Strategic Management: Innovation in the Online Retail Industry Report

This report, prepared by a student for TMC Academy's BUS3005 Strategic Management module, examines the evolving landscape of the online retail industry. It explores the importance of innovation, strategic planning, and the impact of internal and external environmental factors, including PESTLE analysis and Porter's Five Forces. The report highlights the increasing competition in the global market, the role of technology, and the significance of adapting to consumer behavior. It analyzes the competitive advantages of online retailers, discusses the influence of market structures, and emphasizes the need for innovative products and services to attract and retain customers. The report also provides insights into the evolution of e-commerce across different countries and discusses the factors driving the growth of the online retail sector, concluding with the importance of innovation for sustained success.

Running head: STRATEGIC MANAGEMENT
INNOVATION IN ONLINE RETAIL
INDUSTRY
NAME : NG YEA LING
STUDENT ID : 18423758
MODULE TITLE : STRATEGIC MANAGEMENT
MODULE CODE : BUS3005
LECTURER : MR. RAYMOND LOH
SUBMISSION DATE : 06 MAY 2019
TMC Academy, Singapore

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The context of business environment has been evolving rapidly over the years, and
in this consistently evolving environment, the entire business organizations are
required to develop and implement more efficient business policies and marketing
strategies in order to maintain their sustainability quotient and stimulate their
growth prospects. Businesses have a great impact on the economic system of any
nation because they are the prime job provider for a country.
The advent of the concept of online business has brought revolutionary changes in
business landscapes all over the world. Online business has its own importance in
recent times like- it increase sales, improve rankings, increase the customer base,
best Customer service, simple platform for advertising and marketing. It is
significant to say that the online business is itself a revolutionary innovation for the
business world (Laudon and Traver 2016).
The online business industry should have a strong strategic plan to have big
opportunities for them and a plan that can work in this competitive environment,
various changes should be undertaken by these type of industry to hold the market
share of their respective business organization.
The competition level is huge as the industry is global as it serves the whole
world and the industry is serving with full customer satisfaction and the demand of
the industry is reaching in the peak.
Top 10 countries leading the online retail industry
Name Description
10)Brazil Sales: $16.28 billion, Top retailer: B2W Digital Inc.
9)Russia Sales: $17.47 billion, Top retailer: ulmart.ru
8)Canada Sales: $24.63 billion, Top retailer: Amazon

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7)South
Korea
Sales: $33.11 billion, Top retailer: Couping
6)France Sales: $38.36 billion, Top retailer: Odigeo
5)Germany Sales: $63.38 billion, Top retailer: Amazon
4)Japan Sales: $70.83 billion, Top retailer: Rakuten
3)United
Kingdom
Sales: $82 billion, Top retailer: Amazon
2)United
States
Sales: $305.65 billion, Top retailer: Amazon
1)China Sales: $423.26 billion, Top retailer: Alibaba
Table 1: Top 10 countries leading the online retail industry
Source: (Trellis 2019)
The internal and external market environmental factors, have a significant
influence on the innovative initiation within the industry. Furthermore, the entire
business organization all over the world irrespective of from the developing
countries or the developed countries is feeling the prospects of the online business
and with the technological advancement try to make an entry within the online
market. Technology plays an important role in online business industry because it
changes the consumer and retailer relationship, faster delivery time and many
others. For an e-commerce industry technology is one the major factor for its
development.
The technological landscapes of a country are most important for the growth and
development of online business within a country. Moreover, as the online business

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is a technology dependent business hence, the technology plays a vital role in the
establishment as well as the growth of the online business within the particular
nation (Lee 2014).
In recent times, the entire developing as well as developed countries are
focusing on building more technologically advanced infrastructures for the nation.
The governments are also focusing on the establishment of the more advanced
technological framework for the country in order to ensure economic growth of the
country. The technological advancement uses to bring a significant level of growth
in the economies of the country. The political leaders are thus providing interests in
modern technology adoption for the growth of the economy (Souto, 2015).
The economy a country plays an important role in online retail industry as the
government encourages innovation in the online business in order to gain a
substantial level of competitive advantages in the online market (Elmqvist 2017)
The online retail industry is also evolving over the years and several new
organizations are entering in this particular industry to grab the opportunities to
grow. Many established companies are also encouraged to make an entry into the
online industry in order to get required competitive advantages from the market. In
this context, market competition is gradually hiking. In this situation, it is required
to implement innovation as well as innovative ideas in order to gain the required
competitive advantages from the market (Sorescu, 2017).
The online industry put a significant amount of efforts in order to enhance
organizational performance by discovering innovative new knowledge and ideas.
This is considered as one of the most effective means in order to gain a competitive
advantage and defeating rivalry organizations. Through this way, the online
industries could be able to satisfy their customer base to a great extent (Sin et al.
2016). Therefore, it is analyzed that there are numbers of different factors which
were included in the organizational innovation design system. These various factors
can be in terms of both internal as well as external in nature. In an organization,
there are various factors that lead to either the development of an organization or
could be identified as one of the major threat to the organization.

