INTRODUCTION

E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the
Internet, especially the World Wide Web. In practice, this term and a newer term, e-business, are
often used interchangably. For online retail selling, the term e-tailing is sometimes used
Electronic commerce is generally considered to be the sales aspect of e-business. It also consists
of the exchange of data to facilitate the financing and payment aspects of business transactions.

E-commerce can be divided into

 E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered
into a "virtual mall"
 The gathering and use of demographic data through Web contacts
 Electronic Data Interchange (EDI), the business-to-business exchange of data
 E-mail and fax and their use as media for reaching prospects and established customers
(for example, with newsletters)
 Business-to-business buying and selling
 The security of business transactions

Today Ecommerce is an integral part of business because of various reasons like:

 Ease of use & Accessibility all across the globe 
 Great variety & easy compassion of products from different vendors 
 Trusted payment channels 
 Shopping can be done sitting in the convenience of home shopping, hence it is
less time consuming.

It is therefore very important for any new entrepreneur to understand the significance of E-
Commerce and should know how to utilize this tool for the growth and development of business.
So, whether you have an existing business or launching a brand new business, whether the
volume of your business is large or small, you can always generate profit by demonstrating your
products or services online, thereby acquiring a large amount of viewer exposure. In concise,
buying and selling will result in profits and returns. There are so many factors which makes e-
commerce to come to the fore front in today's world. Saving precious time involved in business
transactions is really a prominent factor. Like for instance, net banking makes it easy to carry out
money and baking transactions in a break neck speed as compared to the real banking scenario.
This asserts the fact that Ecommerce is beneficial to both business and consumer wise as
payment and documentations can be completed with greater efficiency and reliability. Another
important factor determining the flow of whole business is connectivity. Connectivity is very
important for both consumers and business. Ecommerce provides better connectivity for all the
potential candidates all over the globe, thus helping in enhancing the business without any
geographical barriers. From the view point of the customer, Ecommerce is a good platform for
hassle free shopping by sitting in your home. The customer can browse through all the products
and services available and can review and compare the prices of the similar products available in
the online space. In global market scenario, the emergence of Ecommerce as a forerunner has
opened up various windows of opportunities for a variety of online companies and investors.
More and more resources are being directed into electronic securities, internet facilities, business
plans and new technologies due to the boom in the space of E-commerce. As a result various
new markets have emerged from Ecommerce itself giving a boost to the global market.

Global trends in E-commerce

 Government programs are a significant vehicle for c-commerce implementations

 Retail, grocery and logistics industries are the most active in encouraging trading partners
to implement EDI
 Small and medium sized companies demand flexible integration solutions
 European companies focus on core competencies and outsource technology to consulting
groups
 High percentage of first time implementers seek to achieve full integration
 Organizations are seeking a scalable, reliable system that is easy to deploy and manage
 Software needs to be capable of handing different business processes and must integrate
with existing IT investments

As social media, app stores and global availability become standard, many companies are
looking to enhance the online customer experience. And while retail and other transactions via
Internet are customary, more than ever companies are simplifying the ways in which customers
interact with their website and ultimately make online purchases. Here are eight trends
happening right now in global e-commerce that seek to enhance the user experience:

 Micro-payments – Among the most revolutionary changes in the coming months—not

years—is the use of micro-payment systems from a variety of financial firms, e.g.,
Paypal, Visa, WesternUnion, among others, including banks.  This trend is facilitated by
the W3C working group that approved these protocols and technical standards for the
interworking. These systems will change not only how we carry money but how we value
money and think about purchases.  (Consider how a purchase of $4.99 feels in a mobile
app store vs. at Dunkin' Donuts.)  Payment systems that make it easier to buy online,
coupled with mobile technologies will accelerate the usage of global e-commerce
applications.
 Mobile technologies – More people access the Internet on their mobile devices than on
any other device. We are rapidly approaching the time (if we are not already there) where
designs must be created for the mobile Web first, and for the desktop second.  Mobile
technologies facilitate comparison shopping; with the advent of barcode reader apps and
price-comparison databases, a consumer could snap a bar code in Walmart and quickly
reference product reviews and prices on walmart.com (or compare prices with Walmart
competitors).  Mobile technologies also facilitate impulse buys – especially with the
advent of micro-payments tied to the mobile device.  Just recently,  Starbucks customers
can not only place an order with their Smartphone, but also make a purchase.
 Social media – As Facebook has become the most visited site on the Web, the role of
social media, including Facebook and its local clones such as Twitter, is increasingly
important.  Social media sites increasingly act as points of entry to e-commerce sites, and
vice versa, as e-commerce sites build rating, loyalty and referral systems tied to social
media. Group buying (e.g., Groupon) is also gaining mainstream ground, with many
"deal of the day" sites competing for an increasingly savvy consumer base, but
improvements lie ahead as the social aspects and user experience are refined.
 Fulfillment options – I believe that users will want to have multiple fulfillments and
return options when interacting with a vendor: ship to address, courier, pick-up in store,
return to store, etc.  Having many fulfillment options is how customers view their overall
 customer experience. Some companies have made a business proposition online by being
exceptional in service to the online channel (e.g., Zappos).
 Global availability – Increasingly, consumers want the availability to buy products from
foreign sites and have them delivered locally.  Thus, currency and customs will be of
growing concern to many online retailers.  Along with this, there will be concerns with
local privacy laws and restrictions on related data collection and storage.
 Localization – While the trend is to globalize, what’s often more important is to
localize.  User Centric’s research clearly shows that sites that ‘feel’ local – with proper
imagery, language, time/date, weights/measures, currency, etc. – resonate far more than
sites that seem culturally distant or sterile.
 Customizability – Consumers want control, and want to be able to design the details of
the items they purchase.
 Time-based availability – Some of the hottest and most successful sites are those that
have a time-critical response component.  Sites like Groupon, Gilt and others capitalize
on the perception of limited-time availability.  Creating a sense of urgency drives traffic
and purchase behavior.

Business models across the world also continue to change drastically with the advent of
eCommerce and this change is not just restricted to USA. Other countries are also contributing to
the growth of eCommerce. For example, the United Kingdom has the biggest e-commerce
market in the world when measured by the amount spent per capita, even higher than the USA.
The internet economy in UK is likely to grow by 10% between 2010 to 2015. This has led to
changing dynamics for the advertising industry

Amongst emerging economies, China's eCommerce presence continues to expand. With 384
million internet users, China's online shopping sales rose to $36.6 billion in 2009 and one of the
reasons behind the huge growth has been the improved trust level for shoppers. The Chinese
retailers have been able to help consumers feel more comfortable shopping online. eCommerce is
also expanding across the Middle East. Having recorded the world’s fastest growth in internet
usage between 2000 and 2009, the region is now home to more than 60 million internet users.
Retail, travel and gaming are the region’s top eCommerce segments, in spite of difficulties such
as the lack of region-wide legal frameworks and logistical problems in cross-border
transportation. E-Commerce has become an important tool for businesses worldwide not only to
sell to customers but also to engage them.

