Business Operations
Amazon has a system to track customer preferences and personalize its shopping experience. Amazon is completely online business, which saves cost on its building and maintenance and overhead costs.
Marketing
Amazon is efficient and resourceful with its promotions and advertisements. The sales volume that increase dramatically is due to the efficient systems allow it to track customer’s preferences and personalize it to their preferences. Mix product line at an affordable price enhances customer satisfaction and builds brand name loyalty.
Products and Services
The company tracks customer purchase and preferences to personalize each customer’s shopping experience, and customer is allowed to participate in the review of some products, which in the end the customers feels as if-they are more a member of a community.
Information System
The new encryption method is introduced to encode transmitted data which is able to protect consumers and also prevent the theft of private information, and the one-click approach to online shopping would enable its web site to be more users friendly.
Human resource management
Recruitment of employees with expertise in software development, international distribution, and brand name building would improve its productivity and also its competitiveness, but expansion of distribution centers would require Amazon to recruit in more new employees to expand its workforce.
External/ Industry Analysis
There are five competitive forces at work in the industry of Amazon.com Inc. They are as follows: (Porter’s Five Forces Model)
Rivalry among existing firms within an industry
The online book industry faces large competition. Amazon’s largest competitor is a brick and mortar company, Barnes & Noble. This company is now following Amazon.com by venturing their business through the Internet.
The bargaining power of buyers
Competition for customers is very strong. Buyers have the ability to compare products and services of many retailers, and have the power to choose from many substitutes.
The bargaining power of suppliers
A variety of bargaining powers exist, which results from the different supplier functions.
The threat of substitute products/services
People have a wide range of ways to buy books. They can shop in the online, or they can go to bookstores.
Threat of new entrants
There are no huge barriers to entry. The threat of new entrants comes from businesses that may already exist in the brick and mortar form, and are trying to venture their business online. People may want to purchase books on their regularly visited bookstore rather than buying from Amazon.com.
GENERAL ENVIRONMENT
Social Environment
Distribution channels and value builders are two social environments. The September 11 event also had an impact on the social environment. Security concerns have been influencing online purchasers more than ever.
Technology Environment
Technology environment explains that an integrated system across the countries is required. Furthermore, it also includes the privacy and the security acts as well as the financial industry through the technical perspective.
Political and Legal Factors
Political and legal factors may impact on business and political relationship. Regulations set by countries may affect the buyer market. Some countries will establish ban on goods or use the embargo method.
Demographic Environment
Demographic environment includes Population and Age range
Economic factors
The economic factors such as recession may change the buying habit of consumers. Even the advancement and upgrading of technology will affect consumer’s consumptions.
TASK ENVIRONMENT
The external factors will the online market and the competitors. These two factors pay special attention to both opportunities and threats. The opportunities are that Amazon.com can expand the market to customers that are not online, provide training and mentoring program and allocate resources more effectively. As for the threats, the growing competitors, market slow down and the increased costs of a running business through online plays a major role.
Alternative Solution & Their Evaluation
Human Resource Management
Provide a better training and development program for its employees to build skills and enhance their specialties. This should be done to ensure that its employees would be well prepared in handling the everyday tasks that is given to them. When its employees are well prepared, it does not have to recruit employees from its competing firms. By introducing a reward scheme for the employees, it will ensure that the employees would be motivated to learn and would enable the firm to achieve employee satisfaction. International placement should be done by sending top performing employees to new markets to gain valuable experience.
Business Operations
Backward integration by forming a partnership with its main supplier, Ingram Book Group’s would enable it to increase its control over the supply. By forming a partnership, Amazon would also be able to defend against external threat. By investing in the latest technology on its computer systems, it would enable Amazon to reduce the cost of maintenance.
Marketing
Advertise through television, radio, and printed materials in the U.S., Asia and Western Europe by highlighting Amazon’s better product quality. These would enable it to create awareness among its consumers and also brand recognition. By organizing promotion such as charity drive, sponsorship and funding will enhance the company image. Increased distribution channels and new product development, with improve features and added value to present products would retain Amazon’s pioneer status.
Financial Viability
Creating partnership and joint venture in new markets would enable Amazon to achieve its desired market position with less risks and financial requirement and thus, formulate a better budget to control its expenditure.
There are a few alternatives that can be by the company. The first solution is by doing nothing. At this point, there no immediate cost involved. Thus, there will not be any loss leaders in the marketplace. Another alternative solution for Amazon.com would be by abandoning retail business in favor of business. This is where the company can become world-class electronic basis organization. By taking this alternative, the company will be able to eliminate operating costs and retain profit.
Brick and Mortar
Another alternative solution will be by adopting “Brick and Mortar” distribution channel. Amazon.com can also achieve long-term strategic and financial objective by having partnership with their competitors to sell products on their site. Amazon.com can also choose to co-brand products that appeal to existing population. Respected and valuable brand names will actually attract consumers to visit the website and shop online.
The four major problems and issues identified are the security, competitions, negative net income and the September 11 event. These problems can be solved by preserving its company’s uniqueness. Therefore Amazon should pursue differentiation strategy. With its strong financial position and strong brand recognition, emphasis on varieties and quality will maintain its competitiveness. Continuous improvement should be implemented to generate more R&D in new product development.
Recommendations and Implications
The best alternative solutions would be by adopting “Brick and Mortar” concept as distribution channel and also the alternative solution of having partnership with competitors to sell their products on their site as well.
As for having partnership with competitors to sell their products on their site as well, the company would actually have increased revenue on their sales, as more people will visit the site. The solution also suggests that there would be a huge amount of reduction in the cost and operating expenses. Furthermore, it has a low implementation cost and the alternative is capable of extending the operations scope. The company can also have maximum usage of its shipping and selling capacity.
As for adopting the “Brick and Mortar” concept, the company would be able to have an increased consumer’s database. These databases will enable the company to monitor their customers well. This would give more flexibility for the production department. The company will also be able to handle better their storage and warehousing. WALMART can be said as the nearest competitor to Amazon.com, which uses the “Brick and Mortar” concept. If Amazon.com can adopt themselves to a different nature of business as well as online business, the company would have a competitive advantage over its competitors such as WALMART.
Our second recommendation for Amazon would be to improve their competitive position in this growing industry through market penetration. This strategy would help to differentiate them from current and other new online companies. The strength includes their promotional campaigns and customer service. However, with the trend of increased online buying, we feel Amazon can shield their current and potential competitors and increase market share. The implementation of these strategies will help in achieving specific long-term objectives.
Appendices
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“Amazon.com is Adding a Warehouse,” The New York Times, January 8, 1999. Hansell, S. “Amazon.com is Planning to Sell PC’s for First Time,” The New York Times, June 6, 2001.
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(Morningstar. “Amazon Financial Information.” 2002)
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'Company Analysis: Determining Strategic Capability' and other Stock Market Trading Books online at traderslibrary.com. Authored by: Hussey, David
- Pankaj Ghemawat, David J. Collis, Gary P. Pisano and Jan W. Rivkin, "Strategy and the Business Landscape: Core Concepts".
- Garth Saloner, Andrea Shepard and Joel Podolny, "Strategic Management".
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