Critical Evaluation the Market Entry Strategy of Amazon - Essay Example

E-Marketing and Section # of Amazon is an e-commerce company that was the first and leading company to have successfully sold products through the internet. They have been in this business since a number of years and now they are endeavoring to enter a new market that sells products digitally over the internet. Usually, the company ships the items ordered but now they have decided to make them available through the internet only and not exactly ship some of their items. They have taken a slow and steady wins the race approach to enter the market because the idea is new and has a number of problems and restrictions attached to it. This essay is a critical evaluation of their entry strategy and also an analysis of their entry strategy with models included to improve their strategy regarding e-marketing. About Amazon Amazon is an American based company situated in Seattle, Washington. It was the first leading e-commerce company that successfully sold products online. The company was booming until the downfall of the IT industry in 1990’s and it had to face serious criticism from all sides. But the company faced the tests of time and emerged victorious after making a profit again in 2003. The founder of Amazon.com, Jeff Bezos started this company in 1995 as only an online book store but gradually the company diversified into new product categories. Amazon is now a virtual multinational since it has its separate websites in many companies around the world, namely; Japan, U.K. Germany, Austria, France, Canada and China. The site is accessible worldwide and it is a global company that is capable of shipping products all around the globe. Today Amazon is a huge name in the e-commerce industry and also a leading company in its genre. Currently, the company has been vying to enter into e-marketing that is selling products digitally over the internet instead of shipping them to every part of the globe. Since the company’s business model has always been swarmed with the shipping mania, it is now taking the conversion from traditional marketing to e-marketing very slowly so that business is fully integrated with no unit left behind and finally gushing towards the prime position successfully. They are still developing as an e-marketing firm and moving steadily to their desired destination. Critical evaluation the market entry strategy Amazon entered the market with the acquisition of mobipockets.com which is based in Paris. Amazon adopted a hush hush attitude towards the acquisition of the company that is now its subsidiary that sells products digitally online. It provides books online as a download for some amount of money. But the amount of money is naturally lesser than the traditional way of selling goods over the internet. Amazon has also introduced its Unbox movie-download which was built in-house by the company in 2006. Amazon decided not to advertise this entry into e-marketing for certain reasons. The company has always been a traditional e-commerce company that ships items around the globe. The sudden insurgency of moving towards e-marketing and making items available digitally as downloads for customers. Amazon wants to stick to the traditional method of marketing and selling but also enter e-marketing without having any adverse effects on the company. They are still testing the new idea and taking it slow to avoid fatal problems in order to easily bounce back in case of any failures. This strategy of taking it slowly is a rational approach by Amazon because a hasty entry might have a negative effect on the company since its loyal customers might have rebelled. If they take it slowly then customers will be able to adopt it gradually and also that they have both the options available for their customers and they can make a choice. It is important for any company to stick to their original values and set standards but change is essential only when it is taken at a pace that is suitable for all stakeholders of a firm to accept and adapt to it. This is what makes an entry strategy successful since customers are essential and must be taken along to implement a change successfully. The partners and competitors of the company have great expectations out of Amazon since they believe that Amazon will soon come up with its own website offering music downloads for an amount of money and also that they will sell an e-book device under the Amazon brand by the name of “Kindle” to their customers. But Amazon did claim that their Unbox movie-download will include NBC TV shows for their customers digitally available online. On the other hand, Amazon believes that the entry strategy has to be slow and gradual and the all the developments expected of the company as stated above are future investments for the company. Amazon is fully aware that money in the digitally made available items market is paltry. Amazon’s entry strategy is practically correct because the profits in the industry they have entered are meager so they are taking it slow and also that they have carried it out at a smaller scale in order to test it initially. Amazon has entered the market but the company’s entry seems tepid or supposedly lukewarm and they have reasons for it. This new market has its own restrictions