This case study analysis serves the purpose to evaluate Amazon’s unique approach to service marketing which creates satisfied and loyal customer base and to estimate its international expansion. Amazon is one of the most customer oriented companies in the world, which is essential for e-tailor business as the competitor is only one click away. With its main focus on customer experience, it offers wide variety of merchandise, lowest price and convenience. This three ‘customer experience pillars’ supported by a foundation of innovation build the center of Amazon main strategy (Figure 1).

Innovation

Figure1: Amazon’s Customer Experience Pillars [5] Let’s have a closer look at each item: 1) The variety and availability of items on site is one of the biggest advantages of e-bookstore in over a regular one. Since there is no limit for shelf space it can offer not only top-sellers but also very unique slow-moving items. shipment within 24 hours. 2) The fairness and competitiveness of overall price is achieved by offering the lowest prices for the most popular products, with less popular products commanding higher prices and a Most of the company products are available for

Convenience

Selection

Price

greater margin for Amazon. Free shipping is offered for all orders over a certain amount of money and is used to encourage increase in basket size. 3) Customer convenience could be subdivided into: a) web site functionality or the ease of use of the site itself, which was achieved by such services as secure credit card payment, ‘search-find-obtain’ experience, personalized recommendations, ‘search inside the book’, One-Click technology etc. b) content or in other words the quality and accuracy of the information on the site, achieved via reducing an irrelevant information on the product, decreased advertisements on website and, specially appreciated by customers, the ability to read customer or spotlight reviews on each product. A core reason for providing such a wide variety of customer services is a constant innovation based on customer satisfaction metrics. Each site is closely monitored with standard service monitoring system, recording every move a visitor makes and afterwards analyzed. This information served as a background for such innovations as a customized recommendation service, "Customers Who bought X" feature, automated optimization system etc. This focus on innovation and on customer itself has translated to excellence in service with the highest American Customer Satisfaction Index over a decade.[7] The importance of customer satisfaction cannot be underestimated. Especially in e-business it has a big influence on success of Web site. Following main benefits from high customer satisfaction come forth: 1) Positive word-of-mouth generated from existing customers often translates into new customers. 2) Satisfied customers often purchase products more frequently and are less likely to be lost to competitors than are dissatisfied customers.

3) Companies with high customer satisfaction scores proved to be more secured against competitive pressure, especially price competition. Customers are willing to pay more and remain with the company that meets their requirements than take a risk by switching to a lower-price service offering 4) Customer oriented companies generally provide better working environments and attract the best and most talented employees. [3] High customer satisfaction ultimately leads to achieving customer loyalty and repeat purchases, which is a key to Amazon’s success. Customer needs are highly differentiated among different countries and have a big influence on international expansion strategy. As many other companies, Amazon is using a hybrid strategy in its globalization approach. Interesting to mention that it follows a typical US online retailer expansion path. Of the top 50 online retailers in the US, some 19 operate dedicated transactional Web sites for the UK, 14 operate sites for Germany, 12 for France and 14 in Italy [4]. Overall Amazon has expanded its geographic footprint into the world’s major e-commerce markets (Figure 2)
Market entry 1995 USA UK Germany France Japan Canada China Italy 1998 2000 2002 2004 2010

Figure 2: Combined waterfall-sprinkler strategy

The first entry was to a so called “old Europe countries”, which included Germany and UK in 1998. In this case a sprinkler strategy was applicable due to such similarities, as existing internet platforms for book selling, as well as being the largest book markets in Europe. The common strategy was to start with book selling and then expand by adding new product lines. This led to a significant reduction of shipping costs and time for thousands of U.S. titles, thanks to a large supply of the most popular U.S. titles ready for immediate shipment from the U.K. and Germany. After a successful conquering of both markets, Amazon launched a French and Japanese website in the year 2000. In contrast to the existing markets, both of these new web sites were developed from scratch and from the very beginning offered a whole range of products and services. While the idea of opening a French web-site was to serve a global French market, Amazon.co.jp was the Amazon's first Asian-language site and opened the doors for an Asian language market. For both countries a big focus was placed on country’s specific features, which is a good example of differentiation approach in globalization strategy. In the year 2002 Amazon enters a Canadian market. The main reason for this was that, in spite of being a superior store in most respects, Amazon fails to compete with the leading Canadian online book retailer, Chapters Online, primarily because of cross-border shipping disadvantages [2]. Amazon.ca profits from experience with French language customers by making its services available in both languages. Here the learning effect of the waterfall model is clearly shown. While entering the Chinese market, it used its old strategy of buying an already existing internet business. Through this acquisition, Amazon blends Joyo.com's expertise in serving the Chinese market with Amazon's experience as one of the world's leading online retailers. This combination allows Joyo.com to improve its customer experience and grow its business.

