Current Issues and Situations for Amazon Australia
Discuss About The Management Strategic Systems Of Information?
When an organization wishes to increase its presence globally, it plans to expand its business in international markets. Business expansion in a developed market is the best way to enhance its presence among more population and increase its customer base. There are so many companies in today’s competitive business world, which are planning to extend their business operations in international markets. Amazon.com is the best example for this, as it is aggressively expanding its business operations by enhancing its online presence and by opening new pop-up stores in shopping malls. Now, this organization is planning to expand its products and offerings in Australia and going to launch its web-based services in the country.
Under this expansion, Amazon.com is confronting various issues and situations while entering in Australia. This report includes the discussion about current issues and situations, which are faced by Amazon Australia. It includes the factors, which contribute the success of Amazon in its home country, i.e. United States and international markets. Amazon Australia is facing a major challenge, i.e. competition in online retail industry. There are so many players in the industry, which are posing competition for Amazon Australia. At the end, the report includes the marketing plan and marketing strategies for Amazon Australia for 2018-2021.
Amazon.com is an American e-commerce organization, which has become an idol of online retail business. The organization was founded in 1994 by Jeff Bozos and introduced it online in the year 1995 as an e-book store. Amazon is one of the largest online retailers in the world that is offering from online books to consumer electronics to potential customers from all over the world. This online giant had started its business as an online bookstore and after that it has diversified its business to offer different products, like; DVDs, video games, software, electronics, food, furniture, toys, apparel, jewelry etc.
This website is well-known for its cheaper prices for their products and experiencing greater expertise for ensuring that needs and expectations of customers are always met (Anderson, Narus & Narayandas, 2009). By adopting effective strategies, this organization has established its image as a largest online business in the terms of revenues all over the world and it is the 8th largest employer in United States. In the end of 2015, the organization has employed around 230,800 part time and full time employees. It has expanded its online and offline business operations in different countries, like; Canada, Germany, United Kingdom, France, Japan etc. In the early 2017, the company has planned to go in Australia.
Success Factors for Amazon in the United States and International Markets
In early 2017, an online retailer giant, Amazon.com has announced to enter in Australian market. In order to expand its business in Australia, Amazon is confronting with different situations, which are affecting the growth and success of company in Australia (Baker, 2014). For analyzing the situations, SWOT analysis model is used here, which includes all the internal and external factors that impacts organization positively and adversely. The situational analysis for Amazon Australia is stated below;
In Australia, Amazon is entering with lower prices, vast market selection and fast product delivery. The organization has made its success with its online books, now the company will focus on the electronics and kitchen appliances in Australia. To differentiate itself from its existing competitors in the Australia, the organization is using a cost leadership strategy (Charlesworth, 2014). It has developed many strategic alliances with other organizations in Australia, so that it can offer excellent customer service. Amazon Australia has an efficient delivery network and deep distribution network for delivering the products.
Under this business expansion to Australia, Amazon may have some weaknesses, like; because of its extensive distribution network, the margins of Amazon are dwindling that is resulting in losses. In Australia, Amazon has enticed negative advertising on avoiding the taxes, which are to be paid by an online retailer (David, David & David, 2016). The major issue, which organization is facing in Australia is that distances in Australia are higher than most of the nations, where Amazon.com operates in, and population of the country are lower than US. The existing business model of Amazon is not working in Australia, so company may face various issues.
This business expansion will offer several opportunities to the Amazon Australia, like; the organization is coming up with new and in-house brands in variety of products and categories. It can go ahead with product differentiation (David & David, 2015). It will assist the organization in making profits and revenues in Australian e-commerce market. It can open its physical stores in Australia that can assist the people to engage with the brand and resulting in enhanced repeat purchases and increase in the customer loyalty.
One of the major threats for Amazon Australia is intense competition. There are so many leading players in the Australian retail industry, which are posing immense competition towards Amazon Australia. The major players are like; Harvey Norman, Bunnings, JB Hi-Fi and Myer. The impact of these biggest retailers in Australia will be high. JB Hi-Fi has$3.9 billion in revenue, Bunnings $11.5 billion and Harvey Norman with $1.8 billion. These three organizations are operating their online and offline stores in the different states in Australia (Dibb & Simkin, 2013). Currently, the Australian market is dominated by Harvey Norman and JB Hi-Fi. Apart from this, another major threat to Amazon is the enhancing concern for online shopping due to hacking and theft of identity that leaves the data of customers exposed. Thus, Amazon Australia has to go ahead quickly to alleviate the concerns of customers over its website and make sure that it provides guaranteed security and privacy.
