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CASE 3-8 Amazon in Emerging Markets
In the spring of 2014, Amazon.com, Inc. (“Amazon”), saw its chief
competitor in China, Alibaba Group, file documents with the
SEC for an initial public offering that could be one of the largest
in history. At the same time, its main competitor in Brazil, MercadoLibre, sustained an approximate 40% loss in stock price despite
several years of profitability, and its two chief competitors in India,
Flipkart and Snapdeal, formed separate mergers with other related
firms. The intense battle for control of a country’s e-wallet was nothing new to Diego Piacentini, senior vice president of International
Consumer Business, and Jeff Bezos, founder and CEO. Their decision to launch Amazon.in in June 2013 marked Amazon’s eleventh
country-specific portal after nineteen years of operation. China was
Amazon’s first emerging market website, and India only its third.
Compared to its experience in China and Brazil, Amazon followed
a different business model and strategy in India. What led to the
differing approaches and which, if any, of Amazon’s emerging markets’ strategies and investments would succeed? The case starts by
examining Amazon’s entry into India and then turns to Amazon’s
experience in China and Brazil.
AMAZON’S INTERNATIONAL EXPANSION
Incorporated in 1994, Amazon had evolved from a small online
vendor of books and other information-based products in 1997 into
a global “customer-centric” company serving consumers, sellers,
and developers with operations in 22 countries. Amazon’s international expansion started in 1998 when it acquired Bookseller,
Ltd. (bookseller.co.uk) in the United Kingdom and Telebook,
Inc. (telebuch.de) in Germany. These two sites gave rise to what
became Amazon.co.uk and Amazon.de, respectively. It was early
in 2000, during this initial European expansion, that Amazon hired
Piacentini, who had been Apple’s general manager for Europe.
Since his hiring, Amazon launched nine other country-specific
websites, in Italy, France, Spain, Japan, China, Mexico, Brazil,
Canada, and Australia. In other countries such as Costa Rica and
South Africa, Amazon located customer service, software development, fulfillment or back office operations.
In 2013, Amazon’s Germany, UK, and Japan sites accounted
for 85% of total international revenues of $30.0 billion. Overall,
Amazon’s international markets (excluding its Canadian site) made
up 40% of Amazon’s total revenues of $74.4 billion (see Appendix
B for consolidated financial results). However, despite a growth of
14% in net sales between 2012 and 2013, Amazon’s international
business had seen a period of declining rate of growth since 2011
(see Appendix C for a geographic break-out). Would this declining
growth rate foreshadow what was to come for Amazon’s international markets, or be merely water under the bridge according to
Bezos and Amazon’s “marathon” mind-set of emphasizing customer service and long-term gains in sacrifice of short-term profits?
THE INDIAN E-COMMERCE MARKET
On June 5, 2013, Amazon officially entered the Indian market with
its launch of Amazon.in. Although the Indian government had liberalized its strict foreign direct investment (FDI) laws in September 2012, the resulting regulations still forbid foreign multi-brand
retailers from having over 51% ownership.1 As a result, Amazon
could not replicate its U.S. business of selling its own products in
addition to serving as a selling platform for third-party vendors. In
India, Amazon would only be able to function as a pure marketplace that would connect domestic sellers to buyers in the market.
For Amazon, these FDI considerations would be only the first hurdle encountered in the nascent but fast-growing Indian e-commerce
market.
According to World Bank data, as of 2013 India had approximately 189.1 million Internet users (15.1% of the 1.25 billion population) compared with only 60.7 million (5% of the population) just
four years earlier (see Appendix D for a list of Internet users per
100 population for select countries;). The Associated Chambers of
Commerce and Industry of India estimated the Indian e-commerce
industry at $16 billion in 2013, a large increase from estimates of
$8.5 billion in 2012 and $2.5 billion in 2009.2 On the other hand,
Forrester Research reported that Indian e-commerce was worth
only $1.6 billion in 2012 after online travel sales were factored out
of the estimates.3 Fast growth was less debated; analysts from the
Indian retail consultancy Technopak believed that the country’s
e-commerce industry could grow 61 times over the next decade.4
Overall, mom-and-pop stores dominated India’s half-trilliondollar retail market. According to Deloitte’s India group, organized
retail in India comprised only 17% of the market versus over 85% of
the market in the U.S.5 Moreover, in addition to stringent laws on
FDI, India still had considerable import duties on certain foreign
products. According to the International Chamber of Commerce,
India ranked 64th out of 75 countries for overall trade and FDI
openness in 2013.6
In terms of transportation infrastructure, many of India’s roads
were in poor condition and overly congested. Even on the better
roads, such as between New Delhi in the north and Mumbai on the
western coast, driving took almost twice the amount of time it took
to drive the same distance in the U.S., according to Google Maps.
In addition, nearly 70% of India’s population lived in remote rural
areas, which in some cases had limited access to major highways.
Thirty-three percent of villages in India, primarily in the northern
Julka, Harsimran. “FDI in online retail: Rift arises as MNCs seek 100% FDI,
domestic cos insist on partial opening-up.” The Economic Times. 9 Jan. 2014. Web.
.
1
“India’s e-commerce market rose 88% in 2013: Survey.” The Economic Times. 30
Dec. 2013. Web. .
2
Dharmakumar, Rohin. “Amazon’s Perfect Timing for India.” Forbes India Magazine.
2 July 2013. Web. .
3
Sen, Sunny. “Moth to a Flame: How China helped Amazon tweak its model for
success in India.” Business Today. 16 Feb. 2014. Web. .
4
“Changing times. Changing roles: Retail HR gearing up to become a strategic
partner.”Deloitte Touche Tohmatsu India Pvt Ltd. 2013. Web. 8 June 2014. .
5
“Open Markets Index.” The World Business Organization. International Chamber of
Commerce. 2013. Web. 8 June 2014. .
6
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states, lacked all-weather roads, making them almost inaccessible
during the monsoon season.7 Furthermore, addresses in India were
notoriously difficult to find due to non-sequential numberings, lack
of street signs, and narrow, winding streets. It was instead commonplace in India to describe locations with directions via landmarks.8
Retailers had tended to prefer commercial airfreight for delivery,
but this option had led to increased delivery costs and a high risk of
merchandise being offloaded to accommodate passengers.9
Over the past few years, India had experienced a series of major
power failures allegedly due to a shoddily constructed electricity
infrastructure. For example, in soaring temperatures on June 10,
2014, in New Delhi 16 million people were subject to power blackouts due to unmanageable demand.10 This power failure came only
two years after a record-breaking electricity crisis in 2012 in which
600 million people were left without power for two days.11
India also still had a highly impoverished population. In 2013,
OECD researchers estimated that 42% of India’s 1.24 billion people lived on less than $1.25 a day, reflective of its $4,000 GDP
per capita.12,13 Much of India’s growth in computing and consumer
spending, however, came from a growing middle class of over
160 million people.14 The Brookings Institution predicted that
India’s middle class consumption would surpass that of the U.S.
by the year 2030.15 However, despite a growing population heavily involved in spending, cash payments remained dominant over
credit or debit card payments in day-to-day commerce in India.
