Situational Analysis: Amazon.com

Executive Summary

Amazon.com has been successful as an online shopping company. Started in 1995 as an online bookstore, Amazon.com has developed to a high level offering more products to online shoppers. The paper is a situational analysis of this company. It reviews Amazon.com situation under various titles.

Amazon.com has experienced rapid and consistent growth since its creation. Currently it has a customer base of over 83 million. The company prospects to grow at above 200%. Exponential growth of internet usage offers great opportunity for Amazon.com. Internet usage has changes people’s lifestyles making people opt for online shopping. Amazon.com is customer oriented, over its period of existence the company has taken various steps to satisfy customer need.

Amazon.com’s marketing mix seems to be working for them. Its products seem to satisfy its customers considering that 78% of its customers are return customers. One of the reasons that make most customers prefer Amazon.com to other e-retailers is convenience of its website. Use of the company’s website is easy making retailing easy. The company has various distribution centres to ensure products easily reach its customers.

Customer situation analysis of Amazon.com indicates that company has high customer royalty. Resource and capability situation analysis shows that Amazon.com is endowed with resources and capability that make it one of successful companies in the world. Its resources and capability has enabled Amazon.com to be a leader in online retail. The company has recorded consistent profits since its creation. The high capital base allows Amazon.com to take advantage opportunities. Apart from capital base, the company’s human resources enable it to come up with innovative products and remain highly competitive. The company has healthy relationship with its suppliers as indicated by suppliers’ situation analysis. Analysis on the company’s competition situation shows that the company experience stiff competition from other online retailers. Macro economic situation analysis indicate that increased usage of internet provide great business opportunity to Amazon.com.

SWOT analysis on Amazon.com provides valuable information over the company. Amazon.com strengths include its profitability, technology and innovation, and its strong brand. Frequent introduction of new products is one of the company’s weaknesses. Competition from other existing and emerging online companies is the major threat to Amazon.com. Fast growth in internet usage across the globe provides unique opportunity to the company. To remain highly competitive, Amazon.com requires some strategic actions. The company should increase its promotion, target market and increase its distribution centres.

Background

Amazon.com, Inc is an electronic business organisation that is based in America. It conducts its sales in different parts of the world. It is among the largest online retailer in the world. It has its headquarters in Seattle Washington and has many other offices in areas where it operates. Bezos Jeff founded Amazon.com, Inc in 1994 (Byers, 2006, p. 5). 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 (Kalakota & Robinson, 2001, p. 92). To enhance access to its products, the company has separate websites in different countries and ships some of its products to some countries.

Customer Market Situation

Currently Amazon.com has a customer base of approximately 83 million. Increase in internet usage in the world has contributed highly to the high number of customers. Products posed in the company’s website can be accessed from any part of the world. Initially, the company targeted customers from American market but today the company has customers from every part of the world. In 2008, the company registered an 18% growth on customer base. The company’s ability to provide competitive product has ensured the consistent growth. One of the reasons that make most customers prefer Amazon.com to other e-retailers is convenience of its website. Use of the company’s website is easy making retailing easy.

Amazon.com has taken various measures aimed at fulfilling its customers’ need. The organisation had multiple site locations and restructured most of them in 2005 so as to enhance the business as a whole. Some branches that were relatively small 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 own investments. A customer service department was implemented so that customers could receive even better services (Kalakota & Robinson, 2001, p. 97). Employees received better salaries and this helped motivate them. New distribution centres were opened in different parts. Experts in software development were distributed in different development centres that were established (Sweeney, 2001, p. 67). These helped in development of software that met the needs of the customers.

Amazon.com Marketing Mix

Amazon.com current marketing mix seems to be effective. The company has had consistent growth since its inception. In addition, more than seventy percent of the company’s customers are repeat customers (Sweeney, 2001, p. 79). This implies that customers that use the company’s website are generally satisfied with its services. Amazon offers wide variety of products to its customers, uses various channels to distribute the products, offers reasonable prices for its products relative to its competitors and uses effective promotion mechanism.

Product

Amazon.com has variety of products that it offers to its customers. Currently Amazon.com products include books, music, videos, DVDs, Toys, Consumer electronics, wireless products, software, tools and hardware, Camera and photo items, Health and beauty supplies, and lawn and patio items (Kalakota & Robinson, 2001, p. 53). Amazon initially dealt with book but has been introducing other products to meet with changing consumers’ demand. The company has also introduced new products to deal with increasing competition. Book, music and Video (B/M/V) segment is Amazon.com’s strongest point. This section is mature and contributes highly to the company’s profitability. The company is highly customer-centred. It is dedicated to ensuring that buyers are able to find any product that they wish to buy. For instance, the company’s All Product Search enables online shoppers to find merchandise that may not be available on its website. Ability to find any product through Amazon.com makes it a preferred destination for online shoppers.

