Amazon.com, Inc is an electronic business organization that is based in America. It conducts its sales in different parts of the world and is America’s largest online retailer. It has its headquarters in Seattle Washington and has many other offices in areas where it operates. Amazon.com, Inc was founded by Bezos Jeff in 1994. It started its online operations in 1995 mainly dealing with books. The company has been involved in offering other products in addition to books.
This allows it to increase its competitive advantage. Some of the additional products include electronics, computer software, toys, music CDs, apparel, and many others. To enhance access to its products, the company has separate websites in different countries and ships some of its products to some countries. The company has been performing very well in the retailing business and was ranked the third retailer in 2009.
Between 2004 and 2006, the company underwent major changes that increased its competitive advantage. Most of the strategies put in place we’re meant to increase customer satisfaction. Within this period, the company was engaged in activities such as buying joyo.com, debuting A9.com, acquiring Booksurge and Mobipocket, and many others. Offering products at lower prices was a major strategy within the period.
The company has unique resources and strategic capabilities that allow it to compete with any other company selling similar products. Amazon.com is a natural acquisition target for Walmart. The business model that Amazon.com is using is quite efficient. To remain competitive, the company should continue to be all things to all people. This paper will seek to analyze the business strategy that Amazon.com used between 2004 and 2006 to increase its competitive advantage.
Amazon Business Model
Amazon.com was 2004 and 2006 involved in operations that helped it create value for its products and customers. The operations helped increase its competitive advantage over other competitors. Online shopping helped customers know of the existence of different products and their prices. A customer only needed access to the internet to budget for his or her expenses. The customer would be leaving to go to specific places to purchase specific goods.
For example, some books that customers could rarely find could now be located by checking in Amazon.com. The website allowed customers to order a book online and the book to be delivered to a shop near them. The organization offered products at lower prices to attract many customers (Johnson, Scholes, and Whittington 2008, p.633). The organization decided to use its customers to know any competitors who were offering the products at lower prices. The process helped create customer loyalty. In addition to electronic commerce, the organization offered to ship some goods to certain places. This gave customers the ability to access goods easily and within short periods.
The move by the organization to offer products in different lines helped increased value for its customers. In addition to offering books, the organization started offering other products such as jewelry, electronics, computer software, and many others that allowed it to increase its competitive advantage. This means that customers could now plan all their shopping and do it in Amazon shops. Customers are time-sensitive and would wish to spend little time in their shopping.
Shopping with Amazon.com helped them save time and money because products went at lower prices. In a move to assure customers of the value of its products, Amazon invited experts to inspect its jewelry, diamonds, and gemstones. Grading of the products showed that the organization was genuine in its operations building confidence and trust on part of the customers. Customers trusted the products and the organization itself. The beauty category was implemented to offer customers beauty products that met their needs (Johnson, Scholes, and Whittington 2008, p.633). The research was performed in different markets to know the needs of the customers and incorporate products that met these needs.
To ensure efficient delivery of services to customers, the organization takes several moves. The move to carry out international commerce helps interact with many customers and increase sales. The organization started offering DVD rental services to customers in the UK and extend the same in the US market. This gave customers the ability to access new movies as they were released. The customers also got an opportunity to plan what movies to watch and when.
Linking with other organizations such as Borders Ltd helped increase its revenue to invest in other areas (Sweeney 2001, p.82). The invention of credit cards allowed customers to acquire products on credit and pay for them later (Johnson, Scholes, and Whittington 2008, p.635). The invention of the credit card also came with the loyalty program that allowed loyal customers to receive gift certificates. For customers whose purchases exceeded certain amounts of money, the organization offered free shipping. There were many discounts and offers aimed at benefiting customers and attracting more.
Customers who bought many products worth high prices received higher discounts than those who spent little in the organization. They were therefore tempted to buy more to receive higher discounts. Sales and revenue increased highly. Offering varieties of products from different manufacturers helped in giving customers choices of products. This is an assurance to customers that they can obtain any products that they needed from Amazon.com.
The year 2005 was faced with many investments, especially in technology. Innovations, partnerships, and acquisitions were made at a high rate. To enhance online book sales, the organization acquired BookSurge that dealt with the printing of books. The aim was to attract more customers and gain widespread operations. The investments were customer-oriented and enabled the company to acquire higher revenue. The culture of innovation has helped the organization to come up with services and products that fulfill the needs of the customers. The services help inefficient delivery of products that the customers purchase.
