About Amazon enters the Middle East

Term Course Project Paper requirements

1. APA style format

2. 15 pages (excluding title, reference, charts, graphs, and tables)

3. Must include all sections outlined in the instructions

The following is an outline of what the paper should contain:

1. Introduction

1. A brief overview of the company, its main products, target country, main target markets, and primary entry strategy

2. Situational Analysis

. Company Analysis

. Market Analysis

2. Business Environment analysis

2. Political/Legal/Institutional Environments

2. Regulatory Environment (Present and anticipated)

2. Economic Environment (Conditions and Trends)

2. Social and Cultural Environment (Factors and Trends)

2. Demographic Environment (Data and Identification of Trends)

2. Technological Environment (Factors and Trends)

2. Natural Environment (Effect of Seasonal or Climatic Factors)

2. Physical Environment (Infrastructure Indicators)

. Nature of Demand

3. Size and Extent of Demand

. Structure of the Industry

4. Cost Structure of the Industry

4. Competitive Structure of the Industry

. Competitor Analysis (in the country of investment)

· Objectives

. International Objectives

. Market Objectives

· Recommended Marketing Strategy

. Target Markets Identification and Segmentation Strategy

. Market Positioning

. Market Entry Strategy

· Marketing Mix and Tactics

. Product/Service and Branding Strategy

. Place (Distribution) Strategy

. Price Strategy Structure

. Promotion Strategy (including Promotional Budget)

· Implementation and Control

. Formal Project Plan for Implementation of Recommendations

. Formal Contingency Plans

· Conclusion

· References

· Appendices

Case Analysis: Amazon in the Middle East

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Introduction

Amazon is an online retailer and a manufacturer of electronic book readers and Web services that is headquartered in Seattle, Washington. As an e-retailer, Amazon has been able to outgrow several competitors due to its competitive advantage of high capital and low prices for goods and services (Shevchenko, 2020). The company sells books, movies, housewares, and electronics and toys either directly or as a middleman. Amazon Inc. started with its target being on the American market. However, over time it has been able to expand to several countries with the target market being mostly the middle class and the young people. This is the reason why the system allows young people to access and shop on the website using the login details (Shevchenko, 2020). The primary entry strategy that the company uses to access and takeover a new market is cost leadership strategies. This has enabled customers to be able to remain loyal and continue using the e-retailer for a good shopping experience.

Situational Analysis

Company Analysis

Amazon has been the leader in e-commerce for many years. To understand this, a SWOT analysis is necessary. This is the internal review of the strengths, weaknesses, opportunities, and threats which occur in the internal and external environment respectively. One of the strengths enjoyed by the company is that it is the largest online

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AMAZON IN MIDDLE EAST
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retailer (Onyusheva&Seenalasataporn, 2018). This increases the profitability as well as reducing costs. The company is able to enhance its profits against its competitors because it is already established and receiving high profits. Secondly, it offers a diverse number of products offering the customers with choices to make on the products needed. The company also offers multiple services to customers such as same-day delivery and free shipping. This attracts the customer more to shopping at the Amazon website (Onyusheva&Seenalasataporn, 2018). The company also has an efficient distribution chain and logistics which ensures that the company has sufficient inventory as well as delivering the products to the customers at the right time.

Within the company, there are some weaknesses. These include the issues related to patent infringement which leads to a series of legal issues. Amazon relies on the use of the website to sell products which are directly obtained from the manufacturer or offer services. Due to patent issues, the company has had to part with huge sums of money in settling court cases (Onyusheva&Seenalasataporn, 2018). Secondly, there are frequent technical outages on web hosting mainly due to the traffic of the customers. This discourages purchases and hence the morale of the potential and existing customers to keep shopping using Amazon. The company is also a low margin business. It relies on cost leadership and hence sells the products at lower prices. This means that the profit margin per item is lower than the other competitors.

Opportunities and threats exist in the external environment. Amazon Inc. has the opportunity of growing into new markets as there is a growing acceptance of e-commerce in the world. As a result, many customers are willing to shop and make orders using e- commerce websites. There is also an emphasis on the use of digital advertisements (Onyusheva&Seenalasataporn, 2018). This is an area that can increase the revenue earned in the organization. Apart from this, Amazon Inc. offers cloud computing services. The increase in demand presents an opportunity for growth and increasing revenues in the firm.

