Amazon’s European Distribution Strategy Harvard Case Solution & Analysis

INTRODUCTION

The internet revolution has seen a massive change increase in the long run purchases made by customers, as geographical barriers are no longer become as important as they were. Online customers today know the convenience of purchasing books online and having delivered totheir doors in a few days. One of the first company took an advantage to become an online bookstore was Amazon.com. Amazon was founded by Jeff Bezos in 1995. Amazon grew quickly in 1996 and 1997 in the United States become abiggest online bookstore. Then it entered intothe European market in 1998 with websites known as telebuch.de inGermany and Bookpagse.co.uk in United Kingdom.

This case provides an overview of the European distribution strategy. In order to implement strategy a major decision Amazon needed to configure the distribution strategy that support to sustain its growth in Europe. The Amazon Europe strategy leads to multiple expansion options such as to replicate the wide array of product line of Amazon US,Expand Amazon distribution center in other European countries,degree of centralization or decentralization in the European network and launch new marketplace activities.It examineshow characteristics of suppliers and customers are differing in the European market.Another challenge for Amazon to implement the strategy is Globalization and Localization.

EXECUTIVE SUMMARY

Amazon is one of the biggest and most famous online stores in the world. Amazon international includes Amazon Europe and Amazon Japan which represented 35% of the company’s revenue and fastest growing segment of the company.Amazon entered intothe European market through two countries, Germany and UK. In order to enter in the leading online market of the country, the Amazon brand re-launched two sites in the country. In 2000, the company increased expansion and entered France. They did not use the same approach as in Germany and UK, the company started from scratch.The Amazon faces challenges from competitors such as Fnac.com, Alapage.com and BOL. After facing competition in the online market, the company decided to develop a strategy to launch Books, Music, DVD’s and Video product line at the same time.

However, there are many challenges faced by Amazon to enter into the European market, such as cultural differences in the Europe,to sustain the growth and revenue of the company. There are some other points which company should consider in developing strategy includes a payment option in Europe, addressing selling regulations, and to adopt their website always with the need of the country.The company envisions the rationalization and cost saving by aggregating infrastructure and service across Europe.

The strategy implementation in the UK, Germany, and France are managed by Amazon Subsidiaries. As each country has its own organization and manage by its own warehouses.Amazon needs to build its infrastructure in order to fulfill the company’s vision. Tom the Director of Amazon transfer from Seattle to London to gather information about the Europedistributionand address their issues. Tom decides which infrastructure should be better to support the AmazonEuropean’s growth potential.

In 2001, the company decided to merge its three operations with the three countries under a single umbrella to embark a major cost cutting strategy and to implement restructuring efforts to increase revenue and profitability. The Amazon wants to work in a long term perspective, that’s why started to work on a European Distribution Center (EDN).

The case comprises of different questions which is necessary to understand in order to come up with possible alternatives.

  • Whether EDN should be implemented?

One of the major strategiesof Europe is to expand its operations strategy in Europe and other countries. To implement EDN, Amazon should work on integration strategy data of all three European sites. The integrated sales data from three DCs is helpful in the trends of sales according to different regions. The transportation and shipment cost can be reduced significantly and service level of customers can be increased to a great extent. It is also cost effective in implementing the EDN.

Amazon’s European Distribution Strategy Case Solution

  • If Amazon wants to expand the strategy in other European Countries?

There is hope under EDN that procurement department would be able to centralize its purchase and extract higher volume discounts from suppliers and global carriers department. It is important that the coordination among departments and effective HR plan is necessary.

  • Issues related to different departments in Amazon?

Amazon would need better coordination among different departments by motivating them and also do better demand forecasting in three countries................

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