Business Strategy of Amazon: a Summary

|Bangalore Management Academy | |Business Strategy – Case Study 2 | |Amazon. Com | Submitted to: Mr. Nirmaalya. B. Biswas Dr. Amrita Saxena Submitted by: Jainie Jose BLR0906032007 Clareena Shafali Serrao BLR0906032032 Prashant Adhangle BLR0906032026 A. R. Sidhardha BLR0906032009

Contents Summary of the Amazon Case:3 Business Model:4 Strength:4 Weakness:5 Threats:5 Opportunities:5 Customer Focus:5 Means to Innovate and Enhance Customer Experience:6 Amazon. com - The Wal-Mart of the Internet6 Recommendations:7 References:8 Summary of the Amazon Case: Amazon. com was founded in 1995 by Jeff Bezos, the CEO of Amazon. com. Jeff Bezos strategy was to offer its clients lowest possible prices and world leading customer experience thereby becoming the biggest bookstore and the leading global online service in the world.

They wanted to remain customer focused and innovate continuously to improve the online shopping experience whereby customers can buy anything online. Even though there was stiff competition from Barnes and Noble, had the advantage as the “first mover”. Between the year 1997 and 1999, it entered into promotional and strategic relationship with internet players like Yahoo. com, America Online, Excite and Dell Computers which reinforced Amazon. com’s position as the leading online bookseller. With growing customer expectations, Amazon. com introduced new products like Amazon. om Advantage, Amazon. fr, and Amazon. com Kids and also expanded operations in Germany and UK. During this phase it also went into acquiring a series of companies like Bookpages, Internet Movie Database, Junglee and Planetall for e-commerce; and announced strategic investments in companies like Drugstore. com, Della & James, Pets. com. Most importantly Amazon launched its most successful music store with over 200,000 CD’s were being offered. However in April, 2000 led to heavy losses within Amazon. com resulting in cost cutting and closing of service centers in Hague, Netherlands, Seattle.

However from 2001 onwards positive signs had begun to show with Amazon recording highest quarter sales over $1b in the fourth quarter. In 2002 by opening a website in Canada, it became the company’s 6th website and thus expanding its international sale as well. Amazon’s biggest achievement was to receive from the American Customer Satisfaction Index in 2002 the highest score in customer satisfaction ever recorded. Hence Amazon’s success shows its willingness to innovate, invest, acquire and form strategic alliances with other companies that offered products, technology and application for better customer experience. Business Model:

A business model is an explanation of the operation of the business which comprises all the element of business, the task carried out in the business and includes the way the business generates revenues (Rayport, 2002). The business model of Amazon. com – a U. S. A based multinational e-commerce company, is well established because of the delivery of goods, services and information provided to its customers. Continuous development of operational efficiency will lead to sustainable competitive advantage of Amazon. com. This model takes title to the newly manufactured products that they sell and often rely on third party.

Amazon. com requires third party source, such as Borders. com and Barnesandnoble. com, to maintain its sufficient supplies. To check whether the existing business model will work in future or not we have to do SWOT analysis. Strength: ? The company themselves developed key competencies in technology development, computer science and software. ? Variety of products available at low prices. ? Strategic alliances invest or acquire other companies that offered developed technology, applications, products or services that fitted its existing business model. High in customer satisfaction. Weakness: ? Amazon. com being in the highly volatile sector, to achieve sustainable competitive advantage it has to constantly revise its strategy and business model. ? Concentration of Amazon. com was on auctions which was a small part of their business. ? Due to issues in broadband/internet in developing countries, huge market is untapped. Threats: ? Concentration of Amazon. com was on auctions which was a small part of their business. ? In Amazon. com, Kindle – its e-book reader has a high value.

Since Amazon builds the Kindle and sells digital books, Amazon is placing a large bet on the success of its Kindle franchise. However, Sony and IREX - have released or are currently releasing competitor e-book readers. ? All high revenue generated or profit making business attracts competitors. Amazon. com would also face competition as it is difficult to differentiate the brand because it sells the product which is available on many other online sites. Opportunities: ? Market in developing countries. ? Increasing number of internet users. By analyzing the SWOT it can be concluded that the business model of Amazon. om will work in future provided that it has to adopt strategies that will give them competitive advantage. Also the attracting factor is the increasing number of internet users in developing countries will provide the new market and new customers. Also concentrating on customer intimacy rather than customer delight would be added advantage. Customer Focus: In the case it can be observed that since the startup till 2004, there has been a tremendous increase in the number of customers from nearly 150 countries which has lead to the expansion of their business and also expansion in their product line.

