Amazon Acquired Souq.com – Case Study
The process of taking control over another firm, usually by the purchase
of shares or assets of the company, is known as acquisition in business and
economics. There is a significant link between economic diversity and economic
progress. When a country's income is created from a variety of sources that are
not directly tied to one another, economic diversity is attained (Al-Omari et
al., 2020).
Amazon Acquired Souq.com – Case Study
Summarize each story
Amazon had acquisition
souq.com in March 2017. It was the largest ever funding deal in the Arab world,
the total sum paid was $580m in cash.
Amazon.com established in 1997, it is
an "Internet-based" Amazon is the largest online services firm
that sells books, audio, video, electronics, Kindle e-book devices, and
a wider range of other products either directly or as a middleman between
other stores millions of customers. It entails using the Internet to
rent data storage and computing power (Hall, 2020).
On the other side, Souq.com started as an auction
website, similar to eBay, and later expanded into the automotive and real
estate classifieds. Then expanded its operations into Saudi Arabia after
launching a B2C website (Mouchawar, 2017).
Since 2005, Souq.com has been the most popular
e-commerce site in the Middle East and North Africa. Souq.com offers over
400,000 products in categories such as consumer electronics, fashion, health,
cosmetics, home goods, books, and more items investigated and launched regularly (Mouchawar, 2022).
As a result, Souq.com offered Amazon a strong foothold
in a crowded and developed e-commerce market. Souq has more than 45(m) monthly
visitors and an inventory of 8.4 (m) items in 31 groups (Russell, 2017). Therefore,
attracting customers cost much to the company, with this acquisition Amazon got
customers and market place with no time, effort, investment, and implemented
strategies. Thus, imagine that 75,000 vendors sell 2 million items across
Thirty categories, fulfillment operations, and an online payment gateway, Amazon has
direct access to them.
Where is the organization now in their change proposal?
Since 2017 Amazon
increased its presence in the Middle East with the “$586 million” purchase of
Souq.com “a big and trusted existing e-commerce platform” that works in Saudi Arabia
and the United Arab Emirates. Amazon has increased its visibility and
established itself as a dominant market leader in Bahrain and Egypt.
Amazon has
redesigned the website mobile and App to be more clear
and friendly, it offers more than “30 million” items from local
and foreign vendors, in addition to “5 million” items from Amazon in the USA. The
market share percentage of Amazon in the UAE would likely be between 12 and 15
percent across the Middle East (Chris Hudgins, 2019).
Where does the organization want to be?
Amazon is putting its consumers first and is prepared to try new
things, fail, and learn. Amazon's e-commerce income has expanded
many-fold from a large base of "$34.2 billion", which
represents only “40%” of the whole e-commerce market in the United States.
Amazon's expectation was to reach almost “47%” of overall retail
e-commerce sales in 2019 (Barrabi, 2019).
The Middle East and North Africa region encompasses a total of “50 million” buyers from different countries. The transaction between Amazon and Souq.com was interpreted as a sign that Amazon was not relying on its own development and progress, it preferred to reinvest in growth and future markets (Russell, 2017).
How this company is to begin the change management process?
The fact that Amazon has arisen as a new paradigm of inventive effectiveness, however, should not be disregarded. Amazon is an example of modern innovation. Amazon has been launching new goods, procedures, and business models at such a breakneck pace that its playbook has become the gold standard against which every firm must measure itself (Tucker, 2021).
Consequently, through
trial and error, booms and busts, Amazon has built a set of guiding principles
and cultural norms to keep its growth machine humming. Customers must be
delighted with “high quality of products and services, door-to-door delivery,
and innovative return policies”, competitors must be crushed, from bookselling
to online retailing to personal devices, and from web services and software to
healthcare to food and beverage, there is something for everyone. Hence, Amazon is dedicated to professional practices that generated success such as
innovation, considering ideas as assets, workout constantly, accepting fast fail,
data-driven, customer-driven innovation is used, and a practice culture of clear thinking and risk-taking (Tucker, 2021).
Does the story detail how they
will manage the change?
Amazon is a
forerunner, with innovations like one-click and Amazon Prime, this has a
significant concern about the sector's expansion. Even before its acquisition Souq.com,
Amazon was well-known and had a strong brand in the Middle East. Amazon
controlled about 15% of the internet retail market in various sections of the
area (Sandeep Ganediwalla and Anuj Kumar, 2019)
Amazon has
implemented leadership dimensions of online retailers, thus amazon has (1)
maximized the value of the money through its Prime program, offering 2 days of free
shipping and, offering multi discounts, and (2) created a positive shopping
experience starting from discovering the product “reviews, videos and photos”
to delivering it to the customers “dealing with many shipping companies and offering
many paying methods in local currency and make installment payments” and, (3)
made its brand the most preferred for online customers “it provides a friendly
use App and website in both languages Arabic and English”.