E-commerce in India
New Gold Rush in E-commerce in India
Kunal Bahl, founder- CEO of e-commerce site Snapdeal.com bought out eSportsbuy.com for an
estimated of Rs.50 crores.

Bahl has 20–million (Rs. 100 crore) stash for acquisition-significant because Snapdeal is itself a
startup-but a rich on. It has raised Rs.52 million from ventures funds.

Bahl is not alone who is scouting for potential suitor. In February this year aggressively online
shopping site Flipkart.com acquired rival Letsbuy.com. Early last year, US-based social buying
site Groupon acquired India’s SoSasta.com and renamed it as Crazeal.com.

And so it seems that e-commerce is not about customers buying goods. It is about firms shopping
for others. Industry trackers say leading sites are gobbling up rivals to build size, or acquiring
customer niches either to add product segments or to get technologies that help efficient
operations.

In the game in which future share issues are on the radar for bigger players, the smaller ones
often prefer to cash out than be crushed in lonely pursuits in an aggressively competitive game.

At stake is a huge market will growing potential because India has 900 million mobile phones,
with a big chunk of that growing up from voice talk to Internet, wile the current Web user base at
more than 100 million is in itself a significant number.

Industry estimates say India’s e-commerce market will zoom from the current Rs.51000 crore to
Rs.10,20,000 crore in revenues by 2020. The race lead to buyouts-often at the cost of
profitability.

“At present sites are falling over each other to offer deep discounts, but you do not survive only
through discounts. This only creates a disloyal discount shopper who moves from one site to
another in search of the cheaper deal,” said Mahesh Murthy , managing partner of investment
firm Seefund Advisors. Murthy added that sites without a credible differentiation strategy and
loyal customers base would bleed-and will be up for grabs.

Experts say acquisition of other sites is also a good strategy to built brand and broaden a loyal
customer base. Snapdeal.com snapped up eSportsbuy.com to get access to its large catalogue of
sports and fitness products. Flipkart.com started out with books, added cameras and mobile
handsets and then got Letsbuy.com to acquire muscle in electronic goods, while Groupon’s
buyout was to enter India.

“There in no room for newer players in the general category but there is space for niche category
players,” he said. This has been observed by Prashanth Prakash, partner at Accel partners, which
has invested in Flipkart.com.

Private enquiry is doing a huge amount of work backstage. Venture capitalists say they more
than doubled the funding level in e-commerce over the past year, and the average size of
investment has ranged from Rs.20 to 40 million.

However, having a deep pocket is no guarantee to success. “Money can only delay your death.
The only key to survive is to have a credible differentiation strategy,” Murthy said.

Size is not everything, but could help if investors have a sense of timing. “As the e-commerce
companies grow and get brand loyalty the valuations are expected to increase even further. It will
be the time when we can offload our stake, for hefty profits,” a venture capitalist with significant
stake in leading e-commerce site.

Hundreds of Internet startups went bust in 2000 and 2001 in the “dotcom bubble” and comparing
the current e-commerce rush to that may not be farfetched said Shailen Amin, co-founder and
CEO of footwear sites Bestylish.com.

“There are a lot of guys in this business who don’t have a retail background. They are form
either consulting or technology. So one should ask if they are really qualified to run e-retail
businesses.”

In the world where old-fashioned retail meets high-technology and innovative management, the
winners could well be those who understand dimensions.
What the consolidation?

 High operational costs affect profit margins.

 Most e-commerce sites compete on deep discounts, which hit their margins.
 Some firms feel the time is right to cash in on brand, customer base.
 Private equity (PE) and venture capitalists (VC) are eyeing safe exit while e-
commerce ventures are still profitable.

What makes a Long-Term Player?

 Loyal customer base, fundamentally strong business models, clear product/service

differentiation.
 Deep pockets to tide over initial gestation period.

Challenges for E-Commerce Sites

 Low customer loyalty

 High returns rates on cash-on-delivery
 High cost of customer retention

State of Play

 Acquiring site is a good way to built brand, broaden loyal customer base and add
categories.
 The companies that are selling have real valuations, real transactions and real customers,
and are not based on eyeballs.

E-commerce companies in India offers the most tangible and finest e-commerce solutions,
provide high end e-commerce solution taking utmost care of the privacy and security of the e-
commerce website. E-Commerce service includes shopping carts, database programmers,
graphic design services, graphics, e-business, Flash designs etc.

Top ten e-commerce companies in India

  20North.com:

This website offers variety of products like electronics ,books ,music ,movies ,car accessories.
The site also offers lucrative deals. Log onto the site to shop. Happy Shopping!!!

 99labels.com:

This site offers many fashion and luxury brands at good prices. Check this site for more brands .

 Dealsandyou.com:

This site offers various kinds of deals be it holidays, shirts etc. Also this site gives heavy
discounts on regular basis that cab be profitable for the shoppers. Browse this site for more.

 Fashionandyou.com:

This site also is a great place to shop and that too sitting at home. Also this site declares sale and
heavy discounts almost every day. Sign Up today to get more deals.

 Flipkart :

This site offers various kinds of products and that too at one place. Mobile, its accessories ,
books, camera and laptop accessories. and many more things are available on this site. One can
find deals for home appliances also that are available at affordable prices. Check this site

 Indiangiftsportal:

This is known for providing gifts for various occasions like birthdays ,anniversary, wedding,
bhai dooj, diwali and many more .Also flowers, cakes ,chocolates and many more things are
offered by this site. Browse it today to send gifts to your loved ones.
  MagazineMall:

This company specifically deals in magazines and one can get magazines of different and
unique categories like Gardening/Housekeeping, lifestyle, fashion, luxury, current affairs
and many more.

 Bindaasbargain:

Here new deal comes everyday at 10 am and it is India's first One Deal A Day online shopping
site.Check out the site for new deal. Happy Shopping

 Buytheprice.com:

The site offers Mobiles, Computers, Cameras, Home Appliances ,Life style, Audio and Video
and much more. Variety of products are available under each category.

 Perfume2order:

It has categories like Perfumes for Men, Perfumes for Women, Deodorants & Deo Stick,
Perfume Gift Set, Designer Wallet & Belts, Flowers, Handbags & Clutches, Sunglasses and
many more things.
E-commerce in Global Sourcing Scenario
What Is E-commerce And How Does It Augments Global Sourcing?
E-commerce or electronic commerce, as it is popular, allows domestic as well as international
trade over the Internet. The advent of E-commerce is boon for global sourcing and import and
export. The boost to global sourcing and import/export through E-commerce is because of its to
conduct online marketing, monitoring supply chain and monetary & data transaction in a
dependable manner.
Evolution of E-commerce with Global Sourcing?
It is hard to tell whether import/export volume has swelled because of E-commerce but sure it
made global sourcing easier to monitor with its evolutionary phases. Three decades ago, it
facilitated fund transfers- albeit electronically besides facilitating exchange of POs and invoices
in international trade. Electronic teller machines are the recent manifestations now overtaken by
internet creditcard processing and endorsement of unsigned invoices even in international trade.
Why is E-commerce Popular in International Trade and Import/Export?
Looked at from both import and export traders' perspective, international trade is easier
conducted electronically. Here are the points why present international trade depends much on E-
commerce.

