Critical Evaluation of Amazon's Strategy in the Indian Market

This report provides a comprehensive analysis of Amazon's strategic approach to the Indian market. It details the company's entry strategy, which involved a Foreign Direct Investment (FDI) entry mode, and its adaptation to the unique challenges and opportunities within the Indian e-commerce landscape. The report examines the motivations behind Amazon's focus on India, highlighting the country's large population and growing mobile phone user base. It explores the strategies employed by Amazon, including low pricing, the 'easy ship' program, and the use of the Dunning model to gain competitive advantages. The report also assesses Amazon's success, including its market share, revenue growth, and the impact of its strategies on smaller sellers. Furthermore, it examines the challenges Amazon faces in India, such as logistics issues, government policies, and competition. The report also includes PESTLE and Porter's Five Forces analysis of Amazon in the Indian market. Finally, the report uses Porter's generic strategies to understand Amazon's overall business strategy in India.

Strategy and International
Management

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Amazon in India
In today’s time, the companies that are able to do their business in an appropriate manner are
more likely to succeed. Strategy refers to the actions that are decided and designed by the
firm so as to achieve long term success. In today’s time in order to ensure the long term
growth and sustainability, firms are crossing borders. In the process, bigger role is played by
the strategies that are made by the companies.
Amazon is one of the largest online retailers in the world established in the year 1994 (Hecht
and Cockburn, 2010). It was founded by Jeff Bezos. It started as an online book retailer and
right now it is everything store. It is the most valuable company in the United States after the
firms like Apple and Microsoft. It is a multinational technology firm based in Seattle,
Washington and does business in the areas like e-commerce, digital streaming, cloud
computing as well as artificial intelligence. It is one the big four technology firm besides
Apple, Facebook and Google. It is the second largest technology firm in terms of revenue. In
the year 2018, this firm generated revenue of USD 232.887 billion. There are more than
647,500 employees working for this firm as of 2018. This report is going to describe the
strategy of Amazon while entering into an Indian market.
In 2015, this company passed Walmart as the most valuable retailer in United States in terms
of market capitalisation (Smith and Linden, 2017). In the year 2017, this firm acquired Foods
Market for $13.4 billion that vastly increased presence of Amazon in the brick and mortar
business. In 2018, its service named Amazon prime has crossed a mark of 100 million
subscribers all across the globe. With the help of many subsidiaries all across the globe this
company expanded in selling of all kinds of products in different parts of the world. It began
its internationalisation process in the year 1998 by acquiring online seller of books in
Germany and United KingdomWith a big chain of small and big supplier and with the help of
strong and fast supply chain they are able to meet the demands of the consumers. They have
place innovation in their culture of business both in terms of the products that they sell as the
services they are providing to their customers. It’s the overall business model of the company
that separates them from their competitors. Fast and reliable services stands in the base of it.
This company has 39.5% market share in India and after its acquisition by Walmart it is the
major competitor of Amazon.
This company entered into an Indian market in the year 2013. Till 2015, this company didn’t
have any infrastructure in the Indian market but the company worked on establishing base in

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the market. Since this market did not have the proper infrastructure for the online marketing
neither the consumer behaviour pretended to be so hence most of the experts believed that
this company will fail into the market. Following their strategies of internationalisation and
keeping the pricing leadership they proved them wrong. The major motivation for Jeff Bezos
to focus on Indian market is that it is having a population of 1.3 billion with more than 800
million people having an access to mobile phone technology (Sen, 2018). In order to succeed
in the market what this company needed was an extremely efficient business model that
reduces its cost of operations as competing with the local vendors is not easy in India. It is its
strategies that now yearly growth rate of users in this nation is highest with approx. 6 million
people adding to it every month. FDI is the chosen entry mode strategy that this company has
chosen for making entry into India. This firm started its Indian operations with a test where in
February 2012, Amazon launched Junglee.com which was a website for comparison where
the sellers can upload the catalogue which was promoted by Amazon (Gangeshwer, 2013).
Such type of market research was necessary for the company as due to lack of understanding
of the market, this company faced debacle in the Chinese and Brazilian market. Due to its
low pricing strategy this firm was able to decrease the overall prices in the market and had
repercussion on the smaller sellers (Shrivastava, 2019). In 2014, this company reached to
these struggling sellers and asked them to register to Amazon e-commerce to sell their
products through their site. Another strategy followed by the company included “easy ship”
which helped sellers in their shipping process. However the major strategy that is used by
Amazon in the Indian market is low pricing strategy. Since India is a market where the per-
capita income is not so high and most part of the Indian population is middle-class hence this
is an effective strategy to win.
According to the Dunning’s model, the primary motive of Amazon to enter into Indian
market was Ownership advantages. This firm knew that the resource that this firm has with
them especially in terms of support from their suppliers and their effective supply chain
management they will be able to gain competitive advantage over the rivals (Sternquist,
2010). They had a huge technology infrastructure that enables them to improve their working
methodology in the country and at the same time ensure that their cost of operations in India
remains on the lower side (Rey, 2019). They found an opportunity in the Indian market as
there is large population within the country having middle class income which can act as a
stable market for the company and can provide them with growth and sales that they desired.
Another motive that this company had while entering into India is the fact that they were able

