Phuoc Hong

A Comprehensive Guide for traditional SMEs to enter an E-commerce Market Case Study: FBA business on market

Degree Programme in International Business 2018

A COMPREHENSIVE GUIDE FOR TRADITIONAL SMES TO ENTER AN E- COMMERCE

Phuoc Hong Satakunnan ammattikorkeakoulu, Satakunta University of Applied Sciences Degree Programme in International Business May 2019 Number of pages: 75 Appendices: 4

Keywords: Amazon, Ecommerce, FBA business

Nowadays a traditional business is considered as less effective and heavily costing, it is the time a business seeks for an alternative which is called digital business. There- fore, the purposes of thesis are to help traditional and local SMEs understand the nature of e-commerce in general and give a specific sample as suggestive approach for e- commerce market entry. Besides, the thesis will also encounter few major challenges which were: limitation in capital resources, degree of reliability in practical sample.

To achieve the objectives, this thesis was aiming to answer the following questions: 1. How to establish an effective business plan for Amazon ecommerce market? 2. How to establish a risk-management framework of the ecommerce business?

The thesis was designed two main parts: theoretical findings and empirical application. In the theoretical part, the topics discussed involves e-commerce, Amazon, business analysis and risk management method. In the empirical part, a research approach cho- sen was quantitative methodology. In addition, the empirical research was conducted using the Amazon market data collected from third-party market research platform, such as JungleScout and keywordtool.io. Subsequently, the analysis of market data would be implemented to form the market entry ideas. Lastly, a specific recommenda- tion on Amazon market entry would be given as suggestive approach for SMEs to enter to e-commerce market. ______

CONTENTS

1 INTRODUCTION ...... 4 1.1 Thesis objectives ...... 4 1.2 Limitation ...... 4 1.3 Stakeholder benefits ...... 5 2 THESIS OVERVIEW ...... 5 2.1 Case study: Vietnamese coffee business on Amazon ...... 5 2.2 Thesis structure ...... 6 3 E-COMMERCE ...... 8 3.1 The nature of e-commerce ...... 8 3.2 Advantages ...... 9 3.3 Disadvantages ...... 10 3.4 Impact of ecommerce on business sectors ...... 11 3.5 Limitations ...... 12 4 AMAZON ...... 13 4.1 What is Amazon? ...... 13 4.2 Business models on ...... 14 4.3 The nature of Amazon market ...... 17 4.3.1 Amazon algorithm ...... 17 4.3.2 Search Engine Optimization (SEO) ...... 18 4.3.3 Amazon Pay-Per-|Click (PPC) ...... 23 5 BUSINESS STRATEGY ...... 23 5.1 Overview of business strategy ...... 23 5.2 Business analysis flow ...... 24 5.2.1 Gather background information: ...... 25 5.2.2 Identify stakeholders: ...... 26 5.2.3 Discover business objectives: ...... 27 5.2.4 Evaluate options: ...... 27 5.2.5 Scope definition: ...... 27 5.2.6 BA delivery plan: ...... 28 5.2.7 Define project requirement: ...... 28 6 RISK MANAGEMENT METHOD ...... 28 6.1 What is risk management? ...... 28 6.2 Reasons for risk management ...... 29 6.3 Process of risk management...... 29 6.3.1 Context establishment ...... 32

6.3.2 Risk identification ...... 33 6.3.3 Risk analysis 34 6.3.4 Risk evaluation ...... 37 6.3.5 Risk treatment 38 7 EMPRICAL STUDY- FBA AMAZON BUSINESS PLAN ...... 39 7.1 Research method ...... 39 7.1.1 Selection of research method...... 39 7.1.2 Tools for market data collection ...... 39 7.1.3 Data analysis 40 7.2 Empirical setting ...... 41 7.2.1 Vietnam coffee production industry ...... 41 7.2.2 Business model for the case study ...... 42 7.2.3 Business setting ...... 43 7.3 Fulfillment By Amazon (FBA) business analysis ...... 43 7.3.1 Background information ...... 43 1. Threats of new entrant ...... 44 7.4 Recommendation ...... 53 7.4.1 Supply planning ...... 53 7.4.2 Pricing strategy ...... 54 7.4.3 Product launch ...... 55 7.4.4 keywords planning...... 55 7.4.5 Pay-Per-Click campaign (PPC) ...... 58 8 IMPLEMENTATION OF RISK MANAGEMENT ...... 59 8.1 Risk context establishment ...... 60 8.2 Risk assessment ...... 60 9 CONCLUSIONS ...... 63 9.1 Research objective #1: How to establish an effective business plan on Amazon ecommerce market? ...... 63 9.2 Research objective #2: How to establish a risk management framework for e-commerce? ...... 64 9.3 Self-evaluation ...... 64 REFERENCES ...... 66 APPENDICES

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1 INTRODUCTION

The thesis will concentrate on the field of e-commerce. As we may know, E-commerce has transformed a nature of global business currently. Nowadays, we can instantly buy a package of Matcha originally from or a set of Pizza ingredients from within a second. A concept of “cross-border” business, or electronic business, is prev- alent in our world. For those businesses who take advantages of the potentials of e- commerce will gain massive benefits to their businesses. However, those businesses. Understanding the potentials of ecommerce, it is essential for traditional business to perceive the importance of e-commerce and how they can exploit its potentials. There- fore, this thesis attempts to explain the importance of ecommerce to small and medium enterprises (SMEs) as well as give a clear instruction for those organization wishes to establish their business in the world of ecommerce. Additionally, this thesis will focus only on selling Vietnamese coffee products on Amazon website as an example for ecommerce business.

1.1 Thesis objectives

The thesis objectives concentrated on establishing a complete business guidance for ecommerce market, specifically Amazon marketplace, as well as provide a specific sample for strategic plan for ecommerce business. In order to achieve the goal, a de- termination of a clear and feasible research questions is significant. Therefore, this thesis aims to answer two primary questions: 1. How to establish an effective business plan for Amazon ecommerce market? 2. How to establish a risk-management framework of the ecommerce business?

1.2 Limitation

Due to the limitation of time and material resources, it is quite a challenge to ensure the reliability of the approach in practice. Moreover, the practical example was imple-

5 mented only for illustrating the main idea of the thesis, regardless the results of imple- mentation. Therefore, the other parties, who use this thesis as a material, should keep in mind that this material is only a suggestive ecommerce approach, not a definite framework for entering ecommerce market.

1.3 Stakeholder benefits

This thesis, firstly, would benefit specifically to Vietnamese local businesses, those wish to entry the ecommerce market. The thesis has already setup a specific sample path for them to follow or adapt on their own business. Secondly, I am a major stake- holder, who would take a huge benefit on this thesis. This is a great opportunity for me to experience and understand the ecommerce market, as well as to adopt profes- sional study in practice, for example market research, business analysis, purchasing and supply, and so on.

2 THESIS OVERVIEW

This chapter introduces the goals of thesis and how the problems are interpreted. the case study defines wherein the thesis took place. The discussion of thesis objectives and scope involved to clarify the limitations of thesis and orientation of problem solv- ing. The key concepts help to explain to focused theoretical concepts serving to address the thesis results.

2.1 Case study: Vietnamese coffee business on Amazon

Ecommerce has longed to become a well-known term in 21st century, which commer- cial transactions conducted electronically on the Internet. Ecommerce market, nowa- days, plays a vital role in the international trade. The revolution of information tech- nology and communication is the fundamental elements of ecommerce, which helps

6 ecommerce canceled the limitations of traditional commerce (Nanehkaran, 2013). The transformation of 21st commerce market has proven its massive benefits to the global economy. However, the approach methods to ecommerce are sometimes still obscured and limited to a traditional business, especially Vietnamese traditional SMEs. Talking about Vietnamese business, in more specific the Vietnamese coffee industry, Vietnam is the 2nd biggest coffee export in the world (we are only behind the champion Brazil). However, the total value of the coffee industry is less significant. In 2018, we were ranking at 10th regarding the global coffee business. The reasons is straight-forward. We sell as the largest quantity, yet the lowest value. In other words, as those Vietnam- ese coffee manufactures, they usually sell raw coffee bean to other foreign buyers. Although Vietnamese coffee experts believe that our resources and technology are sufficient to produce complete coffee products, Vietnamese sellers are afraid of selling those complete products. It is understandable that those traditional manufacturers are get used to their business models with a guaranteed consumption of output. Indeed, the event has pointed out a real problem of Vietnam local sellers that they encountered a problem with consumption. A one feasible solution for this specific problem is the ecommerce. In fact, if the organizations understand a real potential of ecommerce, they may be beneficial massively from it. Understanding the needs of traditional sellers, the purpose of this thesis is to help traditional businesses to sell their products on Ecom- merce market. As a result, in the thesis, the goal is to establish a well-organized and comprehensive guide for a traditional business to enter the ecommerce entry. To be more practical and precise, the thesis will give a suggested approach on an attempt to sell Vietnamese products, for example Vietnamese roasted coffee, on Amazon.

2.2 Thesis structure

Indeed, a successful thesis is needed to conduct in a clear and well-structured ap- proach. Therefore, in this thesis, the structure would follow the subsequent framework:

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Theoritical framework

•Ecommerce in brief •The nature of Amazon marketplace •Elements of a business plan

Data analytics

•Third-party raw data •General and Amazon market research •Analysis of product and market

Feasible plan for approaching the Amazon marketplace (PT3)

Specific sample approach and examination on the feasibility of approach (PT3- cont)

Figure 1. General thesis framework

Based on previous structures, the thesis comprises of 4 major phases: • Theoretical framework: forming theory to address the thesis’s objectives • Data analytics: collecting and analyzing data to gain insight perspectives • Feasible plan: establish a theoretical approach based on theoretical framework and data analytics • Sample approach: establish a step-by-step instruction based on a previous plan To be more specific, to implement the thesis framework, the thesis will be divided into smaller project tasks (PTs) to easily follow and complete. The thesis project tasks are described in the table below:

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Project task Task framework Data acquisition Outcome Theoretical Finding and Reading Self-study Theoretical Industrial publications, books and Desktop study framework in research online resources in Book study supporting the (PT1, project relation to digital establishment of task 1) marketing industry feasible Amazon retail business Advanced Collecting data Data insights Form the analysis of analysis provided by the case study on the (PT2) Doing competitor third-party basis of data analysis resources, collection in order to Doing current-state Market research, examine the analysis expert interview feasibility of the and personal business plan experiences. Results (PT3) Launching the plan on Outcomes of Evaluation of the practice, collecting the PT2 and PT3 specific plan to enter data from sale and Amazon ecommerce marketing departments, market and evaluating the effectiveness of plan Presentation Proof-reading the thesis Outcomes of all Completing the Presenting the ideas to PTs thesis’s process the case company and school Table 1. Descriptions of project tasks

3 E-COMMERCE

3.1 The nature of e-commerce

The telecommunication networks and advancement of digital technology (mobile tech- nology, for example) have resulted a completely new way of human communication and interaction. A modern 21st resident, nowadays, is likely to spend a “half of a day” to live online. Consequently, a new type of business emerges from the ground: Ecom- merce. Ecommerce refers to the activities of buying and selling products or services on the internet (Ziaul, H 2005, 49-56). The terms of “ecommerce” or “e-business”, nowadays, are prevailing globally. Talking about technical views on the ecommerce,

9 the major components of ecommerce comprises of three factors: communication sys- tems, data management systems and security (Nanehkaran 2013, 190-193). Firstly, let’s talk about communication systems. Communication systems are system models to perform communication exchanges between transmitters and receivers (Elmustafa, A 2005). Nowadays, the most well-known communication system, especially for ecommerce, is the internet. The internet is a global network system, its network effect is significant as it brought a huge demand side scale to the ecommerce market. The network of multibillion users means multibillion potential customers for every busi- ness on the internet. Secondly, data management is a necessary for the ecommerce. As the world of digits is created by numbers and data. Therefore, understanding of data management is necessary to every ecommerce business. Last but not least, since the internet is free for “everyone” which means either good or bad users still could access to the internet network. Therefore, ecommerce also bears potential risks that a business needs to take care. Thus, methodologies for protection of network and data are essen- tial in ecommerce (nowadays we call it cyber security). Altogether, regards the bene- fits of ecommerce, they are undisputable for local and traditional businesses. However, its disadvantages and side effects are also worth to examine. In detail, these benefits and risks of ecommerce will be discussed below.