Business Today cited that people in India averaged only six noncash payments each year. As a result, a “cash on delivery” system
had become widely accepted in the e-tailing space and accounted
for roughly 50% to 80% of all e-commerce payments.16
“India Transport Sector.” Transport in South Asia. The World Bank. 2013. Web. 10
June 2014. .
7
Narayanswamy, Harihar. “Despite street-map and address, difficult to find location
in India.” The Economic Times. 19 Aug. 2009. Web. .
8
Bose, Nandita. “E-tailers growth ensnared in India’s logistics jungle.” Reuters. 10 June 2014.
Web. .
9
“Indian protests over power blackouts amid heatwave spread to New Delhi.”
Asia: South China Morning Post. 12 June 2014. Web. .
CS3−29
Competition in India
The Indian e-commerce market’s
promise of rapid growth had already attracted several players,
domestic and international, to the Indian e-tailing scene. Some of
the largest in terms of revenue and market share included Flipkart,
Snapdeal, and eBay.
Flipkart In 2007, two ex-Amazon employees, Sachin Bansal and
Binny Bansal (no relation), launched Flipkart, which became the
leading domestic e-tailing company in India (https://www.flipkart
.com). Having copied some of Amazon’s business model throughout
the country, Flipkart’s founders had been able to capture 4.9% of the
very fragmented Indian e-commerce market by 2013 (Amazon held
1.6% and eBay 1.2%).17 Flipkart found quick success by developing
its own logistics network and by adopting the “cash on delivery” payment option in 2010 in order to adjust to the cash-centric payment
habits of Indian consumers. Since its launch in 2007, Flipkart had
been dependent primarily on funding from venture capital firms.
Snapdeal Although they founded Snapdeal.com as an e-coupon website in 2010 (similar to Groupon in the U.S.), Kunal Bahl and Rohit
Bansal decided to revamp their site after a trip to China in 2011 during which they witnessed the dynamic growth of the Chinese e-tailing
giant Alibaba. Using Alibaba for inspiration, Bahl and Bansal re-created Snapdeal.com in 2011 as an e-commerce marketplace (https://
www.snapdeal.com). Valued at $1 billion in June 2014, Snapdeal had
relied heavily on funding from its investors.18 The largest of these was
American e-commerce firm eBay, which invested $50 million in 2013
and was the largest investor in Snapdeal’s approximately $134 million
round of funding in the first quarter of 2014.19 Other investors in this
round included Intel Capital, Saama Capital, Nexus Venture Partners,
Bessemer Venture Partners, and Kalaari Capital.20
Attempting to replicate Alibaba’s business model in India,
Snapdeal offered 5 million products from over 30,000 sellers—
much more than Flipkart’s network of 3,000 sellers as of May
2014. Similar to Alibaba’s logistics strategy, Snapdeal opened 40
fulfillment centers in 15 cities across India with which it stored and
shipped sellers’ products for a fee.21 Snapdeal planned to open 35
more within the next year.22
eBay The American e-commerce giant entered the Indian market
in 2005 after it acquired Baazee.com, India’s largest online marketplace at the time, for $50 million plus acquisition costs.23 Initially,
10
Butkiewicz, Lynann. “India’s Electricity Crisis: Background on the Issues.” The
National Bureau of Asian Research. 7 Aug. 2012. Web. .
11
“Special Focus: Inequality in Emerging Economies (EEs).” Divided We Stand: Why
Inequality Keeps Rising. OECD. 2011. Web. .
12
“India.” The World Factbook. Central Intelligence Agency. 2014. Web. .
13
Varma, Pavan K. “India’s middle class awakes.” The Times of India. 23 Nov. 2013.
Web. .
14
Kharas, Homi. “The Emerging Middle Class in Developing Countries.” Brookings
Institution. The World Bank, June 2011. Web. .
15
Das, Goutam. “Cash-on-delivery: Necessary Evil.” Business Today. 16 Feb. 2014.
Web. .
16
cat12354_case3_CS3-1-CS3-39.indd 29
“Flipkart raises $210 million; will utilise funds for acquisitions.” The Economic Times.
26 May 2014. Web. .
17
Rajagopal, Divya. “How Kunal Bahl’s Snapdeal scaled a valuation of $1 billion in two
years.” The Economic Times. 20 June 2014. Web. .
18
“Why eBay Raised Its Stake In India’s Snapdeal.” Forbes. 4 Mar. 2014. Web.
.
19
“EBay Inc. Makes Strategic Investment in Snapdeal.”eBay Inc. 26 Feb. 2014. Web.
.
20
21
Chilkoti, Avantika. “India’s Snapdeal seeks to follow Alibaba playbook.” Financial
Times. 22 June 2014. Web. .
Gooptu, Biswarup. “Snapdeal plans to acquire up to 4 companies in FY15.” The
Economic Times. 29 May 2014. Web. .
22
23
“EBay to Acquire India’s Baazee.com.”eBay Inc. 22 June 2004. Web. .
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Supplementary Material
eBay took a cautious approach in India while other e-commerce
startups were aggressively investing to grab market share early on.
In its infancy, eBay.in concentrated only in selling gift items such
as chocolates and flowers from third-party traders.24 However, eBay
since invested heavily to ensure its place as a leader in the Indian
e-commerce market. By 2014, eBay India listed over 2,000 specific
product categories from 45,000 traders.25,26 Similar to its model in
the U.S., eBay was functioning solely as a marketplace in India, and
offered products for auction as well as for a set price.
Much of its investment had gone into logistics options for its
traders as well as into other companies. In 2012, eBay.in launched
its PowerShip program option, in which eBay coordinated shipping for its member traders among its logistics partners in India—
FedEx, BlueDart, DTDC, and Aramex. For set PowerShip rates,
eBay’s logistics partners would pick up products packaged in eBay
packing material directly from sellers and ship them to the buyers.
With PowerShip, sellers could offer prepayment or cash-on-delivery
options to be handled by their eBay Paisapay account, an escrow
account that transfered money from buyer to seller after receipt of
the purchased goods.
As mentioned above, EBay’s investments included funding
Indian e-commerce retailer Snapdeal. In return for its investment,
eBay acquired permission to access Snapdeal’s 20-million-person
user database as well as its logistics network.27
Amazon’s India Approach
Prior to Amazon.in, Amazon already had thousands of employees in India performing customer service, software development and back office functions.28 In
addition, in February 2012, Diego Piacentini and Amazon’s VP for
International Expansion, Amit Agarwal, led Amazon’s investment
in Junglee.com, an online product review site that listed over 10 million products, toward the Indian market in 2012. Through the site,
customers could compare reviews, pricing, and shipping details for
each product listed.29 Piacentini and Agarwal were determined to
formulate a strategy that would best leverage their learnings from
nearly a decade of operations in China. Rather than making piecemeal investments over their first few years of operation, Piacentini
and Agarwal decided to invest big from the start. They recognized
that their competitors had a head start of five to nine years to adapt
their businesses to the Indian market, and so Amazon needed to
develop a competitive strategy.
