MKTG6612 NU Week 3 Amazon Walmart and Medical in India Discussion New Low-Cost Surgical Tool Could Help Patients in Third World:
Describe the innovation process leading to the development of the Xenoscope – the low-cost laparoscope.
How does it fit the needs of emerging markets?
What product development principles can you draw from this example for product innovation for emerging markets?
Bad Roads, Red Tape, Burly Thugs Slow Wal-Mart’s Passage in India. Watch the Indian Road Trip: Produce’s Long Haul to Market video before you answer the following discussion questions: (https://www.wsj.com/video/indian-road-trip-produce-long-haul-to-market/7F48862D-4025-437E-BA89-78EAF6FC0B5F.html?mod=WSJ_LifeStyle_VideoModule_2)
Compare the Indian vegetable distribution chain with that used in developed countries such as the US. What are the consequences for Indian farmers- the vegetable growers – and for consumers, of these differences?
How might Wal-Mart’s entry into Indian vegetable retailing benefit Indian consumers and the Indian economy?
Is Wal-Mart likely to succeed? Should it be entering the Indian market?
Amazon, to Win in Booming Rural India, Reinvents Itself:
How is Amazon adapting to the Indian market- to rural customers, poor roads, language and cultural barriers, lack of bank accounts and other impediments? D’Amore-McKim School of Business
Global Distribution Channels
Prof. Ravi Sarathy
Week 3 L2
1
D’Amore-McKim School of Business
A Model for Choosing Global Distribution Channels
Relevant Factors
•Product Specific
Aspects
• Environment
• Customer
• Characteristics
• Firm Characteristics
• Competitive Factors
• Free-riding Potential
Channel Issues:
1. Channel Design
2. Channel Member Selection Criteria
3. Channel Tasks
• Product Adaptation/Homologation
• Warehousing
• Installation and Training
• Advertising and Promotion
• Pricing and Discounting
• After-sales Service
• Marketing: Customer Prospecting
• Information Gathering and Feedback
4. Channel Performance
• Market Share
• Economic and Financial Results
• Strategic Goals
5. Channel Evolution
2
D’Amore-McKim School of Business
A Model for Choosing
Global Distribution
Channels
Variables affecting choice:
Product Specific Aspects
• Proprietary product/process
• Differentiated versus Commodity
• Specific know-how needed to use
• Specific salesforce sales skills needed
• Standard versus Customized
• Core versus Peripheral Product
• Complex training and service required
Environment
• Extent of political and economic stability
• Uncertain market size—possible lack of
• scale economies
• Local govt. pressure to use local agents
• Legal restrictions on parent firm control
• Socio-cultural distance—culture, geography
• Multiplicity of markets
3
D’Amore-McKim School of Business
A Model for Choosing
Global Distribution
Channels (cont.)
Variables affecting choice:
Customer Characteristics
• Relative Importance of Customer
• Help with Installation and Use
• Frequent Upgrades
• Involvement in New Product Development
• (Beta Site)
• Expectations
Firm Characteristics
• Size, Financial, and Managerial Resources
• International Experience
• Current Channels Used
• Satisfaction with Existing Channel Choices
4
D’Amore-McKim School of Business
A Model for Choosing
Global Distribution
Channels (cont.)
Variables affecting choice:
Competitive Factors
Competitors’ Choice of Entry Mode, Channels
Competitors’ Success with Channel Choice
Time Pressure: Short Product Life Cycle
Free-riding Potential
Value of Brand Name, Reputation
Ease of Appropriability
Difficulty in Restraining Distributor
5
D’Amore-McKim School of Business
A Model for Choosing
Wholly Owned Sales Subsidiaries
Global Distribution
Greater
Channels (cont.)
CONTROL Controlled Joint Ventures
Original Equipment Manufacturer
(OEM) Agreements
Channel Issues:
Private Branding
1. Channel Design
Minority Joint Ventures
Franchises
Exclusive Distributors
Less
CONTROL “Piggybacking”
Nonexclusive Distributors
6
D’Amore-McKim School of Business
A Model for
Choosing
Global
Distribution
Channels
(cont.)
Channel Issues: (cont.)
