Discuss about the Concept of E-Commerce Company in Singapore.
E-commerce has reduced the period to a considerable amount, which was never possible with the traditional form of shopping. It has not only provided solutions to the business companies but also helped the customers by providing them some form of business opportunities. The kinds of business involved in the e-commerce is strongly captivating the minds of all such as the government, the organizations and the local customers (Barnes and Hunt 2013).
The main purpose of this assignment is to check the efficiency of the Lazada Company, which is based in Germany. It is an e-commerce Company and is continually exiting about having an entry into some other potential market. The chosen market for the Company would be China. Rocket Internet laid down the foundation of the Company in the year 2011. Ever since its inception, it is continually engaged rapid evolution of the business. This is because of the fact that the Company has now its operational sites also in some other parts of world such as Indonesia, Thailand, Vietnam, Singapore, Malaysia and Philippines (Lazada.sg, 2017).
The main purpose of the assignment is to check the competitiveness of the Lazada in Singapore. Moreover, it would also check the potentiality of the Company for the entrance into the Chinese market. Nevertheless, it would also enquire the threats of its competitors in the Chinese market.
Value Chain of Lazada
The understanding of customer behaviour and the market hold of Lazada have also attracted giant companies from other parts of world such as Tesco of UK. The slumping benefits of the Company in UK have forced them to think of some other parts of world. The Company is not that much a success in the South-East Asia market. This is because of the fact that the Company is interested in operating with Lazada to have success in their business in the Asian market. The motivational approach of Lazada has also attracted the giant Company Tesco. The Lazada believes in delivering as the Amazon of the Asian countries. Despite of all the success, which Lazada is bagging to its credit, it is very difficult to calculate the level of success for the Company in the coming future. The Company is engaged in investing a huge amount in constructing the supply chains, reliable services of delivery and warehouses. However, Lazada is adding value to its products by producing some significant approaches such as one-stop shopping destination, secured mode of shopping and accessible shopping. Apart from all the local and international brands, it also has some products that are exclusive to the Lazada. It adds value to the products by providing an easily accessible mode of shopping (Da Costa 2016). The Company as stated earlier is adding values to its products by also understanding the behaviour of customer. The multiple options for the payment is also another point that is adding values to its manufacturing and services. The payment such as credit card, cash on delivery and PayPal are all part of the shopping from Lazada. Interestingly, in Singapore, this is one of those companies, which are offering the facility of cash on delivery payment to the customers. The cash on delivery payment is widely popular among the customers that do more shopping on the e-commerce platforms. Lazada has even performed well in those parts of the world where others do struggle such as Philippines and Indonesia. This is because of the fact that there are several barriers to the logistical operation in such countries. Lazada; however, have found solution to the problem with its unique and complex chain of supply. The seamless planning to achieve a great supply chain has made this Company able in hitting hard in the market. Supply chain is such a problem that has the potential to hamper the business of any organization (Jusoh and Ling 2012).
Key Competencies of the Company
Key competencies are those factors that are proving wonderful in favour if its bearer. Few years older, Company Lazada has already left a huge influence of its performance in the market. The Company is performing up to the potential level. The intention of the Company is sky high as they are aimed to achieve the status of Amazon in the Southeast Asia market. The performance of the Company has made this one of the top performing retail companies in the market where it presently exists (Schniederjans, Cao and Triche 2013). Unlike other parts of world such as China, US and India, Southeast Asian parts are less developed in terms if e-commerce success. However, the countries are slowing holding their grip in the market. Initially, China, USA and India were not as successful as now; however. With the passage of time, things have been changed now. It is an undeniable fact that the Southeast Asian parts would also grow in terms of their e-commerce business. Following are some of the factors that are contributing in the success story of the Lazada Company:
Cash On Payment - This is one of the factors behind the success of Lazada Company, which is not the part of many companies. Cash on delivery is the widely popular mode of payment that has captivated the minds of customers. Customers prefer more to pay on cash. This might be because of the fact that they believe this to be safest options. This is one term related to the traditional form of shopping where one is needed to pay the amount only after the commencement of shopping. However, this modern form of shopping has not only eased the life but has also reduced the time level for the shopping. Anything, which offers time effective operation, is well worth for those that have tough schedules (Pardalos and Tsitsiringos 2013).
Supply Chain – This is one of the most vital factors for working into the Southeast Asia especially in Indonesia and Philippines. Many companies in past have failed in maintaining a healthy supply chain in those part. However, Lazada has exceptionally performed well in that regard. The seamless performance of the company in the management of supply chain has contributed huge in the success of the Company just within the span of short time. They have focussed a huge on maintaining a flawless supply chain management, which has also resulted in wonder for the Company. The logistics management of the Company have also contributed huge as the results show that almost 50 to 60 percent of the orders are coming from the big cities that are outside (Niranjanamurthy et al. 2013).