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Figure 4: Evolution of e commerce in different countries
(Source: Quan and Williams 2018).
These internal, as well as external factors, are capable to influence the growth of
innovation both in terms of positive as well as negative. The external factors might
encompass the size of the online market organization on the basis of market share
(Silva, Styles and Lages, 2017).
The external factors could also incorporate the market structure,
macroeconomic factors as well as the degree of concentration upon the retail
industry. The organizational size of the online retail industry has a tendency to be
very positive with reference to the new innovation within the profit-making
organization as well as a retail organization when evaluated against the non-profit
making organization (McDonald, Thompson and O'Connor 2016). For example,
online organizations are increasing day by day but due to some negative external
aspects they cannot evolve themselves in this competition market. Some of those
negative external aspects are Easy return policy, Loyalty rewards, Online reviews,
Shipping time and cost, product quality and so on. Thus relying on the level of
competition of the market place for instance when a favorable environment is
present among the various rivalry industries and possess positive competitiveness
then the industry would tend to be more successful in that particular innovation.

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Porter’s five forces analysis of e commerce industry will be discussed briefly-
The global organizations such as Amazon, Alibaba of the online retail industry fear
about the local brands as they know the market strategy and have enough capital
to invest
Threat of new entrants (low to moderate)- The threats of new entrants in the online
retail industry is low to moderate as the new entrants It needs huge investment in
the market. The completion level in the online retail industry is high therefore, new
entrants can face difficulties in creating a brand image in this competitive market
(Marshall 2018)
Threat of new substitute (moderate)- The online retail industry can face mainly two
types of threats the rival e-retail business and the physical retailers. New
substitutes attempt to sell their products which can meet the customer’s demand in
very considerable amount. They try to manufacture better quality product within a
good range of amount.
Industry rivalry (high)- The level of the industry rivalry is high due to the huge
number of competitors. The online retail business is increasing in huge day by day.
There are many global brands like Amazon (232 billion U.S. dollars in 2018 net
sales), Alibaba (250.27 billion yuan revenue) and Ebay (10.7 bn USD revenue)
(Statista 2019), apart from them there are several local brands like Flipkart, Coles,
Welmart and Costco and many more (Statista 2019).
According to the research studies, the organization's ability for innovation is directly
linked to the national innovating capacity features. The output of the innovating in
the nation is influenced greatly by the technologies and scientists of the online
retail industry (Kurnia et al. 2015).
Innovative ideas have a significant role to make the online retail industry
successful. Innovative products and services can be able to attract the attention of
the customers (Fernie and Sparks 2018). It is very important for online retail
organizations to provide innovative products on a regular basis. Without providing
innovative products, online retail organizations cannot be able to run their
organizational operations for long term purposes. Innovative products can be able

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to increase the engagement of the customers. In the online retail industry,
competition among organizations is rapidly increasing.
Western Europe and North America were embraced online shopping first. This two
region was dominated by the B2C online retail market for a very long period of time.
The online retail industry is spreading its network and organizational activities
across almost all over the world. With the help of the internet, customers can be
able to purchase their choice of able products from online retail websites (Griffin et
al., 2014).
Online retail industry provides several categories of products to the customers.
Reliability in the online retail industry is rapidly growing among the population of
the world. The online retail organizations provide several types of offers to attract
customers. This strategy helps organizational management to attract customers
through technology. The population can be able to access internet services to get
beneficiary services from the online retail industry. By using a market pull strategy,
the online retail industry can be able to increase organizational profitability (Laudon
and Traver 2018). In market strategy, the online retail organizations are involved in
the selling of high volume product at low prices. Low pricing strategy is a very
effective method for online retail organizations. In the USA and UK, the online retail
industry is enjoying massive revenue. Technological advancement factors are the
main reason for the difference between physical retail stores and the online retail
industry. Technology and innovation help the online retail industry to enhance their
organizational activities across the world (Rahayu and Day 2015).
The online business has been growing over the years as more and more
business organizations are trying to make fortune from this lucrative industry. In
this context, online retail businesses across the globe are trying to develop and
implement more effective strategies to gain the required competitive advantages.
Moreover, in this matter, innovation is the most efficient tools and hence, the
organizations are trying to adopt innovative ideas to maintain sustainability.

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