The threats are those factors that can contribute to the downfall of a business. One of the threats is the increased competition for e-commerce and e-reader markets. There are a number of online retailers who offer similar services. For example, Alibaba is an e- commerce company that competes with Amazon (Onyusheva&Seenalasataporn, 2018).

The second risk is foreign exchange fluctuations. These results to profit reductions due to the adjustments made.

Market Analysis

Business Environment analysis

Amazon is in an industry that is greatly competitive. However, the threat of new entrants is relatively low. This is due to the presence of a huge capital base that is required to start such a business. However, the availability of the internet makes the entry

easier and allows for comparison of prices by the customers (Lincoln & Andrew, 2018). The company is, however, an e-commerce giant and hence possesses a high competitive advantage over the rival firms. The huge capital base has been used to acquire other firms such as Zappos.com dealing in online supply of shoes. This way it has the ability to overcome competition.

The power of the buyers is high because they have the capacity to shop using other e-commerce platforms available even in their phones. Therefore, Amazon Inc. has to ensure that it meets the demand and the requirements of the buyer. The power of the suppliers is also significant since it influences the profitability of the venture(Lincoln & Andrew, 2018). The company acknowledges the impact that the suppliers possess especially because they do not have long term arrangements with them. Therefore, the availability of merchandize is not guaranteed. A delay in supply, therefore, can affect the company especially in making logistics arrangements to acquire new suppliers.

The threat of substitute products and services is high. This is because there are many competitors such as e-bay. As a result, the customers purchase otherproducts that serve the same purpose as what Amazon is selling. However, the company has remained innovative and has become customer-centric such that the threat of substitution is in the short-term (Flood, 2016). The competitive rivalry is intense in e-commerce. This is because there is rapid development.

Political/Legal/Institutional Environments

The political and legal environment is the current laws and regulations which affect how business is conducted. All the firms must adhere to the set standards while at the same time avoiding the negative impacts that may be caused. Some of the political factors include strict laws on tightening data regulations(Flood, 2016). This is especially a challenge because the company operates in an international market and hence makes it necessary to adhere to all the set laws. The technology business undergoes a lot of scrutiny from the government officials so as to ensure that the interests of the small entrepreneurs are met. For example, Amazon was at one time forced to sell its China cloud assets due to the tightening of regulations on online data(Flood, 2016). In general, the restrictions on trade favor the local players in business which puts Amazon in a difficult place.

The EU has established the General Data Protection Regulation standards. This was a measure that was passed in 2016 (Bennett, 2018). As a result, the cloud services offered by Amazon Inc. were affected. This is because it was required to adhere to these regulations as well as having the security experts who assist the customers and manage the business not to have any extra costs.

Regulatory Environment

There are a number of regulations and legal challenges in the technology sector.

This is because governments all over the world are mounting regulatory policies. Therefore, there are issues arising against technology and especially in areas such as antitrust regulations and labor laws (Althafairi et al., 2019). Secondly, the general data protection regulation in the European Union is strict. This requires that the company deploys new experts as well as the data protection specialists. In the future, these trends are expected to tighten. This is as the technology advances several people can access the internet and hence issues such as cybersecurity are on the rise. To cover the generation, it is important to develop an environment that enhances growth.

Economic Environment

The performance of Amazon Inc. depends on the situation where there are online and non-online businesses. The effects of the economic factors and trends to change focus on the macro environment. Some of the existing economic external factors include the economic stability of the developed markets in the European countries and the United States(Althafairi et al., 2019). There is also an opportunity in developing in low-income countries due to a rise in their disposable income. However, there is a threat of economic recession in China. The economic development in developed countries has contributed to the growth of Amazon Inc. this is because the environment minimizes the economic issues in the remote environment and hence the company’s ability to expand its retail business. Through the growth experienced in developing countries, Amazon can be able

to boost its financial performance due to the availability of a high disposable income(Althafairi et al., 2019). Therefore, there are trends in the economy that show some signs of a recession and hence it is good to take precautionary measures in time.

Social and Cultural Environment

The social factors are a determinant of Amazon Inc. the social-cultural changes are required to enhance the performance. Some of the social-cultural external factors faced include an increase in the wage disparity which is the rise in the gap between the rich and the poor(Flood, 2016). This is a threat to amazon because such a trend can lead to a decline or stagnation of the disposable income which the customers can use to purchase goods and services. High disposable income is the most favorable for e- commerce and increasing the revenue of the business.

