Foreign Direct Investment Opportunity for Amazon

This report outlines the Foreign Direct Investment (FDI) opportunity for Amazon in expanding its business in Sweden. It provides a detailed background of the company, including information about its offerings and financials, as well as a summary of the economic background of Sweden. The report also concludes with various analytical tools such as PESTEL Analysis and Porter's five forces model.

REPORT OF
ESTABLISHING AMAZON
DELIVERY IN SWEDEN

Table of Contents
INTRODUCTION...........................................................................................................................1
BACKGROUND INFORMATION ON BUSINESS ORGANISATION......................................1
BACKGROUND TO BUSINESS ENVIRONMENT -SWEDEN..................................................3
ANALYTICAL TOOLS TO BE USED..........................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Amazon is a global company which offers various technological services such as E-
commerce, Cloud computing and Artificial Intelligence. Company offers its services in 5 regions
such as Asia, Europe, North America, Oceania and South America. Now, Amazon wants to
expand its operations in Europe by establishing its business in Sweden. It is an advantage for the
Amazon if it expands its business in Sweden because there is an huge opportunity of Foreign
Direct Investment in Sweden as political & economic situation of Sweden is so good, Tax rates
in Sweden is low, purchasing power of individuals of Sweden is high and economy of Sweden is
sustainable and having high demand of High-Technology products & services. FDI of Sweden is
also increasing year by year and Market of Sweden is ranked 10th in terms of ease of doing
operations. Thus, there is an opportunity for Amazon in entering into Sweden and expanding its
business.
BACKGROUND INFORMATION ON BUSINESS ORGANISATION
Amazon is a largest E-commerce company in the world and includes variety of services
related to cloud computing, digital distributions, consumer electronics & online trade in its
portfolio. Company is also a number one E-commerce company in the world in terms of revenue
generation. Revenue of the company is 232.88 billion U. S. dollar in 2018 which is increased as
compare to the 2017. Companies financial position is improving year by year with the increased
revenue, net income, net operating income, employees, product offerings & with the decreased
assets & liabilities.
 Headquarter- Amazon has its headquarter in Seattle, Washington, U.S.
 Organisational Structure- Organisational structure of Amazon is hierarchical because
its business is diversifies and large. This is structure divided into 7 segments such as
Human resources, legal structure, information technology, financial administration,
international retail, digital management and global corporate affairs. All the segments are
controlled by the CEO of the company(OECD, 2016).
 Legal Form of the Organisation- Legal structure of Amazon is a two tier structure
which includes corporate affairs department and tax & audit department. Legal structure
of company helps in maintaining all the legal provisions applicable on operations of
Amazon. This structure also guides company to follow all the legal rules related to tax,
audit and corporate governance.
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 Range of Goods & Services- Amazon offers variety of E-commerce products & services
in many countries across the globe. Product offered by Amazon are Amazon Echo,
Amazon Fire, Amazon Fire TV, Amazon Kindle and Amazon Fire OS. Beside these
services offered by Amazon includes Amazon.com, Amazon Prime, Amazon Music,
Amazon Alexa, Amazon Video, web services and Amazon App store(Glick, Williams
and Weyant, 2016).
 Overseas Operations- Amazon is investing more in its international offerings but its is
not beneficial for the company. Organisation's losses are increased by 25% with
introduction of overseas investment. Amazon delivers its services in more than 100
countries across the globe by introducing a feature of international shipping with this
feature customers of market where Amazon is not offering its services can also order its
products & services by using mobile application of Amazon. In overseas business
company cannot generate profits by taking percentage out of the goods & services sold.
 Market share- Market share of Amazon is E-commerce industry is 37% and operations
of the company shows that it will increase in cup coming years up to 50%. Thus, this
shows that Amazon is growing and successful company in the E-commerce industry.
Amazon is a listed public company which has its shares listed in NASDAQ which also
contributes in increasing profits of the company. Market capitalization of company is 803
billion dollar in year 2018.
 Market structure- Market structure of Amazon is oligopoly according to this structure
few sellers command the market and they did not let enter others in the market. Amazon
dominate most of the market of E-commerce industry. Amazon offers all type of E-
commerce services which reduces competition in the market and only few companies like
E-bay offers this kind of products & services. Thus, E-bay & Amazon operates in
oligopoly market with in same industry(Amazon, 2015).
 Financial position of Amazon- Profits & revenue of Amazon is growing day by day
because company is expanding its business in many international counties. Company
generate its profits by taking a small percentage from products & services offered by it.