that limit profits as a result. The e-books available online are restricted in the sense that customers can view them only on certain devices or from particular places. This limits the customer base and also profits. The traditional method of shipping does not have any such restrictions so it is much more profitable for the company. Although Amazon is taking it slow but if they launch Kindle then their digital business might do wonders for them because although mobipockets.com is not a very well marketed or advertised website still it provides the largest number of e-books to its customers compared to competitors like Sony. Mobipockets.com provides 40,000 e-books Sony provides only 18000 e-books. Amazon has a wider customer base and also stronger brand equity so with the launch of Kindle their entry into the digital market can prove to be the most phenomenal step taken by the company. The company can yet again make waves in the business and become leader just like it did when Amazon was born. Its good to take it slow but they seem unenthusiastic which is wrong because their new developments can bring them luck. Since their competitors are aware of their future developments they should make it fast into the market to avoid being late and having regrets over it. Their competitors have a chance of beating Amazon in this race since the company is not interested in the new market. They must rethink their strategy at this point and not loose a golden an opportunity to become the leader yet again. Amazon believes that the digital deliveries of products is not very profitable and to a certain extend its true because of the restrictions on the use so things can change once the restrictions are lifted. But still Amazon needs to find solutions and invest more into this new venture because this is the beginning of a new era and if Amazon starts now then it can be the leader a few years from now when the boom comes. Thus, Amazon needs to revamp its strategy and enter the market with a blow and a thud scaring away its potential and actual competitors. Shifting from Traditional Marketing to E-marketing The shift from traditional marketing e-marketing is not an easy one because it comes with its problems, restrictions and limitations. Initially, the development of a market entry strategy has to be analyzed and then applied so that the chances of failures are minute. It is important to study the situation, condition and requirements of a market. This is important to devise a splendid strategy. There are a few factors that a company must keep in mind while developing a market entry strategy and they are as follows: Barriers: Every market has certain barriers to entry and a company endeavoring to enter a new market has to either overcome these barriers or decide to live with them. These can be legal in nature like in the case of Amazon the e-books and music have software and device restrictions which limits the prospects of a growing customer base and also profits. Amazon realized these restrictions and entered the market halfheartedly although it can find solutions to the problem. If they launch Kindle and an e-book reader soon then they can overcome these barriers. Amazon still is in a better position than its competitors and if it develops a brighter entry strategy then this venture can work out for them. Type of product/service being sold: This is an important factor because if the product or service being sold has certain maintenance costs attached to it then it can strangle profits for the firm. The product must also have a competitive advantage or a unique selling proposition over its competitors because that can help achieve sustained competitive advantages. Amazon is privileged compared to its competitors because of its positioning and also that it is the leader. The company is now offering books, music and movies online but they do not have a USP or competitive advantage up till now. Definitely, with the development of Kindle and e-book reader they will have a USP and also a competitive advantage. It is important to make sure that the product has an appeal and people want it. The demand can be long term/short term. The market Amazon has entered has its restrictions so it has to come up with effective solutions. Amazon can also come up with modifications in the service and products in order to differentiate from their competitors. Resource requirements: It is important to consider the resource requirements since that affects profit margins. If a company has to stretch its resources for the product then profits might diminish. Amazon has to alter its model by offering digitally since no shipping will be involved in this business. Amazon is not very enthusiastic about this business because they believe restrictions will limit the customer base and developments will involve huge investments incurring costs. But Amazon should overcome the problems and currently the best way out is to launch Kindle. Competition: It is important for any company to plan its positioning in the market and conduct a competitor analysis. Amazon will face competition from studios that have who provide movies digitally at wholesale prices and other companies in the similar business like Sony or Apple etc. But Amazon has a different scenario because if the company