Overview of Shopee’s Online Shopping Platform
Shopee is a Singaporean online shopping platform in Latin American, Southeast and East Asian countries, with platforms across various countries, including Malaysia, Indonesia, Thailand, the Philippines, Taiwan, and Vietnam. It first opened in Singapore in 2015. It offers a seamless and convenient shopping experience for consumers. With robust logistical support and payment, Shoppe offers a secure and safe online shopping environment for all consumers. It aims to constantly improve its platform and become a preferred e-commerce destination through localized user-centered strategies and Ongoing Product Optimization (Shopee.com., 2022).
Recently, Shopee’s users have not shown high consumer brand loyalty to the business in its wing. As other brands aim to increase customer brand loyalty, Shopee wants to venture to the UAE to compete more competitively and increase brand loyalty. Thus, this report will examine the external environment that Shopee has to face in a new country and evaluate how Shopee can manipulate and expand its resources and capabilities. Finally, the report will discuss the decision-making process for the organization to make better decisions.
While in the UAE, Shopee will be affected by several external factors that will pose problems for operations here. The UAE is a challenging choice because many competitors like SOUQ, Groupon, and Amazon are currently operating in the UAE. To create a position and be successful in the UAE, Shopee must address each external environmental issue through PESTEL analysis.
Political Factor
The UAE is considered a major power in the Middle East and hugely influences the world stage. While in the UAE, Shopee will certainly face many political issues that could hamper its effectiveness. There are special political structures for combining sophisticated and traditional structures that allow them to maintain terrible political stability. The country is changing its import policy, making it harder for newcomers to develop strategies. The UAE has signed dual tax treaties with more than 70 nations. The treaties are intended for minimizing taxes on multinational companies while expanding sales and production in the UAE. It will give an advantage to local competitors in a pricing strategy. Nevertheless, the UAE government has now lowered the entry restriction on FDI (UAE, 2022). Thus, Shoppe can easily enter the UAE market.
Economic Factors
The UAE is the richest country in terms of per capita income. It has made significant economic growth over the years, and its biggest contribution is due to its economic diversification, abundant natural resources, the inflow of FDI, and innovation. By 2020, the annual nominal GDP of the UAE was 353.899 billion dollars. The strong economic factors of the UAE are significant for Shopee to build its base there. Due to the Covid-19 epidemic, mass lockdown and travel bands have lessened the nation’s growth. Economic growth and abundance of natural resources have attracted many foreign direct investments. The total foreign direct investment of the UAE was 14 billion dollars in 2019 (Focus Economics. 2022). These economic factors could create benefits for Shopee in the UAE. Further, the constant currency fluctuations threaten newcomers to the country.
Shopee’s Expansion to UAE
Social Factors
The UAE is the only liberal and modern nation in the Gulf region. It has supported the country build an image of the Asian business hub within the global marketplace. The total population of the UAE in 2019 was about 9.8 million. People in the UAE are driven by the fashion industry and tend to purchase the latest design products. Thus, Shopee should focus on service design to compete with local market suppliers. It can be easily managed because Shoppe offers consumers a secure, fast, and easy online shopping experience through strong payouts and uninterrupted support. Therefore, Shopee can gain a competitive advantage over the local eCommerce organizations (UAE, 2022).
Technological Factors
The UAE is a technology-inspired organization. The relatively young population is very technology conscious, allowing organizations across the UAE to take advantage of technology. Shopee can use the technology to improve its platform with the latest technology. Additionally, the organization can enhance the delivery of goods and services. Emirati nationals are very active on the internet and spend about three hours a day on social media (AG Reporter., 2019). Shopee can use this opportunity to promote its business on social media to attract people in the UAE.
Environmental Factors
The UAE is not environmentally friendly and does not strive for sustainability. There is no marketing by eCommerce organizations that focus on sustainability. Shopee should serve eco-friendly and durable products. This will provide Shopee with the competitive benefit to market its products to reduce environmental problems and protect the environment caused by the standard delivery process. The organization should promise to buy electric-powered delivery vehicles to support Shopee’s carbon footprint. Shopee should promote low-standard and low-cost labor management to keep costs down (Heritage.org., 2022).
Legal Factors
The UAE is the safest country globally, with literally a 0% crime rate. Strict rules and regulations and severe punishment are provided to lawbreakers. Western clothing is allowed, but no one can show off their excessive skin in public or show love and affection. On the other hand, the theft of business ideas and patents is common. Therefore, Shopee must ensure that its business is patented so that competitors cannot copy it. However, the country’s law supports the organization to develop market strategies (Heritage.org., 2022).
The most valuable resources of Shopee are its distribution centers and employees. The organization provides immense importance and respect to ??diversity in the business. However, inequality and discrimination in the organization have been observed in many countries where Shopee operates, leading to media attention and conflicts – ultimately lowering customer loyalty to the brand. To that end, Shopee must use its capabilities and resources in the UAE. The organization should develop gender equality by providing equal opportunities for female and male staff.
The VRIO framework will examine the impact of various resources and capabilities on the company’s business operation.
Valuable
Valuable resources that Shopee can use include the uniqueness of marketing strategies, human resources, patent designs, products, and financial resources. It has a great staff with unique capabilities and skills. Its R&D team is constantly trying to be innovative. Its continued focus on research and development has helped Shopee gain robust capabilities through sophisticated algorithms that recommend products and make it more convenient for sellers and buyers to deal in the online market. The organization can use all these resources to gain competitiveness in the UAE market (Alzahrani, 2018).