This percentage varies by country to country. 8th ranking given to Amazon by Fortune
500 ranking in terms of largest revenue generator. There is also an increase in sales of
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products & services of company from 14.835 billion to 177.866 billion in 2018 which
also leads to increase in market share, customers base, employees and product offerings.
BACKGROUND TO BUSINESS ENVIRONMENT -SWEDEN
 Continent- Sweden in Europe Continent and located in Northern Europe in the area of
410.335 km.
 Neighbouring countries- Norway and Finland are the neighbouring counties of Sweden.
Illustration 1: Neighbouring Counties of Sweden
Source:(Map of Europe, 2016)
§
 Population Size- Population of a country ia factor which helps countries to make
decision for expansion. Population of Sweden is 9,103,788 which is enough for Amazon
to expand its business in Sweden.
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Illustration 2: Population of Sweden
 GDP per capital- Economy of Sweden is most powerful & growing economy with the
per capita GDP 52311 dollar. GDP of country is increasing year by year which shows
that country is having a huge investment opportunity and it is easy for expanding
business in the country for Amazon.
 Unemployment level- Unemployment is rate which shows number of individuals who
does not have any job or earning tool or not wanted to work. Rate of unemployment in
Sweden is 6%. Thus, if Amazon operate its business in Sweden than it helps the economy
by reducing rate of unemployment(Mathooko and Ogutu, 2015).
 Inflation Rate- Inflation Rate is 2.30% of Sweden which is not so high and favourable
for Amazon in doing its business because purchasing power of individuals of country is
also high and they are interested in the spending their earning in new products & services.
 Exchange Rate- Value of Swedish Krona is equal to 0.11 U. S. dollar. It shows that
Amazon does not need to invest much in the Sweden market. Company can expand its
business with the less amount invested.
 Important section of the economy- Economy of Sweden is most developed and it is an
export oriented economy. Most of the revenue generated in this economy is by motor
vehicles, telecommunication, forestry, iron, steel, chemical goods and homogeneous
products & services. Agriculture sector contributes more to the GDP of country.
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ANALYTICAL TOOLS TO BE USED
Amazon uses various analytical models & tools before expanding its business in Sweden.
Company does PESTEL analysis for analysing factors affecting economy of Sweden and Porter's
five forces model for analysing companies competitiveness(Fozer, Sziraky and Mizsey, 2017).
PESTLE Analysis
Amazon is thinking to increase its business in Sweden. Therefore, in order to expand its
operation, the company examines the business environment of Sweden based on pestle analysis
of Sweden with the help of which company would be capable of observe the opportunities
available inside the marketplace for expanding its business in Sweden.
A PESTEL analysis is a structure used to evaluate and show the macro-environmental
elements that can have a essential impact on the company's usual performance. This concept is
particularly beneficial for the companies who want to start its new business or want to expand
into international marketplace.
 Political factors- If Amazon wants to expand its operation in Sweden than it has follow
all the rules, regulations & guidelines made by government of Sweden and company
should also adapt changes in these guidelines. Moreover, various political factors such
government stability, taxation policy, exchange rate and government rules affects of
Sweden affects business of Amazon. Thus, Amazon has to analyse all these political
factors before entering into new market.
 Economic Factors- Economic factors includes interest rate, tax rate, exchange rate,
unemployment & GDP which affects business of all the organisations. Before entering in
to the Sweden market Amazon will analyse that economy of the country is favourable for
the company or not. Tax rate in Sweden is low thus it is beneficial for the company and
further GDP &revenue of the economy of Sweden is also showing an increasing trend.
Thus, Amazon can invest in the country.
 Social Factors- Social factors such as ethics, beliefs, ideas, opinion and attitude of the
citizens & society of Sweden also affects operation of a company. If individual of the
country are interested in using digital technology and prefers online shopping than it is
useful for Amazon in expanding its business in Sweden(Glick, Williams and Weyant,
2016).
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 Technological Factors- Technological Factors includes advancement & innovation in
technology. If Sweden uses advance & innovative technology than Amazon also has to
adapt that technology and expand its business in the country by using those innovative
technologies.
 Environmental Factors- Environmental factors such rainfall, earthquake, pollution and
carbon footprint affects operations of Amazon. For expanding business of company in
Sweden market company has to consider all the environmental factors which affects
environment of country. Company has to further analyse what the impact of these factors
on its operations.
 Legal Factors- Legal factors includes provisions and rules of various laws & Acts
formulated by government of Sweden and has an effect the operations of companies.