Agarwal brought local knowledge and deep company experience to this endeavor. The Mumbai-born new Vice President and
Country Manager for Amazon India had joined Amazon in 1999
after earning his computer science degrees at the Indian Institute
of Technology-Kanpur and Stanford University. He rose through
the ranks from software development at Amazon headquarters to
Managing Director of Amazon’s Development Center in Bangalore
and then “Shadow and Technical Advisor” to Bezos.
After the launch of Amazon.in in June 2013, much of Amazon’s
initial Indian investments went to its core strength in logistics, as
the company learned to adjust to the difficulties of distribution in
India. Just prior to the launch, Amazon had completed the construction of a 150,000-square-foot fulfillment center just outside
Mumbai. It later built one of similar size in Bangalore to serve
southern India. With so much of India’s retail space dominated by
local mom and pop shops, Agarwal and Piacentini decided to offer
a “Fulfillment by Amazon” program in which Amazon enabled sellers to store their products at an Amazon distribution center and
have Amazon handle the delivery for a fee. Eventually three out of
every four orders on Amazon.in were fulfilled by Amazon.30
Agarwal and Piacentini decided to further differentiate Amazon
from its Indian competitors by being the first e-tailer to offer next-day
shipping for the orders it fulfilled. In order to compensate for the difficulty of locating addresses and to ensure timely delivery of its sellers’
products, Agarwal also added PIN code (postal codes similar to ZIP
codes in the U.S.) and landmark fields on the delivery information
page, reaching 21,000 PIN codes versus other retailers’ 12,000.31
Since Amazon would function solely as a marketplace in India,
seller acquisition was a major priority for establishing market share.
To attract domestic sellers across India, Piacentini and Agarwal
offered sellers a promotion for a two-year membership agreement
with the first year free of cost. After the first year, members were
only required to pay Rs 499 ($8.27) per month in addition to Amazon’s commission charge of 4%-8% (4% for most electronics, 8%
for watches and jewelry) and a Rs 10 ($0.17) “closing fee” for each
transaction. Piacentini and Agarwal also stressed educating Indian
sellers on Amazon’s platform and services. For small retailers with
little to no online selling experience, Amazon offered a pilot service
called “Mainstreaming Sellers/SMEs” to teach them how to transact online, catalogue their products, and accept online payments.
In addition, sellers could utilize the “Fulfillment by Amazon”
option to give responsibility for delivery to Amazon.32
In order to attract buyers from India’s growing number of Internet users, Piacentini and Agarwal offered multiple incentives for
those who referred customers to or bought products from Amazon.
in. In the beginning stages of operation in India, Amazon offered
free shipping for the orders it fulfilled. It also offered permanent
free shipping on all orders fulfilled by Amazon over Rs 499.33 Piacentini and Agarwal also introduced the Amazon Associates Program, which offered a commission to all online publishers (e.g.
bloggers, businesses, authors, nonprofits, and personal websites)
who directed their viewers to Amazon.in via a link to a “contextually relevant product.” If a purchase was made, the commission
for referrals would range between 5% for consumer electronics and
10% for most other product categories, such as books and movies, and would cover all purchases made by the referred customer.34
Piacentini, Diego. “Customer Focus Builds Global Growth [Entire Talk] – Diego
Piacentini from Amazon.” The Entrepreneurial Thought Leaders Lectures. 3 Nov. 2010.
Web.
28
Sen, Sunny. 16 Feb. 2014.
29
Sen, Sunny. 16 Feb. 2014.
30
Bose, Nandita. “eBay shifts gears in India as rivals step up.” Reuters. 27 Apr. 2012. Web.
.
24
Batra, Avinder. “eBay India, CAIT pact may help traders grow business by up to
20%.” The Economic Times. 22 Apr. 2014. Web. .
25
“Apparel Fast Facts.” The Company: Online Media Centre. Ebay.in. Undated. Web.
Accessed 16 June 2014. .
26
27
“Why eBay Raised Its Stake In India’s Snapdeal.”
cat12354_case3_CS3-1-CS3-39.indd 30
31
Sen, Sunny. 16 Feb. 2014.
Sen, Sunny. 16 Feb. 2014.
32
Rai, Anand. “Amazon.in cheapest to buy books with promotional shipping
policy, Flipkart cheaper for heavy book buyers.” Techcircle.in. 6 June 2013. Web.
.
33
“Amazon introduces ‘Amazon Associates Program’ in India.” Press Releases.
Amazon.in. 8 July 2013. Web. .
34
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Assessing Global Market Opportunities
Piacentini and Agarwal also attracted buyers by replicating the
cash-on-delivery option it had offered in China. In addition to
online payment options such as credit cards, debit cards, and bank
transfers, cash-on-delivery would allow Amazon customers to pay
for their merchandise at the time of delivery. However, this option
had tended to delay payments to Amazon up to one week.35
E-retailers in India appeared to be fighting to offer the largest
selection of products at the lowest cost and with the fastest delivery times. Just after Amazon introduced next day delivery, Flipkart
announced that it would be offering “In-a-Day Guarantee” delivery.
Soon after, both companies began to offer same day delivery in a
number of cities if ordered before a certain time.36
While Amazon waited for its rivals to take the lead on the
e-tailing side for many years in India, the firm had entered China a
decade earlier in 2004.
THE WORLD’S LARGEST MARKET: CHINA
In 2002, China had an estimated 27 million online consumers,37 rising to over 80 million in 2004.38 By 2014, the country was expected to
reach 650 million online consumers.39 In 2002, China’s e-commerce
market was valued at an estimated $1.3 billion, growing to over
$16 billion by 2005-2006.40 At the start of 2014, China’s e-commerce
market was valued at over $300 billion, expected to reach $540 billion by 2015. Growing at a compound annual rate of nearly 70%,
China’s e-commerce market was scheduled to surpass the U.S. as the
largest e-commerce market in the world.41 According to World Bank
data, China recorded 621.7 million Internet users in 2013, approximately 46% of China’s 1.4 billion population and more than double
the amount of Internet users in the U.S. at 266.2 million.
At an investor conference in 2013, Jack Ma, founder and chairman of Chinese e-commerce giant Alibaba Group, remarked, “In
other countries, e-commerce is a way to shop, in China it is a lifestyle.”42 Chinese consumers were known to use social media extensively. According to McKinsey & Co., China’s 300 million users
of social media spent more than 40% of their time on the Internet browsing blogs and social networking sites.43 Using popular
social media sites such as WeChat and Weibo, Chinese users often
accessed and posted product reviews, got buy/don’t buy product
advice from “key opinion leaders” and friends, and saw advertisements of featured products from retailers.44
35
Sen, Sunny. 16 Feb. 2014.
