Entry mode selection
1. Amazon.com: Background leading up to the decision.
2. China: Endless possibilities.
3. Amazon in China: Entry mode selection and strategy.
4. Partnership with Joyo and current status.
(NOTE: While background information is meant to be an appendix and not be considered in terms of required word count, the decision was made to place it at the beginning for a much better flow of the project.) 1. Amazon.com: Background leading up to the decision.
In the mid 1990’s, a time where the Internet was booming and it’s use as a channel for commerce was becoming prevalent in society; many companies and entrepreneurs turned to the World Wide Web to conduct their business. At this time, in 1994, Jeff Bezos, president of a Wall Street firm read a report that projected growth of the Internet by 2,300% and he quit his job to write a business plan that one year later would become Amazon.com. Out of a list of items he believed could be easily sold online he ended up choosing books due to the great size of the market, vast amount of offering available and because of the low price that could be offered for them. Within one month of operation, Bezos had shipped books to the 50 states and over 47 other countries. This was proof to him of the possibilities his business had thanks to the scope of the market reach the internet provided and he proceeded to move out of his garage and into a Seattle office where all operations would be handled. Amazon’s operations were very innovative for the industry as unlike competing bookstore giants they only held about 2,000 titles in their warehouse. They passed orders received through the website directly to publishers and suppliers who sent them to Amazon’s office to be shipped to the client. Also, taking advantage of his role as a pioneer on the online business front Bezos hoped to make his company a benchmark to what e-commerce should be like and he strived to make his business as customer friendly as possible. An example of this was the very successful recommendations feature based on previous purchases, which many businesses continue to imitate to this day and also the product review feature, which let customers provide and read other’s opinions about the book they were considering and at the time was revolutionary. A year later Amazon pioneered a marketing strategy that would once again be imitated by a vast number of e-platforms; the associates program, by which web owners could sell Amazon products on their sites and then get a commission for doing so. 1997 was a very eventful year for the company; it went public and it opened a new distribution center in Delaware which not only put it closer to customers and publishers diminishing the time it took to get books into the center and to get books from the center to customers but also it expanded the capacity of the Seattle warehouse by 70% resulting in much faster processing. All of these features combined into a new goal that would serve as one of Amazon’s most important differentiating factors into the future; same day shipping of stocked items. All the above mentioned strategies set the stage for the company Amazon was to become; in 1998, with a growth of 564% in new customer accounts over the previous year and a catalogue of over 2.5million titles the company became the third largest bookseller in the states and begun it’s international expansion through the purchase of Bookpages, one of the largest online booksellers in the United Kingdom, Telebook, the largest online bookseller in Germany. After this acquisitions the company continued to grow through a series of strategic moves that would take it into other product segments such as movies and music however as big as their presence was, the company had yet to make a profit. "After seven years and more than $1 billion in losses, Amazon is still a work in process." Read a 2002 Business Week article....
References: & Sources:
Class lecture slides
Strategies for entering and developing international markets, David Arnold, Oct 17, 2003
Amazon buys into Chinese market, Matt Hines, August 2004
Amazon targets China with Joyo purchase, Juliana Liu, August 2004
Tips for Entering the Chinese Market, Elizabeth Lloyd, April 13, 2006
Joyo Amazon Chengdu Operations Center Inaugurated, Sino Cast Daily Business Beat,Nov 25, 2009
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