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The Indian Online Grocery Market - Task 1

After reading the case study Amazon’s KiranaNow: The Indian Online Grocery Market, comment on the industry analysis by analysing the macro-environmental factors affecting Amazon’s KiranaNow using the Porters Five Force framework.

Solution:

Macro-environmental factors are known as the external factors that can impact the business of an organization. These factors are political, demographic, legal, cultural, technological and economic (Iamratanakul, 2015). To analyze the impact of macro-environmental factors affecting Amazon's KiranaNow, Porter's Five Forces framework can be used.

Porter's five forces framework is an effective business tool to measure the external forces in the industry based on the power of suppliers, power of customers, the threat of substitute, new market players and industry rivalry. The attractiveness of the market and competition in the industry can be evaluated through porter’s five forces model (Mathooko & Ogutu, 2015).

To investigate the impact of macro-environmental factors on the growth and operations of Amazon's KiranaNow, Porter's five forces analysis can be conducted with in-depth analysis. 

The threat of new entrants

The threat of new entrants is high for Amazon's KiranaNow due to low investment, the high population of the country, attractive customer base and increasing digital customers. It can be explained with the following factors that can influence the entry of new organizations in the industry.

  • Entry barriers: India has low entry barriers in the industry of groceries due to a low requirement of capital. It promotes a significant benefit to the organizations.
  • Capital requirements: The entry of new organizations is easy due to the low initial investment. It attracts several organizations to take benefit of the market (Jha, Jain, Chowdhry & Bose, 2015).
  • Entry barrier: Major focus of the customers in India is towards strong brands which promote a highly concentrated market. Endogenous entry barrier leads to a high threat of new entrants.
  • Government policies: The government has allowed a 100% FDI (foreign direct investment) in businesses to enhance business opportunities in India. It leads to improve foreign investor confidence in the Indian market.
  • Access to distribution channels: People in India are not so technology friendly which raises a concern for the organization to meet the logistics needs. However, the cheap labour force is a benefit for the companies (Sharma & Rajput, n.d.).

With a loyal and trustworthy customer market, Amazon can promote its customer base for KiranaNow. Promoting digital distribution and effective quality service can reduce the threat of new entrants. Amazon is a strong brand which can be trusted by customers.

The threat of substitute products

The threat of substitute products is high in Indian economy due to the preference of individuals towards traditional shopping experience. Digital buyers are low in the economy which represents the behavioural hindrance of individuals towards traditional purchasing.

  • Availability of substitute products: In the Indian market, a large number of substitute products are available for customers. Distinguished products have substitutes which help the customers to switch to another product if prices increase.
  • Switching costs: The switching costs for the products are low in the Indian market place with customer trust and prices (Yadav & Sagar, 2018).
  • Price of substitute: Low price of substitutes attract customers in the Indian economy as most of the customers are based on the middle class. These customers usually compare the prices and quality while purchasing a product.
  • The traditional approach towards Kirana needs: Mostly customers prefer to buy from traditional Kirana shops. Customers believe in physical purchase to get a high-quality product (Sharma & Rajput, n.d.).
  • Supermarket chains: Availability of supermarket chains such as Walmart and Big Bazar provides a higher range of products with their substitutes. It allows the customers to easily switch to another product.
  • Eating at restaurants: Most of the people in India are a foodie that promotes a large customer available in restaurants. It reduces their needs to purchase products from online websites.

Higher discounts and promotions can help in managing the threat of substitute products. An increasing number of customers in the e-commerce industry can take advantage of lower prices.

Bargaining power of buyers

With the available customers and available substitutes, the bargaining power of buyers is high in the Indian economy. Low switching costs of customers define the availability of products among consumers. Relationship of customers with the stores also impact the organization and its performance.

  • Switching costs: Low switching costs of customers promote high bargaining and negotiating power of customers which can raise a key concern for the organization to operate in the e-commerce industry.
  • Relationship with stores: Customers in India maintain a loyal relationship with the stores that allow physical purchase rather than online purchase.
  • Undifferentiated products: Mostly similar products are available in the market with strong brands that attract customers. The products available in online and offline stores are similar which makes no difference for consumers to purchase from anywhere.
  • The number of customers: The population of India is 2nd highest in the world which provides a large customer base for the organizations to target the desired demography.
  • Price sensitivity: The customers available in India are price sensitive that influences the organizations to promote the products with discounted prices.
  • The ability of buyers to substitute: Buyers can easily switch to the substitute products due to a larger customer base and numerous competitors are available in the perfectly competitive market (Yadav & Sagar, 2018).

To differentiate the products, Amazon can allow distinguished discounts on products and services which can easily attract the customers. High quality and low priced products can maintain loyal customers for the organization.

Bargaining power of suppliers

The bargaining power of suppliers can be identified as moderate in the Indian economy. Distinguished delivery options are available in the industry with a strong customer base.

  • Commissions: The suppliers take a small commission for the products wherein the margins are already low. It benefits the organization to take advantage of better profits.
  • Online market integration: Amazon has a benefit of online market integration with higher sales and increased profit margins.
  • Strong customer base: With a strong customer base, Amazon can promote distinguished delivery options and provide quality based products to suit the needs of customers.
  • The number of suppliers: A large number of suppliers are available in the Indian economy due to perfect competition which reduces the bargaining power of suppliers.

Amazon can easily opt for another supplier with the perfect competitive marketplace. A low commission can promote better profit opportunities for the organization.

Rivalry among existing competitors

Indian economy shows an example of a perfectly competitive marketplace wherein the rivalry among competitors varies from moderate to high. Several small and large competitors are available in the market to target the higher customer base.