The Marketing Plan and Marketing Strategies for Amazon Australia for 2018-2021
The below presented are the success factors which can be proven relevant for the business entity for analyzing the business environment in which the firm is executing the business operations. The analysis has been executed for Amazon.com which has been planning for expanding the business operations in Australian regions and the entity is mainly operating the business in USA (Dudovskiy, 2017). The below is the description of the external environmental factors for the firm:
Political: This factor can highly impact the business environment and the variables which play an integral part in influencing the business entity involves the political stability, law and order situations norms and regulations associated with the business etc. These political factors are considered as very much liable in influencing the entity and as mentioned in the scenario USA has a strong democratic political environment with effectiveness in the norms imposed and the elections are also fair and transparent (Evans, 2015). This aids the business entity on varied range of grounds and has been proven as a success factor. Apart from this the entity has also been expecting to expand the business operations to the new regions of Australia. The Australian region has been considered as the one of the most politically stable region for the MNC’s in Asia-Pacific and will also be proven advantageous for Amazon.Inc.
Economic: These variables are mostly linked to the economic conditions of the regions in which the entity has been operating the business. USA has a GDP of over $16.760 trillion and has been recognized as the biggest economy in the world. The economy is also one of the most developed and due to which the entity will be aided on number of grounds. The firm will be aided by the modernization and the skilled workforce which is already prevailing in the economy (Gmelin and Seuring, 2014). Moreover, in the case of Australia, the economy have strong growth rates, a high GDP and low degree of risk which will enable Amazon with number of benefits and the expansion will be proven successful.
Technology: Innovations and technology has been considered as the two cornerstones of the US economy. The economy has been ranked on the top in adopting the technological up-gradations and applying the same. This will be proven very much beneficial for Amazon as technology is one of the success factors and the same is in the case of Amazon. Additionally, the US economy has also been at the vanguard in developing mechanization in the sectors such as nanotechnology, environmental technology and biotechnology (Harris, 2010). This will open-up massive opportunities for Amazon. Whereas, Australia the Commonwealth Scientific and Industrial Research Organization (CSIRO), have its headquarters in the region of Melbourne and was founded in 1926, which is an independent public owned agency. This organization supports research and development in all the sectors of the physical and biological sciences and is also a great hub for e-business. These all will contribute in the success of the Amazon in Australian regions (Hollensen, 2015).
The below presented is the major challenge which will be faced by Amazon while expanding the business operations in the Australian markets:
Competition has been considered as one of the biggest challenge which can be faced by any of the business corporation and also plays a significant role in stimulating the entity and the operations and functionality. On the basis of the conducted research it has been analyzed that Myer, Harvey Norman and JB Hi-Fi will be considered as the top rivals for Amazon.Inc while executing or expanding the business operations in Australian regions. These rivals play an integral role in stimulating the demand of the business entity. The se mentioned entities are operating business through both online and offline means. The Australian regions have some other online retailers who are ruling the e-business sector such as Temple & Webster and Kogan. These business entities play a critical role in influencing the business environment of Amazon (Kipley & Jewe, 2014). The below presented are some of the driving forces to this challenge for the business entity while operating the business in Australian markets:
Competitive rivalry: The multinational corporation has been facing an intense level of competition from number of strong competitors such as Myer, Harvey Norman and JB Hi-Fi and from online retailers such as Temple & Webster and Kogan. The further explained are the external factors which are considered as liable for the intensity of the competitiveness in the business environment of online retail industry:
- High aggressiveness of firms
- Variance in the availability of the substitutes
- Minimum switching expenses
Retail firms are generally considered as aggressive by nature and hence they have to exert strong competitive forces against each other (Kotler, 2011). For instance, Amazon has been competing against Wall-mart which has been considered as one of the empirical and expanding name in the sector of e-commerce. Moreover, the business entity has also been facing a risk or threat of substitutes.