3.2 Advantages

As mentioned previously, ecommerce plays a significant role in global economy. There are few features that we may mention here:

1. Non-stop global marketplace The ecommerce offers a great opportunity for buying and selling globally and contin- uously. While we are sleeping, the functions of our online business are still operating, as well the customer are looking for our products, determining their orders (Nanehkaran 2013, 190-193).

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2. Cost optimization The online business has benefits significantly in optimizing the business cost. In case of traditional business, marketing and operational cost are usually main concerns re- garding to the effectiveness of business management (Nanehkaran 2013, 190-193). Nowadays, ecommerce provides the opportunity for a traditional business to approach potential customers more efficiently, yet smaller cost. Therefore, thanks to the online market, it is possible to cut down all unnecessary costs. For example, in case of digital goods, such as videos or music, we are able to eliminate completely transport costs.

3. Easy business launch In the online commerce, the needs of physical outlet setups consider as a supplemen- tary factor, in some cases, even unnecessary. SMEs, who start with a tight budget of business, may consider this ecommerce feature as a great opportunity to establish a new business (Nanehkaran 2013, 190-193).

4. Transparency The ecommerce is a universal market. The competition within the marketplace is high and transparent. The transparency of cost structure is clear to the buyer and seller (Nanehkaran 2013, 190-193). In addition, the customer may also compare the price (or cost) of their products within multiple ecommerce platforms (such as Amazon, Ebay and Alibaba) in order to make the best decision based on their own criteria.

3.3 Disadvantages

In addition to those advantages, ecommerce still involves some serious problems:

1. Lack of security The security has been the most well-known problem since the beginning of ecom- merce. A widespread of internet connection and easy-to-access features proved to be massively useful, yet also seriously unsafe. There are more than million users every day on the internet. Therefore, it is inevitable that there are not only good users, but also bad users. In addition, a fraud of online business seems to be correlated to the growth of digital economy. While genuine businesses consider ecommerce approach

11 as a profitable solution for their business, it is also not a small amount of scam busi- nesses also found their fortune to do an online business. These affairs become more and more popular in the world of internet.

2. Low quality control Since the emerge of ecommerce, quality of products is always customer’s priority. Trust is most important factor to the customer’s satisfaction. The control of quality recently has been emphasized by many largest ecommerce platforms, such as Amazon, Ebay or Alibaba. However, the customer sometimes still has to be afraid of the product quality, because of its slightly differences, such as colors, freshness or expected feel- ings (Nanehkaran 2013, 190-193).

3.4 Impact of ecommerce on business sectors

Either its advantages or disadvantages, both sides of ecommerce placed its influence on many business functions, for example marketing, economics, finance and account- ing or production and operation management. To be more specific, some of ecom- merce’s influences will be demonstrated in the following sectors:

1. Marketing The traditional marketing has changed to adapt to the development of ecommerce. A “new” term, currently referred to “marketing activities on the internet”, is digital mar- keting. Nowadays, marketing, or “digital marketing”, is not completely dissimilar to the traditional one. Instead, it is an “online” version of traditional marketing, with a high commitment of efficiency. If a purpose of traditional marketing is to attract cus- tomer via TV advertisings or promotion, the digital marketing performs the same pur- pose, yet in different forms such as search engine optimization (SEO) or social media promotion. Thanks to the development of information technology, today marketers can easily reach their target customers, reach the new market or new opportunity, with a power of ecommerce. However, to maximize benefits of ecommerce, understanding the digital marketing tools and the nature of online customer behaviors are vital to any digital marketers (Kiran, N 2017, 324-336). It would be a barrier for traditional organ- izations who are freshers of online business. Although the digital marketing may bring

12 massive advantages to a business, yet the combination of both online and offline mar- keting strategies should be considered to achieve an effectiveness and diversity in the marketing.

2. Economics Ecommerce opens the new opportunity for global economy. Highly competitive global marketplace leads to the shift from traditional business to electronic business (Nanehkaran 2013, 190-193). For example, in the tourism industry, as the emerge of online reservation trend in accommodation, hotels have to change their traditional sys- tem, which refers to call reservations, to online system to adapt the customer’s needs. Besides, ecommerce may also bring the changes in cost structure of firms, value added chain and logistics function. For example, an involvement of intermediaries in the dig- ital world is diminished and thus reduce cost or increase value added to clients. Now- adays people may search for a product on the search engines, for example Google, and then match their needs to those products via sellers’ website. Therefore, the need of intermediaries to match buyers and sellers is not necessary (Ziaul, H 2005, 49-56).

3. Product and operation management The world of ecommerce opens continuously 24/7. The ecommerce market never sleeps throughout five continents. While everything, including customers and prod- ucts, seems to be all the time online. The “offline” operation and production manage- ment may get outdated due to our limitation on working hours. Thus, information man- agement is a core answer for the online business. Nowadays, the demands of customers transmit directly to the production managers through a data management system. The manager’s plan, therefore, is more accurate and on-time to the demand of market. Con- sequently, due to changes in customer behaviors, managers also need to adapt to new style of working and managing. In addition, they are required to learn new skills in relation to ecommerce in order to manage their operations effectively.

3.5 Limitations

Although “ecommerce” seems to be ubiquitous, a path to setup an electronic business is still obscured. There are few key barriers to enter the ecommerce:

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• Barrier of language for local business: • Legal infrastructure is insufficient • Security and confidentiality of information exchanged This thesis aims to resolve a few previous limitations in order to have a clear path for a local business to establish a well-planned online business (Nanehkaran 2013, 190- 193).

4 AMAZON

4.1 What is Amazon?

Amazon is an American international e-commerce company (Bharti, 2017). Its website (www.amazon.com) is platform-based marketplace. Established by Jeffrey P. Bezos in 1994, Amazon marketplace offers a diversity in its product portfolio, ranging from books to fashion or electronic devices. In 2018, Amazon market accounted for 49.1% of US retail spend and 5% of US retail sales (Techcrunch, 2018). Today, A successful story of Amazon ltd has been a common case of a successful global platform-based market.

There are some fun facts about Amazon ltd based on its statistics: • If Amazon were a country, its net sale would make it 146th richest country. • The CEO of Amazon, is the world’s wealthiest man. At first glance, it may sound impossible. However, if we know the net sales of Amazon approximates $210 billion in 2018, then it is reasonable. Although a history of the ecommerce empire was long, it was made up of some inter- esting milestones that we may have a look below: • In July of 1994, at the beginning of Amazon, Jeff Bezos opens a first online store called Cadabra, renamed to Amazon later, focusing on selling books. To- day, Amazon sells everything that we could think of, ranging from books, elec-

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tronic devices, video games, sports, fashion cloths, etc. A starting point of Am- azon was modest, yet its development was remarkable to the cyber world later in next century. • On 15th May, 1997, Amazon ltd launched its Initial Public Offering (IPO) and listed on Nasdaq as AMZN. A starting price was $18. After its IPO, Amazon was successfully raised $54 million. Nowadays, it reached over $1800 with made to 10000% increase. • In 1998, Amazon opens its international services to and Ger- many. • During 2001 to 2003, a bunch of improvements was added on Amazon website, for example “look inside the book” or “search inside the book” features. • In 2007, Amazon introduced its own product, 1st Kindle, an e-book tablet. The product has received massive positive feedback from global technology com- munity. Consequently, Amazon brand has brought to new level. • In January 2009, Amazon’s forth quarter sales reached to $6.7 billion. Its op- eration overspread not only 12 U.S state but also 8 nations. 21000 Amazon’s employees were working in places of five continents. Amazon’s growth was remarkable and continued its success until today (Website of Techwalla 2019).

4.2 Business models on Amazon marketplace

Since the arrival of Amazon platform, it has been a golden field for many businesses. Regarding business model, it is a sustainable way to do business (Christian, N & Morten, L 2014, 2). Nowadays, Business models on Amazon market are diverse, based on the resources of the enterprise. In instance, the sellers who started with low budget may choose to be retail arbitrage, or also known as drop shipping. For those enterprises owning private label product, they could exploit the potentials of Amazon platform to expand their global business. In detail, the business categories will be further explained by these following sub chapters.

1. Retail arbitrage

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The retail arbitrage model is suitable for startup companies with limited resources. A definition of retail arbitrage is simple. The seller, using this model, buys his/her prod- uct from other retail stores, such as local stores, and sells it at higher price on Amazon market. This practice seems to be a simple approach, yet it still bears its own risk. As a common buying behavior, customer usually compares his or her multiple options in order to look for as much profitable and convenient as possible. A relatively high-price product along with similar features may cause a huge disadvantage to the retail arbi- trage seller. Moreover, for unauthorized retail products, the manufactures will not con- sider their warranties on the products. Therefore, these difficulties often make sellers change their mind while thinking of doing retail arbitrage business (Website of Boot- strapping Ecommerce blog 2019).

2. Fulfillment by Amazon (FBA) As precisely the name of method, Fulfilment by Amazon method, A part of business section would be fulfilled by Amazon. This method looks appealing to many business owners as its simplicity and convenience. For retailers, who would utilize the Amazon FBA service, their job is diminished as much as possible (Dune 2015, 125). All they need to do is taking care of their inventory and sales performance on Amazon platform. For the heaviest parts ranging from logistics, warehouse and packaging products, Am- azon will be responsible. For online customers, FBA brings them a bunch of privileges of Amazon premium services. The products, managed by FBA shipping methods, pro- cess faster than others, managed directly by retailers, as they were already available in Amazon’s warehouse center. In addition, the customer satisfaction remains positively as the product tracking and customer service will be managed directly by Amazon service.

A description of FBA method may be explained on the following business cycle:

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Figure 2. Cycle of FBA process

In the cycle, at first, the seller sends the products to dedicated Amazon warehouses. The instructions of packaging and labelling are strictly followed by Amazon standards of packaging and labelling. In the meantime, the seller is asked to open an Amazon account. The opening account steps are straightforward and easy-to-follow. Once the products arrive at Amazon warehouse, the seller needs to list his or her products on Amazon platform according to Amazon instructions. Until this moment, the seller ba- sically qualifies for selling on Amazon. From now on, Amazon will be responsible for product stocking activities and customer deliveries. The seller is now concentrating on profit-driven activities such as conversion rate optimization (CRO), new product de- velopment and digital marketing campaign. Once Amazon receive the customer or- ders, the payment will proceed to Amazon seller’s account after deducting Amazon’s services fee. Subsequently, the product is collected from Amazon warehouse, and the delivery will be initiated. In addition to, the customer service, such as customer refund, will also be taken care by Amazon services.