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to trade off the savings in transactions. Setting up an establishment in India could help them
in saving the cost that is related to the export that was previously done by the company in
India. Another crucial strategy that this company needs to understand is Ownership, Location
and Internalisation strategy. Following ownership, this company has specific competitive
advantage in terms of the fact that it has large numbers of international and national suppliers
which helps them to provide larger numbers of options to the people. In terms of location, it
can be said that this company provides services in many regions all across the globe and
hence it has location advantage in India (Contractor, Kumar and Dhanaraj, 2015). Amazon
also has internalisation advantage where if they do not have any product available in any
country then they avail it from cross-borders. India’s foreign policy is changing and it has
become the partners of many of the countries which is making it easier for the firms like
Amazon to do their business (Kontinen and Ojala, 2010). However, the market situation in
India is apt for doing business and there are large numbers of people that moving towards
purchase from online mediums. With government supports like making the uniform tax
systems and building rural infrastructure will improve the market situation.
In 2013: Amazon founded its Indian e-commerce platform (Ritala, Golnam and Wegmann,
2014).
In 2016: This firm launched its first service in India. After continuous investments over the
years this firm’s revenue growth of 105%.
In 2017: In the time of Diwali 10,000 sellers of the company claimed to have scored the
greatest ever sales numbers. More than 100 new sellers made more than crore rupees selling
through this site. During this time, nearly 20,000 sellers got registered on Amazon which was
a new milestone for the company.
In 2018: They have won 30% of the market share within the Indian market and has become
worth $16 billion Company.
Amazon success strategy can be understood in terms of the porter generic strategy. In order to
gain competitive advantage they are following cost leadership strategy where with the use of
resources they have they have been able to achieve cost leadership. They are having larger
numbers of low cost suppliers that are available within the market which helps them in
lowering the prices to even further lower levels. With the process automation they have been

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able to reduce the operational charges which have further given them boost to their cost
leadership strategy (Reddy and Divekar, 2014).
They have been following differentiation strategy as their source of competitive advantage.
This can be understood by the fact that Amazon is selling more the 25 million products in the
Indian market which is much greater than its closest competitor Flipkart by 5 million. They
are dealing with the cost focus strategy where they are focusing on cost of each product. This
is also used by them in the form of promotional pricing where they provide lower prices in
certain weeks for different market segments in the market. Targeted pricing has been
introduced by the company for attracting specific group of people.
Differentiation focus is also done by the company where they are bringing different types of
products at different prices. They have done this to ensure that they will be able to attract
more numbers of people towards their products. People have varieties to purchase and hence
they regularly visit the website and hence promote higher sales from the side of the company.
They regularly add new suppliers in the group to ensure that they have lot of differentiating
products to offer to their different kinds of customers (Ray, 2011). With the help of
differentiation focus they have been able to deal with the type of changes in the market and
hence make their penetration within any country to be fast.
The success of Amazon within the country can be understood by the fact that Amazon right
now captures more than 30% in the Indian market. They have added new investors in their
pool that has provided them with new economic strength. Amazon shopping app is the most
downloaded shopping app in India. Amazon seller services receive Rs. 8,150 Crore seeing its
growth opportunities in the country.
The competition in the India is increasing at much faster rate and hence Amazon had to pump
up new set of investments within the country so as to achieve competitive advantage to the
firm. Larger players are plagued with issues in delivery, cyber security and payment issues,
personalisation of offerings. These have impacted on the value chain adversely. Salaries for
delivery boys and unreliable COD issues have made them take a drastic hit on the
profitability. Logistics cost within India is on the higher side. Since India’s 67% of the
population lives in the village area hence the problems related to the logistics and supply
chain management will be bigger. The problem is also big in terms of the fact that
government policies are very much rigid about the FDI hence they still have to be dependent
on the partners in order to achieve competitive advantage over the rivals. This has also