Threat of substitutes: On the basis of the conducted research it has been analyzed that this is one of the strongest force which has been considered as liable or a strong competing force. This force will negatively impact the business operations in Australia (Luo, 2008). The below mentioned are the external factors and also supports the strong intensity of the threat from the substitutes:
- Variance in the availability of the substitutes
- Minimum switching expenses
- Minimum expenses of substitutes
As there are number of substitutes available in the market there are more chances and options to choose from and also easy for the consumers to switch over the brands. Low cost of the products of the substitutes and high availability of the same influence the consumers. For instance, the consumers can directly and easily from Temple & Webster online stores.
Threat of new entrants: The new entrants are the pioneers which can also be considered as threat or can rise as a challenge for Amazon. Mostly the new entrants launch their products at low price with some additional benefits for entering the market and establish their name (Merchant, 2014). And this will tend the consumers to switch over the brands.
Effective designing of marketing plan and marketing strategy is very important for an organization. When an organization plans to expand its business operations in international country, it needs to develop new and effective marketing strategies and marketing plan for reaching to target market (Murphy, 2017). These marketing strategies assist the organization in attracting new customers towards company’s products and services. An organization follows various steps to develop its marketing plan and strategies. In designing the marketing strategies and plan, Amazon Australia Director will go through different processes, which are stated below;
Situational analysis is a tool that is used to analyze the external and internal environment of an organization. Under this step, the director at Amazon will identify the strengths, weaknesses and opportunities and threats of company in the developed market of Australia. When it will expand its business to Australia, it will analyze the current situations, faced by organization. By this, it can find out that on what area, the organization should emphasize more (McDonalds, 2007). Amazon will consider its weaknesses and threats and develop effective strategies, so that it can overcome these threats and weaknesses.
Furthermore, the marketing team of Amazon will conduct a market research, which will assist the organization in understanding the current market trends in e-commerce retail industry. Through this marketing research, the team can find out the needs, expectations and preferences of customers. By understanding their needs and demands, company can develop its products and services and make the marketing strategies accordingly. This marketing research process will help the company in analyzing the competition in the industry and major competitors in Australian retail industry. This marketing research will provide relevant data and information to overcome the marketing challenges, which Amazon.com will face in business planning process. Through this, Amazon will be able to gather the related information (Payne, Kennedy & Davis, 2009).
Marketing objectives are the objectives, which are set by an organization when advertising its products and services to the customers which should be attained in the predetermined time. Amazon.com will establish its marketing objectives for promoting its products and services in Australia. These marketing objectives will be attained by developing effective marketing strategies and tactics.
Target market is the group of customers, who share the similar likes and dislikes and characteristics. A company identifies a target market by considering different characteristics, like; behavioral, psychographic, demographic and geographic characteristics. Under this step, Amazon will select a target segment, to which it will offer its products and services in Australia (Peppard and Ward, 2016).
After identifying marketing objectives and target market, the organization will establish a marketing budget, which will consist of different costs, like; advertising costs, social media networking costs, offline media related costs etc. This budget will include all the media, like; online, traditional and print media, which will assist Amazon in increasing its presence among Australian population and Australian retail industry. This marketing budget will aid the Amazon.com in defining all the costs and investing in all the activities and processes of marketing and promotional practices of company.
Thus, by following all these steps, Amazon.com will be able to design its marketing strategies and marketing plan.
The population in Australia is much lower than United States, so Amazon.com may face various issues in promoting and establishing its business operations in Australia. Some of the issues and challenges are mentioned in the above section of this report (O'Guinn, Allen & Semenik, 2011). To handle these issues and promoting its business in Australia, the company will establish some effective strategies. These strategies of Amazon Australia are given below;
Amazon Australia can use cost leadership strategy as its generic strategy for gaining more competitive advantage over its competitors. The company is using enhanced networking technologies for maximize its efficiency that minimize the costs for company. The major objective behind using this strategy is to create e-commerce competitive advantage by improving its infrastructure. Furthermore, this strategy pushes Amazon Australia to lower its prices, which will assist the organization in attracting more customer base. Lower prices of products and services are significant for retaining existing customers and attracting new customers towards its offerings (Ritala, Golnam and Wegmann, 2014). Thus, by using cost leadership strategy, Amazon Australia can gain competitive advantage to aid its mission and vision statement, with regards to international growth and leadership.
