the electronic business system of Amazon.com, Inc

University Degree Business and Administrative studies

1.0 INTROUCTION

This report aims to critically evaluate the electronic business system of Amazon.com, Inc. This objective will be achieved in this report by clearly explaining E business, Principle-Based Systems Analysis (PBSA) methodology or any other related terminologies. Further these systems will be compared and critically evaluated to the operational method of the e-business activity carried out by Amazon.

2.0 E BUSINESS

“E-Business is the conduction of business in the electronic marketplace. In practice, this involves the introduction of new revenue streams through the use of e-commerce, the enhancement of relationships between clients and partners and improving efficiency from using knowledge management systems. E-business can be conducted over the public Internet, through internal intranets and over secure private extranets.” (K-Solutions 2000)

However the most basic definition or explanation of e-business is “using the internet to connect with customers, partners, and suppliers. But the term also implies the transformation of existing business processes to make them more efficient.” (Netessence 2003)

E Business in a lay mans terms is conducting of business over the internet. Today it is more generic than the term e commerce because it not just buying and selling but also about customer servicing and business collaborations.

3.0 ABOUT AMAZON.COM, INC

Amazon.com. Inc is an American E Commerce company founded by Jeff Bezos in 1994. It started as an online book seller and has today diversified into various diversifications. Amazon started its rush of acquiring various companies and adopting diversifications in its offerings in the late 90s.

“That same land-rush logic fuelled Amazon's decision to start selling toys, electronics, tools, patio furniture and even cellphone service plans - all in 1999 and 2000.” (Rivlin 2005)

There have been mixed reviews and responses about the company and its business model and operational systems. However Mr. Bezos scoffed at sceptics, “Amazon has gold-plated customer service, he said, and has championed any number of nifty early innovations, like one-click buying. With such superior service, he seems to suggest, why won't the world beat a path to his door to buy everything from toasters to trumpets and tennis rackets?” (NY Times 2005)

4.0 E BUSINESS SYSTEM OF AMAZON

“A system is a set of interrelated components working together to achieve a collective goal.” (Bocji 2003)

(Alter 2002a) defines a system as “business processes using computer and communication technologies and computerised data”

An E-Business System (EBS) is a system which performs and co-ordinates business processes using computer and communication technologies and computerised data.

The E Business System of Amazon is a sales oriented one. The architecture it operates on is purely web based right from selection to purchase and payment for the goods or services. Amazon sells its products on the internet making it a virtual access store. However Amazon has established separate websites in Canada, the United Kingdom, Germany, France, China, and Japan. It ships globally on selected products.

The unspoken mission and vision of Amazon is to be the market leader and world largest online shopping portal. Amazon indeed “made its Internet premiere when Mr. Bezos opened a Web site he audaciously called ‘Earth's Biggest Bookstore’. Amazon sold only a half-million dollars' worth of books in the first six months, but was soon posting the kind of gaudy growth rates that impress Wall Street: sales hit $15.7 million in 1996 and $147.8 million in 1997.” (Rivlin 2005)

E Business and technology system has been the backbone of the company’s operations since its inception. Amazon right from the starting has had all details about its products fed in the computer as it did for books in its early years. “Books, it turns out, are among the most highly data-based items on the planet. The wholesalers even had CD-ROMs listing them. It seemed to Bezos as if all the stuff "had been meticulously organized so it could be put online.” (TIME 1999)

5.0 PRINCIPLE BASED SYSTEM ANALYSIS - EXPLANATION

“The principle-based analysis (PBSA) method starts with defining the problem and the work system within which the problem exists. It then uses the seven work system principles to explore the situation and to find potential improvements. The last step is making a recommendation about what to do and why.” (Alter 2002a)

5.1 E-BUSINESS HAS BEEN BUILT ON TECHNOLOGY, BUT IS NOT ABOUT TECHNOLOGY

E-business system is just a platform used to perform business. E business is all about people and procedures as vital components. In any given business the base or back bone of the business is trading. Technology is all about being a platform to perform business. Technology provides the platform on which the system is built (another essential component). Business processes form a major chunk of the process and must be reviewed for the e-business model. E-business is built on a work system.

In the case of Amazon, the ...

This is a preview of the whole essay

5.1 E-BUSINESS HAS BEEN BUILT ON TECHNOLOGY, BUT IS NOT ABOUT TECHNOLOGY

In the case of Amazon, the e-business system is the only source of trading. But it is still defined as a platform used to perform business. Amazon’s business process involves people and procedures as vital ingredients of the business mix. In any given business line of Amazon, the base or back bone of the business is trading but the major platform used is technology.