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The disadvantage of this method may only be its fee structure (Dune 2015, 138). Since the fact that Amazon will be responsible for everything of your business, they will also charge anything within their responsibilities. 3. Private label Talking about private label method, a private label owner outsources his/her product manufacturing to third-party companies and then sell it under his/her brand name (Website of ecommerce software 2019). Private labelling model is quite popular on Amazon market. In this model, the sellers will label their product, so they will acquire their own brand on Amazon market. The brand owner only needs to ask their manu- facturers for customizing the product based on the brand owner’s requirements. The private labelling method seems to be an “upgraded version” of FBA method. Numer- ous FBA sellers on Amazon, after an average period of 6-12 months, tend to launch their own private labels. The consequences are understandable. Owning the private label may consider to be a great advantage as it helps the owner to differentiate his or her product to the other sellers. In addition, in case of long-term sellers, owning com- petitive products, labelling their products may bring a direct benefit to the customer’s awareness. As a result, the “label effect” may make a huge bump in sale performance.

4.3 The nature of Amazon market

In this chapter, we will investigate on the functionalities of Amazon ecommerce mar- ket, including Amazon algorithm, search engine optimization and pay-per-click method.

4.3.1 Amazon algorithm

An algorithm is a set of instructions designed to perform a specific task (Website of Tech Terms Computer Dictionary 2019). As an ecommerce platform, keyword search- ing algorithm plays as a key role in the platform’s function. The purpose of the algo- rithm is to match its customer’s needs with the most relevant results. In instance, re- garding Google search engine, a person is looking for a new smartphone. While he places his keyword, for example “smartphone”, on the google searching bar, he would

18 likely to receive multiple results in relation to smartphone such as new models, price, selling location and so on. Amazon searching algorithm functions similarly to Google searching algorithm. The Amazon search algorithm also serves to match its customers with highly relevant results based on their terms or keywords (Melamed, C 2016, 3- 6). On the side of sellers, a comprehensive understanding of searching algorithm is critical as it helps the sellers effectively reach out to the potential customers. In fact, a ranking of product listing results is likely correlated to the result of revenue sales (Anindya 2013, 4). The result is not surprising. Considering this case, for example if we look for a new “Samsung S10” smartphone product on Amazon platform, we will likely to buy the “Samsung S10” product on the 1st, 2nd or 3rd searching results. Even if “Samsung S10” on the page 100 has the most competitive edge with additional gift for its customers, such as a smartphone case, yet the customer will not find it.

An Amazon’s A9 ranking algorithm, a current Amazon’s search algorithm, is based on 3 factors: listing relevancy, sales and reviews (Melamed, C 2016, 6). In relevant to ranking optimizing, therefore, we will need to optimize the result based on these 3 factors.

4.3.2 Search Engine Optimization (SEO)

SEO is referred to a process of activities which attempts to boost a website to higher ranking on internet search engine, for example Bing, Google, etc. (Todd 2017, 3) The search engine (Google, Bing, etc) is defined as a set of rules, operated by an algo- rithm, which ensures that people get a relevant result of a product or service based on their searching term.

As an emerge of ecommerce, SEO plays a key role in digital marketing strategy. In fact, a degree of visibility in the digital world is extremely important. An organiza- tion’s digital activities, such as website or promotional program, need to appear in the search results, in order to ensure an awareness of customer regard to the organization. A website, nowadays, needs to be “optimized” not only for users, but also the “search

19 engine”. To have an over-view of the search engine, these following chapters will de- scribe a few key parameters that will impact on the website’s visibility on search en- gine.

The SEO techniques apply directly to marketing function of Amazon business. In spe- cific, it helps to improve “listing relevancy” factor, which mentioned in previous chap- ter. Algorithm A9 has a set of rules on its own ranking system. There are mainly 4 influencers that the A9 takes into consideration. Those factors will be listed in the following, respectively to the ascending degree of its influences (1 means most im- portant, 4 means least important) (Website of Retail performance marketing blog 2019): 1. Titles 2. Feature Bullet Points 3. Product Descriptions 4. Backend Search Terms

A common sense regarding search engines is that the engine tends to favor those searching results with relevant keywords and details. Amazon’s algorithm seems to be indifferent. The A9 algorithm prefers listing those products with detailed titles. Therefore, an optimized title is especially important to Amazon product listing. Due to its significance, a further guidance to optimize a product listing on Amazon will be illustrated in the following parts. 1. Title There are a few suggestions on how to optimize a product title on Amazon platform. First and foremost, a list of relevant keywords and terms should be established. For example, if the seller is about to sell “blanket” on Amazon market. The list of key- words, firstly, should contain the word “blanket”. Additionally, some of blanket’s fea- tures should be mentioned, for example its colors, size and so on. However, it is worth to note that spamming keywords or terms on a title is such a bad idea. In fact, it could even harm your ranking due to your obvious manipulation on title.

Secondly, there are a few do’s and don’ts things about title of product:

• Do things:

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o Capitalize the first letter of title o Spell out measure words such as ounce, inch and pound o Numbers should be in numeral forms o If something is not relevant details, do not list it in the title

• Don’ts things: o Price and quantity o All caps o Personal information o Promotional messages, such as 90% sales off o Suggestive commentary, such as best seller o Symbols (% $)

Subsequently, after the list of optimized keywords established, it’s time to write a com- plete version of the title. Regarding A9 preferences, Amazon algorithm forms a posi- tive correlation between higher relevancy and earlier appeared keywords in the title. Therefore, few notes should be taken into consideration: • Firstly, the title should start with its own brand (private brand) and its product name. • Secondly, the product’s characteristics may include in the following, for exam- ple pattern, model, size, color, etc. • Make use of special characters, such as & | , .

Altogether, a basic title listing may look similar to this formula: (Brand name) – (Product name) – (Feature #1) – (Feature #2) – (size, color) – (etc)

2. Feature bullet points The feature bullet points refer to where the seller describe his/her product’s features in detail. According to A9 algorithm, the feature points are second most influence on search ranking.

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Figure 3. Example of feature bullet points (Website of Amazon 2019)

Similar to the case of product title, the product feature contents may also apply a few following standards (Website of Retail performance marketing blog 2019): • An average character number approximate 250. • Highlight top 5 features of products, the more or less number of features may consider as less significant effect on bullets optimization • Begin each bullet point with a capital letter • Bullet sentences in fragmented forms and no punctuation at the end of each bullet • Numbers in numeral forms • Separate phrases in one bullet with semicolons • Spell out measurements, such as quart, inch, or feet • Avoid vague descriptions, be specific • Not mentioning any private information, such as seller contact, listing features only • No promotional messages • No shipping information

3. Product description

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Regarding to a third influencer, the product description actually has similar character- istics to those previous bullet points. However, it is usually written in several long paragraphs. In addition, a light HTML technique is required in this phase. For exam- ple:

Figure 4. Example of product description in HTML syntax (Website of Amazon 2019)

Considering the previous product description written by HTML syntax. The outcome will be illustrated in the following as:

Figure 5. Result of HTML syntax on website of Amazon (website of Amazon 2019)

In the product description, it is possible for making call-to-action phrases or creating your own slogan to attract the customers’ attention on your product.

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4. Backend keywords/ terms

Regarding the product visibility, there is a list of “invisible keywords” helps customer to discover products. The backend keywords follow the influences order. Amazon allows a seller to add additional 5 backend keyword categories, a seller needs to list the most priority category in the first row and lower relevant in the subsequent rows.

4.3.3 Amazon Pay-Per-|Click (PPC)

Pay-per-click (PPC) or cost-per-click (CPC) refers to the paid amount that we need to pay per customer click on our product in our PPC marketing campaign. (website of wordstream, 2019). In general, PPC is an advertisement tool for digital marketing. Amazon PPC method works as the same way as other platform-based PPC methods. The usage of PPC focus on bidding the “keywords” on searching engine in order to improve the ranking performance. The cost of bidding may vary for different products, especially competitive products. For example, a bidding cost for a keyword with 1500 searching results is 0.5$ per search, and a bidding cost for a keyword with 10000 searching results may increase significantly to 3$ or even 5$ per search.

5 BUSINESS STRATEGY

5.1 Overview of business strategy

Business analysis and business planning are vital factors of every successful business. Business analysis is defined as the practice of enabling change in an organizational context, by defining needs and recommending solutions that deliver value to stake- holders (Website of International Institute of Business Analysis, 2019). Business anal- ysis could also be perceived as a gap between strategic analysis and system analysis (Debra, Donald & James 2010, 7). In practice, a business analysis is required to inves- tigate the current situation of business context. Based on that, suggested feasible next moves for the business are determined. It is evidence that doing a business analysis is

24 an important phase for every enterprise to decide on any business matters. Regarding a common business analysis, the approach usually considers three aspects of the busi- ness system: • The business concept: This aspect aims to investigate on business blueprint. Are they well defined and communicated? Is the concept already existed? Etc. • The business context: This aspect considers a specific business setup. For each specific context, the aspect approach may be different to look for problematic issues of the company. • The resources: The last aspect is to examine the limitation of the business on their resources, for example human resources or technology. As a business owner, it is very important to understand these three aspects to examine the effectiveness of a business. However, the process of business analysis sometimes is ambiguous to the owner.

5.2 Business analysis flow

The following business analysis flow provides a sample template of established business analysis.

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Figure 6. Business analysis flow (Website of Glowtouch technology 2019) The process of analysis comprises of seven steps:

5.2.1 Gather background information:

The background information is a backbone of business analysis. Regardless a starting point of the business, whether it is brand-new or existing concept, it is important for gather a business database as significant as possible. As we may have heard, with re- spect to 4.0 industrial revolution, “data” considers as a new fuel of the global economy. Likewise, it is true in the context of business, especially business analysis. The data insight, nowadays, brings many privileges to those who utilizes the powerful of data resources. Subsequently, as we understand the importance of data gathering, data gath- ering progress should be underscored by data analysts. In specific, there are few sug- gestive categories needed to define through this stage (website of GlowTouch technol- ogy 2019):

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• Determining business domain: the data regarding business sectors, for example healthcare, finance, energy, and so on, needed to collect to determine the con- text wherein the business takes place. • Determining influences on business: multiple circumstances is needed to con- sider estimating the external potentially impacts on the business. To accom- plish this task, a few framework analysis, such as Porter’s five forces frame- work or PESTEL analysis, may implement. Talking about the latter case study, we will in need of conducting analysis. In fact, Porter’s five forces is able to apply here due to its simplicity and effectiveness. Re- garding Porter’s five forces framework, it was first introduced in 1979 by Harvard School Business professor Michael Porter. The Porter’s framework helps to analyze an industry’s attractiveness and profitability. In more specific, Porter has determined five major forces in business environment which will impact on the business. These are competitive rivalry, supplier power, buyer power, threat of substitution and threat of new entry (Christopher, I. … 2014, 77-78). A specific application of Porter’s five forces will be mentioned later in the empirical chapter.

5.2.2 Identify stakeholders:

Stakeholders are defined as those parties beneficial directly or indirectly from the anal- ysis. As stakeholders are ones who make final decisions on practical approach and requirement approvals of the project, it is vital for any business analysts to consider those parties within their analysis plan. There are few common types of stakeholder that we may mention in the following list (website of GlowTouch technology 2019): • Owners- board of directors, shareholders or anyone who sponsored the busi- ness or project. • Executives- direct or middle managers responsible for business managerial ac- tivities. • Employees- developers or analysts responsible for business execution. • Partners- corporate parties responsible for providing complementary services or products to deliver business success. • Customers- end users of services or products • Competitors- a potential competitive products or services.

