Communication Plan

Focus on Global Expansion in India

Sarena Miller, Molly Pontius, Linshan Shu, Lanh Truong, Dillon Willette
Team Amazon
October 18, 2017
TABLE OF CONTENTS

EXECUTIVE SUMMARY .......................................................................................................................3

SITUATION .........................................................................................................................................4

CHINA.......................................................................................................................................................... 4

INDIA........................................................................................................................................................... 4

BACKGROUND AND ANALYSIS ............................................................................................................5

ECONOMIC GROWTH ..................................................................................................................................... 5

INTERNET USERS ........................................................................................................................................... 5

GLOBAL POLICY ............................................................................................................................................. 6

KEY STAKEHOLDERS ...........................................................................................................................7

CUSTOMERS ................................................................................................................................................. 7

EMPLOYEES .................................................................................................................................................. 7

RECOMMENDATION ..........................................................................................................................8

RESPONSE..........................................................................................................................................8

RETURN ON INVESTMENT ................................................................................................................................ 8

TIMELINE ..................................................................................................................................................... 9

CONCLUSION ................................................................................................................................... 10

WORKS CITED .................................................................................................................................. 11

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 EXECUTIVE SUMMARY
As Corporate Communication Interns, we have analyzed Amazons international expansion,
Amazons current financial situation, and market share in several countries. Amazon has
experienced difficulties in gaining significant market share in China, but has been successful in
the Indian marketplace. Amazon would increase its profits by reducing operations within China
and investing that money into operations in India. As the Chief Financial Officer at Amazon, we
believe that this information will benefit you as you make important financial decisions for 2018.

Situation
Amazons goal is to be Earths most customer-centric company. We have accomplished this goal
in the United States, but these efforts have not been recognized globally. Amazons focus has
been increasing market share in China, however, our company only has .8 percent of the market
share. On the other hand, India is eager for foreign countries to increase operations locally. Also,
India is experiencing economic growth and a higher demographic of internet users; these
components make expanding in India easier and profitable.

Background & Analysis

When considering global expansion; economic growth, internet users, and global policies
justified our recommendation to expand operations in India. According to (OECD.org report),
economic growth in India shows an upward trend, therefore, Amazon is expected to gain
significant market share. In 2017, urban Indias internet user base grew to 270 million people
and rural areas reached 175 million users (livemint.com). Amazon needs to capitalize on this
growth while the trend is still increasing. In addition, Indias global policies are relaxed and
allow foreign companies to easily implement products into their country.

Along with these factors, Amazon also needs to consider key stakeholders. Our customers in
India have an increased need for quality American products and wages increase. Amazon plans
on hiring an addition 8,000 employees in India in 2018, making employees another major
stakeholder. Also, Indias global policies are more lenient than China policies, making
expansion feasible.

Recommendation
Our global expansion issue can be solved by reducing expenses in China. In addition, Amazon
should focus on cost saving strategies that increase our resources and allow for expansion in
India. By lowering expenses in China, Amazon will have a greater budget to expand in India.
Amazon will have the funds to create innovative products in a country that is eager to receive the
benefits from global expansion. Amazon will not only save on expenses in China, but will be
more profitable in India because of the growing economy and internet user demographic.

Conclusion
Amazon would benefit financially by reducing a portion of our Chinese operations budget, and
allocating those funds to expand operations within India. After implementing this change,
Amazon should expect a return on investment of seven percent. This information will benefit
your team as important financial decisions arise this upcoming year. Our team would be able to
answer any questions you may have at mollypontius@email.arizona.edu, thank you for your
time.

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As Corporate Communication Interns, we want the best for Amazon financially. Therefore, we
have analyzed Amazons international expansion, how the company operates in different
countries, Amazons current financial situation, market share, and difficulties with expansion in
China. This document will also go into detail about Amazons financial success in India, the
companys market share in India, the effects of demonetization on currency, and key
stakeholders.
Amazon has experienced difficulties in gaining significant market share in China but has been
successful in the Indian marketplace. Based on this information we have concluded that Amazon
would increase its profits by reducing operations within China and investing that money into
operations in India. This decision would lead to increased profits for years to come. As the Chief
Financial Officer at Amazon, we believe that this information will benefit you as you make
important financial decisions for 2018.

