SIES COLLEGE OF

MANAGEMENT STUDIES

GENERAL MANAGEMENT:
AMAZON'S BUSINESS PLAN TO ENTER INDIAN
FOOD RETAIL INDUSTRY

SUBMITTED BY:- ANAM KHAN

POOJA NAG
 AMAZON'S BUSINESS PLAN TO ENTER
INDIAN FOOD RETAIL INDUSTRY

 Perception of opportunity

The Indian food industry is poised for huge growth, increasing its contribution to world food trade
every year. In India, the food sector has emerged as a high-growth and high-profit sector due
to its immense potential for value addition, particularly within the food processing industry.

Accounting for about 32 per cent of the country’s total food market, The Government of India has
been instrumental in the growth and development of the food processing industry. The
government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to
encourage investments in the business. It has approved proposals for joint ventures (JV), foreign
collaborations, industrial licenses, and 100 per cent export oriented units.

After knowing this fact, Amazon perceived an opportunity to enter into Indian Food Retail
Industry

 Establishing objectives

To become the bestselling e-tailer in the Indian food industry.

 Development of planning premises

After setting objectives, it is necessary to outline planning premises. Premises are assumptions about the
environment in which plans are made and implemented. Thus, the assumptions about the likely impact of
important environmental factors such as market demand for goods, competition in the market , population
growth , government policy etc are important on which future plans are made.

 Market demand for goods

The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per
cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s
 total food market, one of the largest industries in India and is ranked fifth in terms of production,
consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross
Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports
and six per cent of total industrial investment. The Indian gourmet food market is currently valued
at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent.

 Competition in the market

The online food ordering business in India is in its nascent stage, but witnessing exponential
growth. With online food delivery players like Big Basket, Grofers, Nature's Basket, having a
creeping growth, the organised food business has a huge potential and a promising future as
especially for Amazon as it has already well established infrastructure and reputation required for
an ecommerce giant to attain speedy growth.

 Government policy
Some of the major initiatives taken by the Government of India to improve the food processing
sector in India are as follows:

 The Government of India aims to boost growth in the food processing sector by leveraging
reforms such as 100 per cent Foreign direct investment (FDI) in marketing of food products and
various incentives at central and state government level along with a strong focus on supply chain
infrastructure.

 In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth
Rs 8,000 crore (US$ 1.2 billion).

 The Government of India has relaxed foreign direct investment (FDI) norms for the sector,
allowing up to 100 per cent FDI in food product e-commerce through automatic route provided
they sell locally made items.

 Search for alternatives

While entering into food retail industry, Amazon has to consider various alternatives like which
segment of food industry to enter, say whether to enter in the market for perishable food items or
non perishable food items.

 Evaluation of alternatives

These alternatives have to be evaluated in terms of their pros and cons like costs, associated risks
involved, benefits likely to arise, availability of spare capacity etc.

If the company enters into perishable goods market (eg fruits, vegetables, meat, bread), then
though the costs, risks associated are high but the benefits likely to arise outweigh these costs and
risks as not many competitors are there in perishable goods market.

 Selection of alternative

after doing the market analysis, amazon came to conclusion that the alternative to enter into
perishable goods market(eg fruits, vegetables, meat, bread) would be a better one as it is already
 into non perishable food items which have a good shelf life (eg pulses, rice, cooking oil etc) and
packed food items.

 Formulating derivative plans

After selecting the best course of action, the management has to formulate the secondary plans to
support the basic plans. The plans derived for various departments, units, activities etc in a
detailed manner are known as derivative plans.

For example the basic production plan, training of employees, logistics development, provision of
adequate funds.

Financial plan- as finance is the life giving element to every commercial activity, therefore to
ensure smooth supply of finance to execute the mail plan, amazon has decided to invest from
internal source of financing. Amazon has planned to invest $500 million to build out a food retail
business.

Production plan: Amazon has decided to enter into contract with local manufacturers and sellers
of food items like bread, meat, fruits, vegetables, beverages etc in each city it wishes to operate.
Amazon will provide them a platform to sell their products directly to the consumer.

Training of employees: amazon has to plan for training its employees about the packaging of
various kinds of food items and how to take due care of them while delivering them.

 Quantify plans by Budgeting

now a budget needs to be prepared to decide how much is to be allocated to what activity and
what would be the expected revenue. This budget plan would serve as a controlling tool to know
whether the main business plan has been executed correctly or not.

 Follow up

Plan needs to be revised in the light of main objective of the company. Company needs to review
from time to whether its plans are properly executed or not or whether there is a need to modify
the plan as per changing market conditions.

Decisions are to be taken with respect to plans laid down from time to time in order to ensure that
these plans are contributing to accomplishment of main objective of the company.