Place/Channel

Channel of distribution is very important factor to success of an organization. Amazon.com has made various initiatives in order to make its products easily available to its customers. To avail it products to customers, Amazon.com has established various distribution centres in the United States and other parts of the world. The company has a total of eleven distribution centres; seven in United States and four outside in other parts of the world. The seven centres in the United States consist of Kansas, Delaware, North Dakota, Nevada and two centres in Kentucky (Whitfield, 2009, par 13). Internationally Amazon.com has centre in Germany, United Kingdom, Japan and France. Amazon.com is hosted in World Wide Web implying that products hosted in its website can be accessed from any part of the world. To address specific needs in different places, Amazon.com host specific products to particular markets. This enables the company to be more customer-centred by presenting the right range of products to particular market segments. The company is able to avail purchased products through shipment making it possible for any individual to shop through the company’s website.

Price

Prices influence the manner in which individuals make decision to buy or not to buy a product. Compared to its competitors, Amazon.com does not seem charge high prices. In reality, the company generally seems to offer about same prices as its competitors. Amazon.com’s prices for CDs and DVD seem to be relatively lower to those offered by other companies. The fact that more that seventy percent of Amazon.com’s customers are repeat customers shows that most of the customers are happy with pricing. Repeat customers are more concerned with quality of products and service. However, new customers are more concerned with prices as they to make best deal, other than seek quality and customer service. Most of Amazon.com books and other products are sold at a discount as high as 40% (Small Business Notes, 2010, par 3).

Promotion

Market communication has high contribution to success or failure of an organization. Good market communication can help a company to gain competitive advantage while poor promotion strategies may lead to failure (Hakansson & Snehota, 2006, p. 105). Looking into Amazon.com, its promotion seems to be successful. Amazon.com has been able to create a strong brand for itself through superior product and promotions. For instance, Amazon.com sponsorship of Oprah Angel Network has played an important role is selling its brand to the public. Through its sponsorship Amazon.com is offered sit rerun of Oprah program. The reruns play a very significant role of the company advisement. Amazon.com makes good use of associate programmes to advertise itself and its products. With more than 530,000 web sites enrolled in Amazon.com associates program, the company is able to reach a wide market. Public relation appearances made the company’s CEO Jeff Bezos also play a significant role in promotion (Byers, 2006, p. 83).

Supplier situation

Amazon.com gets pride from an online-shop where shoppers can find variety of products that they require. Majoring on sale of books, video and music, Amazon.com depends highly on its suppliers. It liaises with publishers and producers for supply of products. Having worked as an e-retailer for some time, Amazon.com has been able to establish strong relationship with its suppliers (Spector, 2000, p. 69). Publishers prefer Amazon.com for its ability to access a large market. Amazon.com mission is to become a preferred online shop where shoppers can get easily anything that they require. Guaranteeing supply for variety of products that it hosts in its website is a major challenge. Amazon.com has to compete with other online retailers for supply of products.

Resource and Capability Situation

Amazon.com is endowed with resources and capability that make it one of successful companies in the world. Its resources and capability has enabled Amazon.com to be a leader in online retail. One of the valuable resources to the company is the company’s CEO. Jeffrey Bezos has been very instrumental in Amazon.com’s success (Spector, 2000, p. 64). He has exceptional leadership qualities that unite all other stakeholders toward the company’s core objectives. Apart from the CEO, Amazon.com has highly skilled and motivated employees. Amazon.com has been dedicated to the plight of its employee enabling it to form highly motivated and innovative work teams.

Having operated for a period of about fifteen years, Amazon.com has been able to form a strong technological foundation. Its strong technological base gives it competitive advantage over its competitors. With technological infrastructure, Amazon.com is able to adapt flexibly to customers’ needs. Amazon.com’s website is an important resource. The website is designed in a superior manner that makes search and ordering very efficient.

Amazon.com has a strong capital base. The company has recorded consistent profits since its creation. The high capital base allows Amazon.com to take advantage opportunities. Apart from capital base, the company’s human resources enable it to come up with innovative products and remain highly competitive. Over it long period of operations Amazon has been able to open several distribution centres. The centres enable to company distribute products in an effective and less costly manner.

External Situation

Competition Situation

Amazon.com faces stiff competition form many emerging e-retailer companies. Although there are many emerging competitors, its main competitors are Wal-Mart, EBay Inc and Barnes & Noble Inc. Emerging competitors from other parts of the globe pose threat to not only Amazon.com but also other e-retailers. Amazon.com has been able to successful deal with competition. The company use win-win strategy to ease competition. For instance, Amazon.com seeks collaboration with other e-retailers such as Drugstore, eHobbies.com, Sears Canada and others. The company has also use acquisition as a strategy for increasing customer base and reduce competition. A good example of acquisition is that of joyo.com from china. Such innovative strategies have enable Amazon.Com remain competitive (Whitfield, 2009, par 6).