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5.2.3 Discover business objectives:

Establishing comprehensive and achievable objectives is crucial to the any types of business. The business analysts and managers may stay focus on an associated vision and eliminate disturbances. A few techniques possibly apply on this step are (website of GlowTouch technology 2019): • Benchmarking: understandings of competitors and partners in the same level (Ansoff’s matrix). • SWOT analysis: analysis of strengths, weaknesses, opportunities and threats. • Brainstorming • SMART method: established objectives based on five categories (Specific, Measurable, Achievable, Relevant and Time-bound).

5.2.4 Evaluate options:

Within this phase, the feasible path to achieve the objectives is established. Various options may be listed in this step for the stakeholder to determine. The options may consist of suggesting new products, purchasing new systems, customizing existing so- lutions and so on. While narrowing down the solutions, it is worth to consider a few factors, such as feasibility, project budget, benefits and business case (website of GlowTouch technology 2019).

5.2.5 Scope definition:

A project scope is necessary to define based on project’s objectives and team’s discus- sion. Developmental goals are established, along with a list of uncovered items in the project. For example, a scope definition may consist of (website of GlowTouch tech- nology 2019): • Developmental aspects within scope • Developmental aspects out of scope • Integrations in scope • Integration out of scope

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BA delivery plan: A delivery plan consists of a detailed timeline and delivery requirements. There are few necessary aspects needed to mention in the timeline of the requirements: stake- holders and their availability, project scope and project methodology (website of GlowTouch technology 2019).

5.2.6 Define project requirement:

A list of requirements is essential to every business analysis as it helps business ana- lysts to communicate the feasibility and credibility to the development team. Require- ments may be categorized into 2 major types: functional and non-functional require- ments (website of GlowTouch technology 2019).

6 RISK MANAGEMENT METHOD

6.1 What is risk management?

Risk refers to unfavorable outcomes or chances of loss associated with an action. Un- certainty is potential threats for business. The greater uncertainty may bring a great risk to firms, yet the risks or uncertainties also mean opportunities. If there were no risk, there would be no return to the ability to successfully manage it (Laurence C, Gene G, Steve I, Doug J & Rod S 2013, 2). According to theory’s finance, an asset pricing models concerns the effect of risk on the evaluation of firm’s value. The effect of risk will correlate to a business discount rate. The formula is expressed by the fol- lowing formula:

Value of firm = ∑[ Cash Flows at period t / ( 1+k)t ] where k is the market discount rate.

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The previous business valuation method is based on a simple theory: Actions taken by a firm which reduces associated uncertainties, improve its prospect to survive in the future may enhance the value of the firm in the market. Once again, the role of risk management is emphasized.

6.2 Reasons for risk management

As mentioned previously, risk management may place an impact on general value of a firm. Therefore, the management of associated business risks can not be diminished from the firm core managements. Areas mostly needed to manage risks included: • Health and safety • Plant, equipment, environmental costs • Financial position of your organization • Confidence by members, key stakeholders and • funders • Insurance premiums • Member protection • Reputation, publicity, credibility • Compliance requirements

The risks associated with each category may require a specific knowledge and solution to reduce effectively its frequency. However, the process of risk identification and management may be similar. In fact, a standard risk management process is able to establish. In the thesis, the sample of the standard risk management framework will be acquired by ISO 31000 - an ISO standardization regards to risk management’s princi- ple and guideline. (Website of Department of planning, transport and infrastructure of South Australia government 2019)

6.3 Process of risk management

The AS/NZS ISO 31000:2009 defines risk management as the ‘coordinated activities to direct and control an organization with regard to risk’ (Website of Department of planning, transport and infrastructure of South Australia government 2019). These

30 guidelines and principles, taken from risk management, are structure approaches to tackle and eliminate specific risks associated. A common risk management framework usually provides a set of activities involved identifying risks, designing and imple- menting methods, monitoring and continually improving risk management.

According to ISO 3100, the risk management is established by three major elements:

Figure 7. sample of risk management process (Drawn from the ISO 31000:2009)

• Set of principle: an essential set of reasonings to establish good risk manage- ment • Risk management framework: provide structure of risk management • Risk management process: establish a structured approach to understand, com- municate and manage risks in practice.

In general, risk management can be answer based on four questions (Website of De- partment of planning, transport and infrastructure of South Australia government 2019): 1. Which events is likely to happen? 2. What is its impact? 3. What can a firm do? 4. How can a firm communicate the event to its organization?

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These straightforward questions have put forward an idea of how a risk management process:

Figure 8. Risk management process (Website of Department of planning, transport and infrastructure of South Australia government 2019)

There are five key phases of a risk management process: context establishment, risk identification, analysis, evaluation and treatment.

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6.3.1 Context establishment

In general, to manage an event or occasion, it is essential to know where the event or occasion takes place. Similar to risk management, it is necessary to understand an or- ganization’s objectives and a risk environment. As a result, a very first step of risk management is to make a set of objectives on risk management throughout organizational agreement. By involving the organizational level, which means gathering as many people as possible, an awareness and education of risk spreads out through inner communication. Within the organization commit- ment, the objectives are needed to define explicitly or implicitly. Secondly, identifying those key parties and stakeholders are presented for organiza- tion’s risk, lead an organization to risks or help an organization to manage risk. Regarding the nature of risk context, there are three major context that is needed to consider within risk assessment (Website of Department of planning, transport and infrastructure of South Australia government 2019): • The external context: The environment whereas a firm operates, and its objectives occurs including cultural, operational, political, human relationship, environmental, regulatory, financial, economic and technological factors. • The internal context: The elements exists within an organization and is relevant to risk assessment. The common factors including in a firm/ an organization’s strategic objectives, organizational culture and resources. • The risk management context: The clarification of risk management to answer specific questions, for example a. what are the goals and objectives of risk assessment? b. How are they implemented? c. Who is responsible for which part? What is scope? Once the agreement is defined, it should be spread out through the organization. It’s essential to keep protecting proprietary and confidential information away from the agreement.

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6.3.2 Risk identification

Purpose of risk identification is to develop an all-inclusive list of uncertain events that are likely happen and have impact on the organization’s objectives in the future. The risk needs to be described as precisely as possible. A risk description usually consists of risk events, risk potential cause and impact. It’s also important to define those fac- tors potentially rise risk, such as actions, scenarios, unexpected events or external agencies. The source and caused of risk need to be well understood and documented. The process of risk discovery may apply multiple types of technique. These can be complicated and well-organized or simple and informal, depending on the purpose and context of risk assessment. It is essential to consider all external factors (industry policy, community effect, etc.) and internal factors (human value, activities, capabilities, etc.) and assessment factors (firm’s objectives, team’s goals, etc.) that may affect risk assessment to ensure that the examination is not out of context or scope. Sources of risk are varied, yet risks can be classified into 6 common categories below (Lauren, C, Gene, G, Steve, I, Doug, J & Rod, S. 2013, 2): : • Legal – organization encounters legal obligations • Financial – Financial impact externally or internally (global financial crisis or construction damage) on organization’s financial status • Human resources – low quality in terms of knowledge, skills and experiences of board members may result a crisis within an entity. • Social media – negative effect of organization’s electronic identity (bad rumors on social media networks) on its reputation. • Physical – damage on physical properties or humans • Technology – technologies or machines are not functioning properly or dis- rupted by external factors (storms, electricity, etc.) • Moral/ethical – organization’s reputation faces crisis regarding moral issues (parental leaves policy, etc.)

Since the sources of risk are really diversified, it’s important to look for as much po- tential risks as possible. Generally, there is not a specific way to identify a risk

34 properly. Instead, the combination of methods works perfectly, such as checklist, re- views of rules, legal obligations, policies, gathering information externally and inter- nally. In general, a process of risk identification may illustrate as: identify all identify po- identify po- possible risk tential causes tential effects events of risk of risk

Figure 9. Risk identification process

6.3.3 Risk analysis

As each risk identified from the previous step, it is significant to understand com- prehensively and precisely its effects on organization as well as its frequency of occurrence. In fact, a risk analysis establishes a matrix of risk based on 2 elements: level of potential effect and probability rate of occurrence. “Risk severity matrix” or “risk heat map” are common name of an approach to implement a risk analysis:

Figure 10. Example of risk heat map (Website of Accounting Archive, 2019)

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The previous risk heat map demonstrated how a risk may impact on the business, based on its probability of occurrence and potential impacts. For example, an identified risk 16 considers at low risk as it is unlikely to happen (probability is about 10%) and it has lower impact comparing other risks (its impact may range from $25000 to $35000). In this section, we will learn how to establish a similar risk map as the previous exam- ple. In more specific, to establish a complete risk management, a process of establish- ment consists of three steps: 1. Establish risk parameters For each element, likelihood or consequence, a specific parameter is required to setup. For example, to establish a parameter of likelihood, it may look similar to the follow- ing table: Score Likelihood Parameter 5 Most frequently More than 5 times per month 4 Likely Between 4-5 times per month 3 Possibly Between 3-4 times per month 2 Rarely Between 1-2 times per month 1 Least frequently Less than 1 time per month Table 2. Example of risk parameter

Consequences of risk may look a bit more sophisticated, for example:

Table 3. Example of risk consequences

It is essential to analyze all risks based on the same parameter framework, so risk as- sessment is as precise as possible.

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2. Establish risk matrix:

Subsequent to the previous parameter setup, it’s time to map a risk based on these 2 elements. A risk heat map may look like the following example:

Figure 11. Example of risk matrix

In fact, a level of “low”, “moderate”, “high” and “extreme” is different from different organizations in different contexts. Therefore, a specific scale of risk rating may vary based on the organization’s objectives and agreement among stakeholders in the “con- text establishment” step.

The next step is to determine required actions based on the previous risk ratings. An example of this step may look like:

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Risk rating Required action Low • No immediate action required • Unlikely to require significant re- sources • Monitor an event monthly Moderate • Broad attention may require • Likely to cause some damages to organization’s functions • Monitor on a 2-week basis High • Some immediate actions may re- quire • Likely to cause some significant damages • Treatment plan to be established and managed by board members • Monitor weekly until further an- nouncement Extreme • Immediate actions required, re- ported directly to CEO and board of directors • Likely to threaten a survival of organization • Monitor on daily basis until fur- ther announcement

Figure 12. Example of risk rating

6.3.4 Risk evaluation

In fact, since the commence of any business entity, risks are likely to associate with it. However, some risks are acceptable, and some are not. Therefore, risk evaluation helps an organization to determine the tolerability of each risk associated. A priority of risks

38 is established to look for appropriate ways of dealing each one. While considering risks, we need to estimate and compare few factors whether to decide for treated or untreated (Website of Department of planning, transport and infrastructure of South Australia government 2019): • Capability of risk controls within an organization • Cost associated between treated and untreated method • Possibility of transferring risks to other third-party providers such as insurance companies

6.3.5 Risk treatment

Risk treatment is a specific workload to tackle the risks in response to risk evaluation.

