Project 3 Instructions Based upon the research conducted for Projects 1 and 2, select the method that you believe would be most appropriate. Next, explain why that method is the most appropriate for y

Kathy A. Greggs

Liberty University

06/03/2020

Keeping Up E-Commerce Growth

Amazon is arguably the largest E-commerce company in the world, and in recent times the company has seen enormous growth, e-commerce growth. Meaning that the market is expanding and if the company will not adapt to the expansion, it might fail. What does this mean, it needs to adapt to the environment. Therefore, the general problem to be addressed is keeping up with the e-commerce growth. On the other hand, the specific problem to be addressed is how to keep up the operating segment (online stores) which makes up more than half of Amazon’s Revenue. There are a few points that needs to be focused upon, the shifting business mix of the company, whereby a significant and relevant growth indicator and the general health of business has been illustrated by the pace of the gross profit growth. According to Anthony Diclemnte (2017), “gross profit model buoys his 12-month price target on the e-commerce giant to $1,965 from $1,800.” But another important and intricate aspect to understand is the growth challenge that international rather than domestic, mainly because the company has been handling the domestic market efficiently holding almost a half of the retail market.

Based on the Financial Reports of the retail Giant, the Fluctuations of the foreign exchange played an important role. This is because it cost the company almost $1.3 billion to hit the “international revenues.” Ignoring the impact of the movement of the foreign exchange, amazon would have continued to grow more slowly. This pattern of growth has been the norm of the day for some time, and it is what will affect the company if it is not taken care of, but it is a challenge that affects the company, a sit invests in the business and captures margins at cost of growth while losing money at the same time. The company has positive operating margins in every quarter, and the reverse is similar for the international segment of the company. Meaning that the international growth segment comes at a cost that might affect the other markets of the company. Therefore it is important to acknowledge that the business is small internationally and in addition to that it has a slow growth curve, combining these two aspects; lower profits and slower growth creates a concern.

One of the key strategies of the company has been getting closer and closer to the customer, t creates more competitive features. Currently the business has differentiated its services based on different geographical areas, many new features and exclusive services are only in specific geographical areas, and even within the home market the United States. Some of these services depend on coming up with accompanying infrastructure, specifically in the fulfillment and distribution centers of the company. Whereby the main purpose for such initiatives is mainly accomplished by partners (who contribute over half of its revenue) like the retailers (Amazon Locker and/or the Postal Service that help to accomplish same day deliveries or delivery on Sundays. Whereby these services cannot be established outside the country easily, and specifically in new countries whereby they may lack such structures and the partners might completely not be there, whereby it puts the fulfillment of the company on a tight spot.

In the United States, there are more than sixty distribution and fulfillment centers that have approximately 50 million of square feet of space, which is way bigger than any centers in foreign countries with Amazon operations. In the sense that Germany and China have less than 10 million of square feet respectively. This creates an imbalance as the ecommerce market in the three countries is almost on the same magnitude. Which becomes a problem, because before the company mainly focused differentiation that was solely created by low prices and its massive online selection, but the differentiation ta the moment focuses on customer personal fulfillment, and it can only be feasible in the local market, which enables the kind of innovation that has been discussed before. On the other hand the company cannot just decide to invest in the international market, which has been established actually costs the company instead of making profits meaning that additional investments will make losses for the company. This is because the company lacks market share and lack scale in the foreign countries, which creates a vicious circle that prevents Amazon form being able to create the same services that are in the local market and extend the services to the international market.

Therefore, what does this mean, the revenue of the company comes majorly form a few countries. The country details are not provided but the North American Region that consists of United States, Canada, U.K., Japan, German and Mexico, but dominated by the U.S. Market, make up almost 95% of the revenue that the company receives annually (Dawson, 2015). Therefore I is possible that these countries that company is looking forward to achieve the scale and density that it has achieved in the U.S. market in the other markets. This can only be fulfilled through focusing on building the density and scale rather than spreading thinly all over the international market. Looking at the company currently, the investment is mainly and particularly focused on the Chinese market and to some extent in the Indian market (Wu & Park, 2019). Whereby these regions are a challenge because of the presence of the local competitors in these regions and the tough regulations put in place in these markets. This makes it almost impossible to succeed in these markets. The investments being made in these regions are essentially all the cash and profits established in these regions and the in addition to the current expansion plans, which showing any signs of paying off. Therefore, the company thinly spreads itself, meaning that the more it continues with this technique of thinly spreading it is the likely that it will not succeed in any market of the international countries outside the U.S. making their current strategy counterproductive.

Works Cited

Amazon's International Growth Challenge by Jan Dawson, May 11, 2015. Retrieved from https://www.vox.com/2015/5/11/11562518/amazons-international-growth-challenge

AMAZON.COM, INC Report by Anthony DiClemente & Lee Horowitz, December 5, 2017. Retrieved from https://www.academia.edu/36436755/Initiating_Coverage_Initiate_on_AMZN_with_Outperform_Rating_and_1_350_Target_Price_Fearing_the_Mammoth_Disruptor

Wu, J., & Park, S. H. (2019). The role of international institutional complexity on emerging market multinational companies’ innovation. Global Strategy Journal, 9(2), 333-353.