However in the case of Amazon’s performance it is not purely based on trading or technology but is also built on the work system. The work system involves inventory, warehousing, pricing, accounts, billing, collections and various other department which form the backbone of the company. Hence it is rightly said that E-Business has been built on technology but is not about technology.

6.0 DESCRIPTION OF THE WORK SYSTEM (PBSA 1)

A Work System is a system of people, procedures, hardware, software, communication links and data, working together to achieve the business objectives of the organisation.

Modern organisations manage complex relationships and vast quantities of data and information using Work Systems.

FIG 1 ELEMENTS OF WORK SYSTEM FRAMEWORK (Alter 2002a)

Customers are the main consumers and target audience of a company. They are the people who use and receive direct benefits from the products and services produced by the work system and this in turn generates the revenue for the company. They may be external customers who receive the organization's products and/or services or they may be internal customers inside the organization.

In the case of Amazon, all registered users (active and pro-active) are customers of the company.

Products and Services are the combination of physical things, information, and services that the work system produces for its customers. The work system exists to produce these products and services.

Amazon today offers a wide range of products from books to toys, electronics to furniture all at the convenience of a single click.

Business process is a sequence of activities that are performed within the work system. These steps may be defined or explained precisely in some scenarios or may be relatively unstructured in others. The process is purely objective and can be tamed or tailored according to the requirements of a business work system.

Amazon business system is purely internet based, right form selection to purchase and payment.

Participants are people who perform the work steps in the business process. Some participants may use computers and information technology extensively, whereas others may use little or no technology.

Participants here means the back end office of Amazon including the administration, shipping and various other team responsible to keep the work system of Amazon going.

Information is the data available to be used by participants to carry their routine work. Some of the information may be computerized, but other important information may never be captured on a computer.

Amazon system of making data available is mostly in soft copies. However some areas of the work system still work on a hard copy system.

Technology includes all hardware, software, and other equipments used by the participants while at work. The technology considered to be within a work system is dedicated to that system, whereas technical infrastructure is technology shared with other systems.

Amazon uses higher end enterprise servers and dedicated online servers for its portal. All its business offerings are made available for its customer on the internet.

Context is the organizational, competitive, technical, and regulatory realm within which the work system operates. These environmental factors affect the system's performance even though the system does not rely on them directly in order to operate.

Amazons context can refer to the organizational structure, hierarchy, technical defaults, its competitions in the market like eBay, and other legislative regulations which directly or indirectly influence the work system.

Infrastructure is shared human and technical resources that the work system relies on even though these resources exist and are managed outside of it. This typically includes human infrastructure such as support and training staff, information infrastructure such as shared databases, and technical infrastructure such as networks and programming technology.

Amazon has a strong dedicated team of support staff which works through out the year to ensure customer satisfaction, optimum utilization of resources and to ensure timely delivery of all the products.

7.0 PRINCIPLE BASED SYSTEMS ANALYSIS METHOD

Systems analysis is a very general process of defining a problem, gathering pertinent information, developing alternative solutions, and choosing among those solutions.

In general, systems analysis is applicable to almost any given problem involving people, resources, and action. This section expresses the general concept of systems analysis in a way that helps in analyzing work systems and information systems.

Basically systems analysis is a decision-making process as proposed below

Defining the problem

Describing the situation in enough depth

Designing potential improvements

Deciding what to do

FIG 2 STEPS IN SYSTEM ANALYSIS (Alter 2002a)

As discussed in the previous sections the PBSA method is a decision making process where in first we need to identify the problem, analyse the situation; suggest solution and then deciding on how to go about it.

Systems analysis iterates between defining the problem, describing the current situation, and designing potential improvements. The final step is deciding what to do. The work system icon at each stage emphasizes that the framework can be used throughout the analysis process.

This method can be used in a number of ways:

To help organize the analysis when business professionals must build their own small information systems using end-user tools.

As a way to create an initial understanding of a situation and even a tentative recommendation before starting a collaboration with IT professionals.

As a way to make sure that an ongoing collaboration between business and IT professionals balances business issues and computer system details. Maintaining this balance is especially important during discussions with software vendors, who often view the system as the software they sell rather than as the work system their customer is attempting to improve.