Indeed, there are many ways to treat a risk, some common strategies may involve (Website of Department of planning, transport and infrastructure of South Aus- tralia government 2019): • Accepting the risk as its minimal damage • Avoiding a risk by not taking a specific action which causes the risk • Transferring a risk to other parties such as insurances • Taking a risk to avoid other more serious risks • Modifying the control of risks

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7 EMPRICAL STUDY- FBA AMAZON BUSINESS PLAN

7.1 Research method

7.1.1 Selection of research method

In this chapter, we will choose a research methodology which fits to our case study. In this case, our research is aiming to examine and analyze the key data related to similar product sellers on Amazon website. Consequently, based on the examination and anal- ysis, a feasible approach to Amazon e-commerce market will be suggested. In addition, the data will mainly be collected through third-parties provider (the detail will be ex- plained in the section) under the form of numbers, statistics; and there will also be information collected directly by calling to retailers of target selling products. Thus, the most appropriate research method, in this case, will be quantitative method.

7.1.2 Tools for market data collection

Amazon e-commerce marketplace has shown a great potential. Its popularity also spreads out globally. Thus, a significant number of startups and entrepreneurs has es- tablished their business to support the Amazon ecosystem. Nowadays, there are many business applications supporting the Amazon website. In this case study, the product information will be acquire mainly from the official Aamzon website (www.amazon.com) and two well-known tools for Amazon product research: Jun- gleScout and keywordtool.io.

Firstly, Jungle Scout and keywordtool.io are product research web-based platform for Amazon sellers. It provides users with online solutions for tracking products, exploring product opportunities and ideas, monitoring competitor sales data, calculating Fulfill- ment-by-Amazon (FBA) fee estimates, and more.

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Figure 13: Overview of JungleSout dashboard (website of JungleScout, 2019)

Figure 14: Overview of keywordtool.io dashboard (website of keywordtool.io, 2019)

7.1.3 Data analysis

In the case study, Thanks to JungleScout and keywordtool.io tool, it is possible to col- lect the product information related to average daily sale, average price, daily ranking on A9, etc. The information will be analyzed later by quantitative methodology to gain the market insight. These market insights will help the thesis’s owner to suggest the best fit model of market entry as recommendations.

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7.2 Empirical setting

7.2.1 Vietnam coffee production industry

Coffee production has long time a major source of income for Vietnam economy since the early 20th century. Indeed, Vietnam is second world’s largest coffee export. In 2018, Vietnam accounted for second largest worth of exported coffee with $3.1 billion (Website of World’s Top Export 2018). Although the potentials of coffee production in Vietnam is significant, the coffee economy in Vietnam has usually seen fluctuations. Since the 1980s, Coffee farmers in Vietnam has always experienced the cycle of boom and burst in coffee price. In other words, the coffee prices in Vietnam are highly vol- atile. However, despite the fluctuations, export prices to abroad customers always stayed stable. Thus, the coffee producers in Vietnam suffered significantly to the vol- atility of coffee industry. As the boom cycle, coffee production households can main- tain their living standards, for example children’s education fees. However, during the burst cycle, those farmers can’t afford even their basic living costs. Thus, they have to cut off the cost from their children’s education.

Figure 15: Ten World’s largest coffee exporters (Website of World’s Top Export 2018)

Although coffee production industry in Vietnam has full of potentials, there are not many complete coffee products produced by Vietnamese producers. In fact, there is only one most well-known coffee production brand in Vietnam: Trung Nguyen café.

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Figure 16: Trung Nguyen premium Legend G7 café (website of Trung Nguyen, 2019)

About Trung Nguyen café, it has been established since 1996 by Nguyen Vu Dang Le, its current CEO. Trung Nguyen ltd focuses on producing café-made products. Nowa- days, Trung Nguyen products is presented in over 60 countries. In general, Trung Ngu- yen currently has three major product lines: premium Trung Nguyen café, roasted café, In this case study, we will concentrate on Trung Nguyen café products, pure coffee bean packs and instant G7 café. In this study case, the Trung Nguyen premium Legend G7, which is a hybrid product between instant G7 cafe and premium Trung Nguyen café, will be our target product for selling on Amazon market.

7.2.2 Business model for the case study

The main objective is to establish an effective approach for budgeted enterprises to sell their product on Amazon platform. The planned approach needed to fulfill these criteria: manageable, feasible and well-constructed. After a careful consideration among range of Amazon business model, in my opinion, the most feasible business idea should be Fulfillment By Amazon (FBA) business. By completely outsourcing the logistics and warehouse activities to Amazon, we are able to concentrate my re- sources on supply planning, product launching and digital marketing plan.

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7.2.3 Business setting

In order to go further for the analysis, we need to have a concrete description of busi- ness setting regarding few aspects such as size of business, business model, products, etc. Thus, the table below will summarize a general view on the thesis’s business set- ting, then thanks to it, we may have a better perspective for deeper analysis: Business setting Description size With an estimate budget of $1.000, this project considers as a small sized project Business model FBA model Product Trung Nguyen premium G7 legend cafe Market Amazon U.S (amazon.com) Table 4: Descriptions of business setting

7.3 Fulfillment By Amazon (FBA) business analysis

Therefore, in this chapter, the process of business analysis will be taken into consider- ation. The outcome of this chapter is to create a clear business analysis on the thesis case study. Due to thesis’s purposes, the business analysis flow has been modified to fit the thesis’s idea. Thus, the business analysis will consist of three steps: background information, business goals, recommendations.

7.3.1 Background information

The thesis focuses on the case of individual seller, as myself, in attempt to sell Viet- namese coffee product on Amazon website. Thus, Porter’s five forces analysis is cho- sen for this cases analysis due to its popularity and easily to conduct an analysis. In this case, we will focus on analyzing and examining the Vietnamese coffee products on Amazon ecommerce market based on financial capability of small individual seller. Based on the framework of Poster’s five forces, there are five main sectors needed to investigate, included threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, rivalries and environment. In detail, the analysis will be described below:

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7.3.1.1 Threats of new entrant

About threats of new entrant, in this thesis case, there are two matters that are worth to consider. Those matters are time and cost of entry and market knowledge. Firstly, regarding the cost and time of entry, these matters can be clarified by process of ex- port/import from Vietnam and procedures of Amazon business setup. Considering the export/ import process from Vietnam to United states, the process is clear and easy-to- follow. Similarly, regarding Amazon business setup, Amazon has made a comprehen- sive instruction for every new seller to follow. Thus, there is no barrier on process of export/import and procedures of Amazon business setup. Secondly, although Amazon ecommerce business does require some specialist knowledge, for example, on digital marketing, import/export procedures and supply management, those knowledges may mostly acquire from Internet resources or experiences. Therefore, specialist knowledge for Amazon ecommerce seems not to be a significant barrier. In conclu- sion, threats of new entry in Amazon ecommerce market are relatively low due to the optimizations of Amazon website. In addition, since Doi Moi Reform in 1986, Vi- etnam transformed to socialist-oriented market economy. Thus, Vietnam started to open the market. Since then, activities in relation to export/ import are emphasized and promoted by government’s incentives. Regard to relation between Vietnam and United State, the 19-year embargo against Vietnam has ended in U.S on February 3rd, 1994. This period was marked as a prospect period of Vietnam economy. For example, after the end of U.S embargo, Vietnam was second largest rice export in U.S market. Since then, there isn’t any political barriers between Vietnam and U.S. Regarding the thesis setting, the context is taking place of the ecommerce business between Vietnam and United State. In the current political context, Vietnam, since the political relation are stable, there will be no significant barriers in relation to economic and political situa- tion. Instead, due to Vietnam government’s incentives to export, it may be an ad- vantage for any local seller in Vietnam to export their product into U.S market.

7.3.1.2 Bargaining powers of suppliers

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Talking about suppliers, we are mentioning coffee producers in Vietnam for Trung Nguyen instant coffee package. In order to understand the power of suppliers, powers of suppliers are determined by quantity of suppliers, size of suppliers and our ability to substitute. Talking about Trung Nguyen coffee product in Vietnam, for a long time, Trung Nguyen has been a well-recognized coffee brand in Vietnam. Nowadays, we can see Trung Nguyen mostly everywhere in Vietnam. Thus, suppliers for Trung Ngu- yen product are enormously. In addition, retailers of Trung Nguyen products, specifi- cally Trung Nguyen instant coffee pack, are various in forms. Majority of them are business-to-customer (B2C) retailers, such as supermarkets, grocery stores or conven- ient shops. They could also be business-to-business (B2B) sellers such as wholesalers or merchants. In order to get the best competitive price, it is reasonable to buy products from at least B2B retailers. In more specific, in this case study, I am aiming for 1 target product at first time from Trung Nguyen company which is ‘Trung Nguyen premium G7 legend special edition’. In fact, I have contacted to five Trung Nguyen retailers by direct calls. The information aiming to collect regards to price, order conditions, lead time, quality and certifications. Three out of five retailers responded to my request. The table 4 below illustrates an overview on these suppliers considering their price, size order, accessibility, opening hour, lead time and quality of products: Supplier A Supplier B Supplier C Price $7 (~140%) $8 (100%) ($4 in $7.8 (~156%) first 3 months) Size order Medium, At least 70 Small, flexible flexible units/order Accessibility Easy Intermediate Easy

Opening hour 8am to 7pm 9am to 4pm 8am to 7pm Lead time 3 days 14 days 7 days Quality &certifica- High High unknown tion Experience 4 years 2 years 3 years

Table 4: Comparison among three suppliers of “Trung Nguyen G7 legend special edi- tion” product

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7.3.1.3 Bargaining powers of buyers

Talking about buyers, in this case, we are mentioning about Amazon customers. The power of buyers is determined by buyer market size, size of order, price sensitivity and cost of changing. Firstly, regarding the market size of buyers. Amazon website is a global ecommerce platform. It has accounted for 49% of U.S retailing spending. Now- adays, there are millions of Amazon buyers daily on Amazon website. Thus, number of Amazon potential customers for our business is tremendous. Specifically, there is a potential market existing in the U.S Amazon market for instant coffee products.

7.3.1.4 Threat of substitute products

In fact, substitute products of Trung Nguyen instant coffee are diverse and highly com- petitive on Amazon market such as Starbucks, Nescafe and so on . Therefore, if we consider the aspect of business growing potential. It is clear that the coffee targeted segmentation may not be a right choice.

Figure 17: Statistical findings regards to instant coffee products (website of Jun- gleScout, 2019) However, in our business case setting, since we only started with a small – sized pro- ject. Moreover, we may not wish to have a long-term expectation on the project. Thus, the threat of substitute product may not be considered as significant issue.