From books, music all the way to a toilet brush has been made available to customers to buy with Amazon. com. With attractive low prices, huge selections and fast delivery of the products, Amazon. com has been able to successfully cater to the needs of various customers all over the globe. Also with the increase in the number of internet usage that can be seen in exhibit 8, Amazon. com still has a wide market of customers to cater to. Therefore they should continue catering to all the people has they have been successful with their existing business model.

Means to Innovate and Enhance Customer Experience: ? Amazon. com has more than 76 million customers in which they can buy any item through the internet. It has introduced the selling of the items through internet and has customer accounts of only 1. 3 million and it is trying to increase this base. To increase it should make the customers aware of the selling of items through them and the price factor should also be taken care of. ? It has a loyalty program for its customers where they can join with a membership fee, on which they would be receiving discounts on express shipping i. . fast delivery of the products which they offer this only for the US, the UK, Japan and Germany. They should also make the availability of the offer in India, China and other countries. ? To improve its business it should start its e-commerce business in other parts of the world where people use internet extensively. ? Amazon. com sells its products to the customers without revealing who the vendor of the product is; whereas the other online sellers who have tie-ups with different kinds of vendors are able to provide its customers ith lower prices. Hence, Amazon. com should reveal its vendors so that it can provide the products even more at a cheaper price. Amazon. com - The Wal-Mart of the Internet? There is intense competition in running an ecommerce venture and the many fierce competitors existing makes it all the more competitive for Amazon. com. Using Amazon’s stores will further help in creating internet based business and will force to have a direct competition with these competitors emerging. As Amazon. om offers the best prices for all kinds of products and also some products do not have any shipping deals, this makes them stand out from the others and they still make a profit out of it. Wal–Mart also focuses on offering the best deals to their customers, by charging low prices they bring out an added advantage to their retail business. Amazon. com has been entirely unique with their business model as they focus not only on a particular products but a series of products which in turn adds values to their company.

There are numerous reasons why the customers prefer using Amazon. com is mainly because they can get it directly and at a low price without any additional charge deducted. As usage of internet has increased all over the world, this further helps people to make their decisions faster and they also save time when compared to buying from an Amazon. com store. Also Amazon. com offers finest return policies, most excellent shipping prices and also biggest assortment of various products of any place over the whole web.

Additionally those who have an account get 2 day free shipping as well as others promising deals. Products like kitchen items, clothes, computers, etc are free from shipping charges can be bought at one go. Amazon. com had engraved itself in many areas and had captured the attention of various consumers. Looking at their statistical range, they consider using the information that they have access to and come to conclusion about how prices should be charged and how to attain the low price wholesalers that exist in the market and make their business through.

Since Amazon. com has entered into different areas, mainly into different markets wholly they now have the right to sell anything over the internet as they have the entire advantage over the other existing online businesses. In conclusion, we would like to say that as Amazon. com had engulfed various businesses into one whole business wherein customers can find whatever they require and shop accordingly, they have captures a very large unit on the internet in such a way that they have created barriers for other competitors to enter the market.

An attractive way to expand themselves was by making their business stable and also sustaining the needs of the customers by the prices they set for their products. Recommendations: ? Being a competitive market and expenses being high, offering free shipping of books might affect the future financial position of the company. So Amazon. com should charge for shipping at a discounted rate. ? Amazon. com might also consider introducing Spanish version of their website since Hispanic Americans and the Latinos are the fastest growing ethnic group online. ? In order to have a competitive advantage and triple its sales Amazon. om might consider introducing referral programs for the its customers, wherein discount coupons would be given to those customers who bring in approximately 10 new members to their website. Also discount would be given to the new members who were newly referred in order to encourage them to start buying. References: About Amazon. com, (Jan 31st, 2010). Retrieved on 23rd March, 2010 from: https://digitalenterprise. org/cases/amazon. html DaveChaffey: Your guide to Digital Business, (n. d. ). Retrieved on 23rd March, 2010 from: https://www. davechaffey. com/E-commerce-Internet-marketing-case-studies/Amazon

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