2. Channel Member Selection: Criteria
3. Channel Tasks
Product Adaptation/Homologation
Warehousing
Installation and Training
Advertising and Promotion
Pricing and discounting
After-Sales Service
Marketing: Customer Prospecting
Information Gathering and Feedback
4. Channel Performance
Market Share
Economic and Financial Results
Strategic Goals
5. Channel Evolution
7
D’Amore-McKim School of Business
Key Issues in Global Distribution
Channel layers vary across markets
Implications for total cost of distribution; cascade effect of margins at
each layer
Impact on end-user price; limits affordability, can affect net margins
earned
Channel performance: channel reach, meeting targets, price
discounting, ethical behavior
Distribution territories and exclusivity
Buying-out distributors
Distributor interests and firm interests
Post-sale activities: Service, parts supply, training, customer
support, customer feedback
8
6/25/2019
Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
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https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176
Amazon, to Win in Booming Rural India,
Reinvents Itself
The retailer is targeting hundreds of millions of new online shoppers in India’s countryside by adding
Hindi and videos to its order screen and opening stores to help people shop; local deliverymen take cash
By Eric Bellman Photographs by Rahul Dhankani for The Wall Street
Journal
Updated Dec. 31, 2018 1 03 pm ET
▲
DHOWACHALA, India— Amazon.com Inc. AMZN -1.86%
is building a logistics network from
scratch to target customers in India’s rural backwaters—the home of more than 800 million
people, many of whom have little access to retailers. Most are new to online shopping and often
don’t have smartphones, credit cards or even delivery addresses.
What they do have is money to spend.
Amulya Bhuyan, 37 years old, lives in Dhowachala, in the northeastern state of Assam, and has
few ways to buy new things. It takes hours to get to the nearest small town from the village of
1,000 people.
Mr. Bhuyan, a teacher, made his first purchase on Amazon in 2016. After a recent delivery of a
pair of jeans, he showed off other acquisitions: the shoes, socks, pants and shirt he was wearing;
in his house, the curtains, glasses, flowery decals decorating the wall, a peacock clock and a
painting of seven white horses running in the moonlight.
“Before I didn’t even know where to buy these things, and now they arrive on my doorstep,” he
said.
Last year India’s rural shoppers accounted for more than $400 billion of retail sales. Investment
bank Barclays PLC estimates Amazon in India recorded more than $7 billion in gross
merchandise volume, an e-commerce measure of the amount of business transacted, in the
fiscal year that ended in March. That’s about 2% of what it records world-wide.
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
Amazon’s efforts here
face direct competition
from Walmart Inc. and
local startups, who are
all trying to capture
customers jumping
directly to e-commerce
thanks to the recent
rollout of 4G mobile
internet across India.
Amazon expects the
number of online
A deliveryman who takes packages around the neighborhood of the Amazon store in Maddur.
shoppers in India to
triple in the next few
years, most of them from rural areas. More than 80% of its new customers this year are from
outside India’s biggest cities, it said.
The Seattle giant has modified its app to work with inexpensive smartphones and patchy
cellular networks. It has added hundreds of thousands of Indian language descriptions of
products and videos for those who can’t read, and it has opened physical Amazon stores to walk
people through the process of ordering online. It brought on tens of thousands of local
distributors to deliver packages, often by bicycle down dirt roads, where it will accept cash or
digital payment on delivery.
Since starting operations in 2013, Amazon has pledged to invest more than $5 billion in India on
its warehouses and logistics network, technology, customer and seller recruitment as well as
staff and content development for Amazon Prime.
China has proven there are fat pockets of profits for e-commerce companies that reach rural
areas. Alibaba Group Holding ’s Taobao, J.D.com Inc. and others have been the trailblazers in a
rural e-commerce market there that has ballooned sevenfold in the past four years to more than
$180 billion. Amazon has small operations in China but hasn’t been competitive with the
homegrown giants.
In India, Amazon invested aggressively, making use of powerful search and logistics
technology as well as an advertising blitz and discounts to capture customers. This year it
passed Flipkart, the homegrown leader Walmart bought for $16 billion this year, to become
India’s biggest e-commerce company by gross merchandise volume, according to estimates by
Barclays.
Selling to Indians who live outside cities has long been a challenge. The standard retail outlet in
the countryside is a closet-size store, where simple, small and inexpensive products—soap,
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
cigarettes or snacks—are sold after dribbling their way through multiple middlemen. The
result is limited selection, poor quality and relatively high prices for rural consumers.
Traditionally, big purchases have required a long trip to a town or weekly market.
Now, Amazon is enlisting the small stores as package depots along its distribution network.