Sophisticated Online Experience
The one important point, which is keeping Lazada apart from most of the e-commerce companies in the Southeast Asia part is their unmatched online shopping experience. Its competitors such as Zalora are basically just an online platform for fashion designing costume and accessories. However, Lazada is more like an online mall that provides easy operation from just the point of clicking to the entire shopping experience. This is one thing, which has helped the Company in gaining much success in this part of the world, as people here are very much available on the internet. Philippines, Thailand and Indonesia are some of the potential places for the online shopping. Other companies have failed in penetrating the two potential online places such as Indonesia and Philippines (Kou 2013).
Lazada has used its expertise in the Singapore market to capture the dominion here again like other part of the Southeast Asian countries. Unlike other countries of the Southeast Asian part, Singapore is one of the most established markets. When Lazada headed to the Singapore market, they just mentioned that the intention is to increase the area of business not to capture the market. The strategy is very effective in its own area as it provides a long-term success planning of the company in the Singapore market. To maintain the competitiveness in the Singapore market, Lazada has planned something different. The Company is planning to tie hands with the leading e-commerce Company of China “Alibaba”. The plan is to utilise the largest shopping platform of Alibaba with the special dedicated website link from the Lazada. This would help Lazada in proving the same dominion in the Singapore market. Moreover, the success would encourage them for some other potential market such as China. Lazada is adding its expertise in the feather of one of the largest e-commerce companies of the world. The trick has worked for the Company in Singapore as it has emerged out as one of the leading brands in the e-commerce companies in Singapore (Gangeshwer 2013).
External Environment of the Chosen market
The market of choice for the Lazada Group is China, which attracts the participation of bulk number of outside companies into the market. China is the second largest retail market of the world and one of the largest markets for e-commerce. However, it would not be an easy business for the Company the external environment in China is very challenging. Moreover, the country is also featuring some of the world’s most powerful e-commerce companies such as Alibaba Group. The choice of country for Lazada is China because of several factors such as some that are mentioned below (ChinaAbout.net, 2017):
PESTEL analysis of a new market
Political – The political environment in China is stable not like other parts of world such as India and Pakistan where the flourishing of any companies depend heavily on the political condition (Niranjanamurthy and Chahar 2013).
Economy – The economy of the country is undoubtedly one of the strongest in the world. Arguably, both China and India are the emerging giants in terms of economy. This is one of such factors, which have attracted bulk participation of a long list companies to this part of world. Walmart is one of such examples, which was attracted towards the growing economy of the country. The profit of the Company was slumping to the lower position in its home country. This was another factor, which has compelled the Company in attracting towards the Chinese market. However, the Company never gained any high success in the market because of the strategy, which it had outlines for the Chinese market. Nevertheless, the Chinese market has not stopped attracting foreign companies (Pt Joseph 2015).
Social – The e-commerce market is already towards the developing area, which is making this as one of the most suitable places for enhancing the business of the e-commerce companies. People here have significant passion for the online for of shopping. This is something that makes this attractive for the foreign companies. The socio-cultural lifestyle of the people and their love for the online form of shopping has contributed great in the success of Alibaba Group in China. Another most important factor is the rate of literacy in China, which is almost equal to 92.8%. This is something that speak about the potentiality of the e-commerce market in China (Segovia, Szczepaniak and Niedzwiedzinski 2013).
Technology – Technology is an integral part of China, which has even challenged the dominion of the United States through rejecting the usage of Goole search engine in China. In place of this, they have imposed and introduced their own online search engine Baidu, which is providing an alternative solution to the Google platform. The duplication of major Smartphones such as of Samsung does present the rate of efficiency of the Chinese technology. China is one of the most powerful countries in terms of technological advancements (Iddris 2012).
Environmental – Environmentally, the country is less safe as it has some problems that are significant. The shortage of water, varied climate at the different regions, natural disasters such as flood and less efficient carbon technology are some of the environmental related problems that are a problem for the foreign companies. These all are the problems for the labour or employees, as they might not enjoy these differences (Fernie and Sparks 2014).
Legal – The local government rules and regulations are less in favour to the outside companies as it pretends to support the local companies more. They tend to allocate the good locations to the local companies for fostering their growth. This indeed forces the foreign companies to suffer. Despite of this problem, another problem in the country is with the state union that tends to oppose the businesses of outside companies. High labour costs are other very important factor that tends to reduce the profit margin of a Company (B?ing 2013).
Porter’s Five Forces
Competition analysis of the Chinese e-commerce market is as follows:
Rivalry within the e-commerce market – The rivalry in the e-commerce market in China is medium because of the fact that the intention of companies is more towards attracting the participation of customers. The companies are not directly attracted towards achieving the market shares of competitor companies by doing some extensive marketing of the products. This is because of the fact that a fierce competition in between the companies is less. The highly growing market of B2C has attracted the interests of companies towards adding new customers (Huang, Yoon and Benyoucef 2012).