 Quick and ease of setting up E-commerce storefronts for both global sourcing as well as
import/export.
 Automatic running off of an import and export outfit without having to recruit many
staff.
 Global sourcing agents/companies can evaluate/list import/export vendor Online.
 Software assisted documentation for each global sourcing and import export transaction
 Ability to handle multiple, quick and secure data and money transaction crucial to
international trade, simultaneously

In international trade, global sourcing happens to be one of the chief aspects of import and export
business. Global sourcing is an integral part of B2b scenario and has essentially transformed
world economies as well as boosted business in a great way. Nonetheless, it is also giving great
transformation to the work culture around the globe with China playing a lead role in global
sourcing. Nevertheless, it is also transforming work cultures around the world silently with
China business playing a major role. Being an extension of open market dynamics, global
sourcing facilitates the export and import of goods to be in the reach of several small and
medium enterprises in different countries. In this b2b scenario, E-commerce plays an active role
in the global sourcing where the business houses are putting in deep efforts and reaping the
benefits. In this rally of export and import, traders happen to claim the share of the pie in global
sourcing.
E Commerce & Global Sourcing
 Global sourcing is one of the widely known strategies of ensuring smooth business and
access to markets in a cost effective manner. In such a scenario, E-commerce has brought
in a new transformation. It has added to advantages like removing the barriers of time
 zones, differences in costs, geographical locations etc. This has resulted in a major push
in development in infrastructure, technology and several other sectors across the globe.
As we see, E commerce is driving the export and import and propelling the economic
growth of numerous developing as well as developed nations. Business strategies are
becoming easy to execute and business houses are having a wide range of options from
where they can make their choices.
 E-commerce has made the path of business smoother and has facilitated not only in lower
cost, but also resulted in procuring material from places where there is specialization.
Moreover, business negotiations are easier and decisions are quicker due to this boon.
Driving the import and export business in this global sourcing scenario has opened new
frontiers for higher growth. The ease in supply chain is one of the best advantages that
has come from e-commerce in the global sourcing scenario.
 China, a major player in the global sourcing scenario has reaped several benefits in the e-
commerce enabled era. The use of internet has facilitated trade and boosted it at an
immense rate. Business from all over the world has been bagged by this country in spite
of the competitive market. Chinese traders have minted fast money and are still running
in that race.

Security concerns in Global Sourcing

E-commerce is not without security concerns, loss/misuse of encrypted data which are still being
seriously being viewed by import/export operators before engaging in international trade
electronically. The truth is E-commerce providers employ SSL (Secure Sockets Layer) to
encrypt data/money (remember banks) transfer from your desktop to your clients'. You can say,
E-commerce is secure for both import/export operators as well as global sourcing agents alike.
E-commerce has arrived on the global sourcing scene as both import and export and international
trade partners are accepting it. Despite its growing stature and popularity E-commerce is still
thriving in retail sector domestically and the international trade needs to cover a long distance
before it catches up. Another reason for import/export operators' leaning towards E-commerce is
the growing costs of delays in processing POs and invoices through traditional methods which
render global sourcing useless.
E-commerce: A Boon for the Current Economic Downturn
E-commerce: A Boon for India
By the end of 2011, the e-commerce market in India had clocked close to Rs 50,000 cores. It is
interesting to consider whether the global economic downturn may have negatively impacted the
growth of e-commerce or possibly accelerated it as consumers look to new online channels
which can often deliver greater value than traditional stores. Today, even though there are less
than 10 million internet users who are actually engaging in e-commerce activities, there are
about 150 million internet users in India or around 75 million households that are ready for e-
commerce. The growing reach in terms of internet connectivity to the interiors of India coupled
with the positive experiences of end consumers when buying online beyond the metros and big
cities are key drivers of the e-commerce boon in India. Businesses in even the smallest towns
and villages are becoming increasingly aware of e-commerce and are excited by the growth
potential. The growing penetration of e-commerce along with positive consumer experiences is
reflected in a trend towards higher value online purchases. Today, consumers across urban India
are confident enough to make purchases that exceed Rs 20,000-25,000. Earlier, the same
shoppers stayed in the Rs 2,000-5,000 ranges. According to one study almost 57% of business
for e-commerce product sites came from tier I, tier II and tier III cities while the eight metros
accounted for the remainder 43%. The same pattern was visible in the service sites too, with tier
I, tier II and tier III cities contributing 54% of revenue versus 46 % by the eight metros.
According to a report by the IAMAI, the current e-commerce market in India is around US$ 10
billion. But with different levels of adoption, the market has the potential to grow anywhere
between US$ 70 billion – US$ 150 billion under one scenario and at another level it can grow
between US$ 125 billion – US$ 260 billion by 2024-25.
E-commerce: The world over
Globally, the scenario is much the same. Brazil, one of fastest growing economies in Latin
America, is seeing considerable growth. According to a recent report, it estimates business-to-
consumer (B2C) ecommerce, including both retail e-commerce and online travel sales, will total
to $18.7 billion in 2012, a growth of
21.9% over the previous year. Brazil will account for more than half of the total B2C e-
commerce sales in Latin America through 2013, thanks in large to its huge populace and growing
number of online buyers. Retail e-commerce itself in the U.S.is predicted to grow at 17% and it
will likely account for $200 billion in sales in 2012 , according to a presentation at a popular
forum. Retail e-commerce totalled $48.2 billion during the third quarter of 2011; an increase of
13.7% compared with the third quarter of 2010, according to estimates from the U.S. Census
Bureau. 2011 also saw the European online market boom despite the floundering euro.
Germany’s online trade increased 17% in 2011 to €21.48billion compared to 2010, crossing the
€20 billion mark for the first time, outstripping traditional mail order sales by 10%. A similar
growth rate of 10% to 15% is expected in 2012. In the global scenario, China is fast emerging as
the biggest player in e-commerce. According to an e-commerce report, by 2015, it may well
surpass the U.S. In an astonishing illustration of its online growth rate, China has added the
equivalent of the entire population of France in internet users in each of the last four years. It
will add the equivalent of the entire population of Canada as e-shoppers in each of the next four
years. China is projected to rise from 145 million e-shoppers today to 329 million by 2015.
Key reasons for the success of e-commerce
 Shopping 24x7: E-commerce facilitates shopping anytime, anywhere and for almost
anything desired. Busy consumers prefer this to the restrictions of when a mall/shop is
open and the need to physically travel to a shop. Online business takes shopping a step
further by taking itself to the customer creating conveniences of shopping anywhere and
at anytime.
 Reduced operational cost: Since the entire business can be moved online, the need for
physical stores has become obsolete. Less infrastructural investment and associated
labour costs drives up the profit margin. The seller can then transfer this benefit to the
customer in the form of discounted pricing which boosts the appeal of online shopping.
 Easy to compare: It is far easier and quicker to compare prices of goods online,
equipping the customer with the information to decide the right price or terms for
themselves. The comparison is not restricted to items from a single seller, or a single
region. One can explore products across global markets via e commerce.
 Safe & secure:Customers can trust the process of going online and purchasing only when
transactions are fast, convenient and secure. A high degree of integrity is possible only
when the online electronic payment provider is reputable and trustworthy. In India, all
payment transaction providers are required to comply with the security requirements laid
out by the Reserve Bank of India making the system more robust and reliable.
  Increased reach for the merchant: Just as the customer finds them able to venture
across geographic markets, the merchant too is able to display his product to customers in
new territories. Market penetration also becomes far more achievable with e-commerce;
it is possible for a merchant in Mumbai to extend his reach to north-eastern cities or even
rural villages that are now connected by the online network.
 Social media trend: In India, with the increasing propensity of social media, businesses
have now begun to engage their customers on social networking portals such as
Facebook. Promotions, sales and new products are increasingly showcased through such
channels and mobile apps are now available that suggest products to users based on their
profiles. These are likely to be rapidly developing marketing channels for the future.