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7.3.1.5 Rivalry among existing competitors

Talking about competitive rivalries, we are mentioning sellers on Amazon website who are selling Vietnamese coffee products. In this case of thesis, we are trying to sell specifically Trung Nguyen instant coffee. In order to understand the power of sup- pliers, we need to investigate number of competitors, sales perfomances, and their strategies on product listings. Besides, in order to have a quality analysis on our exist- ing competitors, data for those indicators are critical to the investigation due to its credibility. In this case, we will collect those data via Amazon website, specifically amazon.com (Amazon website for U.S area), and other reliable sources, in this case, JungleScout and keywordtool.io. There are few noteworthy statistics about Amazon suppliers of Trung Nguyen instant coffee which have been collected. Firstly, according to the market research, interestingly, there are only under 100 suppliers of Trung Ngu- yen coffee on Amazon website. This number is significant low if we compare it to number of suppliers from other sectors such as “Iphone charger”, roughly 50.000 re- sults for it (appendix 1). According to JungleScout data, there are roughly 30 success- ful Trung Nguyen sellers on Amazon, who achieve an average month net sale over $3000. The list of 30 Trung Nguyen sellers will be attached below in the appendix 2. In the course of competitor study, we will make our analysis based on these 30 suc- cessful cases of Trung Nguyen sellers. According to the appendix 2, within the sample of 30 successful cases, in general, there are approximately 76% (23 out of 30) of Trung Nguyen products sellers tend to sell their products under Amazon’s grocery product category, 16.67% (4 out of 30) selling their products under Amazon’s kitchen product category and only 6.67% (2 out of 30) selling their products under Amazon’s office product category. In addition, an average price ranges from $9.14 to $29.99 and the daily sales ranges from 2 units to 31units. Since the price range is varied. At this stage, we may want to investigate the correlation among price, daily unit sold and the average performance. Thus, let’s have a look at the chart below:

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average daily unit sold

>$20

$10 to $20

<$10

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

Figure 17: Average daily unit sold of 30 successful cases based on price range

The previous chart examines the correlation between average daily unit sold and price of product. As we can see, the highest daily unit sold belongs to the products which price per unit below $10. It seems to be reasonable that the lower a price is, the higher chance a product sold. According to the chart, it is likely that a product with price lower than $10 has three times higher in chances to be sold than a product with price higher than $20. Thus, we may conclude that selling the product lower price bring the most benefits to the sale performance. However, in fact, the accumulative sale in USD has a little different from our previous conclusion.

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Figure 18: Average sales performance (in USD) of 30 successful cases based on price range

The previous chart illustrates an average sales performance of 30 sellers based on the price range. According to the chart, the highest average sales performance is generated by the price range of $10 to $20, which has $340.56 in daily average. This target price range seems to be most attractive to the sellers as there has been over 70% these sellers sold their products in this range.

Regarding the SEO strategy of these sellers, there are few interesting points that we may consider below. The research was conducted on website of keywordtool.io. Spe- cifically, a set of data regards to targeted keywords of competitors, a level of keyword trending, keyword bidding price, and level of keyword competition are collected. Ac- cording to the research on keywordtool.io, I have collected a list of potential keywords which have been used by these 30 sellers. The list is attached below in appendix 3. According to the research, those 30 suppliers of Trung Nguyen coffee mainly comes from 2 search terms “Trung Nguyen coffee” and “Trung Nguyen Vietnamese coffee”. Thus, it could be understood that these are 2 major terms for being paid in Pay-Per- Click (PPC) campaign. Besides, the volume of keywords has a wide range from below 100 to over 50000 monthly search times. According to appendix 3, there are 83 rele- vant keywords under 1000 keyword search times per month, about 16 relevant key- words which has from 1000 to 10000 keyword search times per month and 3 relevant keywords which has above 10000 keyword search times per month. Additionally, the frequency of relevant terms such as “Vietnamese coffee”, “g7 instant coffee” and “3 in 1” is relatively high comparing to others. Similarly to volume, the cost per click (CPC) also varied. The lowest bid is $0.01 per click and the highest bid could reach to $2.62 per click.

7.3.2 Business objectives

In order to define the goals clearly, firstly, we need to understand our business potential benefits and costs of FBA business model with Trung Nguyen instant coffee product,

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specifically Trung Nguyen G7 legend special edition. Therefore, The SWOT frame- work is suitable for this benefit-cost analysis. Thus, the SWOT model for our business is described below:

Strengths Weaknesses • Optimized operations and cost on logistics and • No clear long-term orientations supply management • Lack of capital and resources • Low costs required in Fulfillment By Amazon • No experiences on ecommerce market be- model fore • Short-term pricing advantage

Opportunities Threats

• Experience e-commerce business • Low market demand on Trung Nguyen instant • Create a passive income channel coffee products • Manage general operations of a real business • High chances of product substitutes such as Nescafe instant products • High chance of duplication if profitable busi- ness model being proved

Figure 19: SWOT analysis on case study

7.3.2.1 Strengths

By conducting strength analysis, the purpose is to understand our potential resources and capabilities. Therefore, we may exploit our resources to use in business in an ap- propriate manner. Considering the case study, as FBA model for selling Trung Ngu- yen instant coffee products. There are three main strengths of this business model. Firstly, FBA business model helps Amazon sellers to optimize logistics and supply management. As mention previously in chapter 4 about Amazon, in the FBA method, Amazon will automatically track seller’s inventory and sale performance and report it on Amazon seller’s account with real-time data. Therefore, it is easy and effective for Amazon sellers to know their status of product inventory and sale performance, so they can plan for their next product batch more accurately. Secondly, there is a fact that customer satisfaction is usually a big trouble for any new seller without experiences regarding this matter. Thus, it is usually cost the sellers a lot of resources and time to

51 manage this problematic issue. In the FBA model, Amazon is also responsible cus- tomer delivering service. Therefore, seller is stress-free concerning customer satisfac- tion and yet maintain a low fee cost for those Amazon management activities. Conse- quently, the seller has more resources to concentrate on sale performance and other perspectives of business. Last but not least, special packaging design may bring posi- tive impacts to customers. It is not surprising that product price may increase by 20% to 30% only because of good package design. Indeed, in case of Trung Nguyen prod- ucts, there are also 2 types of instant coffee package. The first product is “standard coffee G7 3in1 – 18 sticks 16gr, and the second one is “Legend special coffee G7 edition – 12 sticks 18gr”. In addition, the former products are targeted for mass market segmentation with the cost per package at $2.5 to $4, yet the latter one focuses on a little smaller market segmentation who has higher standard of coffee taste with a unit price at $7 to $9. Fortunately, I am thankful from one of my friends, who refers as supplier B previously, working as a Trung Nguyen merchant seller. As a close friend, he gave me the best offer that I couldn’t resist. In case of my business launch, he of- fered me to buy the package “Legend special coffee G7 edition – 12 sticks 18 gr” at discount 50% from his normal price at $8, which means $4 for first 3 months of my business launch. He would only ask for 2 conditions that each of my order needs to be informed at least 3 week and size of order not lower than 70 units. Indeed, this deal made my first step of business launching easier.

7.3.2.2 Weaknesses

There are three main points on my business’s weaknesses. Firstly, the purpose of this business case is only for demonstration for Amazon business sample. Thus, even in case I started my experiment project, I have no intention for doing a long-term busi- ness. Consequently, this mindset may limit my ability to run the business effectively. Secondly, regarding resources and capital, it is an individual capital. Thus, it would be really limited if we compare to those Amazon professional sellers. Consequently, Last but not least, in fact, I have not yet experienced any practical selling on ecommerce market. Thus, it may consider as the biggest obstacle to the business launch as capa- bility of managed risks are low and may consider as incapable.

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7.3.2.3 Threats

Regarding threats within my case business, there are four significant risks which are worth for consideration. Firstly, regarding market segmentation on Amazon ecom- merce website, instant coffee market is considering average demand volume on Ama- zon. However, Trung Nguyen instant coffee are low demand if we compare to other instant coffee brands which are available on the website. This fact is understandable as we are doing business on U.S ecommerce platform. It wouldn’t be strange that not many American residents know a Vietnamese brand. Secondly, other substitute prod- ucts are extremely competitive. Some examples such as Nescafe instant products or Alphine Start Premium instant coffee products, they may scale up their sale perfor- mance to 500- 1000 units per day. It is an incredible sale performance. Due to the fact that the Amazon instant coffee market is only average market in demand, these com- petitors may have significant impacts directly to their competitors’ sale performance. Finally, there is a small potential risk regarding the business model. If the model proves to be profitable, it is inevitable to avoid the duplicated versions of the model since there is no barrier on it. It is, indeed, a big issue regarding business scale, if there is no way to solve it, then failure is a certainty of the business model.

7.3.2.4 Opportunities

Although there are many threats associated with the case, it is worth to keep the busi- ness running if we consider those potential benefits. Firstly, it is precious opportunity to gain experiences in ecommerce business. Since the digital trend is dominating the world, everybody talks about ecommerce. However, only some of them are true pro- fessionals. Thus, understandings the nature of ecommerce market and digital market- ing techniques are considering as gold in the future. Secondly, similar to the first op- portunity, it is also a great chance to gain management experiences on general opera- tional activities such as supply planning, import/export activities and pricing strategy in a real business. Lastly, in case of being successful, this business may become an excellent source of passive income for the owner.

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7.4 Recommendation

7.4.1 Supply planning

As discussing in the previous section regarding bargaining power of supplier. We have mentioning 3 potential suppliers. Thus, in this part, we will not mention anymore the comparison of three suppliers. Instead, we will attempt to conduct a supplier screening for choosing the most suitable supplier for our business. Indeed, supplier selection is an important process. There are several factors influencing the process of selection. The table below will illustrate the suppler screening idea based on influencing criteria:

Supplier A Supplier B Supplier C Weight price 4 5 3 3 Lead time 5 4 4 2 accessibility 5 3 3 1 Quality & certifica- 4 5 1 3 tion Customer support 3 5 4 1 Market experiences 5 3 4 1 Average score 7.8 8.2 5.2 Table 5: Supplier screening

The table of supplier screening followed a simple rule: the more important a criteria is, the higher weighted multiplier a criteria receives. For example, in order to select a proper supplier, price and product quality are the most important factors while evalu- ating the suppliers. Thus, in the table of supplier screening, these factors have the high- est weighted multiplier as 3. Thus, after comparing all relevant criteria in the supplier screening, it is reasonable that the most suitable supplier for our business is the supplier B. Therefore, our first batch of product will be ordered from supplier B. After selecting supplier, this time we need to plan for the size order of the first batch, estimate the lead time and also prepare for logistics function. As we started the project

54 with the initial investment of $1000, we may start the first order with the minimum order requirement of supplier B is 70 units.

7.4.2 Pricing strategy

To come up with a proper pricing strategy, at first, we need to examine our first order cost structure.

cost strucutre

4% 7%

41%

29%

19%

1st order expesnses shipment listing optimization Amazon account fee FBA fee

Figure 20: estimated cost structure of first order shipping to Amazon warehouse

Basically, the cost structure of my first batch consists of five main costs: 1st order expenses of $280, which consists of 70 product units; shipment cost regarding to im- port/export fee is approximately $130; listing optimization budget for $200; fee of opening Amazon account is $50 and FBA fee for storage and performance tracking is $23. Thanks to the cost structure, our estimated cost per unit is about $7.32. As we have made our research on 30 successful cases of Trung Nguyen sellers on Amazon. Most of them are selling the product under the price range from $10 to $20. Therefore, we may apply the same price range in our case business. As our cost are pretty low at $7.32, we may aim for profit margin at 30%. Thus, the average price of our product is approximately $10.4 before taxes. Offering the product at this price, we will have a good chance to attract buyers and gaining advantages for the first step of market pen- etration

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7.4.3 Product launch

Launching product is a critical process in ecommerce market. Indeed, there are hun- dreds of products is listed every day. Thus, when our product is launched to the market, we will start literally from 0 as other similar products. Thus, to make our product vis- ible for customer, it takes time and a lot of efforts. More importantly, we need an appropriate approach. In this case, we will conduct a specific product launch approach based on the four steps: keywords planning and PPC.