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affected the decision making process of FDI (Spector, 2014). The challenges is also in terms
of the fact that larger amount of money of Amazon gets invested on paying bribery as the
challenges related to corruption is higher within the country. The working environment
within India is also not as easy as in U.S. as there is large section within the country that does
not know to efficiently utilise the technology hence the customer related grievances are much
larger than as thought. They are also facing challenges related to poor infrastructure in rural
areas (Mohapatra, 2013).
The political environment within the country is stable but the policies made by the
government do not fully support FDI and at the same time there is higher corruption that has
impact on the business. Introduction of GST helps the company in paying taxes without much
discomfort. On the other hand bureaucratic system of India seems to be highly complex and
hence Amazon had to deal with slow processing and policy making. In economic
environment it can be stated that India is one of the fastest growing economies. In the last
five years more than 5 Crore people have been elevated from the poverty line hence there is a
large population of people that can be target by the people (Akhter and Equbal, 2012). With
larger numbers of investor’s pool available in the country, it is easier for the company to
strengthen their partnerships. The development of rural areas is slow hence developing good
supply chain management or doing marketing in these areas hence Amazon requires huge
economic support from local investors and partners. Society has changed and so is its habits
related to economic and purchasing behaviour. This kind of purchasing behaviour has
strengthened companies like Amazon to invest in the nation. India has a very large population
as unemployed; this gives the company to have cheap labourers. Since there is large numbers
of population under the age of 35 hence it acts as one of the major target markets for the
company (Deshmukh, Deshmukh and Thampi, 2013). People are choosing the online
mediums for purchase rather than offline hence it gives an excellent opportunity to the
company to improve their sales and boost up their profit margins. In technological terms it
has already developed a technology infrastructure that is advanced. The technologies such as
mobile technologies have reached the hands of the people. It is expected that in the rural belt
also there will be increment in the number of people will want to purchase from mobile
technologies hence this company will have more opportunities (Mathew, 2015). Technologies
such as social media are becoming an effective tool for doing marketing even in the rural
parts of the country hence providing support to the business. The legalities related to the
consumer right have been strengthening and hence companies have to make sure that they are

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not violating the consumer laws (Kalia, 2015). On the other hand, legalities related to doing
business have been made easier which improves the chances of the company to do business
in the country in an easier manner. The environment related laws have been made strong
hence the company will have to look towards environment friendly business especially in
terms of packaging and waste management.
Amazon is very much useful in the Indian market. Amazon is reducing the overall prices
within the market. It is also strengthening the distribution network within the country.
Amazon is also providing the platforms for the sellers that are struggling.
The suppliers bargaining power is on the lower side as there are any low cost suppliers
available within the industry inside the country. For example local suppliers from the cities
make the bargaining power to go on further lower side. With larger numbers of competitive
forces available within the country, customers have larger numbers of choices and hence the
bargaining power of customers remains on the higher side (Williamson, et al. 2013). For
example, with one click people can compare same products being delivered by different
companies at different prices and on the basis of it they can make easy choices of which one
supports their choice of products. There are large numbers of competitors within the country
hence threat of competition is on the higher side. With increasing use of technology within
the Indian market, there is increasing chances that more competition can arise. For example
app based technologies are available in every hand hence enhancing the way in which they
can do their business. In the type of competition that is going in the industry and the barriers
to enter into the market, this threat remains on the lower side (Parnami and Bisawa, 2015). At
the same time the incumbents like Flipkart saw a downfall in their sales after the arrival of
Amazon hence it does not show a positive sign for the companies that aims to enter into the
Indian market. The threat of substitution is moderate. It is because the numbers of substitute
options are less while the threat from brick and mortar business is on the lower side. Since
innovation has become the key to success hence it has become critical for the management to
ensure that no substitute services can change the fate for the Indian market for them.
It is recommended that in order to achieve long term sustainability in the Indian market, this
company needs to make more partnerships with the local players. This will give more control
to the company in the Indian market. It is also recommended that company reduces the cases
related to the customer grievances as Indian customers lose their interest and trust from any
mode of purchase if they feel cheated.