  • Distinguished players: A large number of competitors are available in the market. Distinguished competitors create an environment of the perfect competitive marketplace. Large and small competitors are available in the market that promotes the entry of new entrants.
  • Industry growth: With technological advancement, the growth of the e-commerce market is increasing.
  • Brand loyalty: The competitors compete with the brand image of the organization. Amazon is popular for its e-commerce market with a strong base of loyal customers (Sharma & Rajput, n.d.).

Amazon can focus on loyal customers by providing low prices with distinguished offers for the existing customers. It can help in attracting new customers.

The Indian Online Grocery Market - Task 2

What challenges is KiranaNow facing, and what strategies should it use to overcome these challenges?

Solution:

KiranaNow is facing distinguished challenges in the Indian market based on the customer market of e-commerce. The e-commerce market is growing with a multitude of factors such as greater awareness for online shopping, increasing number of smartphone users, increasing internet penetration and improved support in logistics. However, the key challenges faced by KiranaNow are based on technology, people management, logistics and merchandising. These challenges can be explained as below:

  • People-management challenge: High attrition rate is the major challenge for Amazon’s KiranaNow wherein the rate of attrition varies from 12 to 30 per cent. It is difficult for the organization to manage the staff, which is already in a large number, and hire more to fulfil the needs of distribution. However, Amazon KiranaNow is working collaboratively with local retailers which requires many delivery staff and it is difficult to provide necessary training to the newly hired staff. For a better customer experience and quality service, training and hiring are necessary which is a key concern for Amazon's KiranaNow (Jha, Jain, Chowdhry & Bose, 2015).
  • Merchandising issues: Amazon’s KiranaNow faces numerous issues relating to the quality of products. Collaboration with local retailers impacts the customer experience. It becomes difficult for the organization to maintain standardized quality products. Perishable nature of the products can lead to enhance merchandising issues. A fresh delivery of products is a concern to maintain high quality and trust of the customers.
  • High competition: Indian market is consisting of higher competition with large and small retailers in the e-commerce industry.
  • Technology challenges: It is difficult for retailers to accept the new technology and work collaboratively with the logistics company. Thus is raises a concern in the value chain. Some of the retailers in Indian economy identified technology as a challenge thus they remained sceptical about technological use in the retail sector. Technophobic staff and poor data availability lead to increase the complexities in connecting with merchants (Sharma & Rajput, n.d.).
  • The behaviour of customers towards traditional stores: It can be identified that most of the customers available in India believe in traditional grocery shopping rather than online shopping. To attract a large pool of customers with increasing digital technology, Amazon needs to focus on product quality, fair prices, ease of transactions and on-time delivery.
  • Availability of substitutes: A high range of substitutes are available in the Indian market that reduces the switching cost.
  • Strong bargaining power of buyers: Customers in India have strong bargaining power with a large customer base. It raises a concern for managing lower prices to meet the needs of customers and attract them towards online grocery shopping.
  • High competition: A key concern of the companies available in India is based on high competition availability. Several small and large companies are encouraged towards e-commerce business which leads to adapt a low-cost structure.
  • Low margin on products: Due to high competition and low-cost structure, the profit margins are lower on the products. It reduces the overall profits of the firm and enhances the challenges of stability.

To mitigate the challenges in the Indian economy, Amazon’s KiranaNow can emphasize on distinguished strategies. These strategies are discussed as below:

  • Innovation: To meet the challenges of Amazon's KiranaNow in India, innovation can be highly beneficial. It can promote new opportunities for the organization to meet consumer preferences. Ease of ordering and using mobile applications can be promoted by the organization that enhances the loyal customers.
  • Emphasize on volume sales: Amazon can promote distinguished offers for the existing customers that can attract new customers. With a minimum value of the cart, Amazon's KiranaNow can promote high volume sales. It can increase the profit margins and fulfil the needs of the profits (Yadav & Sagar, 2018).
  • Focus on local manufacturers: Amazon can promote local manufacturing items to increase the profit margins as the costs can easily be reduced through supplies from local manufacturers. It can help the customers to use “Made in India” products and also to get low priced products.
  • Maintain high product quality: It is essential to maintain a high quality for all the products. No question return policy is essential to enhance customer satisfaction and promote loyal customers for the benefit of the organization.
  • Low prices and on-time delivery: Amazon can promote the facility of on-time delivery and low prices by supplying local manufacturing products. Without the involvement of other retailers, the profit margin increases with a low-cost price of the product.
  • Partnership with local Kirana stores: Amazon can enhance the partnership with local Kirana stores to meet the needs of on-time delivery and fulfilment of the local needs (Yadav & Sagar, 2018).

References for Amazon’s KiranaNow Analysis

Iamratanakul, S. (2015). Modelling the Macro-Environmental Factors of International Distribution. Retrieved from: http://www.toknowpress.net/ISBN/978-961-6914-13-0/papers/ML15-125.pdf

Jha, A. J., Jain, V., Chowdhry, V., & Bose, I. (2015). Transforming the traditional Indian retailer. Retrieved from: https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?referer=https://scholar.google.com/&httpsredir=1&article=1027&context=ami

Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), 334-354.

Sharma, U., & Rajput, B. (n.d.). Future of E-commerce in India. Retrieved from: http://journal.commerce.du.ac.in/confdata/5thAICC_paper_45.pdf

Yadav, N., & Sagar, M. (2018). Amazon India’s “Apni Dukaan”: branding strategy. Emerald Emerging Markets Case Studies, 8(3).

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