Other small retailers have become Amazon learning centers for new shoppers.
Arjun, 29, runs a tiny Amazon store in Maddur, in the southern state of Karnataka, where
people can get help learning how to search and order. Customers walk in with screenshots of
something their favorite Bollywood stars wore, and Mr. Arjun, who uses one name, gets the
search started.
Seated at linked computer screens, the customers, most of whom aren’t comfortable with
English or typing, can follow along as he pulls up options. He helps them pick the right size
using a chart on the wall and a foot measuring device. Later, customers come back to pick up
their orders and pay cash at the store. There is even a changing room so they can try on clothes
before paying.
“It helps me introduce people to the strange new world of the internet, where they can buy
everything, try it and even return it,” said Mr. Arjun. He gets an 8%-10% commission on sales.
A college
student, Likhit,
who uses one
name, comes in
to shop for a
smartphone,
wanting one that
takes good
selfies and has a
fingerprint
sensor. Mr.
Arjun shows him
The Amazon store in Maddur, where sta help customers shop online and can take delivery of packages.
some models.
Mr. Likhit said
he likes being able to try products before he pays and not having to worry about English.
“I can’t risk making a mistake and placing an order incorrectly,” said the 18-year old. “It
involves money after all.”
To make its screen easier to understand, Amazon added icons for books or electronics or beauty
products. When it figured out customers didn’t know the magnifying glass was a standard
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
symbol for search—some were calling it the ping-pong paddle—it added pop-up descriptions
and recommendations in Hindi.
Then there’s the “Add to Cart” button. “It is not just about the translation but about the mental
model of dropping something into the cart,” said Zahid Khan, senior manager of customer
experience at Amazon India. “There are lots of places in India where customers have never even
seen a cart. We might have to change that into ‘bag.’ ”
Humans translated descriptions for 35,000 of Amazon’s most popular products into Hindi. That
allowed a machine-learning system to master the language, and eventually every product
description will be translated. Amazon said it plans to add voice searches and descriptions in
other major Indian languages.
Satish working at his barbershop. He said his father would spend more than half a day every week at the nearest market to buy
goods. Now Satish orders most of what he wants online.
Amazon added video descriptions for tens of thousands of its best-selling items, after labs set
up to observe Indians’ online surfing and shopping habits noticed that many would find a
product they liked, and then leave the site to find a video about it.
The most difficult part of reaching rural customers is delivery. The post office is known for
being inefficient. Amazon used data showing the location of people searching its site to figure
out which parts of India need more delivery capability. Then it reached out to small businesses
for help.
Nogenchandra Das, 31, responded. In the small town of Jorhat in Assam, he operates a dusty,
shed-size store, with a few shelves to display basic goods—cooking oil, rice, a few kinds of hard
candies—and a corner to pile Amazon packages delivered every morning. He signed up for the
“I Have Space” program, along with more than 20,000 mom-and-pop stores, offering to take
packages and deliver in neighborhoods for a commission.
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
Amazon gave him a uniform, a bag and a week of training. A motorcycle deliveryman brings
about 25 packages a day from a small distribution center nearby. Customers can come pick
them up at his shop, or he will deliver them on his own motorcycle. After living his whole life in
the neighborhood, he knows many addresses just by looking at the family name.
Nogenchandra Das at his small shop in Jorhat. He signed up for an Amazon program to take packages and deliver in the
neighborhood.
Amazon desperately needs the local knowledge; the address system in India is so chaotic people
will often give their locations by using a local landmark. “It can be something like ‘behind the
temple’—but you don’t know which temple they are talking about,” said Akhil Saxena, vice
president of customer fulfillment at Amazon India.
Stitching small stores into Amazon’s global supply chain meant logistics technology had to
work on basic smartphones, the only technology most have. The phone is used to scan
deliveries, record payments, arrange for returns and take signatures. For neighborhoods
without cellphone coverage, the app can work offline and update the Amazon system later.
Rural users are less likely to have credit or debit cards, so Amazon lets them pay cash when they
receive their items. When it struggled to provide all the change needed, it launched Amazon
Pay, so customers could receive change or refunds electronically and also pay utility bills and
buy things elsewhere online.
Walmart, Amazon’s main foreign competitor in India, is using its national network of wholesale
stores to sell and deliver directly to country stores, restaurants and other businesses. Flipkart,
the Walmart unit, is also building its own delivery network using freelancers to reach rural
customers, and has asked the government for permission to start drone deliveries.
