandemic. The country’s retail and service sectors
have also been hit hard as a result of a reduced inflow of foreign visitors.
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• The government has adopted extensive fiscal measures to mitigate the economic
impact of the pandemic, including increased unemployment benefits, additional
healthcare expenditures, and financial support for affected households and businesses.
• Spain has one of the highest unemployment rates in the EU, 14.1% in 2019.
Unemployment is expected to increase significantly, as struggling businesses are likely
to not renew temporary contracts.
Political Risk: Low
• To pass legislation, the coalition government will have to negotiate with opposition
parties. Current policy-making will focus on the response to public health and the
economic crisis.
• Negotiations regarding the sovereignty of Gibraltar in light of Brexit continue. Spain is
backed by all members of the EU, which has given the country power to exclude
Gibraltar from any trade deal.
• The government’s relationship with the Catalonian region remains under pressure.
Catalan independence protests in Barcelona and Madrid are likely to increase as
lockdown measures are lifted.
Financial System Risk: Low
• The General Directorate of Insurance and Pension Funds, an agency of the Ministry of
Economy and Finance, regulates the country’s insurance industry.
• Spain’s banking and financial sectors have developed significantly after a period of
reform. The banking system is well capitalized, and banks have improved their real
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estate asset quality. The country is also set to receive substantial economic relief from
the European Commission’s Economic Recovery package.
• The public debt ratio is likely to increase over 100% by the end of 2020 due to fiscal
measures to stimulate the economy. Spain’s insurance industry remains strong and well
capitalized, reporting USD73 billion in written premiums in 2018.
Sector Analysis – Ecommerce in Spain
Spain had to deal with a big financial crisis, but that was barely visible in the
ecommerce sector. In fact, the ecommerce industry was one of the few sectors that
experienced a double digit-growth in 2011 and 2012, something that also happened in
the years after. Ecommerce in Spain was worth almost 28 billion euros in 2018, a report
from the Ecommerce Foundation shows. Spain is the 13th largest market for
eCommerce with a revenue of US$17 billion in 2019, placing it ahead of Brazil and
behind Russia.
In 2018, more than 24 million people have already used e-commerce in Spain. It is
estimated that in 2022 the number of purchasers on the e-commerce market in Spain
will increase to 31 million people. The graph below shows the estimations of e-
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commerce beginning in 2017, the graph shows that the number of online purchasers will
increase every year
The growth in e-commerce in Spain is largely due to the age group between 16 and 30
years old. This can also be seen on the graph below which has been taken from IAB. Due
to the fact that the age group between 16 and 30 years old will continue to impact e-
commerce, this will be the consumer target group of this research.
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Number of online purchases per age group in Spain for 2016, 2017 and 2018, IAB, 2019
Fashion is one of the largest sectors in the e-commerce market (IAB, 2019). In 2019, the
revenue of fashion sales from e-commerce is estimated at €5.2 million in Spain (Statista,
2019). The graph of Statista shows the estimated growth for both online food and fashion
sales for upcoming years. By 2023, these two sectors are expected to yield €8 million for
the fashion sector and €6.5 million for food and personal care sector (Statista, 2019).
Predictions of sectors in the e-commerce market (in millions), Statista, 2019
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According to the Statista graph below, Spanish citizens prefer paying via PayPal when buying
products online. Over one year, the percentage of using PayPal as a payment method increased
with 7%. For 43% of online sales in 2018 Spaniards used debit and credit cards. (Statista, 2019).
The graph below of Statista shows the payment methods and differences in use for 2017 and
2018.
Preference of payment methods in Spain in 2017 and 2018, Statista, 2019
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Challenges faced by Amazon in Spain
Amazon Spain was launched in 2011 and since then, has made its way as Spain’s
largest eCommerce websites, superseding eBay Spain. The European crisis in 2008 did
leave some marks on the Spanish economy; however, it is recovering fast in recent
years. Amazon’s declared revenue in Spain in 2016 almost doubled from €59 million
2015 to €106 million, which is a very clear indicator that the economy is recovering.
Spain’s location in the European Union also allows for cross-border business
with Amazon France, and other European countries.
