Can Amazon book a spot in South Korea?
1. Introduction of Amazon.com, Inc.
With the technological development the last decades and the rise of computers and Internet, new business concepts have emerged, including electronic business (e-Business) and electronic commerce (E-commerce). Being a first mover and pioneer in the fast growing E-commerce sector, the American-based company Amazon.com, Inc. revolutionized the entire industry, which lead to major “creative destruction” (Schumpeter, 1942). Founded by Jeff Bezos 1994, Amazon transformed book buying through its retail website with a low price and high convenience strategy into the “fastest, easiest and most enjoyable shopping experience possible” (Hammond, 2013). Soon, Amazon diversified its product assortment into apparel, electronics and general merchandise products. Today Amazon is the world’s largest Internet company, based on revenue (74.4 billion USD) and number of employees (117,300); also it operates with various international subsidiaries, business in North America, Europe and Asia (Amazon.com I. , 2013). 1.2 South Korean Market
Due to its location and cultural differences, South Korea is often still considered as an emerging market. According to Wharton Faculty, an emerging market is defined by “its economic and political institutions such as the rule of law, regulatory controls and enforcement of contracts.” (Knowlege Wharton, 2008) With a Gross Domestic Product (GDP) per capita of 25,976 USD, more goods are produced and services provided per person in South Korea than in developed countries like Portugal and Greece. Furthermore, South Korea has an efficient and stable political system, a strong economy, an excellent innovation structure and finally relatively low obstacles for Foreign Direct Investments (FDI). These characteristics and the high potential, especially in online retailing, of the developed South Korean market are obvious reasons for Amazon to enter the market. 2. Structure of Assignment
This assignment is going to regard with a potential market entry of the multinational e-commerce company Amazon into the South Korean market. Firstly, the strengths and weaknesses of the company will be elaborated. Secondly, the opportunities and risks of the South Korean market will be constituted and analyzed. Taking into account previous findings a complete entry-strategy for Amazon will then be developed. To do so the OLI framework by John Dunning (1997), the PESTL Analysis as well as the Marketing-Mix will be applied (Hill, 2014, 556-558). The analysis of company and market includes a constitution of strengths, weaknesses, opportunities and threats (SWOT-analysis). 3. Amazon’s Competitive Positioning
Amazon’s competitive position is characterized by unique strengths and weaknesses, which will have an impact on whether a market entry in South Korea will be successful or not. Business model
Amazon’s key competitive advantage is simply its business model. It is really simple and does not necessarily need high inventory and big capital-intensive warehouses, which leads to magnificently low costs. For instance, although Amazon just had a small distribution center in Seattle with around 2,000 books stocked in its early years, its website offered around 2,5 million books (Hammond, 2013). This was possible with a significant just in time sourcing strategy (Hill, 2014, 530-531); meaning after the customer placed the order, Amazon purchased the inquired book from its wholesalers or publishers. Amazon became the “biggest bookstore of the world”, due to some special characteristics and skills, which made them more competitive than its business rivals. Firstly, positioning the distribution centers in best possible regions, which is dependent on customer and supplier locations, freight rates, warehousing expenses, labor and costs. Secondly, there has to be evaluated which product assortment should be held in stock and which will be ordered on an as-needed base....
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