MKT00720 Background of Amazon
In increasingly competitive markets, consumers have a greater choice over where they buy their goods and services. For an organisation to meet its business objectives, it has to find out what consumers require and then identify the best way in which it can satisfy these needs and wants. Creating a competitive advantage can be difficult. A unique marketing strategy with clear objectives is vital to ensure effective promotional activity.
Your task in this case analysis is to answer two questions by critically analysing Amazon Australia’s market situation. Please do not just describe events, although you should read Amazon Australia’s history to understand the background to your analysis. You should use the principles and concepts that you have learned throughout the unit to answer the following two questions:
- What marketing strategy or strategies has Amazon Australia has adopted since it was created? Answer this question by applying one or more of the theoretical approaches discussed in the course.
- What marketing options can you describe for Amazon Australia if it wishes to remain a successful organisation throughout the next decade? Answer this question based on the circumstances that exist in 2018 and your best forecasts of relevant future industry factors.
These are wide-ranging questions and you should undertake extensive independent research into Amazon Australia and its industry. You should explore different aspects of these issues and incorporate them into your report. This is a practical assessment of a real company, but you need to show an understanding of theory and research in your evaluation and suggestions.
Answer:
This report has aimed to evaluate and examine the strategic practice and strategy of a real organization. The rganization that has been chosen for the investigation is Amazon.com, Inc. The strategies pursued by the organization has been evaluated in the report where the nature of the marketing strategy of Amazon is identified since it’s commence in Australia and the future strategic marketing option for the organization while moving forward in the industry. The report commences with brief introduction of the company and concludes with proving ecommendations regarding the strategies that the organization should implement to hold on their supremacy in the market.
Background of Amazon
Amazon is the largest cloud computing and ecommerce company in the global market. It has its headquarters in Seattle, Washington. The organization has been founded by Jeff Bezos in the year of 1994, and has the largest share in the market and revenue among the online retailers (Amazon.com 2018). The organization started as being a book store but diversified their product portfolio and started selling audiobook streaming/download, video download, video games, software, electronics, furniture, apparel, toys, jewellery and food.
The organization also diversified the product line to enter into the market of consumer electronics, echo, fire tablets and Fire TV (Amazon.com 2018). The organization also sells their low-end products under the brand name of Amazon Basics. The organization is largest cloud infrastructure services providers in the world. The organization has different retail websites in different parts of the world and uses separate websites for operating in a particular country. The organization has separate website in India, Mexico, China, France, Australia, Netherlands, Spain, Italy, Brazil and Canada (Amazon.com 2018). The organization is one of the most valuable countries in the world as it one of the largest employers in the global market.
Amazon entered the Australian on 5th, December, 2017 and Australians had to wait for a longer time to avail the same services in other countries (Bach 2017). Amazon took their time to enter the Australian market as they were lacking in warehouses so they were unable to store the items that has to be shipped to the residents. Even the Australian sellers on Amazon faced issues as they had the only option of sending their goods offshore. Similarly, the general population in Australia ordering goods from Amazon had to wait for more amount of time for the goods and had to pay excess amount for shipping when compared to the other countries (Bach 2017). The organization has set up a distribution warehouse on the peripheries of Melbourne which will assist in cutting down the delivery by a huge margin. Australia became the 13th country all over the world to have a dedicated amazon site for that particular country (Bach 2017).
Marketing analysis
The marketing analysis evaluates the market dynamics and it is used for formulating strategies for current market situations. The different dimensions that are used to perform the market analysis are market growth rate, market size, market profitability, market trends, and distribution channels, key factors for success and cost structure of the industry. The second part of this section will focus on providing recommendation for future growth of Amazon in Australia.
Nature of Amazon Australia’s Marketing Strategies in relation to marketing theories
Amazon uses psychographic and demographic segmentation to develop their target market. The actual purchasing behavior of the consumers are analyzed by the company to develop their target market and position their products. The market segmentation is also based on these purchasing behavior. The major target market for Amazon are the consumers belonging to the middle and upper-class population (Carey 2018). These target populations have been developed based on their disposable income and have the tendency to prefer convenience shopping over the physical outlets.
Initially, when Amazon entered the market in Australia it had a smaller number of offerings and the price of the products were higher. The majority of the consumers were criticizing the initial service as only the basic features and services were in the initial phase. Amazon strategy is based on technological disruption and their strategies are based around consumers as they have always have been customer centric in nature (Kahn 2018.).
The initial strategy includes orchestrating a bigger investment all at once so that they can drive a bigger return in the future. This shows that they have been developed a multi-year strategy so that they can gain loyalty of the consumers by spending huge amount of capital. However, even though the price of the products on a RRP search is higher adding the delivery charges which is under $49, the organization is trying to check the loyalty of the consumers as the consumers have the perception they will offer at minimum prices than the other local competitors and global competitors (Kahn 2018).
Amazon used the GLOCAL strategy for entering into Australia which they have already used while making an entry into other countries (Ryan 2016). This strategy means that they will make their global expansion but will act as a local company. This means that their initial attempt is to enter the market and get a grasp of it effectively before, they fully setup their operations and make expansions in different regions in Australia. Amazon had been measuring the current market opportunities so that they would have developed a market strategy to exploit those situations (Jager 2018). This has been done by forming partnerships with the local supply chain companies.