SITUATION
As we have discovered through our research, Amazon has a strong internal narrative of global
expansion. Our vision statement is, To be Earths most customer-centric company
(Panmore.com, 2017). While assessing our companys external narratives compared to our
internal narratives we found that we are not as global as our goal based on our vision statement.
We only have a 0.8 percent market share in China and 12 percent in India. (Business Insider,
2017). We believe with such low market share we are not taking full advantage of the
opportunities our Asian market provides.

CHINA
In China, the e-commerce industry is primarily dominated by Tmall.com, otherwise known as
Alibaba. They control 56.6 percent of the market share in China, and the company is only
expected to see continual growth (Business Insider, 2017). As a China based company, Alibaba
can develop and innovate for the Chinese market much more rapidly than Amazon is able to do.
This puts Amazon at a great disadvantage, with such a low market share already, it limits few
opportunities for growth.
Even through our recent implementation of a limited version of Amazon Prime, we have not
been able to gain much market share in China (Business Insider, 2017). A large percentage of
Chinas population is using the internet and are technologically savvy, which makes
implementing new products difficult unless it is very advanced. Our team believes that there are
more profitable opportunities for global expansion in other countries; India for example shows
great potential to increase our global expansion initiative.

INDIA
India offers more opportunity for growth, with the fastest growing population, continuous
economic growth, and fewer dominating competitors. Amazon already controls 12 percent of the
e-commerce market share in India, and that percentage is expected to grow significantly
(Business Insider, 2017). Amazon has a great opportunity to expand in India because of their
technological advancement. India is the ground floor of the internet trend. As a company based
almost exclusively on internet connectivity, implementing our company now would make future
expansion in India much easier because we would already have a strong consumer base.

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Amazon will see an increase in the number of internet users in India, which translates to a
growing e-commerce industry. In addition, Indias economy has been growing at an average
annual rate of seven percent each year for the last two years. This leads to an increase in
household income and an increase of Indian shoppers preferring top American brands (The
World Factbook, 2017). As an American company, we can capitalize on the growth and demand
trends, and instill trust in customers when they decide to purchase American brands.

BACKGROUND AND ANALYSIS

There are many factors to consider when making decisions concerning global expansion such as:
exchange rates, economic growth, language barriers, return on investment, and domestic trends.
We have researched these factors in both India and China to better understand which market has
the most potential growth and financial opportunities for Amazon. The market share we have in
China is much smaller than our market share in India. After analyzing these factors, we should
focus on directing more efforts and resources in India.

ECONOMIC GROWTH
According to (OECD.org report), the economic growth in India shows a strong upward trend,
and will remain a fastest-growing global company. Therefore, it is a reasonable expectation for
Amazon to gain significant market share in India. Unfortunately, manufacturing has lagged and
many workers are receiving a very low income. To change this situation, the Indian government
is encouraging foreign developed companies to enter the Indian marketplace to diversify
education and increase wages. Thus, using modern machines and technology will have a positive
impact on employees and enable the labor force to earn higher salaries.

Investing in education within India such as introducing advanced technology and updated
education resources would be advantageous for Amazon in India. In addition, Amazons
expansion in India will create job opportunities for the Indian population. By investing in the
education of people in India and creating a larger job market, Amazon will be able to build a
strong brand name and gain an outstanding reputation locally.

INTERNET USERS
The urban areas of India have an estimated population of 444 million; of that population, 269
million, or 60 percent, are already using the Internet (livemint.com, 2017). Rural India has an
estimated population of 906 million according to the 2011 census, and only 17 percent of that
population are Internet users (livemint.com, 2017). As an e-commerce company, we operate
almost entirely via the internet. This data proves that we should focus on the urban areas of India
such as Kolkata. Urban areas are tech savvy, and has many people living in a small area which
allows for faster delivery and opportunities to expand more rapidly.

We will also use our failure of the limited version of Amazon Prime in China as a learning
opportunity. Before a new service is launched, extensive research will be done for the target
market segments. For example, research from The Census Report states that 77 percent of urban
users and 92 percent of rural users consider mobile devices the primary source for accessing the
Internet, as seen on the graph below, largely driven by the availability and affordability of

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smartphones (livemint.com, 2017). This statistic proves that Amazon needs to implement our
smartphone app for Amazon India to increase user traffic and accessibility.