As a way IT professionals can make sure they have an adequate understanding of the business situation. (Alter 2002a)

TABLE 1 PRINCIPLE BASED SYSTEM ANALYSIS TABLE

7.1 Defining the Problem and the Work System

“The first step in analyzing a system is to define the problem by identifying the purpose of the analysis and the scope of the work system that is being analyzed. The purpose is typically to accomplish a goal such as increasing the efficiency of a business process, producing a better product, or solving an employee turnover problem.’ (Alter 2002a)

Amazon’s hyper-growth business models depend on enterprise working with partner's and supplier's enterprises to present a seamless cohesive team (the Inter-prise); sharing customer data, coordinating transaction details and synchronizing their collective execution on behalf of customers (Collaboration). All groups need support; Senior Management, Sales, Finance, HR, Customer Service, Engineering, and Manufacturing as well as Customers, Partners and Suppliers.

Another important part of the problem definition is identifying constraints and priorities that affect the way the analysis will be done.

“Constraints refer to limitations that make particular changes infeasible even though they might otherwise seem beneficial. Typical constraints that apply in some situations include budgetary limits restrictions in shifting personnel, the organization’s technology standards, and policies related to privacy.” (Alter 2002a)

“Priorities are statements about the relative importance of different goals. Because many different types of improvements are typically at least conceivable in most situations, the analysis process tends to be more successful if a small number of high-priority issues remain the primary focus.” (Alter 2002a)

The basic problem that Amazon faces at many a occasions is integration of its business worldwide without being present physically (as a normal store) and the information technology infrastructure required to run its business.

7.2 In depth analysis of the current situation and potential improvements

The next stage of analysis after is looking at different sides of the work system in place. This would help in imagining potential suggestions.

“Each of the seven work system principles is used in turn as a lens for focusing on a particular part of the work system, thinking about how well it is operating, and identifying possible directions for improvement. Since each principle summarizes an aspect of the way things should be, deviations from a principle indicate that potential changes should be identified and evaluated.” (Alter 2002a)

While applying each principle, first describe the situation at a level of depth and completeness consistent with the purpose of the analysis. Each principle helps us to identify potential improvements area as discussed below.

Principle #1: Please the customers by providing them a comfortable and easy to access shopping are on the web by designing the pages in a browsing friendly manner.

Principle #2: Perform the work efficiently, this brings into light the infrastructure issue discussed in the previous sections. This problem can be overcome by designing less heavy pages which open quicker than any normal page with more data in it.

Principle #3: Serve the participants at regular intervals. Amazon is a virtually business transacting unit, hence it has lots of its participants present across the globe. It is important to involve and interact with these participants to keep them engaged and happy with the company. These participants include but are not limited to suppliers, vendors, staff colleagues of Amazon and others involved in the work system

Principle #4: Create value from information; every company has information about its customers, suppliers and other participants. This information needs to be used in order to create value from it. Amazon uses this data and information at hand about its registered customers to regularly apprise them of various exciting offers on the portal. This would generate higher traffic to the website, rising up the sales graph.

Principle #5: Minimize effort absorbed by technology; Amazon is a company which uses technology as its platform, but the back bone of the company are the approximate strength of 17000 employees of which gets the company going. Hence the efforts absorbed by technology are minimized to a great extent.

Principle #6: Deploy infrastructure as a genuine resource; many a companies fail to succeed in spite of sound infrastructure and operational structure. This is dues to the non optimum utilisation of resources. Infrastructure in particular need to be employed to optimum levels at Amazon to ensure timely delivery of products.

Principle #7: Minimize unintended conflicts and risks by foreseeing the risks or hazards involved in a business process. This can be done by employing a set of professional who specialize in risk management, retail supply chain management and other related field of expertise.

These 7 principles will help identify various problems and draw an imaginative and potential suggestion for the problem in discussion.

7.3 Deciding what to do

With the above principles in hand, the company will have an imaginary line of path. However this imaginary suggestion or potential improvement does not guarantee to be the best. This suggestion may or may not be appropriate in real life situation. Hence it is important to assess and evaluate the suggestions for improvement before synthesising the propositional outcomes of the previous stage.

Table 2 COMMON EXAMPLES OF FAILURES TO FOLLOW THE WORK SYSTEM PRINCIPLES IN E COMMERCE WEBSITES

“One reason for citing these general principles is that some work systems (especially information systems) are no longer adequate even if they operate exactly as they were originally designed to operate. The original design goals gradually may have become less important as the business situation changed.” (Alter 2002a)

For example, Amazon has a hiring system that might have been developed to hire a large number of salespeople during a period of growth. Five years later or five year earlier the same goals might no longer apply even if the same hiring system had or still existed.

It is very important to be wise in taking practical decision in the e business system set up. E commerce and E business systems are prone to change every minute of business. One never know what is gonna be next in terms of development and improvement in the industry. Amazon needs to be apprised of all these forthcomings and a decision in the work system needs to be taken only after considering all the points discussed in the previous sections.