MobiPocket helped in the printing of online books instead of hard copies. Some of the companies that were acquired used to offer competition but acquisition of the same helped reduce competition on part of Amazon.com and increased its competitive advantage. Through allying with such organizations as Johnson and Johnson, Drugstore.com, Unilever, and other health and beauty brands helped the organization earn a lot of profit. Working together has helped the organizations acquire benefits from each other (Hakansson and Snehota 2006, p.264). The acquisition of Joyo.com helped it increase its spread in China.
Through A9.com, customers could trace businesses close to them that offered the products they wanted. The popularity of the organization attracted many other organizations. Such companies approached Amazon.com to help them power their websites. Some of them include Shutterfly, eHobbies.com, Sears Canada, and others. All the operations allowed the company to increase customer satisfaction.
The organization had multiple site locations and restructured most of them in 2005 to enhance the business as a whole. Some relatively small branches were closed. To retain its reputation, employees from such branches were relocated to work in other branches and others were offered severance packages which they could use to start their investments. A customer service department was implemented so that customers could receive even better services. Employees received better salaries and this helped motivate them. New distribution centers were opened in different parts. Experts in software development were distributed in different development centers that were established.
These helped in the development of software that met the needs of the customers. Global expansion and other programs helped define an effective model. The organization came up with a program where it informed customers about newly released products. Only customers who had bought similar products or products from the source were informed (Johnson, Scholes and Whittington 2008, p.638). This helped the organization to remain relevant in its operations. At the end of it all, the organization achieved the highest levels of customer satisfaction.
The business model that Amazon.com uses has not changed but has just evolved. The organization started as online bookstore commerce but has evolved to offer everything that customers need. The organization has kept on changing visions to increase revenue and create value for the organization and customers. The increase in the variety of products offered not only increased sales but also increased the profits for the shareholders. The company still offers online sales but this time around it offers many products in different lines.
Amazon’s Unique Resources and Strategic Capabilities
Amazon.com has achieved high levels of success as a result of the unique resources available and strategic capabilities. The management in the organization is very unique. It has succeeded in a challenging environment having companies such as Wal-Mart and Stables Inc that were established earlier. Financial resources such as shareholders’ capital have been very useful to the organization. To implement the strategy to have global operations, a lot of capital is needed.
High profits have been very useful in acquiring new products and defining distribution channels. The organization has a unique management team that has always come up with complex decisions that ensure success (Fairhurst 1986, p.121). The management in the organization has managed to identify attractive markets that have enabled the organization to increase its revenue. The management also retains a strong relationship with other organizations that manufacture the goods that they offer. This creates a basis for the organization to form joint ventures with them.
Human resources play a major role in ensuring that the needs of the customers are met. To ensure that the members of the staff have the necessary skills required to offer services that meet the needs of customers, the human resource department has strategies of recruitment and motivation to the employees. Staffs recruited receive frequent training that allows them to learn new trends that emerge in the markets. Motivation to employees allows them to work whole-heartedly.
The department has helped the organization to acquire experts in software development that produce software that meets the needs of the customers. These experts have helped in the integration of other organizations that work closely with Amazon.com. Employees in the organization are flexible and they can stretch their skills to meet some new customer needs. The physical capability of the organization is unique and helps it to deliver its business strategy. The defined distribution channels offered to customers have helped create customer loyalty.
The brands that Amazon.com offers are strong. It even involves experts in analyzing them. Many customers go for products that have high quality. Linking with organizations that manufacture quality products is one of its strategies in achieving success (Johnson, Scholes and Whittington 2008, p.635). Goodwill and reputation have enabled the organization to relate well with other organizations and customers. The organization has a culture of innovations that is very important to help satisfy customers. It can maneuver many markets and offer its products in the same. The capacity to offer different products to its customers globally ensures success on part of the organization.
Amazon and Wal-Mart
Amazon.com has been growing at a very high rate. It has been offering great competition to Wal-Mart. As a result, Amazon.com is a natural acquisition target for Wal-Mart. Acquiring Amazon.com would mean a lot for Wal-Mart. All the competition that it has been facing from Amazon.com would have come to an end. Acquiring it would also accelerate the growth of Wal-Mart in that all the branches and machines that it uses would belong to them. Amazon.com is enjoying huge profits. Acquiring it would mean that all the profits are transferred to Wal-Mart (Business Knowledge Resource 2002, para.3).