Apart from the social context identified, Amazon is faced with a rise in consumerism in developing countries which is an opportunity that should be grasped(Flood, 2016). This is because when it expands it can increase online buying habits because people in the world have developed a trend of purchasing the products online.

Demographic Environment

In the United States, the majority of targeted shoppers are the educated ones. This means that older people are the main targets because they have a high disposable income. About 60% of these people are motivated by the presence of services such as free shipping(Althafairi et al., 2019). A platform such as Amazon Prime has been increasing with customers especially as they pay $99 to obtain a total of two free shipping days in a year. However, the trends are changing on the main targets that have been set by the company. The target groups right now include the middle class and the young people.

Technological Environment

Technological changes directly affect Amazon. This is because it is based on the platform that uses and was developed to fit with the technology. Technology advancements increase the trend of rising technological obsolesces which presents a threat and an opportunity for the company. It has to ensure that the technology continuously develops the assets. However, in case the company optimizes its business including heavy investment in technology helps to boost the competitive advantage. It also helps to protect the business from the risk of new entrants. Amazon can increase performance by rapidly increasing IT efficiencies such as using the new computing technologies(Althafairi et al., 2019). However, there is the threat of cyber-crime which reduces the quality of services the customers receive at a particular time. This means that it is important for the company to continue investing in technology and improve it to adapt continuous improvement of the technologies.

Natural Environment

Amazon is a company that performs its operations online. However, it is affected by the natural environment. Some of the factors that are considered include the rising interest in environmental programs. This is an opportunity that can be used to reach out to the community and create a lasting relationship. The improvement of the corporate social responsibility strategy enhances the impact of the environment(Althafairi et al., 2019).

Therefore, establishing higher sustainability standards helps to further improve the environmental impact and as a result, the e-commerce brand image is improved.

Physical Environment

The infrastructure comprises of all the items and the systems that are available to enhance the use of the physical environment. This is because the infrastructure plays a critical role in the acquisition and delivery to the customers. Currently, Amazon has invested in enhancing the infrastructure and ensuring that they reduce the time it takes from ordering and the delivery of the products(Althafairi et al., 2019). It is also so as to ensure that the merchandize from the suppliers reaches the warehouses at the right time to avoid being out of stock. Therefore, the physical environment supports the success of online business.

Nature of Demand

Comment by Microsoft Office 用户: what is the demand for Amazon in your prosed market. This is what is required in this section.

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In Amazon, the individual demand for a product is used. This is because the
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demand for the products in the company depends on the prices of the products set, the
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income of the customers and the tastes and preferences (Hoy, D., Immorlica&Lucier,
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2016). This means that the demand is not determined by one factor. The customers decide
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on which product to buy after they have compared the prices for all the available
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alternatives. Therefore, the total quantity demanded at a particular price and price is the
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market demand.
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Size and Extent of Demand Comment by Microsoft Office 用户: What % of people is driving demand. By what % is e-commerce growing?

Amazon Inc. is a global company. The existing website gives the customer from any part of the world the ability to order and have their products delivered. Therefore, the company has a wide market which gives rise to an unmeasured demand in the world.

Apart from the website, the company is continuously entering into new markets such as in the Middle East so as to enlarge the demand and the market for the products (Hoy, Immorlica&Lucier, 2016). Therefore, the size of the demand is huge. On the other hand, the extent of demand is the level to which the customers are able to order goods and services. In this case, the extent of demand is high because the customers are able to order the goods and services at any place. The result is a huge market demand which needs to be satisfied.

Structure of the Industry

The e-commerce industry has played an important role in changing the way business is transacted in the retail, global and local levels.

Cost Structure of the Industry

The e-commerce industry is characterized by efficiency while shopping. Therefore, some of the costs that must be incurred in the industry include web development costs. In e-commerce, all the business is run on an online platform. This includes the complete cart functionality and the other aspects such as the reviews and rating features as well as the analysis tracking to keep a record of the visitors who access the website (Zhang, 2018). Apart from this cost, the industry must incur web hosting costs. This is because instead of having a physical retail store, e-commerce businesses are run online. This requires having high-speed servers so as to avoid a breakdown in times of high traffic.

The e-commerce industry incurs the cost of technical and market support. The servers and the online system are all prone to some form of failure. When this happens the customers are not able to access the services. The technical staff responds in time to ensure that incase of failure the system is restored back as soon as possible. The website also requires having some changes made from time to time(Zhang, 2018). This includes adding features as well as the content and the images. The cost incurred in the e- commerce industry is thus much lower compared to the physical retail stores.