Amazon Spain faces a serious challenge from a similar online marketplace
AliExpress owned by Chinese company Alibaba.com. Due to this competition the
projected net sales of Amazon.es might decline in 2021.
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An increasing number of sellers not based in Spain are coming to Amazon Spain,
it came as strategy from Amazon Spain but turned out to be serious challenge as
many Chinese retail sellers entered the online retail market space and started
selling. Lots of fake and copy of original products were being sold which caused
a lot of problem to the customers as well as Amazon Spain when they received
the complaints. Amazon Spain: 28% Chinese Sellers.
Keeping up with the E commerce growth in Spain. As noted in a recent report
from by Evercore ISI's Anthony DiClemente, growth in Amazon's legacy, first-
party e-commerce business has lost some of its steam, with Amazon posting
10% growth year-over-year in the segment "While other higher margin business
lines have taken over the growth mainly from the Online Stores unit, this
operating segment still makes up >50% of revenue, and a more substantial
slowdown would weigh on consolidated revenue growth," he wrote.
Benefits faced by Amazon Spain
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As seen in the above picture, which was a part of research done by Algopix, it
states that Amazon Spain enjoys better product sales performance than most of
its close substitute competitors.
All permanent Amazon employees, whether working in Spanish fulfilment centres
or corporate offices, receive competitive pay and a comprehensive benefits
package, including private medical insurance from day one, life insurance, an
employee discount on Amazon.es, and a company pension plan. Amazon offers
fulfilment centre associates a minimum yearly salary of over € 19.300, in both
Madrid and Barcelona, the two regions where the majority of its associates are
based.
In the Electronics & Media market in Spain, amazon.es is ranked #1 with >
US$1,000m in 2019. Therefore, amazon.es accounts for 30% - 35% of
eCommerce net sales in this category. The top stores are amazon.es,
pccomponetes.com and apple.com
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RECOMMENDATIONS
As a leader in the global online trade, company has all the resources and wealth to
continue and develop its online dominance in the modern world. At the moment
company has a little portion of business in developing and some emerging countries.
This is vital for the company to extent their business in those countries this is because
the change of life styles of peoples due to globalization. Due to technology and
innovation such as internet and various mobile apps bring countries together and
reducing barriers between territories. Company like Amazon, they have invested and
develop their business model with help of technology to boost bigger market opportunity
on those countries. Their successful business strategies such as technology and
innovation are big boost for the company to extent their businesses on those new
markets with the low-cost strategy. This strategy also helping company to offer
customers low price product and service with the help of technology and its
developments on those countries.
The bigger disadvantages for the company to extent their online trade on those
countries are legal systems and control over internet and mobile app usage. In most of
the developing countries government have direct control over internet and online use.
This is biggest challenge for company to deal those markets according to those
countries legal system. To address those issues and close competition, company must
have strategy to develop its brick and mortar stores. This is very vital for them to play a
leading role and brand popularity in the multinational trade.
CONCLUSION
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Amazon has adopted several strategies like blue ocean strategy approach in order to
survive this competitive world. This low switching costs models and approach on online
trade help them to offer low cost product service to their customers worldwide. This is
necessary for them to using technology to expand their business infrastructure.
Amazon’s another approach call considers consumer buying hierarchy lead them to
develop low cost products and service through technology and innovation. These types
of approach help their customers, before making decision to buy go through various
process regarding product and service’s price quality and reliability. These types of
approach create a customer bases model and confident to deliver better low-cost
product and service for the customer around the world. One of the positive aspects for
Amazon online trade is high cost brand development for new entries; help them to
merge with world leading brand to become online trade leader. This mechanism and
approach make them as a one and only global reliable search engine for products and
service
REFERENCES
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https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_
studies/2019-Spanje-Entering%20the%20e-commerce%20market%20in%20Spain%20website.pdf
https://www.aboutamazon.eu/press-release/amazon-created-over-3-200-new-permanent-
jobs-across-spain-in-2018-and-has-now-more-than-4-800-permanent-employees-across-the-
country#:~:text=All%20permanent%20Amazon%20employees%2C%20whether,and%20a
%20company%20pension%20plan.
https://www.webinterpret.com/us/sell-online/spain/
https://algopix.com/amazon/spain
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