36
Sen, Sunny. 16 Feb. 2014.
eBay Inc. Press Release. 17 Mar 2002. Web.
37
Amazon.com Inc. Press Release, 2004. Web.
38
“E-commerce in China: Gain entrance into a completely different world,” 18 Jun. 2013.
Web. .
39
40
eBay Inc. Press Release. 17 Mar 2002. Web.
KPMG Global China Practice, “E-commerce in China: Driving a new
consumer culture.” China 360. Jan. 2014. Web. .
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Chinese consumers were also becoming very active shoppers
on mobile devices. With the largest volume of mobile e-commerce
transactions in the world, China expected purchases via mobile
device to reach $41.4 billion by 2015 from only $7.8 billion in 2012.
This volume of mobile transactions attested to the Chinese consumer’s craving for fast shopping at any time of the day.45
China, however, did not represent a consistent market from
region to region. KPMG International highlighted that customers
in “tier-1” cities such as Beijing and Shanghai varied drastically in
their shopping preferences and purchasing decisions from other
consumers in smaller markets, such as Xi’an and Fuzhou. Sales volume for higher-end goods, such as cars, jewelry, and handbags, was
much greater in Shanghai than in smaller coastal and inland cities.
This trend was also true for brand loyalty, as consumers in China’s
smaller markets favored differed products and tended to stress current fashion styles less than those in larger cities.46
By operating in a communist-led country, Amazon faced limitations on its operations that it had not encountered in its prior
international experience. Chinese law regulated and restricted
Amazon’s Internet content, as well as its sale of any media-related
products or services. In addition, Chinese law demanded that Amazon’s website, www.amazon.cn, be operated by a Chinese-owned
corporation in order to comply with local ownership laws.47
Competition in China, 2004–2014
While the Chinese online commerce market had consolidated
significantly by 2014, the competitive landscape in the nascent
market of 2004 was far more fragmented. All the players
started with somewhat different business models that would
continue to evolve. Central competitors in the early battle for
Chinese market share included Alibaba, and Jingdong.
Alibaba Founded in 1999 by Chinese entrepreneur Jack Ma, Alibaba.com was launched in Hangzhou as an online forum for Chinese
manufacturers to sell their products to domestic and overseas buyers.
In 2002, Alibaba made its first profit, only $1. It “badly trailed” EachNet, according to the Wall Street Journal.48 By 2014, Alibaba Group
with Jack Ma as chairman operated several web services including
two of China’s largest e-commerce sites, Taobao.com and Tmall.com.
However, faced by competition from eBay EachNet, little- known Alibaba’s quest for market share in the early 2000s was not easy.
In response to the eBay-Eachnet acquisition, Alibaba launched
Taobao.com in 2003 as a way of preventing eBay from taking away
its customer base.49 Taobao.com began as a marketplace and auction site that would later serve as a pure marketplace which connected merchants of all sizes to a network of millions of consumers.
According to Helen Wang, author of The Chinese Dream, given that
Chinese users at the time were unfamiliar with Internet auctions,
only 10% of Taobao’s product listings were available for auction,
as opposed to 40% for eBay EachNet. Alibaba also offered longer
and more flexible listing periods for its auction products. Furthermore, to cater to China’s three hundred million cell phone users
41
“E-commerce in China: Gain entrance into a completely different world,” 18 Jun.
2013. Web.
42
Chiu, Cindy. “Understanding social media in China.”McKinsey & Company. Apr.
2012. Web.
43
cat12354_case3_CS3-1-CS3-39.indd 31
KPMG Global China Practice. 18 Jun. 2013.
44
KPMG Global China Practice. 18 Jun. 2013.
45
KPMG Global China Practice. 18 Jun. 2013.
46
Amazon 2013 Annual Report. 10 Apr. 2014. Web. .
47
Osawa, Juro, Paul Mozur, and Rolfe Winkler. 15 Apr. 2014.
48
Wang, Helen.
49
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Supplementary Material
(compared with only 90 million Internet users at the time), Taobao offered its buyers and sellers the option of communicating via
instant messaging and voice mail.50
The marketing strategies of the two companies also reflected their
different knowledge and experience. EBay purchased exclusive rights
to Internet ads on major Chinese portals Sina, Sohu, and Netease
whereas Ma blitzed the major TV channels with Taobao ads. At the
time, many more Chinese were in front of their TVs than on the Internet. Most importantly, Taobao charged no commission fees to its sellers. Signing up was very easy—even five minutes was enough to register
on the site.51 Many of these differences appealed to the Chinese and
helped Taobao to quickly overtake eBay Eachnet. In 2013, Taobao
recorded 7 million sellers and over 800 million product offerings.52
Tmall, was Alibaba’s next offering. It was a business-to-consumer marketplace designed for bigger merchants and major labels,
such as Nike and Gap. Each business selling products on Tmall
was required to pay a deposit to set up its business, and was then
charged a fee on each transaction. Created in 2008 as part of
Taobao.com, Tmall.com officially became its own website in June
2011.53 By the end of 2012, Tmall had attained a 51.5% share of
the Chinese business-to-consumer marketplace (see https://www
.tmall.com for Tmall’s homepage and https://world.taobao.com for
Taobao’s homepage).
In 2013, combined transaction volume for the two sites equaled
$240 billion, more than the transactions for Amazon and eBay
combined (approximately $100 billion and $75 billion, respectively); (see Appendix E to compare Alibaba with major western
Internet companies). According to The Wall Street Journal, Alibaba
controlled nearly 80% of all Chinese e-commerce in 2013.54
Alibaba Group filed for an initial public offering in the U.S. on
May 6, 2014, with analysts valuing the company at over $150 billion. Alibaba sought to be listed on the New York Stock Exchange
(NYSE) with the ticker, BABA. As of the time of the case, Alibaba
had since filed various amendments throughout the summer in
response to requests for additional information from SEC approval.
The expected IPO date had been pushed back to September 2014.
Jingdong Mall/JD.com Other major competition came from Jingdong Mall (JD.com), formerly known as 360buy.com. Reportedly
founded in 1998, its marketplace went online in 2004. In 2012,
Jingdong Mall had a market share of 22.7%, making it China’s
third largest Internet retailer.55 Total merchandise sales reached
$16.39 billion in 2013.56,i In March 2014, TenCent Holdings, a
leader in online games and mobile messaging (through WeChat)
agreed to acquire at 15% stake in JD.com for $215 million, in a
move to enter the rapidly growing mobile commerce market.57
Amazon’s China Experience
Amazon first entered China in 2004 by acquiring Joyo.com for
$75 million. Amazon’s entry came at a time when China’s GDP
was growing at a rate near 10% each year, accompanied by a small
but growing Internet user base of 94.6 million people (7.3% of
the 1.3 billion person population) and an e-commerce market estimated to be worth $8.6 billion. In 2004, Joyo.com had
5.2 million registered users as well as projected revenues of
$15 million.58 Within six months of the acquisition, a little earlier
than expected from the time of due diligence, the management
team had departed.59
For its first year in China, Amazon operated under Joyo.com’s
domain name, mainly offering books, DVDs, and CDs to its customers in China’s largest cities of Beijing, Shanghai, and Guangzhou.