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In conclusion it can be said that Amazon has done an effective business within the country.
Their strategies like cost leadership and differentiation in products have helped them in
penetrating into the market at very faster speed. They are using faster supply chain with the
help of larger distributors group to improve the overall user experience. Their focused
strategy and promotions using pricing such as Amazon shopping weeks have given them
space in the market that was highly dependent on the local vendors. Following the strategy of
strengthening the supply chain mechanism they are adding larger numbers of suppliers in
their group. Increasing numbers of goods is core to their strategy as it is able to attract more
numbers of customers towards their business.

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Contractor, F.J., Kumar, V. and Dhanaraj, C., 2015. Leveraging India: Global
interconnectedness and locational competitive advantage. Management International Review,
55(2), pp.159-179.
Deshmukh, S.P., Deshmukh, P. and Thampi, G.T., 2013. Transformation from E-commerce
to M-commerce in Indian Context. International Journal of Computer Science Issues
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Falk, M., 2016. A gravity model of foreign direct investment in the hospitality
industry. Tourism Management, 55, pp.225-237.
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extant research. Journal of Family Business Strategy, 1(2), pp.97-107.
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apparel segment. International Journal of Applied Research, 1(9), pp.207-2014.
Mohapatra, S., 2013. E-commerce Strategy. In E-Commerce Strategy (pp. 155-171).
Springer, Boston, MA.
Parnami, M. and Bisawa, T., 2015. The rise of Indian women entrepreneur in e-
commerce. IOSR Journal of Business and Management, 17(10), pp.36-40.
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Challenges. Computer Engineering and Intelligent Systems, 2(5), pp.17-35.
Reddy, N.A. and Divekar, B.R., 2014. A study of challenges faced by e-commerce
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Rey, J.D. 2019. Amazon’s invincibility is showing some cracks — and a big one is in India.
[Online] Available at: https://www.vox.com/2019/2/1/18205635/amazon-india-regulations-
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Appendix
Financial statistics of Amazon
PESTLE analysis
Factors Opportunity/Threat Explanation
Political Opportunity
Opportunity
Threat
 Stable political environment within
the country.
 Introduction of GST.
 Bureaucratic system of India seems
to be highly complex
Economic Opportunity
Opportunity
Opportunity
Threat
 India is one of the fastest growing
economies.
 In the last five years more than 5
Crore people have been elevated
from the poverty.
 With larger numbers of investor’s
pool available in the country, it is
easier for the company to strengthen
their partnerships.

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 The development of rural areas is
slow.
Social Opportunity
Opportunity
Opportunity
Opportunity
 Change in habits related to
economic and purchasing
behaviour.
 Availability of cheap labourers.
 Large numbers of population under
the age of 35 hence it acts as one of
the major target markets.
 People are choosing the online
mediums for purchase.
Technology Opportunity
Opportunity
Opportunity
Opportunity
 Developed advanced technology
infrastructure.
 Mobile technologies have reached
the hands of the people.
 It is expected that in the rural belt
also there will be increment in the
number of people will want to
purchase from mobile technologies.
 Social media is becoming an
effective tool for doing marketing
even in the rural parts of the
country.
Legal Opportunity/Threat
Opportunity
 Consumer rights have been
strengthened.
 Legalities related to doing business
have been made easier.
Environmental Opportunity  Environment related laws have been
made strong.
Porter’s five force analysis
Factors Explanation
Bargaining power of The suppliers bargaining power is on the lower side.