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Amazon and Future Group: Rethinking the Alliance Strategy
Group 3Sarah Bennani Vladimir Pushmin Anton Telepnev Maria Zatkova
140008670130014419140010985 140022155
Have Amazon and Future Group made the right decision with respect to selecting each other as alliance partners?
Market outlook
Vertical complementary strategic alliance
Diversifying strategic alliance
Synergetic strategic alliance
Cross-border strategic alliance
Growth opportunity in the Indian retail market. Future Group helped to provide with the Indian sources that are required according to India’s foreign direct-investment policy
Synergies in distribution as both companies have a well-developed and well-equipped logistics system
Synergies in customer acquisition and cross-promotions
Opportunity for Amazon to enter fashion market that popular among most of the e-commerce retailers due to high margins and growing demand
Future Group expected to enter the FMCG market, where Amazon is present
Opportunity for Future Group to leverage Amazon’s investments, innovations in technologies through secure payments, fast delivery and easy returns
Amazon have an opportunity to use Future Group’s product portfolio and its understanding of the local consumer
Growth of the Indian economy,
changing demographics,
increased disposable income,
focus on technology
Significant retail industry growth, from
$204 b to $600 b between 2000 – 2014 and expected growth
of up to $1,3 trillion by 2020
Fast growth of the online retail
industry, from $500 m to $2 b between 2009 –
2014 that expects to double by 2020
Brick and mortar retailers are looking for opportunities to
enter online channel
Direct investment policy restrict foreign
companies operations
Business related cooperative strategy
Corporate related cooperative strategy
International cooperative strategy
What are the probable risks faced by Amazon and Future Group? What can they do to safeguard against those risks?
1. Small profit due price alignment between physical stores and high discounting e-sales.
2. Strong and powerful competitors3. Lack of trust, Biyani is still criticizing the
e-commerce companies4. Ineffective alliance negotiations, terms and
conditions of future cooperation were poorly negotiated
5. Amazon is locked with Future group brands, so other companies can’t sell their products, resulting in limited offerings by Amazon.
6. Slow integration with other Future Group brands
7. Government legislations, only 25% of sales can be done via online platforms
Risks faced by Amazon and Future Group
Ways to safeguard from the risks
Increase the prices to increase the margin while keeping the sales near 25% limit.
Price
Attract new
brands
Contracts review
Deversify
Amazon can allow some other brands to use its services due to a limited amount of sales per brand group.
Continue to add new non-fashion brands to the Amazon delivery network.
All of the old contracts should be reviewed/renegotiated to avoid future conflicts with ongoing operations.
What actions would you recommend for the Amazon-Future Group partnership? What are the implications of your recommendations?
• In order to achieve their targets within three years (60 billion)
• Demonstrate a better expertise of customers portfolio
• And penetrate the market
The developed expertise of Amazon is highly needed• Penetrating the market online is an indirect
way to advertise for the offline stores with a trade off situation
• Since the new India’s foreign direct-investment policy in 2016, India’s government allowed Amazon 100% foreign direct investment in the business-to-consumer online marketplace-> Future Group is dependent on Amazon
1The negotiation of profit or margin sales 2 Exclusive collection/line
Available only online, no competition between online and offline selling-> agreement on both sides by setting the “discounting” strategy
3Unsold items from offline stores
transferred to Amazon online platform
Promotions and discounting could be present to the retail industry• Particular items would not be found in offline
stores anymore
4Amazon & Future Group have been
collaborating only for 2 years• Lacking on time to bring major changes to
the cooperative deal• Lacking on the experience/background and
knowledge in order to make an improvement• TIME + EXPERIENCE= KEY FACTORS