Despite the departure of Joyo’s management team, the transition
was seamless to the Chinese consumer.60 By 2007, Amazon had
increased its product offerings thirty-two fold, offering electronics,
baby products, beauty care products, and watches. With $26.1 million in sales in the last quarter of 2006, Joyo.com’s market share
had reached 12%.61 In 2007 Amazon changed the domain name
from joyo.com to amazon.cn, with Joyo Amazon as its name in Chinese. Amazon was renamed Amazon China in 2011, pronounced
in Mandarin as “Yamashi.”62 Amazon finally launched its Kindle
e-reader in China in June 2013.
Amazon strived to replicate the acclaimed customer experience
it delivered to consumers in developed markets. For instance, Piacentini liked to tell an anecdote about the delivery of a new Harry
Potter book in Chinese on its publication date in 2005. Amazon
China delivered 5,000 books on schedule. However, when a competitor undercut Amazon’s price by 5 RMB (less than $1), Amazon
issued a refund for the difference to the customers, who were not
expecting a refund. This gained Amazon much positive publicity,
and Piancentini hailed it to be the firm’s best public relations and
marketing move in China for the year63.
Amazon had to drastically adjust its logistics operation in China.
To start, Amazon used Joyo.com’s three existing fulfillment centers
located in Beijing, Shanghai, and Guangzhou. From there, Amazon distributed orders to its other thirty delivery centers across the
country.64 Piacentini and his team eventually expanded Amazon’s
distribution network by creating fifteen fulfillment centers across
China, its largest logistics operation outside the U.S. Differently
Wiles, Greg. “Amazon to buy Joyo for access to China.” China Daily. North American
edition. 21 Aug. 2004. Web. .
58
“Customer Focus Builds Global Growth [Entire Talk] – Diego Piacentini from
Amazon.”
59
50
51
Wang, Helen.
User interview.
Osawa, Juro. “How Does Alibaba Make Money?” Digits. Wall Street Journal, 9 Sept.
2013. Web. .
52
Osawa, Juro “Alibaba Isn’t the Amazon of China.” The Wall Street Journal. 16 Oct. 2013.
Web. .
53
Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.”
The Wall Street Journal. 15 Apr. 2014.
54
55
Wang, Xin, and Z. Justin Ren.
Tong, Frank. “China’s No. 2 online retailer posts its first profits.” Top 500 Asian
E-Retailers. Internet Retailer. 2 Jan. 2014. Web. .
56
Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.”
The Wall Street Journal. 15 Apr. 2014.
57
cat12354_case3_CS3-1-CS3-39.indd 32
Piacentini, Diego. 3 Nov. 2010.
60
Tsuruoka, Doug. “Amazon Streaming into China Market with New Services;
‘Fastest-Growing Geography’; U.S. e-tail kingpin planning to double its investment in
Chinese unit Joyo Amazon.” Investor’s Business Daily. 26 Jun. 2007. Web. .
61
Sen, Sunny. “Amazon Inc. wants to invest a lot in India and very fast: Diego
Piacentini.” Business Today. 29 Jan. 2014. Web. .
62
“Customer Focus Builds Global Growth [Entire Talk] – Diego Piacentini from
Amazon.”
63
Wiles, Greg.
64
4/3/19 5:13 PM
Cases 3
Assessing Global Market Opportunities
from its U.S. model at the time, Amazon played a large role in the
last leg of the delivery process. Amazon started to handle deliveries
in-house by hiring employees to transport the merchandise the “last
mile” to the customer. Instead of vans or trucks, however, intra-city
deliveries in China were commonly carried out on bicycles or scooters due to China’s tendency for traffic-filled roads.65 When Amazon
entered China in 2004, overnight deliveries had only recently been
made possible due to new developments in truck, rail, and aerial
transport.66
Amazon initially faced payment challenges similar to those it
encountered later on in India. In the early 2000s, many Chinese
customers were reluctant to pay in advance for their purchases with
credit card. As a result, Amazon’s China team adopted Joyo.com’s
cash on delivery option. Furthermore, Amazon began to offer free
shipping on all purchases through its site. Joyo.com also offered
product recommendations to customers based on their past purchase history, something that had proved successful in other Amazon markets.67
Despite its early investment and efforts, Amazon’s share of the
Chinese business-to-consumer e-commerce market stood at a mere
3.5% at the end of 2012.68 However, as noted by Piacentini, Amazon
had at least made its way into the top five e-commerce websites by
January 2014.69 On the one hand, Piacentini knew there had been
mistakes in China, but on the other hand, the glass was half full.
ANOTHER EMERGING MARKET: BRAZIL
Amazon launched Amazon Brazil (home to Amazon’s namesake)
in December 2012, just six months before launching its India site.
Brazil joined China and India as one of the world’s largest emerging markets, ranked 7th in the world by GDP at $2.2 trillion. In
2013, 51.6% of Brazilians used the Internet, or 103.4 million people
out of a population of 200.4 million. According to McKinsey &
Company, 85% of Brazil’s population would have access to mobile
broadband by 2015, a population that had increasingly used mobile
applications to purchase products and follow retailers.70
Despite a record 7.5% GDP growth rate in 2010, however, Brazil
experienced an economic downturn from the end of 2013 through
the first half of 2014. Brazil’s GDP growth rate reached a mere
2.3% in 2013, and was expected to grow by only 1.5% through 2014.
Low retail sales, declining commodity exports, and reduced production levels served as evidence of the downturn.71 At the start of
2014, Brazil’s e-commerce market was valued at over $11 billion.72
Tong, Frank. “Amazon China builds its own delivery network.” Top 500 Asian
E-Retailers. Internet Retailer, 14 Mar. 2014. Web. .
65
66
Tsuruoka, Doug.
Tsuruoka, Doug.
67
68
CS3−33
In 2014, Brazil ranked 116th in the World Bank’s “Ease of
Doing Business” measure, ranking as low as 159th out of 189 countries in ease of paying taxes. Parts of Brazil also varied drastically in
terms of transportation infrastructure. Many major rail, road, and
port construction projects that were started in the 1970s during
the “Economic Miracle” period in Brazil had been left unfinished
across the country. For example, over half of the Trans-Amazonian
Highway, intended to connect the eastern and western regions of
Brazil in 1972, remained unpaved as well as impassable during
rainy seasons. According to Brazil’s National Confederation of
Transportation, 69% of Brazil’s roads remained in poor condition,
often narrow and dotted with potholes.73 Brazil’s poor roadways,
inefficient railways, and crowded airspace had led the World Economic Forum to rank Brazil 104th out of 142 countries measured
in terms of “quality of overall infrastructure.” Brazil ranked behind
both China (69th) and India (86th).74
Competition in Latin America
MercadoLibre Launched in 1999 by Stanford MBA student Marcos Galperin, MercadoLibre (MercadoLivre in Portuguese and
“free market” in English) served as Brazil’s largest e-commerce
marketplace for buyers and sellers (https://www.mercadolivre
.com.br). With headquarters in Buenos Aires, Argentina, MercadoLibre offered country-specific sites in thirteen countries throughout Latin America and in Brazil and Portugal. Benefitting from
first-mover advantage in Brazil in October 1999, MercadoLibre’s
marketplace had 20.2 million unique buyers and 5.1 million unique
sellers by 2013. MercadoLibre’s Brazil site accounted for 43.7%
of its total revenues of $472.6 million, reaching $206.4 million in
2013, 14.9% higher from the year before.