PESTEL Analysis of UAE’s External Environment for Shopee
Rarity
The rarity provides companies with a competitive edge in the foreign market. The rarity aspect that Shopee has is its international presence in Latin America, Southeast and East Asian countries, which is a rare factor for other companies. The organizational expertise in e-commerce that helps create a competitive advantage is rare. Other companies can develop their expertise and know-how, but it is hard to gain technical knowledge of Shopee, especially for new companies. Shopee has acquired rare problem-solving proficiency due to its risk-taking traits and great workforce (Xuhua et al., 2019). The organization can use the same when entering the UAE.
Inimitable
It will also give a competitive benefit to Shopee in the market. As Shopee has patented technology for its products and services, competitors cannot replicate it in the market. In addition, the marketing strategy and business model of Shopee are so complex that their competitors cannot replicate it. However, the Asian market is heavily influenced by counterfeit and duplicate products sold under international brand names. Therefore, the organization must use its capabilities to stop the counterfeit distribution of duplicate products. These imitable factors allow the company to develop a sustainable competitive advantage to increase the chances of long-term sustainability (Lestari, MUHDALIHA & Putra, 2020).
Organization
These include the company’s financial strength, technology integration in the supply chain network, large distribution channels, delivery capacity, and research and development. These organizational factors let the organization know what needs to be done or improved in the long run. Shopee recognizes that maintaining customer loyalty is a challenging task at a time of fierce competition. Shopee maintains a satisfactory relationship with its consumers despite annoying its suppliers. Some consumers misuse this strategy by demanding the return of damaged or used products. Shopee accepts refunds and returns even if the supplier is not satisfied. Hence, customer loyalty and service are imitable. The organization is ready to use and realize the potential of these resources (Deng & Wang, 2016).
Fig: VRIO Framework of Shopee
Source: Shopee.com. 2022
Shopee needs to create a strategy to work with the decision-making process. Now, the most serious problem of Shopee is facing stiff competition from other eCommerce organizations, like Amazon, SOUQ, OUNASS, and Groupon. Therefore, the organization should analyze the market to find strategies to create better competition (Aktymbayeva et al., 2018). The following section will discuss the decision-making process of Shopee.
The problem has been identified after a careful market analysis of the average traffic of current market competitors in the UAE.
Fig: Top Ecommerce Sites in UAE
Source: https://www.fmeextensions.ae/blog/ecommerce-sites-uae-middle-east-dubai/
The analysis shows that SOUQ and OUNASS have the largest market share in the UAE market. This problem reduces customer loyalty to Shopee.
Shopee has several options for dealing with these issues. The organization should offer a competitive price compared to the competitors in the market. The second alternative is to enter another country with no competitors like SOUQ and OUNASS. The third option is to improve the service design. The fourth option is to give discounts on the product (Kiu & Lee, 2017).
Evaluation of Shopee’s Resources and Capabilities in the UAE
The pricing of Shopee is competitive with its competitors. The organization cannot lower the price because it will affect its revenue and not bring it to a break-even point. Also, offering a discount on the product is not a solution because other organizations will imitate it. The best option is to open branches in nations where Shopee does not currently operate (Stratopoulos, 2017).
Shopee should plan for internationalization in a country where its competitors do not currently operate. The country should be one of the eCommerce hubs to reduce import costs. Thus, the UAE is seen as a suitable opportunity. The organization can gain first-mover benefit by entering a new land (Alzahrani, 2018).
Shopee should examine the current market in the UAE to explore customer preferences and market trends to design the right service that can quickly capture the market. As the UAE will be a new market for Shopee, but individuals already know the organization, Shopee will have to launch its best-selling products, provide after-sales service, and offer discounts. Shopee should develop customer engagement strategies through social media to perform a market survey to know about the customer preference in the UAE. Once in the UAE, the organization must strictly market its products by showing the factors of distribution sustainability and environmentally friendly nature (Kasemsap, 2018).
The final step is to assess the decision to enter the UAE as the next internationalization destination. To understand the effectiveness of the decision to enter the UAE, the organization must conduct financial analysis, revenue generation, and customer feedback after six months (Hu & Luo, 2018).
The most important issue here is the declining customer loyalty that has led Shopee to plan for internationalization in the country where it has not operated before. To gain market share in the UAE, Shopee must focus on customer retention by offering exceptional customer service. Shopee must do more to incorporate R&D into their supply chain network design. In the new nation, Shopee must use various marketing strategies to enhance brand knowledge and brand awareness to start business operations in the UAE. It should include online marketing and traditional marketing (Fawzy et al., 2018). It provides a clear insight into inimitable and valuable factors that can be easily replicated in the long run, thus making the company use valuable aspects to please customers, create sustainable competitive advantage, and improve its strengths and value for developing strong competitive benefits within the market. It is essential to develop and maintain the organization to stay profitable and maintain market share in the long run. Finally, the organization must adhere to strict rules regarding product patency and take action against the unethical sale of counterfeit products in the name of a famous brand (Qosasi et al., 2019).
Conclusion
This study discussed the strong competitive environment where Shopee is currently operating. Thus, the organization has to move to a new country with fewer competitors. The study conducted a PESTEL tool to analyze the external environment of the UAE that could make problems for the launch of Shopee. The study also discussed how Shopee could better use its resources and capabilities within the VRIO framework. Finally, the decision-making process has concluded that the right strategy is to enter the new country to enhance customer retention and loyalty.
References
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