This would help not only in smooth decision making but will also strengthen the operational capability of the e business system. A strong e business system for a company like Amazon, which runs its business purely on technology, is a strong view factor of consistent, fast and steady growth.

8.0 CONCLUSION

E-business system is inevitably here to stay until the time internet exists. E-business does what it is best at; using the internet to connect with customers, partners, and suppliers. But E-business also implies the transformation of existing business processes to make them more efficient to ensure optimum utilisation of resources.

The current problems and challenges faced by Amazon are firstly, the distance factor which is reflected by late deliveries of its stock to its customers and secondly the infrastructure for running the business virtually. These factors may mount up to a big sum in the future. Hence it is important to address these two issues.

However the first issue of distance can be reduced but not totally solved as for the fact that Amazon is a web based business system. The delivery channels and operations management in this e business system needs to be smoothened and streamlined in order to ensure faster and on time delivery. The second issue of technological infrastructure must can be addressed very easily by upgrading to new technology at regular intervals.

If these suggestions are taken into consideration and applied in a practical manner, Amazon can surely tackle the discussed problems with ease and stay at the top of competition in its field of online trading of goods and services.

9.0 REFERENCES

Alter, Steven. Information Systems, The Foundation of E-Business. 4e. London: Prentice Hall, 2002a.
Bocji, P. "System." In Business Information Systems, Technology, Development and Management for the E-Business, by P Bocji, D Chaffey, A Greasley and S Hickie. London: Prentice Hall, 2003.
K-Solutions. e-commerc eEbusiness white paper 31 May 2000. May 31, 2000. http://www.k-solutions.com/library/whitepapers/e-commerceEbusinesswhitepaper31May2000.html (accessed March 20, 2008).
Netessence. "B2C." Business Consultants Cyprus. 2003. http://www.netessence.com.cy/downloads/b2c.pdf (accessed March 20, 2008).
NY Times. 10 Amazon. July 10, 2005. http://www.nytimes.com/2005/07/10/business/yourmoney/10amazon.html?ei=5090&en=c805d53acf76f2b3&ex=1278648000&partner=rssuserland&emc=rss&pagewanted=all (accessed March 20, 2008).
Rivlin, Gary. "A Retail Revolution Turns 10." New York Times, July 10, 2005.
TIME. "TIME Magazine." Person of The Year, December 27, 1999.

10.0 BIBLIOGRAPHY

Alter, S. (2002b) The Work System Method for Understanding Information Systems and Information Systems Research. Communications of the Association for Information Systems, 9, 90-104.
Alter, S (2004) Making Work Systems Principles Visible and Usable in Systems Analysis and Design. Proceedings of 10th Americas Conference on Information Systems, New York, August 2004.
Gordon, S and Gordon,J (2004) Information Systems, A Management Approach Third Edition, Wiley.
Turban,E; McLean,E; Wetherbye,J; Bolloju,N and Davidson,R (2002) Information Technology for Management, Transforming Business in the Digital Economy Third Edition, Wiley.
Alter, S. (2002a) “The Collaboration Triangle,” CIO Insight, 09, January 2002, 21-26. http://www.cioinsight.com/article/0,3658,s=307&a=22258,00.asp
Alter, S. (2002b) “The Work System Method for Understanding Information Systems and Information Systems Research,” Communications of the AIS, 9(6), Sept. 2002
Alter, S. (2003) “ 18 Reasons Why IT-Reliant Work Systems Should Replace ‘The IT Artifact’ as the Core Subject Matter of the IS Field,” Communications of the AIS. 12, 23, 365-394.
Appleton, B. (2000) “Patterns and Software: Essential Concepts and Terminology,” viewed on Aug. 17, 2003 at http://www.cmcrossroads.com/bradapp/docs/patterns-intro.html
Browne, G. J. and Ramesh, V. (2002) “Improving information requirements determination: a cognitive perspective” Information & Management, 39, pp. 625-645.
Gamma, E., Helm, R., Johnson, R., and Vlissides, J. (1995) Design Patterns: Elements of Resuable Object-Oriented Software, Reading, MA: Addison-Wesley.
Majchrzak, A. and Borys, B. (2001) “Generating testable socio-technical systems theory,” Engineering Technology Management, 1105, 1-22.
Standish Group. (2001). “Extreme Chaos”. Viewed on Jan. 30, 2004 at https://secure.standishgroup.com/sample_research/PDFpages/extreme_chaos.pdf
Wand, Y. and R. Weber (2002) “Research Commentary: Information Systems and Conceptual Modeling – A Research Agenda,” Information Systems Research, 13(4), Dec. 2002, pp. 363-376.