Power of suppliers – The power of suppliers in China are low because of three important reasons. All the peoples those who are thronging to the website platform for the shopping, they are usually inclined towards products with the same offers. This means that they are in some terms not brand specific, which makes this clear that the role of supplier is not unique. Another reason behind the facts is the switching cost, which is low for the B2C companies. This means that the rate of switching to other supplier is not expensive. The importance of B2C companies in China is another reason that reduces the power of supplier. They are actually very significant customers of the suppliers. Suppliers cannot afford to break their relationships with these companies (Aydin and Kahraman 2012).
Power of customers – The power of customers is medium in the China because of four reasons that are very effective in maintaining a healthy balance in between the e-commerce companies and the dominion of customers. B2C websites used to have customers at the most scattered level that purchases any good alone by being on the available platform. The bargaining power is medium because of the fact that the purchasing does not happen in bulk amount. It rather happens when a single customer wants to buy something. The third reasons behind the fact are the growing popularity of the e-commerce market in China, which shatters any sort of threat from the sight of e-commerce companies. One of the most effective reasons behind the fact is the individual buying habit of customers. The shopping happens for individual person not for the entire group. The habit of group shopping would have threatened the power of e-commerce companies in China (Camarinha-Matos, Afsarmanesh and Rabelo 2013).
Threat of substitutes – Threat of substitutes is higher for the e-commerce companies as price-effective offerings by some other platform can overturn the participation of customers towards the offerings. In this context, the C2C form of shopping is also growing in its popularity, which is a threat for the B2C companies in the Chinese market. C2C is an unofficial kinds of shopping, which is indeed not safe but effective in moulding the costumers towards the offerings. In this platform, other customers tend to offer products at unbelievable prices (Sudhamathy and Jothi Venkateswaran 2012).
Threat of new entrants – Threat of new entrants in the Chinese market is very high because of the following reasons (Monteiro, Swatman and Tavares 2013):
- B2C website opening attracts less capital investment
- Existing C2C websites such as Taobao can enter into the market with their set customer base
- Distribution channels can be with anyone such as B2B, B2C and C2C which is indeed not a personal property of any Company
· No barriers to market entry
· Availability of skilled employees
· Dominion performance in the domestic market
· Production success in future
· Market size expansion in the coming future
· Increasing income level
· Enhancing economy power
· Inflating tax rates
· Rules of governments
· Changing prices
Table 1: SWOT analysis of Lazada
Source: (Created by Author)
One of the main strengths of the Company is their increasing economy, which is dedicated to their unique logistic and supply chain management. However, they seriously lacks in terms of government rules and regulations, which put them under notable pressures. Changing prices of the products is also one of their problems, which is like a constraint to them (Loo 2012).
Top 3 ecommerce companies and Lazada
Tmall of Alibaba, 360Buy.com and Suning.com are consecutively the top three market shareholders in the Chinese market. Tmall, which is the market leader, has everything from Lamborghinis to panties of lace. It also features competitive B2C brands at its platform. These three of the e-commerce brands have dominated the Chinese market. Of the entire mentioned brand, Tmall is the dominating brand followed by 360Buy.com. The one thing, which is common in between the supremacy of both the Tmall and the 360Buy.com, is their legacy to display a wide range of products o the platform (Hajli 2014).
If Lazada in the Southeast part of the Asian countries considered being in competition with the mentioned top rival companies, it would certainly put a tough challenge to those companies. This is because of the fact that Lazada in the Southeast Asian parts tends to have the same format of online facilities such as the availability of all kinds of domestic, international and other competitors brands. Rate of new entrants is high in China, which is supportive to the Lazada Company. However, threat of substitute can anytime pose challenges in front of Lazada in China (Frackiewicz and Grzesiuk 2013).
Mode of entry
- The first point of recommendation for the Lazada would be to reduce the threat of substitutes in China by opening up options for price fluctuation in the products verily depending on the market demand. This would help in holding the customers in odd situations also.
- The second point of recommendation would be to have a good relationship with the state run union, which is helpful for experiencing a healthy business practising in the country.
- The last point of recommendation would be for the management of a healthy logistic and supply chain as this ensures a healthy flow of products, which is important for meeting up with the instant requirement of customers.
E-commerce is a growing concept in some of the world’s potential market such as China, India and USA. The growth has provided another form of shopping, which never existed. However, the trend in itself is conflicting as C2C is also growing with its dominion. Nevertheless, the coming future would produce a healthy competition in between the different concepts of e-commerce. Lazada is a growing prospect for the entire world and a solution for the time saving options of shopping.
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