StoreKing is a local startup that focuses on using e-commerce to sell basic supplies to small
rural retailers. It said its strategy is to focus on businesses, delivering a small selection of
popular items to shops, and helping them manage their costs, inventory and deliveries.
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
StoreKing also works with other
e-commerce players, including
Amazon, for whom it developed
and managed its assisted
shopping outlets in the south, for
example.
Mom-and-pop shops,
meanwhile, are demanding more
protection from online retailers.
The stores wield power through
The ferry across the Brahmaputra River.
their voting numbers, and
through local and national
lobbying organizations such as
the Confederation of All India Traders. They have effectively blocked many foreign
retailers from entering India. Last week, India unveiled new restrictions on foreign-owned ecommerce companies in response to their complaints.
Champak Bez delivers a new pair of jeans to Amulya Bhuyan, a teacher in Dhowachala, who often buys on Amazon because
there are so few retail options in the small town. He paid by using a debit card on a portable device.
Champak Bez, 25, delivers for Amazon in Dhowachala, not far from where he grew up. Every
morning, he loads up a big backpack with 30 to 50 packages from the Jorhat distribution center,
scanning each package with his phone as he goes.
Most packages are small—purchases are often less than $10, for items such as socks, chargers,
cosmetics and sunglasses. Amazon developed “mother bags” to sort the tiny parcels, so
delivery people don’t have to handle each one individually in transit.
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Amazon, to Win in Booming Rural India, Reinvents Itself – WSJ
To get to Dhowachala, Mr. Bez squeezes his motorcycle onto a barge that fits around 20 other
two-wheelers, plus people and cars for an hourlong trip across the Brahmaputra River.
Downriver is a national park that is home to wild elephants, tigers and rhinoceroses. Upstream
are the tea plantations for which Assam is famous.
Once there he rides his Bajaj Pulsar over backbreaking, rough roads. Most are dirt, and the ones
near the river—just like the homes—are elevated 10 to 20 feet to accommodate seasonal
flooding.
Google’s map app provides limited detail for the area so he depends on his own experience and
asking around. Once he has found a customer he records the exact coordinates, so the next
delivery will be easier.
—Vibhuti Agarwal and Newley
Purnell contributed to this
article.
Write to Eric Bellman at
eric.bellman@wsj.com
Appeared in the December 31,
2018, print edition as ‘Amazon
Reinvents Itself For Booming
Rural India.’
An Amazon deliveryman maneuvers small, rural lanes on his motorcycle.
Copyright © 2019 Dow Jones & Company, Inc. All Rights Reserved
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1
D’Amore-McKim School of Business
The Bottom of the Pyramid and
Global Marketing
Ravi Sarathy
Northeastern University
W3 L1
D’Amore-McKim School of Business
Source: Prahalad, C. K.
(2002). The Fortune at the
Bottom of the Pyramid.
Strategy+business.
2
3
D’Amore-McKim School of Business
Difficulty of “Doing Well” and “Doing Good”
The uneasy co-existence of “doing well” and “doing good”
The for-profit corporate culture and possible tradeoffs needed to “do
good”
Difficulties in co-existence have impacts on
Organizational Commitment to doing good
Human Capital: Ability to attract capable managers and staff to
“doing good” BOP-oriented projects
Financial Capital: Ability to invest in “doing good” projects
Long-term sustainability of BOP efforts
As C. K. Prahalad has voiced, there may be …
“A Fortune at the Bottom of the Pyramid”
But it may not be easy to find such buried treasure
D’Amore-McKim School of Business
Strategies for the BOP
Disruptive models
Radically alter industry economics
Improve functionality
Enlarge the market size
Make sustainable
4
5
D’Amore-McKim School of Business
The Super MoneyMaker pump is a human-powered irrigation pump operated “very much like a small
StairMaster,” says designer Martin Fisher. It directs water where needed without fuel or electricity. Here, a
father and son in Mali use the pump, which can irrigate two acres in eight hours. It retails for about the
equivalent of $95. On average, farms using it turn a profit of about $1,100 per year.
Designers: Robert Hyde, Martin Fisher, Mark Butcher, Adblikadir Musa
Manufacturer: KickStart International
A father and son in Mali use KickStart’s Super MoneyMaker pump to irrigate crops.
From Design for the Other 90%, an exhibit held at the C…
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