7.4.4 keywords planning

In this section, we will discuss our plan on product tittle, bullet point and description. Before coming up with the plan, let’s back a bit with keywords data for our similar product sellers that we had in appendix 3. However, at this point, we may want to have our own version of potential target keywords. Thus, I’ve come up with the list of key- words below:

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Keywords Search VolumeTrend (Average)CPC (USD) Competition vietnamese coffee maker 4400 0 0.2 100 vietnamese coffee filter 4400 -18 0.15 100 vietnamese coffee 49500 22 0.4 48 g7 coffee 4400 23 0.11 100 vietnamese instant coffee 1000 0 0.18 100 vietnamese coffee beans 1600 19 0.9 100 vietnamese coffee press 590 0 0.2 100 g7 instant coffee 880 -45 0.38 100 weasel coffee 6600 23 0.29 56 vietnamese drip coffee 3600 52 0.17 100 g7 coffee 3 in 1 320 23 0.17 100 vietnam coffee brand 1300 0 0.19 89 best vietnamese coffee 880 22 0.37 43 vinacafe instant coffee 390 -65 0.22 98 instant coffee 74000 -45 0.78 100 g7 coffee vietnam 720 22 0.09 100 vietnamese coffee grounds 390 0 0.44 100 weasel coffee price 390 -18 0.14 99 nescafe cafe viet 590 0 0.56 64 best vietnamese coffee brand 320 0 0.21 38 viet coffee 1000 48 0.32 28 best instant coffee uk 1600 23 0.65 98 nescafe instant coffee packets 480 22 0.66 100 weasel coffee vietnam 1300 0 0.21 75 3 in 1 instant coffee 480 -19 0.51 100 nguyen coffee 390 50 0.43 27 trader joe's instant coffee 1300 30 0.11 100 how to make vietnamese coffee 3600 22 0.89 4 cafe viet 2900 24 0.17 50 best instant espresso 320 0 0.88 100 weasel poop coffee 720 -18 0.23 45 Figure 21: list of potential target keywords for product listing

The previous list of keywords is generated from the original list of our competitors’ potential target keywords yet based on my own criteria. In more detail, I’ve been mod- ified the original list to look for those relevant keywords with average volume larger 300 searches/month, low CPC bidding ( below $1.3 per click). As we see that the keywords “Vietnamese coffee”, “G7 coffee” and “instant coffee” has generated a quite significant monthly volume search. It is good that these keywords will be inclusive in our SEO process and may consider for the later PPC campaign as well.

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At this point, we are going to create our product tittle. A product title needs to follow the formula that we mentioned in the theoretical findings and involves profitable key- words such as “instant coffee”. After considering carefully, our sample product tittle may look like this: Trung Nguyen Legend Special Edition Vietnamese Instant Coffee - 1 box of 18 sticks x 25grams

Similar to the product tittle, the bullet point and description may be similar to the fol- lowing sample:

Product description: • Package includes: 18 instant coffee sticks. Each stick includes 25grams • Characterized with seducing aroma of grounded beans of strong and pure Vi- etnamese coffee taste • Featured with ground coffee aroma, strong body and taste • Nano+ Technology: g7 instant coffee keeps the original taste of coffee beans • Ingredients o Arabica, Robusta o % soluble and micro-ground coffee: 15%

• Preparation o Hot drink directions: ▪ Empty one stick of Trung Nguyen Legend Special Edition into a cup ▪ Add 90ml of hot water 176oF 212oF (80oC 100oC) ▪ Stir well and enjoy.

• Iced drink serving suggestion: o Empty one stick of Trung Nguyen Legend Special G7 Edition into a cup. o Add 50ml of hot water 176oF 212oF (80oC 100oC). o Stir well, add ice about 100g of cube and enjoy.

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7.4.5 Pay-Per-Click campaign (PPC)

Since we have discussed the PPC campaign in previous chapter about Amazon. It is undisputed that PPC campaign is essential for sales generated from Amazon website by targeting on relevant keywords that may generate sales for the product. However, the main questions are how the PPC campaign truly works and how can we manage it effectively? To answer these questions, we will need to go through some examples. Usually, to setup a PPC campaign strategy, we may experience three steps: one automatic PPC campaign and two manual PPC campaigns.

Figure 22: Sample PPC campaign structure (https://www.bidx-tool.com/en)

An automatic PPC campaign is the campaign generated automatically by Amazon. The purpose of this campaign is to reveal a range of relevant keywords for your listing. After that, the purpose of first and second manual PPC campaign is to shorten the range of relevant keywords into the list of keywords with most sales generated.

We now refer to our case study. Fortunately, in our case, we are allowed to skip the automatic PPC campaign because we have already made a list of potential target key- words. Thus, we may be saving our time and capital resources for other purposes. Then at this point, we will start to plan on our individual campaigns. The purpose is to look for most relevant profitable keywords. Our strategy is simple. At first, we may not

59 know which potential keywords bring the most profitable result. However, we are in- formed their monthly volume search and competition. Therefore, in our campaign, we will place the highest keyword bidding for the most volume search generated. In addi- tion, we also need to concern about the suggested keyword bidding price that we had in the list (figure 20) and place our bidding price that is around to suggested price. Now, we can launch the individual campaign for the first time and start to monitor its sale generated from the Amazon website. The Amazon PPC dashboard may look sim- ilar to a sample below:

Figure 23: Sample Amazon PPC dashboard (https://www.sellbrite.com/)

8 IMPLEMENTATION OF RISK MANAGEMENT

The last step is that we need to constantly monitor the campaign and keep update the keywords list to find the most profitable keyword related to our product listing. As we have been studied the process of risk management, there are three steps in risk management: risk context establishment, risk assessment and risk treatment.

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8.1 Risk context establishment

At this point, we may want to refer the business setting that we mentioned above: Business setting Description size With an estimate budget of $1.000, this project considers as a small sized project Business model FBA model Product Trung Nguyen premium G7 legend cafe Market Amazon U.S (amazon.com)

The business setting represents for the general context where the case study takes place. In fact, it is also an external environment of potential risks.

Our case study is FBA business on Amazon e-commerce website. The risk context, in this case, mainly derives from Amazon e-commerce environment, business environ- ment related to import/export, marketing functions between United State and Vietnam and FBA business model.

8.2 Risk assessment

Regarding the risk assessment process, we will start with identifying potential risks, analyzing risks and evaluating risks. Thus, we will begin the process by identifying all potential risks. In the case of our study, there are few potential risks associated with the risk context that we had previously. In fact, potential risks are associated mainly with the business functions such as supply planning, digital marketing plan and so on. For example, there are few risks associated with the case study that we will go further in detail in the list below: Potential risks Business func- Potential causes Potential effects tion Insufficient Supply plan- • Orders delayed • Damage to sales performance products for ning • Import/Export in- • Business operation postponed sales cidents Unsuccessful Marketing • Wrong keywords • damage directly to revenue PPC campaign targeted

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• High competition • may also cause loss in initial in- in keyword bid- vestment (cost for PPC campaign ding is higher than sales generated) Inefficiency in Marketing • Ineffective tittle • Lower down daily ranking on Am- SEO planning optimization azon A9 search algorithm • Low quality con- • Lower sales generated directly tents in pullet from keyword search points, descrip- tion, etc. Table 6: potential risks associated to FBA business on Amazon website

In order to measure the risk effect more precisely, the risk assessment involves two factors: probability of risk occurrence and risk impact. Firstly, there are many ways to measure the probability of risk occurrence. In our case, we may measure the risk oc- currence as below:

Probability Natural language ex- Meaning Risk range pression score

91% to 99% frequent • Occurs frequently 5 • Will continuous occur if no further actions taken

61% to 90% likely • Occurs less frequently 4 • |Likely to appear if the risk management process is not corrected

40% to 60% occasional • Occur occasionally 3

11% to 40% rarely • Occur rarely 2 • Usually potential issues discovered during pro- cess of review

1% to 10% unlikely • Highly unlikely to occur 1

Table 7: Risk probability of occurrence

Secondly, it is also necessary for us to have a parameter for risk impact. In this case, we will use loss of intial investment (in USD) to be measure the effect of potential risks on our business model. The specific parameter will be illustrated below:

Language Impact Impact in value ($ USD) Risk score expression description

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Critical An event that, if it occurred, would > 61% of initial investment 5 cause project failure

Serious An event that, if it occurred, would 21% to 60% of initial investment 4 cause major cost/ schedule increases. Secondary requirements may not be achieved.

Moderate An event that, if it occurred, would 11% to 20% of initial investment 3 cause moderate cost/ schedule in- creases, but important requirements would still be met.

Minor An event that, if it occurred, would 2% to 10% of initial investment 2 cause only a small cost/schedule in- crease. Requirements would still be achieved. negligible An event that, if it occurred, would < 2% of initial investment 1 have no effect on the project.

Table 8: Risk impact

Lastly, we need to come up with the risk rating as below:

Impact Probability Negligible (1) Minor (2) Moderate (3) Serious (4) Critical (5) Frequent (5) 5 10 15 20 25 Likely (4) 4 8 12 16 20 Occasional (3) 3 6 9 12 15 Rarely (2) 2 4 6 8 10 Unlikely (1) 1 2 3 4 5 Table 9: Risk rating

• Risk treatment

After a risk has been rated based on the risk rating matrix, the next step is to define the roles, responsibilities and specific actions taken for risk management. For each identi- fied risk, we will need a specific approach to resolve the issue. Indeed, we will need the best possible assessment of the risk and description of response options in order to apply the proper response for the risk. However, in general, we may have few guide- lines based on the risk rating result previously. According to the risk rating table, we may define identified risks into 3 categories: extreme, moderate and low risk.

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Risk level Description Action Extreme A risk that rated in range 10 to 25 • Keep monitoring daily until considers at high risk issue resolved • Develop a strategy to avoid or mitigate the identified risk. Otherwise, asking for expert support to transfer the risk Moderate A risk that rated in range 6 to 12 • Keep monitoring frequently considers at moderate risk • Low A risk that rated in range 1 to 5 • Monitor less frequently until considers at low risk future changes • No specific actions taken Table 10: General risk treatment based on risk level

9 CONCLUSIONS

9.1 Research objective #1: How to establish an effective business plan on Amazon ecommerce market?

In general, there are three essential phases in establishing a business plan: business analysis, detailed plan of implementation and examination of key results. Firstly, an in-dept analysis regarding potentials and threats of market segmentation, products, competitors, and so on, is needed to conduct. In course of analysis phase, data collection is the most critical step as it determines a quality of analysis. The mar- ket insights are only precise and well-defined if they are formed by relevant and accu- rate data from real market situation. In order to collect appropriate and accurate data for analysis, it is essential to acquire data from reliable sources such as JungleScout,

64 keyworldtool or Amazon website. Subsequently, after data collected, an analysis needs to conduct based on the data frame. In this stage, various analysis frameworks such as Porter’s five forces, SWOT or benchmarking framework may consider applying. Until this moment, outcomes of the analysis is our understandings regarding feasibility of business model as well as its potentials. After doing analysis, it is essential to know if we are able to determine if the product is good to sell online. There are two answer for this question. If the answer is not, then we close the case and back to research again. If yes, we move to the second step. Secondly, after analysis completed, it is the time for a detailed planning. At this stage, those insights collecting from data analysis needs to transform to clear, detail guideline for market entry strategy such as supply planning ideas, pricing strategy and digital marketing plan. Last but not least, we need also involve the process of risk management in order to mitigate potential effects of risk on our business. Therefore, our business is more sus- tainable and generate good results of sales.

9.2 Research objective #2: How to establish a risk management framework for e- commerce?

Understandings about risk management are critical to any kind of business. In case of ecommerce business, an effective framework of risk management may be defined as how we can manage key metrics using to measure successful level of a specific busi- ness, and external risk factors, which refers to uncertainties. Thus, establishing an ef- fective framework consists of 3 phases. The former phase is to create a list of key potential risks associated with business. Subsequently, the latter phase is where we come up with approaches to manage, reduce or avoid risks associated with these key metrics.