Does the story detail how they
plan to institutionalize the change?
As the firms
expand their collaboration in the region, Amazon wants to keep much of Souq's
existing branding, structure, and management. Souq.com has brought with it a
devoted client base, an experienced team, and a customized payment and
fulfillment infrastructure. all that was configured by Amazon.
In response to the
difficulties of promoting, payment methods and delivery, amazon helped in
developing special manners in conducting online shopping, and developed payment
methods such as using wide credit and debit cards, prepaid cards, and pay on
delivery, and in terms of product delivery difficulties, they built a wide
range agreement of domestic couriers as well as comprehensive logistics
platform of addresses. In addition, Amazon has emphasized the
competitive advantage of entering international companies in this market and
that led to giving more confidence in the region and maximized the potential
growth in the Middle East (Partners, 2017).
If not, how would you propose
they do this?
Amazon kept the
vast majority of former employees and local sellers in Souq.com and even it
kept the former CEO of Souq.com (Ronaldo Mouchawar) in his position and
Souq.com still working in the same culture with the same loyal customers, even though they hired web developers from the same region. Therefore, there were no huge
changes in institutional management.
Does the story detail how they
will avoid mistakes?
The main purpose
of acquiring companies is for geographic and product expansion, which needs
strategic plans to boost business development. However, a large percentage of
acquisitions deals do not work well especially for startups for the following
reasons; (1) setting unrealistic goals, which did not happen with the Souq.com
acquisition, since Amazon aimed to acquire the Middle East market so this aim
was realistic and achievable, (2) shortage of resources for acquisition, which
did not happen with Souq.com, as mentioned above, Amazon transferred all data
and account Souq.com to its servers, (3) lost the human capital, which not
happen in Soup.com, Amazon kept all former staff and even kept the former CEO
and hired new web developers from the same region (Docurex, n.d).
References
Palmer, I., Dunford, R.,
& Buchanan, D. A. (2017). Managing organizational change: A multiple
perspectives approach. Mcgraw-Hill.
Al-Omari, S., Bishnoi, M.,
& Jakhiya, M. (2020). Souq-Amazon and Careem-Uber acquisition deals: An
Analytical Study of the two merging Giants in the UAE. SSRN Electronic
Journal. https://doi.org/10.2139/ssrn.3713825
Hall, M. (2020, April 9)
Encyclopædia Britannica, inc. (n.d.). Amazon.com. Encyclopædia
Britannica. https://www.britannica.com/topic/Amazoncom
Mouchawar, R. (2022, January
8). Ronaldo Mouchawar. Wikipedia. https://en.wikipedia.org/wiki/Ronaldo_Mouchawar
Russell, J. (2017, July 3). Amazon
completes its acquisition of Middle Eastern e-commerce firm Souq.
TechCrunch. https://techcrunch.com/2017/07/03/amazon-souq-com-completed/#:
Mouchawar, R. (2017, August 21). How
Souq.com's CEO built an e-commerce powerhouse in a region where cash still
rules. Harvard Business Review. https://hbr.org/2017/09/souq-coms-ceo-on-building-an-e-commerce-powerhouse-in-the-middle-east
Chris Hudgins, K. A. (2019,
September 30). Amazon in the Middle East: Leveraging a lucrative growth
opportunity. Accelerating Progress. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/amazon-in-the-middle-east
Rosoff, M. (2019, December
13). Amazon will be the most important company of the 2020s. CNBC. https://www.cnbc.com/2019/12/13/amazon-will-be-the-most-important-company-of-the-2020s.html
Barrabi, T. (2019, June 14). Amazon's
online market share may be smaller than previously thought. Fox Business. https://www.foxbusiness.com/retail/amazon-market-share-ecommerce-sales
Tucker, R. (2021, December
10). How does Amazon do it? Five critical factors explain Amazon's
incredible success. Forbes. https://www.forbes.com/sites/robertbtucker/2018/11/01/how-does-amazon-do-it-five-critical-factors-
Sandeep Ganediwalla and Anuj
Kumar, S. to G. N. (2019, May 2). Does rebranding of Souq Change Anything?
stage set for next round of online retail battles in Middle East. Analysis
– Gulf News. https://gulfnews.com/business/analysis/does-rebranding-of-souq-change-
Eugene Kim, A. L. (2019,
January 29). Amazon plans to launch a new Middle East Marketplace, two years
after buying souq for $580 million. CNBC. https://www.cnbc.com/2019/01/29/amazon-new-middle-east-marketplace-rivals-souq.html
Partners, K. (2017, August
30). Amazon sets sights on Middle East expansion. Khalifeh &
Partners. https://www.khalifehlaw.com/amazon-sets-sights-on-middle-east-expansion/
Docurex. (n.d.). 5 mistakes to avoid during the post merger integration process. Sunbelt. https://www.sunbelt.la/en/5-mistakes-avoid-during-post-merger-integration-process
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