The organization has also cost leadership as their basic strategy for competing with the other market competitors. Amazon has formed strategic alliance with other companies for providing a service that is superior to the competitors in the market. Amazon launched prime in Australia at half prices when compared to price offerings in the United States. This shows that the organization is trying to implement a jump start strategy to increase their consumer base in Australia (Kahn 2018.). This pricing strategy is an effective example of the cost leadership that the organization has used to compete with the competitors and provide an added value to the services offered by the consumers. The relationship that the organization that they have developed with their suppliers helps them to achieve economies of scale which is the reason that they are able to offer products and services at competitive prices (Pappas 2016).
However, even though the organization has been successful in gaining access to the Australian market but Amazon is not as same as they are in other countries. The analysis of the current strategies show that Amazon are facing significant challenges in sustaining in Australia. Logistics and supply chain has been the key to their competitive advantage as they were able to reach economies of scale due to technological disruption (Jager 2018).
However, in Australia, the organization has been facing significant delivery obstacles. As mentioned in the article by Kahn (2018) Australia ‘s geography is a major concern for Amazon as the size of the country is 32 times bigger when compared to United Kingdom but comprise of only 40% of the population in the United Kingdom. This has made the shipping expensive because of the sparse population and vast distances. Geographical location of Australia makes it challenging for the company to acquire merchandise from outside the country. This shows that the free delivery option and aggressive pricing strategy could cause them to incur heavy costs.
Moreover, the two industry giants in the Australian retail industry are Wesfarmers and Woolworths which shows that it would take more time and capital to gain a considerable market share as these companies will retaliate based on the aggressive strategies implemented by Amazon. Moreover, the Australian population are reluctant on adopting of US brands which is evident from the struggle Starbucks have to go through in order to sustain in the market. The first year in Australia has been difficult for Amazon and they have been facing heavy losses in the market.
Future Strategic Marketing options
Amazon will have to develop strategies to mitigate the current challenges in the market. Firstly, the organization should increase the number of warehouse in Australia for implementing their cost leadership strategy and implement economies of scale in the market (Ogilvie et al. 2016). The organization also faces issues in bringing in merchandise from outside the country so they can implement backward integration to develop their own products and in house brands to cater to the needs of the target consumers in Australia. In order to accomplish, Amazon will have to use their superior business analytics to identify the purchasing behavior of the consumers and the products having high demand (Watson et al. 2018).
The organization should also make use of their expertise in supply chain activities to store those products that are high in demand which means that effective inventory management is essential for increasing the product line. Amazon Australia has limited products amounting to 60 million products when compared to 480 million products in other countries (Kahn 2018). Therefore, Amazon will have increase their product line in order to compete with the industry giants in Australia. Moreover, pricing, quality and over customer satisfaction has to be increased in order to gain the loyalty of the consumers in the market. The majority of the population in Australia have high disposable income so earning the loyalty of the consumers are essential. Therefore, Amazon will have to develop other loyalty programs in order ti match up to the expectation of the consumers.
Amazon will also have to open physical stores in Australia so that they can effectively engage their consumers and make them understand the story the organization is trying to portray and the role they want to play in the lives of the customers (Surdu, Mellahi and Glaister 2018). This is an effective strategy to improve their branding and develop loyal consumers by increasing the repeat purchasing. Amazon shall also consider the option of acquiring smaller companies in Australia to gain knowledge and facilitate effective knowledge transfer.
Conclusion
The report has shown that Amazon in Australia is still in its nascent phase and would take some time to gain competitive advantage in this market due to the mentality and attitude of the consumers towards US brands. The organization has been incur losses in Australia and will continue to do so as they cannot provide the same number of products and facilities to the consumers in the Australian market. However, the organization should use backward integration to develop more in house products and develop effective inventory management system to offer more products to the consumers. Cost leadership is something that the organization has been using as a differentiating strategy but in order to reduce their losses and increase their profit margin, the organization should develop effective logistics and supply management.
References
Amazon International shopping and shipping made easy.
Carey, A. 2018. ‘Amazon typically doesn’t make revenue at all in the first years’.
- Kahn, B. 2018. Amazon Unveils Prime In Australia At Half-Price; Will Australian Consumers Respond?.
Jager, J. 2018. Amazon Australia: everything you need to know.
Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.
Pappas, N., 2016. Marketing strategies, perceived risks, and consumer trust in online buying behaviour. Journal of Retailing and Consumer Services, 29, pp.92-103.
Ogilvie, J., Lindsey, K., Reynolds, K. and Northington, W.M., 2016. Examining Reactive Customer Engagement Strategies in Online Shopping Cart Abandonment: A Regulatory Fit Perspective. In Rediscovering the Essentiality of Marketing(pp. 755-756). Springer, Cham.
Watson IV, G.F., Weaven, S., Perkins, H., Sardana, D. and Palmatier, R.W., 2018. International market entry strategies: Relational, digital, and hybrid approaches. Journal of International Marketing, 26(1), pp.30-60.
Surdu, I., Mellahi, K. and Glaister, K., 2018. Emerging market multinationals’ international equity-based entry mode strategies: Review of theoretical foundations and future directions. International Marketing Review, 35(2),