Amazon has to follow all the rules and provisions of legal laws to expand its business in
the Sweden market.
Porter's Five Forces Model
Porter's five force model is based on five elements including, threat of substitute services
or products, bargaining power of suppliers, bargaining power of customers, competitive rivalry
and threat of new entrants.
Competitive rivalry- Main driver is capability and number of competitors in market that
affect business activities and functions. Many competitors, offer unique and valuable services
and products to customers which make impact on others. Amazon wants to expand their business
in Sweden where they found many existing companies in market that offering its different
product to people. It will influence company negative in way that also affect on their productivity
and profitability the most. Firm cannot compete against present competitors in beginning
because existing companies already build their reputation and set positive image in customers
mind(Bende-Nabende, 2018).
Bargaining power of customers- Customer access to higher quality detail regarding
online retailers services and products that they sell. This external force impact Amazon the most
when they are expanding their business in Sweden. This force specially deals with customer
ability in which they drive prices down. Amazon has the largest chain of consumer which cannot
drive their product prices down.
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Bargaining power of suppliers- Suppliers is one of the Porter's five forces, this power
address how easily suppliers drive up price of service and goods. Amazon business get affected
by the number of suppliers. Company has high range of supply chain that help to deliver their
products in any place or country. The Largest number of suppliers cannot impact organization
functions and business activities. Firm will not depend on few distributors they have huge
number of suppliers that help to expand their business in Sweden(Duarte, Kedong and Xuemei,
2017).
Threat of substitution- competitors substitutes that will be used in place of
organization's services and products pose a threat. Changing customers values and culture is the
most difficult things to do by any company, when they are introducing new product. Amazon
expand their business in Sweden where a lot of companies already offer low cost goods within
deliver quality products that is one of the biggest threat for company. It is very hard to attract
people towards firm products and seems to be difficult to put pressure on them for switching
form purchasing another company products to them. This will reduce both power of distributors
and attractiveness of market. In expansion process Amazon address strong force of substitutes,
which threaten other firm performance.
Threat of new entry- competitive environment get rise more and more due to new
entrances in marketplace. Gainful markets attract new entrance which erodes profitability.
Amazon expand their business in Sweden where more other companies also entered with them in
marketplace within having different marketing strategies or plans, this will reduce organization
market share and profit margin in online retail not more than now because company build up
their image in market and create good reputation at this level new entrance cannot impact their
business it has moderate rank. Firm already generated high brand awareness among society in
which new entry does not affect it as compare with others(Adi, 2015).
CONCLUSION
This report outlined Foreign Direct Investment Opportunity for Amazon in expanding its
business in Sweden market. Further, this report outlined background of company which includes
detailed information about offerings and financials of firm. Furthermore, this report summarises
detailed background of economy of Sweden. Moreover, this report concluded various analytical
tools for such as PESTEL Analysis and Porter's five forces model.
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REFERENCES
Books and Journals
Linden, G., Smith, B. anBende-Nabende, A., 2018d York, J., 2015. Amazon. com
recommendations: Item-to-item collaborative filtering. IEEE Internet computing.
(1). pp.76-80.
Amazon, E.C., 2015. Amazon web services. Available in: http://aws. amazon. com/es/ec2/
(November 2012).
OECD, F., 2016. FDI in Figures.
Duarte, L.D.R.V., Kedong, Y. and Xuemei, L., 2017. The Relationship between FDI, Economic
Growth and Financial Development in Cabo Verde. International Journal of Economics
and Finance. 9(5). pp.132-142.
Bende-Nabende, A., 2018. FDI, regionalism, government policy and endogenous growth: a
comparative study of the ASEAN-5 economies, with development policy implications for
the least developed countries. Routledge.
Glick, M., Williams, D.M. and Weyant, R.J., 2016. A new definition for oral health
developed by the FDI World Dental Federation opens the door to a universal definition
of oral health. British dental journal. 221(12). p.792.
Fozer, D., Sziraky, F.Z. and Mizsey, P., 2017. Life cycle, PESTLE and multi-criteria
decision analysis of CCS process alternatives. Journal of cleaner production. 147.
pp.75-85.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management. 29(3). pp.334-354.
Adi, B., 2015. An evaluation of the Nigerian telecommunication industry competitiveness:
application of porter’s five forces model. World. 5(3). pp.15-36.
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Online
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q=continent+in+which+sweden+situated&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi-
3rnUoLbhAhXU63MBHZyYC4YQ_AUIECgD&biw=1301&bih=678#imgrc=ptW_nnFunEj1b
M:>
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