The e-commerce world is changing rapidly in the digitized world. These e-commerce
developments may have been accelerated by the global economic downturn which may be
driving consumers to find new ways of reducing their costs of living. The online channel offers
a clear value proposition for both merchants and consumers making it the most sought after and
exciting business model today
Factors affecting influence distribution and forms of global e-commerce

Stage Economic and infra Socio cultural Political legal Supranational

structure related factors factors institutions
factors

Internet adoption Per capita Literacy rate and The internet's UNDP-introduction of the
computer skill democratic
GDP internet in
Nature
many countries
incompatible
with
authoritarian
political

Availability of English language structures GATS-competition

telephone and skill
 computer in telecom

sectors

Pricing structure Viewed as a Tariff and non ITA- reducing the price of
tariff barriers to ICT products.
tool of
ICT
cultural
products
imperialism in
some

Buying/selling Availability of credit Intellectual Redress UNCITRAL model law

online property mechanisms in
protection case of

problems in

online
transactions

Advertising and Operating speed of Influence of Ban on some Products can be advertised
searching phase website in and searched
computer and modern language and

size symbols used on authoritarian globally on

site visited and regimes
GTPN of
purchase
decision UNCTAD

Payment phase Penetration rate of Forms of Governments' UNCTAD smart card

credit cards payment: concern on

check, wire the outflow of

foreign currency.
transfer, cash

on delivery

etc,
Delivery phase Delivery means and Products stolen Tariff and non- Electronic delivery  free
some tariff
infrastructure of custom
countries barriers
duties in WTO member

In present scenario E-Commerce is playing very essential role in the online business. Although it
is one of the best & cheapest intermediate for reaching out to new customers in the online
market, if e-commerce implemented effectively, it also offers a smart way of doing online
business & expanding it more.
An online business eCommerce podium is planned & implemented to make the most of its reach
to potential customers and provide them with a convenient, satisfying & protected shopping
experience.
Advantages of E-Commerce to the Online Business
 E-Commerce helps to Increase the sales revenue to the business
 Business people can spend less money and earn high profits with e-commerce
 It is very Easier to scale up online
 Easily we can track the segment of customers who are happy with purchasing goods
through online
 Avoid losing sales to competitors who are online
 Instantaneous global sales presence in quick time
 We can Operate the business in 24 *7 basis
 Easily we can increase our business customers
 We set up shop anywhere in the world, self-governing of geographical locations
 Inexpensive way to turn your Web site into a revenue center
 Reduce Customer Support costs via e-mail marketing & customary newsletters
 We can create customized mailing list
 Easily we can drive free traffic to the website
 Instantly we can develop our business across the internet by using various e-commerce
strategies
 Customers can easily buy their products by using different payment gateways
 Develop more shopping carts by using e-commerce
 We can easily promote our business website by using various promotional activities such
as Search Engine Optimization, Pay Per Click Management, Email Marketing, Social Media
Optimization, Online Banner Advertisement, Online Branding and Affiliate Management
etc

B2C - business to consumer

In the Australian context B2C (business to consumer) trading activity has been slow to
take off as at first consumers had doubts about the security of credit card transactions.

Initial B2C trading focused on music CDs, software and books - items which were
compact and easily shipped and where prices could be slashed once the retailer's cut was
taken out of the margin. The Amazon book store would be a good example of this. These
products pushed the perimeters of the market out for goods bought on-line.

Books and CDs are relatively generic products. A CD bought in the US will have the
same music and quality as one bought locally (the exception is the cover art) and so there
is no doubt in the consumers mind exactly what the product is. This is not the case with
clothing, where sizes can confuse the purchase decision... and where tactile senses figure
strongly in the purchasing decision.

Ebay has really transform purchasing behaviour on the web. Many people have made
their first ecommerce transaction on Ebay. Many people sell on Ebay too, given raise to
the work-from-home/drop shipping model of ecommerce.

Interestingly though B2C transactions of previously localised or hard to find products can
be extremely strong. If you have a unique product that is highly relevant to a niche
audience, you are likely to do very well on the web.

Although sales are increasing rapidly on the Internet, the volume of turnover figures
continue to fail short of industry estimates. But as retail web sites become more navigable
and privacy policies are displayed, more people will be drawn to Net-based purchasing
by lower prices and convenience.

B2B - business to business

On the Internet, B2B (business to business) is the exchange of products or services

between businesses rather than between businesses and consumers.

Although early interest centered on the growth of retailing on the Internet, forecasts are
that B2B revenue will far exceed B2C revenue in the near future.

According to studies published in early 2000, the money volume of B2B exceeds that of
B2C by 10 to 1. Over the next five years, B2B is expected to have a compound annual
growth of 41%.

Payment Gateways

Both PayPal and Paymate offer credit card to bank account payments. Using one of these

services you can invoice a customer, they can pay on Paymate and the funds will be
deposited in your bank account ... less a transaction fee.

Unlike a credit card merchant facility you will not have ongoing, minimum monthly
fees... and the transaction fee is better than what most card companies offer small
merchants. Additional these service are being backed into other ecommerce sites and
shopping carts. Ebay for example uses Paypal to process some payments.

The Rise and Rise of Auction Sites

Auction sites such as Ebay and TradeMe have done an enormous amount to get ordinary
people involved in online trading. Today many Ebay merchants are establishing their
own web sites to avoid Ebay and Pay Pal fees. They have learnt about how to present
their product in their Ebay store and what issues are important to their customers in
purchasing their product and now they are ready to start their own web site.
 Security

On the Internet, security is handled by passing "keys" between Internet server and client
browser. When entering a secure site your browser is passed a public key by which
transactions between you and the web server are encrypted. The servers key is always
kept private.

On your web site security can be handled two ways - depending on your budget. You can
"piggyback" on someone else's "key" or you can register and pay for your own key or
SSL certificate at Thwate or Verisign.

