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Name: Valerie Ng Suying

BIZ3134-01

BIZ3134 International Management


Individual Assignment 1
Case: Amazon Goes Global
1. Why did Amazon choose the United Kingdom (UK) as its first entry location? Why not
other countries such as Canada and Australia?
Relative to countries such as Australia, Japan or China, the United Kingdom (UK) in
particular held greater appeal as Amazons first international entry location because it
is geographically closer to Amazons home market in the US. Like the US, English is
the main spoken language of the UK citizens as compared to countries like Canada
where some of its citizens speak English and some speak French, or Japan where
Japanese is the official spoken language. This makes the UK market probably the
least costly and most attractive for Amazon to enter into, as it is able to bypass any
possible language barriers as opposed to entering into Canada or other markets
where Amazon would need greater resources to tailor their services and websites to
the non-English speaking citizens as well.
In addition, the UKs online book selling market was a substantially developed one at
the time when Amazon began its global expansion in 1998, with numerous online
book retailers such as Bookpages.co.uk already present in the market. This made
sense for the UK market to be targeted for Amazons first international expansion
since Amazon could choose to undertake an acquisition of these retailers (many of
which are already established ones with valuable strategic assets) to enter into the
market. Given the established foothold of these UK retailers, the UK market seems to
be the most cost and time efficient to execute, thus increasing the appeal of a UK
venture. In fact, the UK recorded one of the highest number of Internet Users in 1997
after the US at 4.33 million users 1 (Li & Li, 2015), hence making it even more
appealing for Amazon to enter into its online book selling market to capture the
interests of these online users.

1 Taken from Exhibit 6 of the case


1

Name: Valerie Ng Suying


BIZ3134-01

2. What strategies did Amazon use in Japan? Did these strategies make sense?
Amazon made its fourth international entry into the Japan market by launching
Amazon.co.jp, offering Japanese and English-language titles. Yet, the unique
institutional landscape of the Japanese bookselling industry, also known as the
Saihan system2 (Peng, 2009), created legal restrictions on discounts and sales tax
that made it difficult for the company to offer books at competitively low prices. To
successfully grow its customer base, Amazon Japan thus focused mainly on their
customers by delivering customer service. Understanding that majority of its
Japanese consumers (99% of the population) could understand website content only
in their native Japanese language, they developed a Unicode-enabled platform for its
Japanese language site in collaboration with Basis Technology, a software service
provider with expertise in Asian-language information processing. This was
considered a strategic move, as Amazon was able to create an international website
customized and adapted for the Japanese and Japanese-speaking customers
around the world. The local Japanese culture, literature and language could thus be
promoted through a localized website, and Amazon was eventually able to gain a
larger portion of the pie as it had offered tailored online services and a localized
website that effectively suited the local market.
The second strategy that Amazon Japan undertook to overcome institutional barriers
was to quickly expand beyond online book selling to include a wide variety of
products and merchandise including electronics, computers, toys, home and kitchen
appliances, sporting goods, rewards program as well as the Amazon Kindle DX. The
company formed alliances and made acquisitions with Virgin Megastores Japan, an
entertainment product retailer to increase the selection of media items. This strategy
made sense for Amazon Japan, as the newly incorporated products were not

2 Saihan System serves as a price fixing cartel to deter entry into the book industry. This system allows
publishers to fix the price at which retailers can sell their books to the end consumers.

Name: Valerie Ng Suying


BIZ3134-01

regulated by the Saihan system and had no legal restrictions (Peng, 2010), thus
allowing Amazon to offer an extensive range of products at discounted prices.
Therefore, despite being unable to sell its books at discounted prices, Amazon was
able to differentiate itself from its competitors by offering a larger selection of
products at competitive prices instead. This has helped them to capture a larger
market share in the long run.
Overall, despite its slow start, Amazon Japan was able to enjoy success as it had
adjusted it strategy to overcome the institutional barriers in Japan.
3. Should Amazon continue global expansion into new markets? If not, why? And if so,
which markets and how?
Given the competitive nature of the e-commerce industry, Amazon faced both
opportunities and challenges in existing markets. Some of its international operations
(i.e. Europe and Japan) achieved more success than others (i.e. China). Its China
subsidiary experienced unprofitable sales that hampered the overall performance of
the parent company due to intense competition by local competitors. In addition, the
companys recently launched operations such as India and Brazil had great growth
potential but presented significant challenges as well. With that being said, the
lackluster performance evidently shows that the Amazon brand remains unstable in
the China market and the company has yet to effectively capture loyal customers and
a strong market share in new emerging markets India and Brazil. Therefore, it would
be wiser for the brand to take a break from its global expansion to develop further in
these existing markets, focus on strengthening its existing operations, developing its
brand name and ensuring their profitability first before expanding into entirely new
international markets. The last thing Amazon would want to see happening, is a
global expansion that seems too rushed and oversized, with numerous stores
opening within a short period of time, but in reality, many of them being unprofitable
and more costly for the parent company.

Name: Valerie Ng Suying


BIZ3134-01

In fact, by focusing and making use of their previously established facilities and
resources in China, as well as taking more time to better understand its China
competitors and their strategies, Amazon may have the potential to improve their
current product offerings or even innovate newer ones that would differentiate itself
from all the other online retail stores and thus enable them to maintain its current
footing at the forefront of the industry. This would allow them to gain back consumer
confidence and achieve a stable position in the market. Only by doing so and
ensuring that its current markets are profitable, would it be more appropriate for them
to consider continuing their global expansion and pursuing new market opportunities.
After all, consumers in new markets would probably be more receptive towards
Amazon if the company were to hold on to their strong reputation and position in the
industry worldwide.
Perhaps the phrase more haste less speed could be used to describe Amazon and
its global expansion endeavors. Successful global expansion requires deft adaptation
to the local markets and its customers, culture, customs and local laws. For Amazon
to keep up with its name of an online retail giant and keep up with its international
rankings, it should focus on already entered markets, do it well, conduct relevant
market research to gain a more in-depth understanding of the existing markets and
thus, make relevant adjustments to their strategy to suit each unique market and to
cater to the unique purchasing needs of their consumers. A localized and
differentiated strategy will allow Amazon to gain a comparative advantage over its
competitors.

Bibliography
Peng, M. W. (2010). Global Business 2009 Update. Ohio, Mason: South-Western
Cengage Learning.
Peng, M. W. (2009). Global Strategy (2 ed.). Ohio, Mason: South-Western Cengage
Learning.

Name: Valerie Ng Suying


BIZ3134-01