The biggest democracy in the world is
notorious for being one of the least business friendly nations in the world.
With ever changing political scenarios, policies, rampant corruption and high
bureaucratic costs involved, doing business in India is a daunting task for
everyone. Many corporate big shots have found it really difficult to do
business in India and some even have shut down their shops. So how did Amazon
not only survived but flourished in this hostile
environment?
environment?
Challenges
faced by Amazon
Amazon entered India quite late in the
month of June 2013 with Flipkart having already consolidated its position as
the leading player in the Indian e-commerce market. Amazon faced many obstacles
in their path. With government restrictions on the FDI in ecommerce in place,
Amazon had to change their existing inventory-led model. Penetration of
internet and plastic money like Credit Cards and Debit Cards is very low in
India. Moreover, people here don’t prefer making online payments. Another
challenge that Amazon had to face was the presence of competitors like Flipkart
and Snapdeal who had first mover advantage and better understanding of the
nitty-gritties of doing business in the country.
Steps
taken by Amazon
1.
Amazon entered India with a
long term commitment in mind. “In every country that we are present in, we
don’t look at one year or two years from now. Everything we are doing is so
that we are happy five to seven or 10 years from now,” Diego Piacentini,
Amazon’s senior vice president for the international division once said.
Amazon is more patient and is ready to keep a long-term vision in mind and
invest heavily in India which might help it to win the race in the future.
2.
Amazon understands that to
succeed in a foreign country, you have to respect its local rules and
demographics. On his maiden visit to India, global CEO and founder Jeff Bezos
said, “Our job is to adapt to the rules, India is no different.” Amazon has
adopted marketplace model to ensure that FDI rule is not broken. Amazon works
as an enabler between third party sellers and the consumers. It doesn’t hold
any inventory of its own and merely provides its online platform for the
transactions and ensures timely delivery and services to its customers. It has
joined hands with Indian postal service for logistics. It has partnered with
many small grocery stores to be their shipment pickup and delivery points to
overcome failed deliveries. It offers an online comparison website Junglee.com
to woo price sensitive buyers.
3.
Amazon has kept a flat and
simple organization structure and has complete faith in its local leadership.
India manager Amit Agarwal is a seasoned, trusted senior executive and has been
provided with complete authority and accountability to ensure that not every
trivial decision has to be approved by someone at the global headquarters.
Conclusion
India is one of the top performing
businesses of Amazon in the world. It is the fastest country to record $1
billion sales in just over a year of operations. While others have struggled,
Amazon has performed beyond their expectations. All this has been the result of
the patience, trust and willingness to adapt that Amazon has shown. However,
with the new found financial backing of Flipkart and Snapdeal and with another
heavyweight Alibaba lurking around the corner, Amazon faces a challenging time
ahead. Whether it will be able to thwart the challenges posed by the
authorities and the customers and continue on their path of excellence or not?
That needs to be seen, however, with their ability to innovate and adapt there
is little doubt that they will win the race in the end.
References
This article is written by Dhruv Bhandula who is a first year PGDM student at IIM Calcutta. He can be reached at dhruvb2016@email.iimcal.ac.in