In addition to its marketplace, MercadoLibre offered MercadoPago, an escrow-based payment service that was one of the
firm’s most important revenue streams—enabling payments for
transactions in an environment where credit card penetration was
limited. Other business lines include MercadoEnvios, a shipping
solution for sellers, Advertising Services, Classified, and Online
Stores Service, which gave sellers the ability to create their own
web stores integrated with the MercadoLibre marketplace.75
Saraiva Saraiva, Brazil’s largest bookstore chain and leading book
publisher, was another competitor for Amazon. Selling books, CDs,
and DVDs from its Internet site (www.livrariasaraiva.com.br),
Saraiva offered 15,000 Portuguese e-book titles in 2013 as opposed
to Amazon’s 13,000.76 Perhaps in response, Amazon added 15,000
more e-books at the start of 2014. Amazon was rumored to have
been in talks to buy Saraiva’s Internet business in October 2012,
just months before starting its Kindle Store in December. As of
2012, Saraiva refused to sell any of its own published 2,500 e-books
to its competition, including Amazon.77
Wang, Xin, and Z. Justin Ren.
Sen, Sunny. “Amazon Inc. wants to invest a lot in India and very fast: Diego
Piacentini.”
69
Chanes, Livia, Fernanda Hoefel, and Anna Gabriela Martins. “Brazil Briefing:
Where is the e-commerce market going?” Consumer and Shopper Insights. McKinsey
& Company. July 2012. Web. .
70
73
Novais, Andréa. “Logistics in Brazil.” The Brazil Business. 10 Sep. 2012. Web.
“Section II: Infrastructure.” The Global Competitiveness Report 2011-2012. World
Economic Forum, 2011. Web. .
74
75
MercadoLibre Inc. 2013 10-K.
71
Trevisani, Paulo, and Loretta Chao. “Brazil’s Economy Seen in a Major Downturn.”
The Wall Street Journal. 14 Feb. 2014. Web. .
76
Israel, Esteban, and Marcela Ayres. “Amazon tests Brazil’s retail jungle with its
Kindle.” Reuters. 7 Feb. 2014. Web. .
77
72
cat12354_case3_CS3-1-CS3-39.indd 33
Sciaudone, Christiana. “Amazon Threat Fails to Damp Saraiva Leading Retail
Rally.” Bloomberg. 19 Apr. 2013. Web. .
Carrenho, Carlo. “Google and Amazon launch Brazilian e-bookstores, minutes
apart.” Publishing Perspectives. 6 Dec. 2012. Web. .
4/3/19 5:13 PM
CS3−34
Part 6
Supplementary Material
Amazon’s Approach in Brazil
Faced with webs of
tax codes, labor laws, logistics challenges, and strong competition
from established Latin American e-commerce player MercadoLibre, Amazon ultimately launched in Brazil by only introducing its
Kindle (e-book) Store. Estimates suggested that Brazilians purchased 435 million books in 2012 valued at $2 billion.78 However,
e-books accounted for only 3% of these sales.79 Upon its launch,
Amazon listed 1.4 million e-book titles on its site, 13,000 of which
were offered in Portuguese.80 Amazon’s launch of its Kindle Store,
however, came only after lengthy negotiations with Brazilian book
publishers who wanted control over pricing in fear of Amazon’s
aggressive discounting strategies. To date, Amazon had formalized
contracts with over thirty book publishers, prominently including
the Distribuidora de Livros Digitais (DLD) group whose seven
publishers controlled close to 35% of the market and whose
demands caused Amazon to delay its entry into the country.81,82 As
of February 2014, Amazon had increased its e-book selection to
28,000 titles in Portuguese, Brazil’s national language.83
In addition to its Kindle Store, Amazon introduced its Kindle
e-reader in Brazil in February 2014. As of then, Amazon planned
to leave logistics to its external partners in Brazil.84 In June 2014,
Amazon’s Kindle Paperwhite retailed for R$479 (USD 215.62) on
Amazon.com.br, nearly twice its price in the U.S. of $119.85 This
significant price difference could most likely be attributed to Brazil’s high duties on electronics imports. Amazon offered customers
the option to pay for the Kindle in up to 12 installments, given
the predilection for Brazilian consumers to use payment plans for
expensive products.86,87 Amazon also offered free shipping on its
Kindle products.88 The Kindle may not be the only physical product
Amazon would choose to sell moving forward.
OTHER MARKETS: DIVERSITY
IN GEOGRAPHY, PRODUCTS,
AND CUSTOMERS
Most recently, similar to its approach in Brazil, Amazon launched
its Kindle Store in Mexico in August 2013 (www.amazon.com.mx),
its twelfth international expansion as of July 2014.89 On the other
side of the globe, Amazon was also making a move. According to
Forbes’ Russian language site, Amazon established its first office in
Russia, rumored to be headed by HBS graduate Arkady Vitrouk,
director for Kindle Content at Amazon EU.90 With 76.5 million
Internet users (53.3% of the population) and an e-commerce industry expected to grow to $36 billion by 2015 from only $12 billion
in 2012, according to Morgan Stanley, Russia would be an attractive market for Internet retailers in the years to come.91 However,
Russian laws, political uncertainty, and poor infrastructure would
inhibit e-commerce growth in this market.
Previously, in 2008, Amazon was rumored to have entered an
exclusive distribution agreement with the Saudi Arabian e-commerce firm Taufeer.com to become a part of its e-channel retailers
program. Through Taufeer.com, Amazon would be able to sell its
products to millions of people across the Middle East.92 According
to an article from March 15, 2009, in Asharq Al-Awsat, an Arabic
international newspaper, Amazon had sent $280 million of merchandise to the Kingdom of Saudi Arabia since 2007.93 However,
no mention of such an agreement existed in Amazon’s company
records and the Taufeer.com website was defunct as of 2014.
While Piacentini spearheaded Amazon’s international strategy,
the rest of Amazon’s leadership continued to focus on developments in new products, services, and logistics. In order to increase
its role in logistics, Amazon had tried its own hand at delivery
with Amazon Fresh in select cities across the U.S. It had also been
experimenting with 30-minute delivery using drone technology.