Structure of the Industry

Market structure refers to the interconnected characteristics of the market which includes the number and the strength of the buyers and the sellers as well as the collusion degree among them, the competition levels and the product differentiation as well as the ease of entry and exit into the market(Zhang, 2018). The bargaining power of the buyers in the industry determines the pressure that the competitors feel in enhancing their value proposition. In the e-commerce industry, this depends on the concentration of the buyers in relation to the industry. The numbers of buyers are many since they are spread all over the world. Therefore, the market is such that the product differences are high to distinguish one from the other(Zhang, 2018). The bargaining power of the suppliers determines the pressure the competing firms in the market feel when paying higher amounts to purchase the products. The most important aspect is the rivalry that exists between individual firms. This affects the profitability of the entire industry. As such, in cases of low growth rates then there is competition. The e-commerce industry has grown very fast. This is the reason why big firms such as Amazon have come up.

Competitor Analysis

Objectives Comment by Microsoft Office 用户: Your marketing objective is tied to your strategy. If your strategy is to increase sales your objective would be the following: “increase sales among men over 40 within the first quarter of 2019”
• The objective has to be quantifiable and measurable over a period of time.

The objective is to tap the e-commerce market in the Middle East. The second objective is to make Amazon a one-stop-shop for all in the Middle East.

International Objectives

Up to the time when Amazon acquired Souq, it was the largest online retailer in the UAE and Qatar. Therefore, the international objectives are to have a platform in a local language that provides all the services to the people of the UAE.

Market Objectives

The market objectives of Souq were to offer customer segments that make the customers intermediaries. Secondly, it was to offer the four value propositions of accessibility, convenience, risk reduction, and brand.

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Target Markets Identification and Segmentation Strategy

Target markets are the segments that a business considers to be more profitable to sell to. On the other hand, market segmentation is the division of the large target market into distinct groups of the consumers who depict similar characteristics, needs and behaviors. For Amazon Inc., two types of segmentation were used in the Middle East.

First of all was the use of demographic segmentation (Camilleri, 2018). This includes identifying the customers by using the criteria such as age, gender, and income. This is an easier method to use especially to determine where the majority of the customers lie and

their tastes and preferences. Geographic segmentation was also used to determine where to locate the business(Pani, Sahu&Majumdar, 2020).

Market Positioning

Market positioning strategies used by Amazon Inc. in the Middle East include the enabling of innovation through acquisition of Souq.com which claimed about 45 million visitors per month (Okasha, 2020). This was a successful regional market leader. The second strategy is identifying the right customer. This is because the Middle East has over 50 million online customers. The third strategy is going local where Amazon launched an Arabic version of the text-to-speech service.

Market Entry Strategy

Although Amazon has always used o entering new markets through cost leadership, in the Middle East it used the acquisition strategy. By acquiring Souq.com, the company has been able to successfully launch its operations and acquire the confidence and loyalty of the customers (Jain, Madan& Singh, 2016). Souq.com was already a trusted platform and hence this played a great role in enhancing the growth of Amazon Inc. in the Middle East.

Marketing Mix and Tactics

Product/Service and Branding Strategy

Amazon offers a wide selection of products. This has been possible through continued diversification and expansion of the available products. They are made such that they meet the market needs (Pogorelova et al., 2016). Some of the available products include the retail goods, consumer electronics, Amazon video, Amazon Prime Pantry, and the Amazon Dash.

Place (Distribution) Strategy

Amazon Inc. is an online business. However, it uses the following areas and places to be able to reach the e-commerce customers. First of all is the official e- commerce website and Amazon books(Pogorelova et al., 2016). The official website is for transacting with the customers. The Amazon bookstore in Seattle allows the customers to interact physically before they make their purchases.

Price Strategy Structure

This is a component that focuses on the price levels and the strategies used. To attract customers to the e-commerce website, Amazon uses market-oriented pricing as the primary approach. This is done by evaluating the competitor prices before fixing prices for Amazon basics. This makes sales attractive and affordable for the customers(Pogorelova et al., 2016). A price discrimination strategy is also used. This is setting different prices for the same product. This is done using different websites.

Promotion Strategy

Promotion strategy includes the strategies and the tactics that are used to communicate to the target market. Amazon Inc. aims to pull the customers to the website so that they can pay for online services. Therefore, strategies used include advertisement, sales promotion, public relations, and direct marketing. The budget for promotion is increasing in the company every year. In 2017, the marketing budget was $10 billion dollars(Pogorelova et al., 2016).