In urban India, the internet user base grew by seven percent to 270 million people in 2017
(livemint.com). In 2017, rural Indias internet user base grew by 22 percent and reached 175
million users (livemint.com). Amazon needs to capitalize on this growth while the trend is still
increasing. Amazon will gain customers in the early stages of growth, create a community of
trust, and gain brand loyalty. Early implementation of our services will be very effective in the
Indian marketplace.

GLOBAL POLICY
The Chinese government has strict global policies, some of which have made it difficult to
implement our successful products and services in their market. One of the global policies that
has caused problems for Amazon is Chinas strict censorship policies; because of their
censorship policies, Amazon Prime Video cannot be used in China. Amazon Prime Video is a
product that has been extremely successful, but with the limitations and policies, gaining
significant market share in China has been difficult to say the least.

On the other hand, Indias global barriers are much more relaxed and allow foreign companies to
easily implement products and services into their country. The Indian government is interested in
companies like Amazon to bring diverse technology and improve education standards. With such
flexible restrictions, Amazon can introduce products that have brought us great success in the
United States marketplace and adapt them to the cultural norms in India.

Fortunately, Amazon now has a better understanding of the customs in India because of our joint
venture with the Ashok Patni Group. Amazon established the joint venture to strengthen our
customer service center that supports the growing number of local-language customers as
Amazon expands throughout different areas in India (The Economic Times, 2017). Our strategy
of partaking in joint ventures will allow Amazon to better customize and develop our services in
India to best fit the Indian culture, norms, and dialects so that our customers will remain
satisfied.

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KEY STAKEHOLDERS
In consideration of global expansion, there are a vast number of stakeholders to consider; the
most important stakeholders to our company are the employees and the customers. As stated in
our vision statement, Amazon strives to be earths most consumer centric company. This goal
has allowed our company to become a dominating entity in the ecommerce industry.
Recognizing customers as our most important stakeholder is not only staying true to our
company values, but the view our customers have of us. Amazon is also aware that employees
are typically customers and are vital to every aspect of our business, therefore, employees are
also major stakeholders.

CUSTOMERS
As Indias economy thrives, their average household income has been steadily increasing as
well. This steady increase started a trend of Indian customers wanting to purchase top American
brand names. With e-commerce making it easier for top American brands to reach Indian
customers, it has emerged as one of the fastest-growing trade channels available for the cross-
border trade of goods and services. (Export.gov, 2017) Being a reliable American company is an
advantage for Amazon because we can satisfy the needs of our consumers with quality American
products. Other e-commerce companies in India do not have the same advantage.

On November 8, 2016, the Government of India launched a major demonetization effort to

address counterfeiting and the black-market cash supply (Export.gov, 2017). This effort
neutralized 86 percent of the currency in India. This obviously had a huge impact on Indias
economy, political state, and social aspects. Gross merchandise fell by 40-50 percent after the
demonetization took effect. (Export.gov, 2017). Most retailers went out of business and suffered
financially.

The demonetization caused online retailers to see an increase in sales through their electronic
payments. This occurred because e-commerce uses electronic payment systems that do not allow
for any counterfeit and black-market cash supplies. The setback magnified the disparity between
brick and mortar companies and e-commerce companies. As this effort nullified, almost all of
Indias currency used in e-commerce companies were left unaffected; customers ingrained trust
for e-commerce companies because their money was safe and retained value.

EMPLOYEES
Amazons marketplace in India is one of the fastest-growing in the industry. This is because
Amazon realizes the value in expanding throughout India, since it is the fastest growing
population. In fact, India is Amazons largest market outside of the United States. Our operations
in India increased by 26 percent last quarter. It is also estimated that Amazon will be employing
8,000 more employees in India in 2018. (Nutting, 2017)

The primary reason for the expansion is to outperform Flipkart, a major online retailer in India.
After expanded globalization, there will be an estimated 14,000 people who will be employed in
India by our company (Nutting, 2017). Although this sounds like a positive effect of global

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expansion for employees in India, it could potentially put thousands of brick and mortar
employees out of business due to the competition of price and convenience.