In terms of new products and services, Amazon introduced
the second generation of the Kindle Paperwhite, the Kindle Fire
HDX, and its Amazon Fire Phone in the year leading up to July
2014. Furthermore, Amazon was expanding its Amazon Web Services (AWS) to reach over 190 countries.94 In December 2011,
Amazon announced a Sao Paulo Region for AWS (aws.amazon.
com/pt/), and later introduced a Beijing Region in December 2013
(amazonaws.cn).95,96 Amazon also catered to AWS customers on
the Indian subcontinent by opening edge locations in Chennai and
Mumbai in July 2013.97 Through offerings such as AWS and its
“News: Amazon Launches Mexico Kindle Store!” Amazon Kindle Forum. Amazon.
com, 29 Aug. 2013. Web. .
89
Zhohova, Anastasia, and Peter Rudenko. “Amazon пришел в Россию.” Forbes.
19 Apr. 2013. Web. .
90
78
Israel, Esteban, and Marcela Ayres.
“E-books chegam a 3% das vendas de livros.” Ilustrada. Folha de S.Paulo, 1 Apr. 2014.
Web. .
79
Lunden, Ingrid. “Amazon Reclaims Its Namesake, Launches In Brazil With Kindle Store;
Kindle Devices Coming In ‘Weeks.’” TechCrunch. 6 Dec. 2012. Web. .
80
Israel, Esteban. “Exclusive: Amazon to take on Brazil’s ecommerce jungle.” Reuters.
29 June 2012. Web. .
81
Carrenho, Carlo. “Is Amazon Really Buying Brazil’s Biggest Bookstore Chain?”
Publishing Perspectives. 19 Oct. 2012. Web. .
82
Mari, Angelica. “Amazon kicks off physical goods operation in Brazil.” ZDNet.
10
Feb.
2014.
Web.
.
83
84
Israel, Esteban, and Marcela Ayres.
85
Israel, Esteban, and Marcela Ayres.
86
Chanes, Livia, Fernanda Hoefel, and Anna Gabriela Martins.
87
Israel, Esteban, and Marcela Ayres.
88
Israel, Esteban, and Marcela Ayres.
cat12354_case3_CS3-1-CS3-39.indd 34
Lunden, Ingrid. “Amazon is finally setting up shop in Russia, says report, expanding
its international footprint again.” TechCrunch. 19 Apr. 2013. Web. .
91
“Amazon joins Taufeer.com e-channel program.” Middle East Company News. 7 Sep. 2008.
.
92
“Amazon.com shipped $280 million products.” Info-Prod Research. 16 Mar. 2009.
Web. .
93
“Global Infrastructure.” Amazon Web Services. Amazon.com, 2014. Web. .
94
“Announcing the AWS China (Beijing) Region.” What’s New? Amazon.com,
18 Dec. 2013. Web. .
95
“Announcing the South America (Sao Paulo) Region.” What’s New? Amazon.com,
14 Dec. 2011. Web. .
96
“Amazon CloudFront and Route 53 Add India Edge Locations in Chennai and
Mumbai.” What’s New? Amazon.com, 28 July 2013. Web. .
97
4/3/19 5:13 PM
Cases 3
Assessing Global Market Opportunities
Kindle Store, it seemed that Amazon’s international strategy could
perhaps transcend the domain of physical consumer products.
Whether Amazon would choose to continue its expansion in
Latin America, capitalize on Russia’s dynamic e-commerce growth,
export its business model to the Middle East, or stay focused on its
current markets, the road to success in emerging markets would
not be an easy one for Bezos and Piacentini. However, according to
Bezos’ oft-repeated mantra, “it’s still Day 1” for Amazon, for every
one of its markets around the world.
ACKNOWLEDGMENTS
The authors thank Nowfal Khadar (MBA, 2014) for his insights in
the creation of the India portion of this case.
CS3−35
QUESTIONS
1. Did Amazon succeed in China? What did it learn?
2. Did Amazon make sensible choices in its emerging markets
entry strategies? Consider location, entry mode, and timing.
3. How should companies and investors measure success in
emerging markets?
4. Should Amazon enter additional emerging markets immediately? If so, why and where? If not, why not and where
should its focus be? More broadly, how sustainable is Amazon’s simultaneous pursuit of geographic, horizontal, and
vertical expansion?
APPENDICES
Appendix A1
Amazon Country-Specific Web Pages
Country
Web URL
Launch Year
Germany
www.Amazon.de
1998
United Kingdom
www.Amazon.co.uk
1998
France
www.Amazon.fr
2000
Japan
www.Amazon.co.jp
2000
Canada
www.Amazon.ca
2002
China
www.Amazon.cn
Austria
www.Amazon.de
2009
Italy
www.Amazon.it
2010
Spain
www.Amazon.es
2011
Brazil
www.Amazon.com.br2
2012
India
www.Amazon.in
Mexico
www.Amazon.com.mx
August 2013
Australia
www.Amazon.com.au2
November 2013
2004
1
June 2013
2
1
Amazon Austria (www.Amazon.at) operates within Amazon Germany (Amazon.de)
2
Web page functions solely as a Kindle Store
Source: “History & Timeline,” Amazon.com, Jul. 2014, Web.