9.3 Self-evaluation

The case study illlustrated that it is possible to start a new online business relatively easily. The first phase of the study was the analysis of market data from publish

65 sources, such as Amazon official website, and other market research platforms, such as keywordtool.io and JungleScout. Conclusion was that the Fulfillment by Amazon model is the good way to start a new e-commerce business. This business model ena- bles a quick start to market entry. Different business models on Amazon website were analysed, and the conclusion was that FBA is the sustainable and profitable business model. Indeed, the case study has successfully demonstrated a sample market entry approach to Amazon e-commerce market based on gathered information from other professional Amazon sellers. Gathered market data proves that the business model works. The conclusions that were drawn, proved to be correct. All the research ques- tions were answered, and lessons learnt were discussed. Although the case study has a lot of limitations. For example. Its reliability of implementation still hasn’t been veri- fied due to lack of capital, yet it still considers as a good example for how to open an e-commerce business in practice. For further study suggestion, it is essential to have more market data if we want to increase the degree of reliability since the current study sample is small, only 30 cases. Moreover, the case study should be conducted in prac- tice. In addition, the sales data should be collected from Amazon dashboard as it is vital for advanced business development. Lastly, talking about my learning experi- ences after the thesis completion, I must say the thesis has improved myself signifi- cantly in the field of digital marketing, supply planning and market research. Now, I am understanding the process of business analysis and managing potential risks asso- ciated with the business. It was such a pleasure experience over the course of thesis. Lastly, it is an honor for me if this thesis may support the future readers in helping develop their own e-commerce business.

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APPENDIX

Appendix 1: sample search from Amazon website (website of Ama- zon, 2019)

Average daily average daily Products ASIN Price sold (units) sales Trung Nguyen Vietnamese coffee - 15 oz can (Grocery Product) B000F17AKC $11.86 25 $296.50 Trung Nguyen Gourmet Blend- 17.6 oz(500g) (Office Product) B002RRLZQW $9.14 47 $429.58 Trung Nguyen Original Vietnamese Coffee - 15 ounces, 2 Cans (Grocery Product) B00NU24YK2 $21.89 14 $306.46 Trung Nguyen Gourmet Blend- 17.6 oz(500g) - (Pack of 2) (Office Product) B074PBNYSY $14.99 17 $254.83 Trung Nguyen Gourmet Blend, 17.6 oz (Pack of 3) (Grocery Product) B00GR9XTQU $29.99 7 $209.93 G7 3-in-1 Instant Premium Vietnamese Coffee, 100 Servings/Sachets (Grocery Product) B00HM CM ADE $18.15 60 $1,089.00 Trung Nguyen Buon M e Thuot Special Ground Coffee, 500 grams (Grocery Product) B00CBE5N8C $10.95 30 $328.50 Trung Nguyen Legendee Gold Coffee 8.8 oz (Grocery Product) B008A0AILI $22.99 15 $344.85 G7 Coffee Black Instant Vietnamese Coffee. 6-Pack of 15 Sachets each. Total 90 x 2 Gram Sachets. Total 180 Grams of Black Coffee. Product of Trung Nguyen Coffee. (Grocery Product) B0725Y6Y44 $21.99 20 $439.80 Vietnamese Coffee | Low Acid, NO HEARTBURN - Peaberry Coffee | Smells & Tastes Great | No.1 Culi Robusta Dark Roast, Trung Nguyen (office Product) B07M FS2C7Q $14.90 6 $89.40 G7 pure black coffee, 3-pack, 45 Servings (Grocery Product) B00D8M XB3K $11.52 31 $357.12 Vietnamese dark roast ground coffee I 15.8 ounce can authentic Premium Blend of Arabica, Robusta, Excelsa and Catimor, Rich flavor with chocolate overtones, low acidity, med caffeine (Grocery Product) B0776TY8G7 $13.89 22 $305.58 G7 3-in-1 Instant Coffee, 3-in-One 50 Sachets (Grocery Product) B008KZAFZM $12.88 14 $180.32 Vietnamese Gourmet Blend Ground Coffee - 17.6 ounce mixed filter ground coffee - Arabica, Robusta, Excelsa and Catimor Blend - Strong and Bold Aroma and Taste (Grocery Product) B0776T4C7J $12.98 13 $168.74 Creative 5 Trung Nguyen Ground Coffee, 12 Ounce (2 BAGS) (Grocery Product) B00M 093WPE $23.95 3 $71.85 Creative 1 Trung Nguyen Ground Coffee (1 BAG) (Grocery Product) B01D0XE2SO $8.95 15 $134.25 G7 3-in-1 The Original Instant Premium Vietnamese Coffee, 100 Servings/Sachets (Grocery Product) B01E5JZHR2 $22.98 12 $275.76 Ground Coffee Ca Phe Dalat | M r. Viet Roasted Authentic Fresh Coffee, Suitable For All Coffee M achines – 250g (kitchen Product) B00TO7FQCC $10.82 10 $108.20 G7 Black Instant Vietnamese Coffee 7.05 ounces (200gram), 100 Packets (Kitchen Product) B06XPSLQ7F $18.30 13 $237.90 Legendee Gold Creative 8 PREM IUM 500g Vietnamese Ground Coffee Arabica, Robusta - Comes in a Box, Perfect for Gifting (Unmodified Packaging) - 17.6 oz (2 packets of 8.8 oz) (Grocery Product) B077WTZRDZ $49.99 8 $399.92 2 Pack Value Trung Nguyen Creative 1 Ground Coffee (Grocery Product) B01MAYDSA5 $17.49 20 $349.80 Whole Bean Coffee. Strong Dark Roast Vietnamese Coffee - M oon Bear Premium 20 Ounce Bag (Kitchen Product) B017V1ZFQ4 $16.99 23 $390.77 Legend Instant Coffee - Special - The best Cafe Sua Da on Earth - 9 packets x 25grams (Grocery Product) B07NKZVD77 $39.95 4 $159.80 Trung Nguyen Creative 1 Whole Bean Coffee - Peaberry Robusta (Kitchen Product) B008A0AGJ2 $16.95 30 $508.50 Vietnamese Coffee Kit by Len's Coffee LLC (Grocery Product) B0097BRWRM $22.95 2 $45.90 Legend Classic Instant Coffee - 12 Sticks x 17grams (Grocery Product) B07PV9S42X $36.95 13 $480.35

Appendix 2: 30 best sellers of Trung Nguyen coffee products

Keywords Search VolumeTrend (Average)CPC (USD) Competition vietnamese coffee maker 4400 0 0.2 100 vietnamese coffee filter 4400 -18 0.15 100 vietnamese coffee 49500 22 0.4 48 g7 coffee 4400 23 0.11 100 vietnamese instant coffee 1000 0 0.18 100 vietnamese coffee beans 1600 19 0.9 100 vietnamese coffee press 590 0 0.2 100 g7 instant coffee 880 -45 0.38 100 weasel coffee 6600 23 0.29 56 vietnamese drip coffee 3600 52 0.17 100 vietnamese coffee packets 140 55 0.14 100 where to buy vietnamese coffee 140 0 1.18 100 g7 coffee 3 in 1 320 23 0.17 100 buy vietnamese coffee 210 0 0.85 100 vietnamese drip coffee maker 210 24 0.21 100 vietnam coffee brand 1300 0 0.19 89 best vietnamese coffee 880 22 0.37 43 vietnamese 3 in 1 coffee 260 0 0.09 100 vinacafe instant coffee 390 -65 0.22 98 instant coffee 74000 -45 0.78 100 vietnamese coffee brewer 170 -18 0.19 100 vietnamese coffee pot 140 21 0.11 98 g7 coffee vietnam 720 22 0.09 100 where to buy vietnamese coffee filter 170 -19 0.3 99 vietnamese coffee strainer 90 57 0.11 100 coffee g7 instant coffee 90 -64 0.06 97 best instant coffee 14800 50 1.27 100 vietnamese coffee infuser 40 -25 0.14 100 best vietnamese instant coffee 110 56 0.43 85 vietnamese coffee set 110 56 0.22 100 g7 coffee where to buy 70 -40 0.19 95 vietnamese coffee grounds 390 0 0.44 100 trung nguyen instant coffee 110 143 0.08 100 g7 3 in 1 instant coffee 260 24 0.18 100 weasel coffee price 390 -18 0.14 99 vietnamese instant coffee 3 in 1 20 -50 0.05 57 nescafe cafe viet 590 0 0.56 64 where can i buy vietnamese coffee 40 25 0.62 100 vietnamese french press 70 40 0.1 86 vietnamese coffee for sale 30 -33 0.4 99 trung nguyen g7 140 86 0.12 97 cafe pho instant coffee 70 -76 0.06 100 Appendix 3: List of competitors’ potential keywords

best coffee to buy 880 22 1.47 100 best asian instant coffee 40 100 91 vietnamese espresso maker 30 33 0.14 100 vietnamese coffee machine 70 29 0.25 100 vietnamese coffee drip filter 110 100 0.16 100 vietnamese coffee french press 110 21 1.17 68 best tasting instant coffee 720 22 1.78 100 vietnamese coffee percolator 30 0 0.11 98 good instant coffee 480 51 1.19 100 best vietnamese coffee brand 320 0 0.21 38 best iced coffee 2400 53 2.62 60 viet coffee 1000 48 0.32 28 vietnamese instant coffee g7 50 67 0.06 100 g7 coffee 2 in 1 90 -22 0.17 82 buy vietnamese coffee filter 20 -33 0.25 94 viet cafe instant coffee 40 67 0.58 100 best vietnamese coffee to buy 10 -50 69 vietnamese drip filter 110 -36 0.12 100 nescafe cafe viet buy 30 -80 62 best instant coffee uk 1600 23 0.65 98 best vietnamese coffee filter 50 -33 0.17 100 g7 coffeemix 3 in 1 70 57 0.06 100 buy vietnamese coffee online 70 0 0.44 100 cafe viet instant coffee 10 -50 0.04 100 nescafe instant coffee packets 480 22 0.66 100 g7 trung nguyen coffee 20 0 0.03 100 weasel coffee vietnam 1300 0 0.21 75 strongest instant coffee 720 0 1.25 100 what is the best instant coffee 390 23 1.7 100 asian instant coffee 110 0 0.09 100 trung nguyen coffee g7 50 0 0.01 100 g7 black instant coffee 30 -40 0.17 100 vietnamese coffee sachets 30 -25 0.09 88 best coffee for vietnamese coffee 50 0 0.54 86 weasel coffee buy 40 -60 1.99 86 where can i buy vinacafe instant coffee 10 -100 nescafe vietnamese coffee 210 129 0.19 66 3 in 1 instant coffee 480 -19 0.51 100 vietnamese french coffee 50 25 0.15 71 nguyen coffee 390 50 0.43 27 vietnam coffee price 170 24 0.33 66 nescafe viet instant coffee 20 0 61 trader joe's instant coffee 1300 30 0.11 100 where to get vietnamese coffee 40 67 0.05 62 vietnamese coffee online 30 0 0.56 100 vietnamese style coffee filter 10 0 0.26 100 g7 black coffee 140 0 0.54 90 vietnamese instant coffee manufacturers 10 -50 71 Appendix 3: List of competitors’ potential keywords (cont)