Macro-Economic Situation

As an e-retailer, Amazon.com highly depends on the number of people using the internet. There has been tremendous increase in internet users. This implies that more and more people can access the company’s website. General trend towards online shopping offers great opportunity to Amazon.com (Small Business Notes, 2010, par 7). A part from increase in internet usage, Globalization significantly affects Amazon.com business (Whitfield, 2009, par 11). Globalization has influenced taste for goods and service. It has widened market such that an organization has a wider market for its products. With globalization, Amazon.com can sell its products to many parts of the world. Although globalization creates wider market, it also implies increased competition.

SWOT Analysis for Amazon.com

It is important to understand the strength, weakness, opportunity and threats in order to understand the future performance of Amazon.com.

Strengths

Strengths are the factors that make an organization to be successful and more competitive in its area of business. To understand the strengths to Amazon.com, one must looks at it main source of revenue and try to understand the factors that contribute to the revenue (Hakansson & Snehota, 2006, p. 117). Amazon.com 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 it operation and counter competition. Technology and innovativeness are other areas of strengths. The organization has fully embraced information technology and use it to strengthen it operation. Amazon.com is one of the most innovative organizations. It is able to come up with variety of products that serves consumer needs. Another major strength is its strong global brand. As one of the initial dotcom companies, Amazon has been able to form a strong brand that makes it more competitive.

Weaknesses

Weaknesses are the factors that make an organization not to 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 counter productive effect by lowering the strength of its brand. Offering free shipping of 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.

Opportunities

Amazon.com has many opportunities as an online company. It can utilize its position in e-commerce to take advantage of globalization and increase of internet users. The company can utilize it experience in the area and highly competent employees to come up innovative products for e-commerce. Innovation in internet technology offer great opportunity for Amazon.com. The company can take advantage of mobile internet to offer variety of products many people in the global market. The company has more opportunities by forming collaborations with other organizations or public institutions.

Threats

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 offer wide range of products, the company has a threat of losing business other niche companies that offer specific products for particular market segments.

Strategic Actions

Amazon.com has great potential for maintaining its leadership in e-retail. To remain highly competitive, Amazon.com requires some strategic actions. The main challenge for Amazon.com is competition. As the main competitor to Wal-Mart, Amazon.com is a potential target for acquisition. To handle competition, Amazon.com needs to increase its promotion. Promotion should seek to increase customer base so as to create wide market for its various products. Although Amazon.com has a strong brand, it should seek to increase name recognition so to distinguish itself from other e-retailer. Amazon.com should increase use of target market. Although the company’s mission is to create online shop for any product, lack target market can waste a lot of resources and opportunity. For instance, Amazon.com can major on books, music and DVDs as these contribute highly to its profits. There is need for better distribution management. To enhance delivery of products to customers, Amazon.com can increase the number of its distribution centres. More distribution centres should be established emerging markets such as China. In addition, Amazon.com should increase product marketing to be able to counter increased competition.

Conclusion

Amazon.com is among the leaders is e-retailer. Started in 1995, today the company registers million dollars of sales. It is an electronic business industry that began by offering books available online. Customers could make their orders for delivery in different markets. The organisation has grown to offer other products in addition to books. Such products include jewellery, electronics, music CDs, and many others. Amazon.com customer base has been increasing consistently since its inception. However, increasing competition is the major threat to the company. In spite of competition, situation analysis shows that Amazon.com had great potential for growth. Advancement in internet technology and increase in internet users in the world provides great opportunity for the company.

Reference List

  1. Byers, A. 2006. Jeff Bezos: the founder of Amazon.com. The Rosen Publishing Group, New York.
  2. Hakansson, H. & Snehota, I. 2006. No Business is an Island: The Network Concept of Business Strategy. Scandinavian Journal of Management, Vol. 22 No. 2, pp: 256-270.
  3. Kalakota, R. & Robinson, M. 2001. E-Business 2.0: roadmap for success. Addison-Wesley Longman Publishing Co., Inc., Boston.
  4. Small Business Notes. 2010. Background of Amazon.com.
  5. Spector, R. 2000. Amazon.com: get big fast: inside the revolutionary business model that changed the world. Random House Business, Boston.
  6. Sweeney, S. 2001. The E-Business Formula for Success: How to Select the Right E-Business Model, Website Design, and Promotion Strategy for Your E-Business. Jim Hoskins, New York.
  7. Whitfield, B. 2009. The World Wide Web: E-Retailing across the Globe.

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