cat12354_case3_CS3-1-CS3-39.indd 35
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CS3−36
Part 6
Supplementary Material
Appendix A2
Amazon Global (Non-U.S.) Locations
North America
Canada
Mexico
Development Centers
Fulfillment Centers
Subsidiaries
Toronto
Delta, British Columbia
AbeBooks.com
Vancouver
Mississauga, Ontario
Victoria, British Columbia
Corporate Offices
Mexico City
Costa Rica
Customer Service
Heredia
San Jose
Africa
South Africa
Development Center
Cape Town
Egypt
Egypt Subsidiary
The Book Depository
Alexandria
Morocco
Customer Service Center
Rabat
Europe
Luxembourg
European Headquarters
Luxembourg City
France
Germany
Corporate Offices
Fulfillment Centers
Amazon Web Services
Paris
Montelimar Sevrey
Marseille
Saran (Orléans)
Paris
Corporate Offices
Fulfillment Centers
Customer Service Center
Munich
Augsburg Leipzig
Berlin
Werne Pforzheim
Regensburg
Development Centers
Koblenz Rheinberg
Dresden
Bad Hersfeld
Berlin
Ireland
The Netherlands
Italy
Poland
Amazon Web Services
Frankfurt
Development Center
Customer Service Center
Amazon Web Services
Dublin
Cork
Dublin
Development Center
Amazon Web Services
The Hague
Amsterdam
Corporate Offices
Fulfillment
Amazon Web Services
Milan
Castel San Giovanni
Milan
Corporate Office
Fulfillment Center
Amazon Web Services
Pozuelo de Alarcon, Madrid
San Fernando de Henares
Madrid
Amazon Web Services
Warsaw
Romania
Development Center
Iasi
Slovakia
Corporate Office
Bratislava
Spain
Sweden
Amazon Web Services
Stockholm
cat12354_case3_CS3-1-CS3-39.indd 36
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Cases 3
United Kingdom
Assessing Global Market Opportunities
CS3−37
Corporate Offices
Fulfillment Centers
Customer Service Center
Slough, Berkshire
Hemel Hempsted
Edinburgh, Scotland
Hertfordshire
Development Centers
Marston Gate, Milton

Amazon Web Services
Edinburgh, Scotland
Keynes
London
London, England
Swansea, Wales
Dunfermline, Fife, Scotland
United Kingdom Subsidiaries
Gourock, Inverclyde, Scotland
dpreview.com – London
Doncaster, South Yorkshire
IMDb – Slough, Berkshire
Petersborough, Cambridgeshire
Rugeley, Staffordshire
Asia
China
India
Corporate Headquarters
Fulfillment Centers
Customer Service Center
Beijing
Beijing Chegdu
Beijing
Guangzhou Wuhan
Amazon Web Services
Shenyang Xiamen
Beijing
Suzhou Xi’an
(Hong Kong)
Corporate Offices
Fulfillment Centers
Customer Service Center
Bangalore
Mumbai
Hyderabad
Chennai
Bangalore
Amazon Web Services
Hyderabad
Japan
The Philippines
Mumbai
Chennai
Corporate Headquarters
Fulfillment Centers
Customer Service Centers
Meguro
Daito Sakai
Sapporo
Ichikawa Takimi
Sendai
Kawagoe Tosu
Amazon Web Services
Kawashima Tachiyo
Tokyo
Odawara
Osaka
Amazon Web Services
Manila
South Korea
Amazon Web Services
Seoul
Singapore
Amazon Web Services
Singapore
Taiwan
Amazon Web Services
Taipei
South America
Brazil
Corporate Offices
Amazon Web Services
Sao Paulo
Sao Paulo
Rio de Janeiro
Australia
Corporate Offices
Amazon Web Services
Melbourne
Melbourne Sydney
Sydney
Brisbane
Source: “Amazon’s Global Locations.” Amazon.com, Jul. 2014, Web.
cat12354_case3_CS3-1-CS3-39.indd 37
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CS3−38
Part 6
Supplementary Material
Appendix B
Amazon Consolidated Financial Results ($millions, except per share data)
Year Ended December 31
Statements of Operations:
Net sales
2013
2012
2011
2010
2009
$ 74,452
$   61,093  
$ 48,077
$ 34,204
$ 24,509
Income from operations
$
745
$
676
$
862
$
1,406
$
1,129
Net income (loss)
$
274
$    (39)
$
631
$
1,152
$
902
Basic earnings per share
$
0.60
$ (0.09)
$
1.39
$
2.58
$
2.08
Diluted earnings per share
$
0.59
$ (0.09)
$
1.37
$
2.53
$
2.04
Weighted average shares used in computation of earnings per share:
Basic
457
453
453
447
433
Diluted
465
453
461
456
442
Statements of Cash Flows:
Net cash provided by (used in) operating activities
$ 5,475
  Purchases of property and equipment, incl. internaluse software and development
(3,444)
Free cash flow
$ 2,031
$
$
4,180
$   3,903
$   3,495
$ 3,293
(3,785)
(1,811)
(979)
(373)
395
$ 2,092
$    2,516
$ 2,920
Source: 2013 Amazon.com Annual Report. 10 Apr. 2014. Web. http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsannual.
Appendix C
Amazon Partial Break-out of International Revenues ($millions)
Year Ended December 31
2013
2012
2011
Germany
$10,535
$8,732
$ 7,230
Japan
7,639
7,800
6,576
United Kingdom
7,291
6,478
5,348
Source: 2013 Amazon.com Annual Report. 10 Apr. 2014. Web. .
Appendix D
Internet Users (per 100 people)
Country
2009
2010
2011
2012
2013
Brazil
39.2
40.7
45.7
48.6
51.6
China
28.9
34.3
38.3
42.3
45.8
France
71.6
77.3
77.8
81.4
81.9
Germany
79.0
82.0
81.3
82.3
84.0
India
5.1
7.5
10.1
12.6
15.1
Japan
78.0
78.2
79.1
86.3
86.3
Mexico
26.3
31.1
37.2
39.8
43.5
Russian Federation
29.0
43.0
49.0
63.8
61.4
South Africa
10.0
24.0
34.0
41.0
48.9
Turkey
36.4
39.8
43.1
45.1
46.3
United Arab Emirates
64.0
68.0
78.0
85.0
88.0
United Kingdom
83.6
85.0
85.4
87.5
89.8
United States
71.0
71.7
69.7
79.3
84.2
Source: “Internet Users (per 100 people).” Data. World Bank. 2014. Web.
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Cases 3
Assessing Global Market Opportunities
CS3−39
Appendix E1
Comparison of Selected Electronic Commerce/Technology Companies
Source: Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.” The Wall Street
Journal. 15 Apr. 2014.
Appendix E2
Comparative Metrics, Selected Electronic Commerce / Technology Companies 2013
Note: Alibaba total includes Taobao and Tmall only
Source: Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.” The Wall Street Journal.
15 Apr. 2014.
Source: Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan. ©2014 Amy Nguyen-Chyung and Elliot Faulk. This case was
written by Elliot Faulk and Amy Nguyen-Chyung (Assistant Professor of Strategy) of the Ross School of Business at the University of Michigan. It was created as a basis for class
discussion, not to illustrate either the effective or ineffective handling of a business situation. Secondary research was performed to accurately portray information about the featured organization and to extrapolate the decision points presented in the case; however, company representatives were not involved in the creation of this case.
cat12354_case3_CS3-1-CS3-39.indd 39
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INTERNET MARKETING & GLOBAL BUSINESS
Baruch College, Zicklin School of Business
Department of Marketing & International Business
Name:_____________________
Case Study Assignment – Amazon
•
•
How Scammers in China Manipulate Amazon
Amazon Waves the White Flag in China as Growth in Prime Memberships
Decelerates
Read the case study and review links above. Then do your best to provide answers to the
questions below:
1. Did Amazon succeed in China? What did it learn?
2. Did Amazon make sensible choices in its emerging markets entry strategies?
Consider location, entry mode, and timing.
1
INTERNET MARKETING & GLOBAL BUSINESS
Baruch College, Zicklin School of Business
Department of Marketing & International Business
3. How should companies and investors measure success in
emerging markets?
3. Should Amazon enter additional emerging markets immediately? If so, why and
where? If not, why not and where should its focus be? More broadly, how
sustainable is Amazon’s simultaneous pursuit of geographic, horizontal, and
vertical expansion?
4. Based on the article and video below, how is a same issue positioned very
differently?
Amazon to shut its China online store
Amazon Gives Up on Chinese Domestic Shopping Business
5. Read the article below and in your words provide some of the implications of the
trade war for Amazon sellers.
How the Trade War Affects Ecommerce and the U.S. Economy
US-China Trade War | What does this mean for Amazon Sellers?
2

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