develops as planned and introduces the products as planned then they will have a competitive advantage. Public Policy: This is the affect of regulations and other legalities on a business. The market for delivering items digitally has certain software restrictions that limit the customer base and curtail profit margins. International market entry: Amazon does not have to worry about this because digital stuff is available all throughout the world but it might have usage restrictions. Amazon is a virtual company that operates through a website so it does not have to focus on this factor. Pricing: In order to be competitive Amazon will have to offer products at competitive prices and also that profits might decrease in this business compared to the traditional way of shipping. Amazon will have to focus and devise a successful pricing strategy for successful entry into the market. The market can be analyzed using various models and theories before devising a successful entry strategy. The AIDA (S) model is a popular model that helps to analyze the market and then devise a strategy accordingly. Attention: This to grab the attention of the customer and make them aware of the product. This is tapping the cognitive needs of the customer since customers want to know more of the product. Amazon has not marketed or advertised the acquisition of its subsidiary that sells e-books digitally. It is important to at least test the market by making them aware of the website. Amazon has made assumptions and also based its decisions on them and this might turn out to be bad for them in the long run. This market is a growing field and Amazon needs to enter the market properly in order to be successful in the long run. Interest: This is to create customer’s interest in the product through packages, incentives etc. If Amazon launches Kindle soon then it can overcome the problem of restrictions and this will encourage customers to buy from them. Desire: This is to create a desire for the product. This can be done by advertising heavily the advantages of buying digitally delivered products. Since it’s more convenient, quick and cheaper the customer can be attracted if the advertisement is appropriate. Interest and desire affect the customer’s decision to buy the product. Action: This is the final step because if the customer is made aware and the interest and desire to buy the product is created successfully through marketing or advertisement then the customer acts and buys the product. Satisfaction: This is essential because if the customer is satisfied he/she will make repeat purchases and come back to the company. This is what determines sustained competitive advantages and also the profit margins of a company. The buying cycle by Mauch is also an important model to consider while making an entry into the market. This model has its limitations because it assumes that the customer gains access to the information regarding the product himself/herself and this is a risk since it might not work. Amazon is following a similar strategy since they have not advertised or marketed their subsidiary that delivers e-books digitally and expects customers to find it out themselves. This model assumes that promotion is not necessary since word of mouth travels and can work out for the company. The model assumes that when the customer receives the information he/she also evaluates according to their needs or wants and eventually makes a buying decision to then utilize the product. Although majority of the customers are so busy with their lives that they might not hear of the product for a long time and even if they do they might not be encouraged to think about it since they might need a stimulator in the form of an advertisement to make their decision. The buying cycle by Schlogel is different and also better since it overcomes Mauch’s buying cycle limitations. This model includes the re-purchase decision of the customer and also that the company must always grab attention of the customers since a lot of them could be in search of that product. This is a better model in the sense that it includes promotion and satisfaction of the customers which is important for gaining sustained competitive advantages. Amazon must follow this model in order to devise a successful entry strategy that determines a wider market share in the long run. Another model known as the “Value Bubble” by Sanders ET all is also an important one to consider while developing an entry strategy since it helps to devise a long term strategy that will be beneficial in the long run. This model has five elements: Attracting (gaining attention of the masses) Engaging (triggering brand loyalty) Retaining (enhancing customer relationships) Learning (keeping track of specific customer information) Relating (to personally relate with the customers in order to form long term relationships and maintain goodwill) It is essential for a company to perform a detailed analysis before devising a market entry strategy in order to implement the strategy completely and successfully. The marketing process offers a model that helps to make an analysis and come up with a successful entry strategy. This marketing process can help Amazon to analyze and then devise the best entry strategy. Situation analysis: This is an