Apart from these pros, the company will have some cons of cost leadership strategy in the future. It will lower the growth of profits and revenues of organization as the prices of product offerings are lower in comparison to its competitors. It will impact the growth of company in develop market, as there will be slow growth in the revenues.
Product development is another strategy that is adopted and implemented by Amazon.com in Australia. The company is using this marketing strategy to support its business growth. When the company will expand its business in Australia, it will develop and offer new products and services to attain higher revenues, which is the major objective of this company. For example, along with its existing products and services, it will offer Amazon Web Services and Amazon Basic products. The cost leadership strategy of organization aids its product development strategy.
The major cons of this strategy are that company needs to make investment on market research and development process that is very expensive for the company. The company needs to hire an expert team for this marketing research. It will increase the costs of company. New product development carries some risks and challenges with it as it is not necessary that customers will like or accept new products and services offered by firm (Ryan, 2016).
In order to implement marketing strategies and tactics, Amazon Australia will develop a marketing plan for the duration of 2018-2021. It will include all the important and related aspects of marketing and promotional process. The marketing plan for Amazon Australia for 2018-2021 is stated below;
In the duration of 2018-2021, the Amazon Australia will use two types of positioning, which include multi-segment positioning and adaptive positioning. Under multi-segment positioning, it will offer a variety of products and services in Australia. It will serve the needs of wide customer segment in the country. In addition to this, the organization will focus on the changes in external environment and consider the needs and expectations of customers (Solomon, 2014).
Under this business expansion, Amazon Australia will aim at the wide audiences, who are interested in online shopping. The variety of products for sale that company offers will recommend that they desire to targeted customers of all age groups from young one to old people. The Amazon will design the website that will ensure that it is very easy to use for the people, who are computer illiterate. The people with medium and lower income level will be attracted towards its products and services as it offers the products at comparatively lower prices.
By expanding its business in Australia, Amazon will segment the market by consider their characteristics, like; geographic, demographic, behavioral and psychographic characteristics. Under demographic characteristics, Amazon will focus on the life-cycle stage of the people. Under geographic segmentation, Amazon Australia will consider different factors, like; age, gender, region and density (Wells, Danskin & Ellsworth, 2016). It will target both males and females and the people from all age groups. As Amazon.com is providing a wide range of products and services online, so it impact the behavioral characteristics of people. Under this segmentation, it will choose the people, who love to shop online on competitive prices. The offerings at Amazon Australia can be purchased by the people of all income levels, i.e. lower level, middle level and higher income level. Through this market segmentation, the company can determine its target market and audiences in Australian market.
Amazon Australia is a global online retailer that uses connections on internet by using different devices. It allows an organization to surf and purchase the products from its website (Wood, 2014). In Australia, the company will offer different products, like;
- Amazon Kindle
- Online books
- Mobile phones
- Home appliances
- Consumer electronic
- Jewellery etc.
For next three years (2018-2021), Amazon Australia will offer its products and services at competitive prices. The company will set the prices as low as possible to capture a market segment in the developed marketplace in Australia. It will make an effective pricing strategy, which will assist the organization in attracting more customers.
At Amazon Australia, the distribution network will be very wide. In Australia, it is planning to establish its distribution centers in different cities of Australia. It will assist the company in delivering the products easily and on predetermined time. As Amazon Australia is engaged in online business, so that the products will be available on its website. In future, it will be opening its physical stores in the country.
For promoting its products, Amazon will use different mode of advertising, like; television commercials, print media, online media, advertising networks etc. Amazon will adopt a smart promotional and advertising strategy in next three years (Wood, 2014). It will set a budget for this marketing plan and promotion, which will includes all the related and incurred costs.
From the above analysis and given case study, it can be concluded that Amazon.com can expand its business operations in Australian retail industry. In this expansion, the company may confront some issues and challenge, which can be resolved by using some effective strategies. The report includes some success factors, which are contributing to the growth and success of Amazon in US and international markets. In next three years, Amazon Australia will develop effective strategies and attract more and more customers. It will assist the organization in establishing its business operations in this developed market, i.e. Australia.
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