Generally today businesses who host web sites offer access to a secure server and you
can use their server and secure certificate for less than if you registered and paid for your
own key.

However the person browsing your site will notice the URL change to one they do not
recognise - or trust. This may put your customers off (although there is no evidence of
this). Therefore one of the advantages of buying your own key would be to have a URL
for your secure pages that is consistent with the rest of your site.

Presently, in Australia, Verisign may sell you a key for over $800 while foreign
ecommerce providers like Instant SSL can sell it for $150. Although Verisign will argue
that their key comes with a range of value add benefits, the bottom line is the product, i.e.
the key, is the same.

The E-Commerce Market: Size and Trends

Since mid 1990’s traditional traders followed large Computer Manufacturers into the new sphere
and today you can buy practically anything through the Internet: from a bunch of flowers to a
car. The only exception seems to be a trip to Mars. Today E-Commerce market is huge and still
growing. The E-commerce market is totally democratic. This is perfect capitalism: if you sell ‘
you win, if you don’t sell ’ you loose. It’s all about marketing and economic rules of demand and
supply. Certain products or services appear more suitable for online sales; others remain more
suitable for traditional sales. Many successful purely virtual companies deal with digital
products, music, movies, education, communication, software, photography, and financial
transactions. Examples of this type of company include Amazon.com, Google, E-Bay and
Paypal. Products less suitable for E-Commerce include products that have a low value-to-weight
ratio, products that have a smell, taste, or touch component, products that need trial fittings ’
most notably clothing ’ and products where color integrity appears important. Nonetheless,
clothing sold through the internet is big business in the U.S. According to eMarketer’s annual
report in 2006 the E-Commerce market size in Europe has grown to 106 billion ($133 billion).
Analysts say that it is very likely to go on increasing and display a very fast rate of annual
growth ’ up to 25%. The situation will be stable for at least five years and the market will reach
the point of ’323 billion ($407 billion) by 2011. Britain, France and Germany prevail in the
European E-Commerce market. These countries have the largest share in the total figures
transactions ’ up to 72%. British E-Commerce market ranks first and analysts believe it will
reach $114 billion in 2011, which is 41% higher than the figures of 2006. Germany holds the
second place. However, it is first in the number of online-customers ’ there are as many as 3
million. Some researchers also note that in the next five years the European market might
increase significantly due to the E-Commerce growth in the countries like Italy, Holland and
Spain. A wide range of goods and services can be sold through the Internet. A large piece in this
pie is held by Information Technology. However, the share of other niches (for instance,
traveling and finance) is unexpectedly high. Real estate, computers, hardware and software,
tourism, and financial services comprise the top of the list
The Ecommerce market is expected to touch 323 billion ($407 billion) by 2011, E Tailing or E
RE-tailing market is only about 1150 Crore INR according to a survey conducted by Internet and
Mobile Association of India and Indian Market Research Bureau (IMRB). The top E-tailers in
India are indiatimes.com, fabmart.com, rediffshopping.com. They have managed to retain their
lead due to innovative business strategies, supply chain model and changing urban lifestyles
Logistics Consumers find a product of interest by visiting the website of the retailer directly, or
do a search across many different vendors using a shopping search engine.
Once a particular product has been found on the web site of the seller, most online retailers use
shopping cart software to allow the consumer to accumulate multiple items and to adjust
quantities, by analogy with filling a physical shopping cart or basket in a conventional store. A
"checkout" process follows (continuing the physical-store analogy) in which payment and
delivery information is collected, if necessary. Some stores allow consumers to sign up for a
permanent online account so that some or all of this information only needs to be entered once.
The consumer often receives an e-mail confirmation once the transaction is complete. Less
sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card
numbers are not accepted by e-mail, for security reasons).
Top ten e-retailers
1.Amazon.com
2. Planetrx.com
3. Ticketmaster.com
4. Gateway.com
5. Barnesandnoble.com
6. Mothernature.com
7. Iprint.com
8. Hallmark.com
9. Buy.com
10. Bigstar.com
Indian e-tailers: Rediff.com, Jaldi.com, Fabmart.com, Tsnshop.com and Satyamonline.com.
Payment
Online shoppers commonly use credit card to make payments, however some systems enable
users to create accounts and pay by alternative means, such as:
Debit card
Various types of electronic money
Cash on delivery (C.O.D., offered by very few online stores)
Cheque
Wire transfer/delivery on payment
Postal money order
Reverse SMS billing to mobile phones
Gift cards
Direct debit in some countries
Some sites will not allow international credit cards and billing address and shipping address have
to be in the same country in which site does its business. Other sites allow customers from
anywhere to send gifts anywhere. The financial part of a transaction might be processed in real
time (for example, letting the consumer know their credit card was declined before they log off),
or might be done later as part of the fulfillment process.
Some online retailing sites in India
E Bay is heading the race of online retailers. In this race it has become very difficult to determine
the online retail store that makes the products available at convenient and cheap rates. From this
very difficulty has cropped up comparison sites. Comparison is done on the basis of an index
which is constructed from the data available from different shopping sites. The bechna.com and
the ultop.com are such sites though many more sites are entering this zone.
The comparison sites not only help to choose the online sites that would be providing the best
deal but also offline as well. Sites like Rediffproductsearch, Compare India.com have
constructed the data that is taken from the conventional local retailers. These sites help the
customer in finding out the local retail store that will best suit his purpose.
Design
Why does electronic shopping exist? For customers it is not only because of the high level of
convenience, but also because of the broader selection; competitive pricing and greater access to
information. For organizations it increases their customer value and the building of sustainable
capabilities, next to the increased profits.
Information load
Designers of online shops should consider the effects of information load. Mehrabian and Russel
(1974) introduced the concept of information rate (load) as the complex spatial and temporal
arrangements of stimuli within a setting. The notion of information load is directly related to
concerns about whether consumers can be given too much information in virtual shopping
environments. Compared with conventional retail shopping, computer shopping enriches the
information environment of virtual shopping by providing additional product information, such
as comparative products and services, as well as various alternatives and attributes of each
alternative, etc.
Two major sub-dimensions have been identified for information load: complexity and novelty.
Complexity refers to the number of different elements or features of a site, which can be the
result of increased information diversity. Novelty involves the unexpected, suppressing, new, or
unfamiliar aspects of the site. A research by Huang (2000) showed that the novelty dimension
kept consumers exploring the shopping sites, whereas the complexity dimension has the potential
to induce impulse purchases.
Consumer expectations
The main idea of online shopping is not in having a good looking website that could be listed in
a lot of search engines and it is not about the art behind the site. It also is not only just about
disseminating information, because it is all about building relationships and making money.
Mostly, organizations try to adopt techniques of online shopping without understanding these
techniques and/or without a sound business model. Rather than supporting the organization’s
culture and brand name, the website should satisfy consumer's expectations. A majority of
consumers choose online shopping for faster and more efficient shopping experience. Many
researchers notify that the uniqueness of the web has dissolved and the need for the design,
which will be user centered, is very important. Companies should always remember that there
are certain things, such as understanding the customer’s wants and needs, living up to promises,
never go out of style, because they give reason to come back. And the reason will stay if
consumers always get what they expect. McDonaldization theory can be used in terms of online
shopping, because online shopping is becoming more and more popular and website that wants
to gain more shoppers will use four major principles of McDonaldization: efficiency,
calculability, predictability and control.
Organizations, which want people to shop more online for them, should consume extensive
amounts of time and money to define, design, develop, test, implement, and maintain website.
Also if company wants their website to be popular among online shoppers it should leave the
user with a positive impression about the organization, so consumers can get an impression that
the company cares about them. The organization that wants to be acceptable in online shopping
needs to remember, that it is easier to lose a customer then to gain one. Lots of researchers state
that even when site was a “top-rated”, it would go nowhere if the organization failed to live up to
common etiquette, such as returning e-mails in a timely fashion, notifying customers of
problems, being honest, and being good stewards of the customers’ data. Organizations that
want to keep their customers or gain new ones try to get rid of all mistakes and be more
appealing to be more desirable for online shoppers. And this is why many designers of webshops
considered research outcomes concerning consumer expectations. Research conducted by Elliot
and Fowell (2000) revealed satisfactory and unsatisfactory customer experiences.
SWOT analysis
Strengths
a. Ability to compete with other companies global and locally
Implementing an e-commerce business solution allows companies to expand their customer base
to a global level without considerable time or expense.
b. Specialization and niche selling
The larger customer base created by online sales allows e-tailers to specialize in certain niche
products that could not support a more traditional business model
c. Low overhead cost and low barrier to entry
Startup costs for an e-commerce retail operation are a fraction of the costs of starting a
traditional brick and mortar company.
d. Direct consumer communication
This form of commerce allows the business to maintain a higher level of consumer
communication. The communication happens when the order is placed, when the order has
shipped and then at a point in the future, should the customer opt-in to receiving regular email
communication.
Weaknesses
a. High Customer Expectations
Small businesses can appear to be large companies on the Internet.Customers have no way of
gauge the business‟ actual level of manpower and resources. This leads to customers that
demand the same level of service from business with 1-2 employees as they would from industry
giants like amazon.com.
b. Search Engine Unpredictability
Web retailers live and die by organic search engine placement. The higher the store is placed on
the search engine result pages (SERPs) translates to more traffic and sales. Search engines
regularly change their ranking systems and this can cause major fluctuation in placement and
create an unpredictable environment.
Opportunities
a. Global Exposure
Adding an e-commerce component to a business allows the company to sell their products to a
global market.
 b. High Availability:
A 24/7 business Selling on the Internet allows the company to take orders around the clock on
every day of the week. Orders can then be filled and processed during set business hours.
c. Strong business-to-business networking
Websites allow for business-to-business exchange links to increase traffic and search engine
placement for each businesses’ sites. This opens lines of communication on a business-to-
business level and aids in the cooperation between companies.
d. Industry Growth
Retail sales on the Internet in America have seen double digit growth each of the past 8 years.
Growth is expected to continue at high rates and having a business online allows the merchant to
be in a position to benefit from this expansion.
Threats
a. Competition
The low barriers and the comparatively low overhead costs allow a for a relative easy entry into
the market. This increases the level competition and can cause a reduction in prices and profit
margins. Threats are produced not only by other retailers within the same industry but also by the
manufactures that supply the products that the retailer sells. It is not uncommon for online
retailers to directly compete with the manufacturer of the lines they carry.
b. Innovation
Future innovation could have an adverse effect on e-commerce
businesses. c. Fraud
Some consumers are leery of doing business online out of concerns of fraud and misuse of their
financial data. This alienates an entire segment of the population from conducting business via
the Internet.
4.Privacy Concerns
Some consumers prefer not to give any personal information out over the Internet because of
fears that the information will be misused, lead to spam email or identity fraud.
5.Future Legislation
Internet sales only have tax applied to the purchase if the buyer and seller reside in the same
state. Considering the growth and amount of tax revenue lost to e-commerce, the federal
government and individual states could write legislation to impose tax on all online sales. This
would remove one incentive to conducting business online.
Amazon.com Overview
Amazon.com was one of the first major companies to sell goods over the Internet and has
become a worldwide established name. Amazon.com is an American e-commerce company
that is based in Washington. It was founded by Jeff Bezos in 1994 and began as an online
bookstore but due to its success, Amazon has diversified into other product lines and services
such as groceries, electronics and Merchant Program (see Appendix 1 for detailed portfolio).
Amazon.com’s stock price has fluctuated in recent years from $105 in 1999 to $5 in 2001
(Lauden and Traver, 2000). Amazon.com has developed separate websites for Canada, UK,
Germany, France, China and Japan. Amazon.com vision is to become (Amazon.com, 2007):