The latest launch of Italian site had profited from a wide range of new categories of products and services than any new Amazon site ever, which is not surprising giving a 6 years of experience since the last international launch [1]. As part of its new offering, Amazon is pushing its selection of “hard-to-find Italian language items” to cater to local consumer needs, which is a similar feature as for Japanese market. This is another example of cross-national differentiation approach used by Amazon in its global expansion. It also shows both a learning effect advantage of a waterfall model and a disadvantage by not using the sprinkler model, by giving its main competitor e-bay more than 9 years of advantage. International growth rates have consistently beaten that of North America, with % growth rates in revenue (Figure 3). [8] Comparison of Growth in Sales between Fiscal Years (2006-2009) Years North America(%) FY09-FY08 FY08-FY07 FY07-FY06 38 26 33 25 31

International(%) 39 Figure3: Increased percent of growth rates

This is due in part to the relative maturity of the US market as well as to the strategy Amazon has employed in rolling out new product categories and features to its international properties. Amazon has typically introduced most of its new stores and features in the US market first, eventually replicating the most successful ventures in international markets (See Appendix 1), which proofs an application of cross-border product standardization approach. Amazon's

international businesses have thus been able to benefit from experience gained through US experiments to grow at an accelerated pace. As a result it can be concluded that Amazon benefits from both a cross national standardization approach in terms of products and a differentiation approach in terms of adaptation of its services and websites to regional customer needs.

References: [1] Amazon.com: News Release. Available from: http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irolnewsArticle&ID=1499588&highlight= [2] Chakrabarti, R., Scholnick, B. (2002) International expansion of e-retailers: Where the Amazon flows. Article first published online: 28 DEC 2001 DOI: 10.1002/tie.1040, Thunderbird International Business Review ,Volume 44, Issue 1, pages 85–104 http://onlinelibrary.wiley.com/doi/10.1002/tie.1040/abstract [3] Czinkota, M.; Dickson, P. (2000) Marketing. Best Practices.Fort Worth [4] Daniell Wigder, Z. (November 23, 2010) Amazon Follows Typical US Online Retailer Expansion Path With A New Site For Italy http://blogs.forrester.com/zia_daniell_wigder/10-11-23amazon_follows_typical_us_online_retailer_expansion_path_w

ith_a_new_site_for_italy [5] Johnson,G., Scholes, K., and Whittington,R.(2008) Exploring corporate Strategy Text & Cases (8th edn). Edinburgh. [6] Szkutak, T. (March 4, 2009) Amazon Investor Presentation, SVP & CFO Morgan Stanley Technology Conference http://www.docstoc.com/docs/6786945/Amazon-Investor-Presentation [7] The American Customer Satisfaction Index [Online]: http://www.theacsi.org/index.php?option=com_content&task=view&id=149&Itemid=157&c=A mazon.com [8] Wikinvest Analysis.Amazon.com http://www.wikinvest.com/stock/Amazon.com_(AMZN)

Appendix A: Global Selection [6]
Product Categories Physical Media Electronics Toys Baby Tools & Hardware Home & Garden Apparel & Accessories Sports & Outdoors Jewelry & Watches Health & Personal Care Beauty Shoes Dry Goods Auto Parts & Accessories Digital Media Office Supplies Fabric Motorcycle & ATV Parts & Accessories US 95 99 99 99 99 00 02 03 03 03 04 05 06 06 07 08 08 08 UK 98 01 01 07 04 04 08 07 07 08 08 07 Ger many 98 01 04 07 04 04 08 06 07 07 08 07 08 08 nce Fra 00 05 07 07 07 an Jap 00 03 04 07 03 na Chi 04 04 04 06 ada Can 02 08

07

05 07 06 08 07

06 06 06 06