Implementation and Control

Formal Project Plan for Implementation of Recommendations

Table 1shown in appendix 1 shows the project plan for the implementation of the recommendations.

Formal Contingency Plans

Table 2 shown in appendix 2 shows the contingency plans for various risks.

Conclusion

In conclusion, Amazon Inc. is an American company that is involved in e-commerce. Its expansion into the Middle East is one way of enhancing profitability and competitive advantage. However, although the firm uses cost leadership to enter new markets, it used

an acquisition strategy in entering the Middle East Market. Souq.com was an already established and successful firm in the region that was acquired by Amazon Inc. to help penetrate the 50 million online shoppers market. This is coupled with market-oriented pricing and price discrimination. On the other hand, promotion takes a great deal of the yearly budget in the company to ensure that the customers understand the services offered and visit the website to make a purchase.

References

Althafairi, B., Alhoumaida, N., Saxena, M., &Almsri, Z. (2019).Case study- AMAZON. Journal of the community development in Asia, 2(2).

Bennett, C. J. (2018). The European General Data Protection Regulation: An instrument for the globalization of privacy standards?. Information Polity, 23(2), 239-246.

Camilleri, M. A. (2018). Market segmentation, targeting, and positioning.In Travel marketing, tourism economics and the airline product (pp. 69-83).Springer, Cham.

Flood, Z. C. (2016). Antitrust Enforcement in the Developing E-Book Market: Apple, Amazon, and the Future of the Publishing Industry. Berkeley Technology Law Journal, 31(2), 879-904.

Hoy, D., Immorlica, N., &Lucier, B. (2016, December). On-demand or spot?selling the cloud to risk-averse customers. International Conference on Web and Internet Economics (pp. 73-86). Springer, Berlin, Heidelberg.

Jain, E., Madan, M., & Singh, S. (2016). Impact of Value Creation on Stock Prices: A Study of Amazon. Com, Inc. Middle East Journal of Business, 55(3035), 1-9.

Lincoln, I. V., & Andrew, C. E. (2018). Porter Analysis: A Business Strategy of Amazon. Com Through a Value Chain and Comparative Advantage Analysis of Amazon’s

Trademarks and Intangibles. Com Through a Value Chain and Comparative Advantage Analysis of Amazon’s Trademarks and Intangibles (November 27, 2018). Practical Guide to US Transfer Pricing.

Okasha, A. A. (2020). Entrepreneurship in the United Arab Emirates. In Entrepreneurial Innovation and Economic Development in Dubai and Comparisons to Its Sister Cities (pp. 158-182). IGI Global.

Onyusheva, I., &Seenalasataporn, T. (2018). Strategic Analysis Of Global E-Commerce And Diversification Technology: The Case Of Amazon. Com Inc. The EUrASEANs: a journal on global socio-economic dynamics, (1 (8)), 48-63.

Pani, A., Sahu, P. K., &Majumdar, B. B. (2020). Expenditure-based segmentation of freight travel markets: Identifying the determinants of freight transport expenditure for developing marketing strategies. Research in Transportation Business & Management, 100437.

Pogorelova, E., Yakhneeva, I., Agafonova, A., &Prokubovskaya, A. (2016).Marketing Mix for E-commerce. International journal of environmental & science education, 11(14), 6744-6759.

Shevchenko, E. (2020). Amazon as a global sales channel for small and medium-size Finnish companies.

Zhang, M. (2018).Further Investigation on the Regulation of B2C E-commerce Industry Structure in China–Analysis Based on the Theory of Contestable Markets.

Appendices

Appendix 1: Formal Project Plan for Implementation of Recommendations

March 2020

June 2020

August 2020

Analyze and enhance the security of the system to prevent cybersecurity issues

Market analysis to identify the best prices for products
To enhance the visibility of the website through SEO

Market survey on expansion in Middle East countries
Recommendations for the right geographic locations for expansion

Appendix 2: Formal Contingency Plan

Risk

Likelihood of Occurrence

Contingency Plan

Cybercrime

High

Risk management with instructions and recommendations on the recovery of data in the event of

Privacy issues

Card Fraud

High

Moderate

breach and disruption

Safeguarding the hardware, data, and configuration.
Adoption of the streamlined risk management plan and installing the prevention tools such as CID to reduce the exposure.