“Earth’s biggest selection and to be Earth’s most customer centric company

Analysis
External Analysis
The external environment is referred to as the macro-environment. This includes the
broad environmental factors which will affect organisations at various levels. It is
important to consider the potential impact of the external factors on the individual
organisations (Johnson et al, 2006, P65).

PESTEL Analysis
PESTEL analysis is used to identify how future trends in the political, economical, social,
technological, environmental and legal environments might influence an organisation.
Industry and competitor analysis
The analysis on industry and competitor environment is important for organisations, because it is
useful for managers to understand the competitive forces acting on and between the
organisations in the same industry (Johnson et al., 2006, p77).

Porters Five Forces in the E-Retailing Industry

Porter’s Five Forces analysis is used to assess the attractiveness of different industries, and
therefore, it can help in illustrating the sources of competition in a particular industry
Competitor Analysis
Given the scope of Amazon.com’s product range, there are hundreds of websites that
Amazon.com competes with. However, for the purpose of economies of scale, many online
retailers are either increasing product line breadth for existing markets, penetrating new markets
with existing products or both. In order to capture the competitiveness of such firms within the
online retail industry, strategic group analysis places emphasis on product line breadth and
geographic markets served (see figure below). From this perspective eBay.com remains a top
player within the group with over 29 geographic locations and 22 product categories.
Amazon.com boasts of 7 geographic locations and 11 product categories. Amazon.com’s
position intensifies the urgency to expand both product line breadth and market presence in its
competition with leader eBay.com (Pitts and Lei, 2006).