RECOMMENDATION
Our difficulties regarding global expansion is an issue that can be easily remedied by reducing
expenses from our operations in China. In addition, Amazon should focus on cost saving
strategies that increase our resources and allow for a successful expansion in India. There are
many ways to cut costs for our global expansion in China. For example, Amazon should
decrease the cost of innovating new products and services in China. In addition, Amazon needs
to focus on delivering products and services that coincide with the local policies.
By lowering expenses in China, Amazon will have a greater budget to expand in India. Amazon
will have the funds to create innovative products and services in a country that is eager to receive
the benefits from global expansion. Amazon will not only save on expenses in China, but will be
more profitable in India because of the growing economy and internet user demographic. Also,
Amazon is also familiar with the needs and wants in India because of their joint venture with the
Ashok Patni Group.

RESPONSE
In India, 34.8 percent of the population are internet users; comparatively, the United States has
88.7 percent of the countrys population connected to the internet (internetlivestats.com, 2017).
The low but growing number of internet users in India will allow Amazon to use the technology
we already created and simply adjust it to fit the qualifications needed to be functional in India.
Amazon needs to take advantage of the increasing number of internet users in India to increase
our bottom line, allowing more capital to be available for company expansion.

RETURN ON INVESTMENT
Amazon has about 2,100 million global users, and of those global users, India contributes about
200 million (Murthy, 2016). If we use a ratio of global users compared to our total global market
cap of $279 billion and apply that to how many users Amazon has in India, we can conclude that
our India-linked market cap is about $26.5 million (Murthy, 2016). China contributes
approximately 15 million, using the same ratio we end with a number close to $2 million. If we
can cut costs by 50% in china expansion we would be able to reallocate 1 million dollars toward
expansion in India.

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Since our company is following the economic growth and the increasing rate of internet users in
India, Amazon should expect a return of approximately 7%. When we apply this to our total
India-linked market share after the reallocation we would end up with a return of about $2
million per year. This return on investment will allow Amazon to generate a significant amount
of revenue that can be reinvested into new product development and other innovative services
our company historically has excelled at.

TIMELINE
When we reallocate our global budget to further pursue global development in India rather than
China we plan to implement an online app to best target the Indian demographic. We will begin
in the January of next year. The timeline for implementing this app will be short considering we
will have less hoops to jump through in terms of global policy and we have the help of Ashok
Patni to translate and update based on cultural norms.

We will spend approximately 1-2 months developing the app. We have estimated inly 1 month
because we will be using the basics of our successful US app. And with the help of Ashok Patni
we will be able to more quickly and accurately develop the application to fir the cultural norms
and dialects of India. After we develop the app we must perform beta testing, which will take
about 1 month. We will send the beta out to various demographics in different rural and urban
areas to get the most accurate results with the most holistic view of performance.

After we preform the beta tests we will analyze and integrate the feedback, understanding what
the app did poorly and what the app did well. We believe integrating feedback will take about 1
month assuming we do this continuously while receiving feedback through beta testing. Once we
analyzed and integrated the feedback we will find the major and minor flaws or errors and
correct them, this should only take about 2 weeks if we are diligent.

After that we will move onto marketing the application, we will do this through social media and
through commercial advertising. This marketing will be continuous for the duration of the apps
life to keep recognition high and increase our user base. Social media would be the most
effective form of advertising our application considering our target market is mobile device users

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and social media is most active on mobile devices. After the marketing has been circling for
about 2-3 months we will launch the mobile app.

The launch should happen over 1 week as we release to major cities sporadically so that we can
help our servers maintain the user traffic. During this launch, we will be capturing metrics for 3
weeks to assess the immediate issues quickly and keep our users happy. We will then
continuously update our application and likely implement more successful Amazon services as
we increase our market share.

CONCLUSION
Amazon would benefit financially by reducing a portion of our Chinese operations budget, and
allocating those funds to expand operations within India. Specifically, Amazons financial
intermediaries should reallocate $1 million of the Chinese budget into our budget in India. After
implementing this change, Amazon should expect a return on investment of seven percent. This
information will benefit your team as important financial decisions arise this upcoming year. Our
team of Corporate Communication Interns would be able to answer any questions you may have
at mollypontius@email.arizona.edu, thank you for your time.

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