Find a company that has recently announced a foreign entry decision. Explain (1) why the company might have chosen that particular market and (2) the mode of entry (licensing, joint-venture, subsidiary, etc.) and why this makes sense.
Market Entry Initiative of Amazon in Vietnam
Amazon is the global leader in e-commerce, but it is facing stiff competition from its rival Alibaba. In 2018, the company showed its intentions to enter Vietnam. The decision has come at a time when Vietnam is showing excellent and promising growth in the e-commerce platform. The country has a population of 93 million people, and the online shopping trend is growing there. It is expected that the local e-commerce market would reach the figure $10 billion by 2020, which was at $5 billion in 2016 (Tomiyama, 2018). However, it is seen as an attempt by Amazon to challenge Alibaba, which is showing higher growth internationally as compared to it.
Amazon has adopted the entry mode of partnership to enter the Vietnamese market. It has been decided to provide a platform with services to 140 local online businesses there. These local businesses would use the e-commerce platform of Amazon for selling and exporting their products. The body with which the company has partnered is the Vietnam E-commerce Association or VECOM (Tu, 2018). Earlier foreign market decisions of Amazon have also relied on partnership with third party businesses, and examples of this are in Australia. It would help the company to start a business in Vietnam completely under its name when its partnership with VECOM would be successful (Keyes, 2018).
The decision to enter Vietnam e-commerce market and choosing partnership entry mode make sense because of at least three reasons. First, Vietnam’s e-commerce market has flourished recently, and Amazon has the potential to capture growth. Second, Vietnam and southeast region have been under the influence of Alibaba, which is a global competitor of Amazon. Entry into the Vietnam market would enable Amazon to challenge its global competitor. Third, the company has decided to enter into a partnership with third-party businesses so that risks remain low, and learning about the market can be possible.
References
Keyes, D. (2018). Amazon is entering Vietnam. R
Tomiyama, A. (2018). Vietnam is next target for Amazon, a newcomer in Southeast Asia.
Tu, A. (2018). Amazon set to wade into Vietnam’s fast-flowing e-commerce market.