E-Retailing: Strategic Group Analysis

Internet Usage
Show that the five countries with the highest internet usage are USA, China, Japan,
Germany and India. Amazon.com have a presence in all of these countries except for
India. This indicates a potential opportunity for Amazon.com.
GE Matrix
A GE Matrix has been used to identify the attractiveness and competitive position of the markets
that Amazon.com operates in, using the indictors as identified by Johnson et al (2006, p320). As
previously discussed, all markets are facing similar conditions, however China and the USA
appear the most attractive as they are the largest and most dynamic markets. China and Canada
have the weakest positions within their markets, suggesting that investment is required for
improvement. The other markets have strong positions within the industry.
Internal Analysis
Internal analysis provides a useful method to establish the relationship between Amazon.com’s
resources and capabilities (internal strengths), and how this is used to create value for the
customer. The internal analysis can also help to identify the limitations within Amazon.com’s
operations (Johnson et al, 2006).
The Value Chain

The value chain analysis undertaken examines the operational effectiveness of activities that
enable Amazon.com to perform better than its competitors; i.e. the distinctive value chain
activities that are difficult to imitate. Using the framework proposed by Amit and Zott (2001)
this analysis focuses on ‘value creation’ and ‘transaction cost economies’; where Amazon.com
configures its value chain activities to create unique value for customers, reduce its costs of
carrying out these activities and reduce the cost of its customers’ transactions. The figure below
indicates examples of how Amazon.com has created value and reduced costs in its value chain
activities.
Strategic Options
Strategic Option 1: Market Development - Acquire a growing, profitable e-retailing company
in India to take advantage of the growing market.
Suitability

 The PESTEL analysis reveals consumer spending is rising in India (Times Online, 2007)
 From the analysis of global internet trends India ranked as the fifth highest in Internet
usage (Internet World Stats, 2007)
 Government policy has targeted three million broadband users, therefore increasing
consumers’ likeliness to shop online (Euromonitor, 2007)
 From the strategic group’s analysis competitors such as Wal-Mart and Tesco aim to
increase their geographic scope and thus may enter the Indian market (Research and
Markets, 2005). Therefore it is vital for Amazon.com to gain from first mover advantage
to establish its presence

Feasibility

 The SWOT (Appendix 4) reveals that one of the strengths of Amazon.com is the
experience and knowledge in successful acquisition and integration such as
booksurge.com and dpreview.com and Brilliance Audio
 Amazon.com need to borrow to finance the acquisition, which may be
 problematic as they are already highly geared at 68%
 By acquiring an Indian e-commerce company they will also be acquiring the
local knowledge

Acceptability
 Internet users are forecasted to increase 254% from 2006 to 2015, presenting a growing
market and, therefore reducing risk and increasing the potential of high returns
(Euromonitor, 2007).
 Shareholders are more favourable towards long- term investments, such as this strategy
therefore there is a higher chance of acceptability (CEO Letter to Shareholders,
Amazon.com 2006 Annual Report, see Appendix 5)
 By acquiring a company there is the risk of cultural conflict

Strategic Option 2: Service Development - Providing a ‘greener’ delivery option.

Consumers will be given the choice of selecting the standard delivery option or the ‘greener’
delivery option. The ‘green’ option means that the items will be delivered in a biodegradable
plastic container. The consumer will be encouraged to return the box after use in return for a
‘green point’. After collecting a certain amount of points, the consumer will be sent an e-
voucher to be spent at Amazon.com. Boxes will be re-used by Amazon.com in future
deliveries, which in the long-term will reduce cost of packaging and ensure less wastage.

Suitability
 This strategy will address the issue of increased environmental awareness, as
highlighted in the PESTLE analysis.
 This is an important issue for the e-retailing industry as all products need to be
sent to customers.
 This strategy builds on Amazon.com’s past efforts to maintain environmental
awareness as highlighted in the Resource Based View analysis.

Feasibility
Biodegradable plastic containers, whilst currently available, will require extensive research
by Amazon.com to ensure that all products can be transferred safely to consumers.
Amazon.com has an active research and development department which can be utilised for
this purpose. Amazon.com has highly experienced workers (as shown in the Value Chain)
who should be able to create and manage the new ‘green points’ system and e-vouchers.

Acceptability
There is a risk that the consumers will not return the boxes for re-use. The cost-benefit
mentioned above will therefore not be obtained. As society becomes more socially aware,
consumers will want to make a difference through their packaging choice. Governments may
take an interest in the greener initiative and may support Amazon.com in some capacity. Value
creation and the possibility of reduced costs should lead to increased returns for shareholders.
Strategic Option 3: Product Development This option recommends the addition of prescriptive
contact lenses to Amazon.com’s product range.

Suitability
 Competitor analysis has identified that Wal-Mart.com and Tesco.com offer this service,
so by choosing this strategy Amazon.com will be able to be competitive.
 The US market for eyeglasses and contact lenses has grown by 3.8% since 2003 to
reach a value of US$19.2 billion in 2004 (see Figure 14)
 An estimated 60% of the US population requires vision correction. This number is
expected to grow as more consumers spend more time working with computers
(Euromonitor, 2008).
 The graph below shows the increase in contact lenses in the geographic regions where
Amazon.com has a presence.
Feasibility
Amazon.com’s value activities (as explained in Value Chain Analysis) include successful co-
operation and joint ventures with other companies. In the case of contact lenses a partnership
with healthcare professionals is important.
Acceptability
Sales of optometric products will increase customer choice in healthcare goods. The initial
investment for this option will be high, however, long-term profitability reduces the overall
financial risk associated.
Strategic Option 4: Market Penetration in China
Amazon.com entered the Chinese e-commerce market in 2004 by taking over Joyo.com (China
IT & Telecom Report, 2007). However, as the GE matrix indicates, Amazon.com is
underperforming and has lost its position as market leader (Dean, The Wall Street Journal,
2006). In order to address this underperformance, the options below attempt to build a stronger
brand image and increase market share.

Implementation Market Goal

Option1 Extensive marketing through various Raising awareness and

medium e.g. TV, outdoor, Press and brand building
Radio

Option2 Increase product range and suitability Increasing market

through introducing the Merchant share and sales
Programme.

Suitability
The PESTLE analysis reveals a high economic growth in China and high
consumer spending
Global internet trends shows that China has the second highest internet usage in
the world
In the GE matrix, China is the most attractive market for Amazon.com

Feasibility
Amazon.com has the resources in skills, experience and knowledge to undertake global
operations successfully as demonstrated in the UK, German and Japanese markets
Market penetration into China will be less capital intensive than entering a new market
Amazon.com has successfully implemented the Merchant Program in the U.S.
Acceptability
Amazon.com’s investments in China must be fully harnessed to exploit the market potentials
thus reduces financial risks The Merchant Program will create value for the Chinese consumers
since it increases the chances of local merchants to sell specialised or local products Penetrating
the Chinese market will have long term benefits which increases shareholder value
Strategic Option 5: Market Development – Setting up a sales facility via the social
networking website, Facebook. Amazon.com could develop a presence on Facebook to boost
digital media sales. This would involve teaming up with Facebook to create an Amazon
Application. Digital media such as films, mp3s and e-books would be sold via the Amazon
Application and purchased goods would be accessed through Facebook profiles. The Amazon
Application will allow users to create wish-lists that can be sent to friends and family.
Facebook is a global social networking site which is currently undergoing a huge period
growth with more than 150,000 new users sign up daily (TIME Online, 2007); with 44% of
US consumers using social networking at least once a month in 2008 (Publishers Weekly,
2008 p16).