analysis of the environment and situation. This can include a SWOT (strengths, weaknesses, opportunities and threats), PEST (political, economic, socio-cultural and technological) and the 5 C (company, customers, competitors, collaborators and climate) analysis. Amazon is entering the digital market or e-marketing and this market has restrictions plus the profits are lesser comparatively. But if Amazon develops by launching Kindle and e-book reader then it can gain a competitive advantage. This is the beginning and soon the market will be swept by the digitally delivered products. Marketing Strategy: Amazon has taken up a market entry strategy and now it is up to them to implement a market leader or market follower strategy. Amazon has the capability to develop and lead the market yet again. It should make good use of this fact. This is also about the positioning of the product and Amazon being a leader should endeavor to position its website in a better way than its competitors. Amazon can also target a segment of the market if the company thinks it would be best. Marketing Mix decisions: The 4P’s are essential to all businesses. Amazon will have to focus on their product, price (mainly) and promotion. Place is not a requirement since they will be delivering digitally. Implementation & Control: Currently, Amazon is not handling the situation well due to its assumptions and pessimist approach. Amazon needs to implement its strategy effectively in order to develop and generate the desired results. These models and analyses will help Amazon form their new e-marketing process which is as follows: Promote & Attract: Amazon must market and advertise in order to reach their customers. Inform & Assist: Amazon must reach to its customers and help them take informed decisions since that will determine their profit margins and also a market share. Guide & Sale: Amazon will be selling products digitally so the company does not really have to work on this aspect. Serve and Support: Amazon will have to provide support to their customers and also make search on the website easier. This is important since if searching is not easy then customers might get irritated and loose interest. Retain: Amazon will have to perform all the steps of the e-marketing process and the goodwill of the company will help retain the customers since satisfied customers always make repeat purchases. This e-marketing process will help Amazon focus on their needs and requirements of their customers and also the market. The company will also have a professional and process oriented approach to their business. This approach will help Amazon to adapt and face all challenges and changes in the market and its forces. The process is very practical and nature and provides a straight forward approach to entering the market successfully. This process will help the business and its process to be more integrative and communicative thus, the company will be able to endure changes. Amazon is not very enthusiastic about entering this market and when it has already entered it should take it more seriously. It is important for them to analyze and study consumer behavior in order to provide their consumers all that they want. Amazon is in a better position than its competitors and if the company brings about developments as planned then Amazon can throng up a phenomenal wave in this new market which will help them lead the market yet again and also expand their business. Amazon needs to devise a proper market entry strategy and succeed in order to keep up with the expectations of its customers and also to save the image of the company as a reliable and leading company in the business. Bibliography Bridson, K; and Evans, J. (2004). ‘The secret to a brand advantage is brand orientation.’ International journal of retail and distribution management, 32 (8): 403-411 CF. Mauch, Willy (1990), Bessere Kundenkontakte dank sales cycle (buying cycle), in Thexis Jg. 7; NR 1. St. Gallen. Pgs 15-18. CF. Sanders, William B; Albert, Terri C; (2003), E-business Marketing (Value bubble). Upper Saddle River, NJ; Prentice Hall. CF. Schlogel, Marcus; Tomczak, Torsten; Belz, Christian (Hrsg); (2002), Buying cycle. St. Gallen; Thexis. Pg 46. Dave Hall, Rob Jones & Carlo Raffo. (2000) Business Studies; 2nd edition, Causeway Press Limited. Ferrell, O.C. and Hartline, Michael (2005). Marketing Strategy. Thomson South-Western. Frank R. Kardes. (2002) Consumer Behavior and Managerial Decision Making; 2nd edition, Pearson Education Inc. Kevin Lane Keller. (2006) Strategic Brand Management; 2nd edition. Pearson Higher Education. Kotler & Armstrong. (2000) Principles of Marketing. 9th edition. Philip Kotler & Kevin Lane Keller (2002) Marketing Management. London: Prentice Hall. Pgs 605-606. Smith, PR, Chaffey, Dave (2002), E-Marketing excellence: The heart of e-business. Oxford; Elsevier Butterworth-Heinemann. About Amazon. Available from < http://en.wikipedia.org/wiki/Amazon.com> [Accessed 20 February, 2008] AIDA (S) model. Available from < http://en.wikipedia.org/wiki/AIDA> [Accessed 20 February, 2008] Developing a market entry strategy. Available from [Accessed 20 February, 2008] E-Marketing Process (Pgs 31-35). Available from < http://www.schwede.ch/e-marketing_mix_schwede.pdf> [Accessed 20 February, 2008] Read More