The marketing power of the company would greatly increase if it acquired Amazon.com. The resources that the organization has been using to counter competition from Amazon.com would be transferred to profits. This would even increase the amounts of profits that the organization attains. By acquiring an organization that is online when most of its operations have been physical, Wal-Mart would have managed to diversify the risks associated with the company. For unrelated businesses, a fall in one does not have a great impact on the other. The organizations thus still stand chances of making profits even if the operations of one are blocked. For these reasons, Amazon.com remains a natural acquisition target for Wal-Mart.
SWOT Analysis for Amazon
It is important to understand the strength, weaknesses, opportunities, and threats to understand the future performance of Amazon.
Strengths are the factors that make an organization to be successful and more competitive in its area of business. To understand the strengths of Amazon.com, one must look at its main source of revenue and try to understand the factors that contribute to the revenue. Amazon.com’s profitability is one of its strengths. The company has had good returns in the last few years. Through the good returns, the company has been able to accumulate capital that it can use it expand its operation and counter competition. Technology and innovativeness are other areas of strength. The organization has fully embraced information technology and use it to strengthen its operation. Amazon.com is one of the most innovative organizations. It can come up with a variety of products that serves consumer needs. Another major strength is its strong global brand. As one of the initial dot-com companies, Amazon has been able to form a strong brand that makes it more competitive.
Weaknesses are the factors that make an organization not perform as expected. Amazon.com has been successful but has various weaknesses that lower its performance. Frequent introduction of new products is one of the weaknesses. The frequent new product kills consistency and may confuse customers. The many new products may have a counterproductive effect by lowering the strength of its brand. Offering free shipping of the sold product is a point of weakness. Although this strategy makes it easier for customers to get products, it may lead to high losses especially as the cost of shipping goes up.
Amazon.com has many opportunities as an online company. It can utilize its position in e-commerce to take advantage of globalization and increase internet users. The company can utilize its experience in the area and highly competent employees to come up with innovative products for e-commerce. Innovation in internet technology offers a great opportunity for Amazon.com. The company can take advantage of mobile internet to offer a variety of products to many people in the global market. The company has more opportunities by forming collaborations with other organizations or public institutions.
Amazon.com faces stiff competition from many other upcoming online companies. Success in online business has attracted other companies. Other big and small players in the area are likely to eat into the company’s market share and may weaken its brand. Amazon.com offers a wide range of products, the company has a threat of losing business to other niche companies that offer specific products for particular market segments.
The efficiency of Amazon.com’s Business Model Five Years to come
The business model where the organization offers products online for customers to order is very efficient. The tendency to explore markets globally is also efficient in attracting more customers. The increased number of customers would increase the revenue that the organization acquires. With time, the business will have covered major areas and the amount of money spent in investment would reduce. This means that profits would go up. The strategy that is currently in place has been very efficient in creating customer satisfaction. The high revenues acquired from the strategy are a result of customer satisfaction.
As long as the company is still earning profits, offering the products at lower prices is very important because it will help bring more customers that will move from the competitors (Campbell and Stonehouse 2004, p.64). Eventually, the competitive advantage of the organization goes up. Acquisitions help the organization achieve high growth and reduce competition. Links with organizations that offer quality products help it win customers’ loyalty. The move from offering books only has led to extensive growth. The organization should therefore proceed in with the current model of offering products in different lines.
Amazon. com-All Things to All People
As stated before, the move by the organization to offer products in different lines has helped increase its competitive advantage. When consumers go out shopping, they go to places where they can find all their needs met. Offering all products ensures customers that they can do all their shopping in one place. Different varieties of the same product from different manufacturers allow customers to those that meet their needs.
Considering that the organization offers products at lower prices, customers would wish to do all their shopping in it. As a result, revenue is likely to increase. Discounts and offers given to customers depend on the amount that they spend in the shops. Offering all products would encourage customers to do all their shopping in the organization so that they can have high discounts. Each product brings some revenue to the organization. Offering different products would therefore increase total revenue. Offering all products to customers generally increases the amount of revenue acquired.
Amazon.com is an electronic business industry that began by offering books available online. Customers could make their orders for delivery in different markets. The organization has grown to offer other products in addition to books. Such products include jewelry, electronics, music CDs, and many others. The business model in Amazon.com allows customers to order products online so that the products can be availed for them. Between 2004 and 2006, Amazon.com conducted major operations that helped it increase its competitive advantage over other competitors. The business model has evolved to become more efficient and provide customer satisfaction.
The organization has unique resources and strategic capabilities that have allowed it to achieve high levels of success. Amazon.com is a natural acquisition target for Wal-Mart because it would increase the competitive advantage of Wal-Mart and increase its revenue. The current model that Amazon.com is using would still be effective five years to come. The business should continue to be all things to all people.
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