Suitability
This strategy will take advantage of the continued growth in social networking websites (as
shown in the PESTEL Analysis). Gain access to large customer base (Facebook has over 30
million active users) that Amazon.com can target This strategy will also help to increase
awareness and boost sales of digital media.
Feasibility
Amazon.com already has the technology to sell digital media online. Facebook may not allow
Amazon.com to have a presence on the website.
Acceptability
This strategy should boost sales of digital media which will increase profits, therefore
pleasing the shareholders. Users of Facebook will be able to purchase digital media whilst
they are on the social networking website. This provides a quick and easy service for the
consumer.

Strategic Option 6: Market Development into Scandinavia

Scandinavia is made up of four countries, namely, Denmark, Finland, Norway and Sweden with
a combined population of 25 million (Euromonitor, 2008).

Suitability

 Amazon.com demonstrates a well functioning routine in outbound, operations and

inbound logistics as highlighted in the Value Chain Analysis earlier in this report.
 This option will attempt to address the lack of geographical scope in comparison to
its competitors
 Exploit the internet and technological infrastructures and skills in Scandinavia
(Copenhagen Capacity, 2008)
 Global internet trends (Figure 6) show that Europe has the largest internet retail
spend and a presence in Scandinavia will provide a significant brand presence in
Northern Europe
Feasibility
The four markets can be served by a single distribution centre in the region of Skåne as shown
in Figure 16
The four airports, seven harbours and logistic expertise in Skane can be easily
exploited and integrated with the value chain activities of Amazon.com Modern ICT
and IT infrastructures to support services

Strategic Choice/Justification
Our evaluative criteria have identified three viable strategic options; Market Development in
China, Product Development (contact lenses), and Market Development through Facebook.
This report recommends that Amazon.com should focus on improving its performance in
China through market penetration. This can be justified by China being one of the largest
consumer markets in the world and has the potential to grow even larger. Today 77% of
urban Chinese households live on less than 25,000 RMB a year. It is estimated that by 2025,
this percentage will drop to 10% (Farrell, Gersch and Stevenson, 2006). This indicates that it
would be wise to improve Amazon.com’s performance in China now so that it can take
advantage of this growth in years to come. With regards to competition in China, the current
market leader, Dangdang.com’s 3 year strategy of selling at the lowest prices (even if it
resulted in a loss) was due to end in 2007. (Infomaticsonline, 2007). Therefore, it is
recommended that Amazon.com act now in order to take advantage of this change of
strategy. Amazon.com have already spent millions in gaining access to the Chinese market
and so we recommend that Amazon.com aim to improve performance here before investing
heavily in other foreign markets (China Business Feature, 2008). This justifies why we do not
recommend going to India or Scandinavia at this time. According to a recent letter to
shareholders (see Appendix 5), Amazon.com only invest in areas which promise a significant
return and “impact on the overall company”. With this in mind, it is clear that China has the
potential to give Amazon.com the largest return and have a greater impact on the overall
business compared to developing contact lens sales and selling through Facebook. From the
PESTEL analysis constructed for China (See Appendix 6), Amazon.com can highlight the
environmental factors affecting the company performance in China and identify the most
important at the present time and the long term. The main issues affecting Amazon.com’s
performance in China have been presented below:
Main problems identified:
1. Dangdang.com’s strategy in overtaking joyoamazon.com as the market leader was
heavily influenced by price war (Sinocast, 2004).

2. Amazon.com lacks cultural awareness of the Chinese population (Dean, The Wall Street
Journal, 2006).
3. China’s internet regulators have made it difficult for foreigners to participate fully,
giving local Chinese e-retailers an advantage from the offset (Dean, The Wall Street
Journal, 2006)
Strategic Objectives
Regain the status as the market leader by increasing market share from its current position
of 16% to 24% within the next 2 years. Improve knowledge and cultural awareness of the
Chinese population, implementing services which best suits the Chinese market. To secure
at least ten merchants for the Merchant Program within the first year
Final Remarks
 1. The global-local dilemma theory relates to the extent to which products and services may
be standardised across national boundaries or need to be to be adapted to meet the
requirements of specific national markets (Johnson et al, 2006). This is a key area which
needs to be resolved by Amazon.com before the identified potential advantages of
operating in China can be fully realised; Amazon.com’s strategy must be locally
responsive
2. Amazon.com lacks cultural awareness of the Chinese population (Dean, The Wall Street
Journal, 2006).
3. China’s internet regulators have made it difficult for foreigners to participate fully, giving
local Chinese e-retailers an advantage from the offset (Dean, The Wall Street Journal,
2006)

Strategic Objectives

· Regain the status as the market leader by increasing market share from its current
position of 16% to 24% within the next 2 years.

· Improve knowledge and cultural awareness of the Chinese population, implementing

services which best suits the Chinese market.

· To secure at least ten merchants for the Merchant Program within the first year
Final Remarks
The global-local dilemma theory relates to the extent to which products and services may be
standardised across national boundaries or need to be to be adapted to meet the requirements of
specific national markets (Johnson et al, 2006). This is a key area which needs to be resolved by
Amazon.com before the identified potential advantages of operating in China can be fully
realised; Amazon.com’s strategy must be locally responsive.

3 Configuration
Configuration is a key factor in order to ensure the chosen strategies are implemented
smoothly and maintained (Johnson et al., 2006). Each of the elements of configuration
as illustrated in the diagram below, are discussed in the following sections.
Structure
As firms go international, De Wit and Meyer (2005) argue that their strategies must address
two dimensions of the international business context. Should they configure their structures,
resources and processes in order: “To adapt to the international diversity encountered” or “To
overcome the constraints imposed by distinct national systems, structures or behaviours
Considering the current challenges faced by Amazon.com in China, such as tough market
competition and price war with Dangdang.com (SinoCast China IT Watch, 2004), and
unsuited banking and payment systems (China Business News On-Line, 2004), it is important
the market penetration strategy exploits internal expertise in order to adapt to local
challenges. Structuring of Amazon.com plays an important role in the internal co-ordination
of functions, responsibilities and lines of reporting so as to achieve the competitive edge in
the Chinese e-retailing market. By analysing the ‘dimensions’ of globalisation as argued by
De Wit and Meyer (2005), it can be argued that the notion of ‘worldwide similarity’ and
‘worldwide integration’ (p224) do not provide the right framework for market penetration in
China by Amazon.com. These notions purport globalisation as the reduction in variance (i.e.
the products consumed by Chinese consumers are similar to Western consumers) and as the
integration of markets (i.e. tastes and subtle differences of local markets are overshadowed by
global interconnectedness). The argument here is that Amazon.com’s structure should reflect
the notion that globalisation is the geographical expansion into local markets with special
needs to be met. Thus the recent difficulties faced by Amazon.com can be better encountered
by adapting structures to meet local needs of China. Bartlett and Ghoshal (1989) proposed the
integrated network (or Transnational) model to structure organisations where country
subsidiaries have close relationships with international headquarters but also have strong
relationships with other subsidiaries. The advantage of Amazon.com adopting such a model is
to: Balance the need for global standards and devolved decision making