Analysis of Amazon.com

History:

Amazon.com, Inc. is an US based multinational e-commerce company(Answers, 2010). It the world’s largest online retailer (Holton,2009) and having ranking 43rd in the best 100 global brand in 2009 (Interbrand, 2010). Jeff Bezos founded this company in 1994 and launched it online in 1995 and in 2009 its revenue was US$24.509 billion with 20,700 employees. In 2008, the main domain attracted 615 million visitors. Amazon has six different websites in the UK, China, Canada, Germany, France, and Japan. It offers international shipping for some products in specific countries. Amazon has gradually split into retail marketing of music CDs, DVDs and videotapes, software, kitchen stuff ,consumer electronics, , lawn and garden items , clothing, sporting goods, tools, watches,toys and games, baby products, epicurean food, jewelry, health and personal-care items, beauty products, musical instruments, groceries, clothing, industrial and scientific supplies and more (Answers, 2010). Amazon is having 70 to 75% or more market share of physical book sales online, plus the currently market-leading e-book reader (Shatzkin,2009) and is world’s largest online retailer (Holton,2009).

Core Competency:

The core competencies for Amazon has been identified as customer convenience and accessibility, unlimited options for selection, custom-made services, the superiority of the content of the web site, the efficient and good quality search tool to find the items of one’s choice and price. Amazon is building the core competencies through online market development and based on customer needs, also they use internet technology for financial issues and make easy for their customers. Using its Core Competency Agenda, the core competencies of Amazon are used in every segment of its matrix, excluding one. The competencies are being built in the new markets of live auctions, electronics items, greeting cards and tailoring of customer needs; the new core competencies are also being developed in the markets of e-commerce by financially collaborating themselves with internet technology companies such as Exchange.com, Accept.com and Alexa.com, which are emerging tools for the internet marketplace. They are continuously getting advantage by growing their services and selections they offer such as readers, game players, and music listeners. The firm is not presently molting any out-dated competencies and not be at the position in the development cycle to have any disused competencies (Mulqueen,n.d.).

Strategic/Competitive and First Mover Advantages:

Amazon has three main strategies which lead to competitive advantage, firstly cost-leadership, customer differentiation and focus strategy. The first strategy based on offer produces same quality with lower price than the market, the second strategy related to the bigger amount of selection than competitors, and the third one is focus on niche customer through applying one of the two strategies (Spann,et al,2004). Also Amazon values affect positively to competitive advantages, the company has two strong values: customer satisfaction and operational frugality, these two factors complement Amazon.com’s operational approach in obtaining and sustaining an efficient competitive benefit and bolstering employees and firm’s performance. Because of its economical approach towards paying less base salary to its employees with respect to its competitors it focuses much more on its business expansion and branding with its saved cost.

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However, the company maintains its employees’ loyalty through the distribution of the company shares among the employees. By doing so, it wants to convey the message to the employees that when the company is going to be benefitted or earn profit, the employees are also going to be the part of this profit through the shares (Spann,et al,2004). The strategic initiatives for Amazon is target multiple categories through technology and information. It applies segregation, novelty, and growth through alliances. It highlights building sales volume externally while minimizing cost internally. Amazon has built organization which is more difficult for competitors to attack. To the extent Amazon is successful; it may be followed by the other e-commerce firms in the future (White,et al,2003). The Amazon’s vision was to be the earth’s largest bookstore, but now it has changed to the earth’s largest selection. It is the first successful online retailers in the U.S. and in the world (Michael,et al,2007).

The competitive advantage is the number of selection from the world which in a one site that is easy to comprehend and pilot, and a good reputation for reliability and the main resource for that is technology advancement and innovation .Amazon has developed infrastructure by investing huge amount of money to make exploration easy for customers to buy any product (Michael,et al,2007). Amazon seems to have the first mover advantage; in terms of the first major company to move into a new market of electronic commerce (Marketing Terms,2009), most of the resources think that Amazon is the first (SearchCIO,2000) but some think it is not (Anders ,2000), however Amazon gained the advantage and position (SearchCIO,2000) because of being the first company of its type in the world to provide the services through internet. It keeps the first-mover advantage in two different ways; through partnership with borders and offering more and more products. This annulled any customer predilection for purchasing from Barnes & Noble by becoming a much bigger, one-stop-shopping destination (Ettington,n.d.).

The internet business of Amazon is a very positive and growing business for the company also because the major selling items like books, CDs are such belongings which do not intensify the customers’ desires to go and personally touch and feel the product before going for it. The sufficient and required information is enough to get the objects of consumers’ choice. The other problem of making the products are also handled by the company very efficiently and made the product available as early as possible enhances the trust and loyalty of the consumers towards the firm. Amazon.com has gained its wide popularity because of its perfect quality, quick services, and wide verities of products which lured consumes towards going for its products. Its unique way of doing marketing through the internet also came at such time when the graph of dot com bubble was on its peak. There was a huge opportunity for businesses also to go for such purchasing through internet. The consumers also got a new way of going for this market of books, and CDs. So, the company quickly spread its wings and captured the whole market as a part of first mover advantage in this business.

SWOT Analysis:

Strengths:

Amazon makes profit and it has become a profitable organization after large losses and it reduces the cost of delivery for customers (M.T.L,2010).

Amazon business strategy has supported by the management of customer relationship and information technology, they have the data of buyer’s behavior which helps Amazon to suggest items for customers (M.T.L,2010).

Amazon is a massive global brand which is recognizable because of the 30 millions Amazon’s customers and the early joined of e-commerce (M.T.L,2010).

They are the foremost on-line retailer (B.T.,n.d.).

Growing business offers additional product (than book and CDs) that attracts new customers (B.T.,n.d.).

The online facility to sell customers items increase Amazon competing and loyalty (B.T.,n.d.).

Weaknesses:

Confusing customer by adding new categories and influence the brand as book retailer (M.T.L,2010).

Amazon can’t offer free shipping everywhere which can lead customer to buy from local seller (M.T.L,2010).

The dependent of delivery services may cause uncontrolled on problems and cost (B.T.,n.d.).

Opportunities:

The company is now gradually more cashing on its identification as an online retail pioneer by selling its know-how to key store groups. Amazon’s new Luxembourg-based unit intends to offer customized services to vendors as a technology service provider in Europe (M.T.L,2010).

Coordinate with the public sector like deal with the British Library (M.T.L,2010).

Moving to new market through buying famous online retails like what Amazon did in Chain in 2004 (M.T.L,2010) or by getting control on other online services like their share in LoveFilm.com(B.T.,n.d.).

Build strong relationship with some famous publisher to have exclusive books, so that influence stimulated growth and new customers (B.T.,n.d.).

Venture in accomplishment will provide an enhanced level of actual customer service meeting consumer prospects. Consumer hopes are banked upon by Amazon.com to make sure reiterated business and permanence (B.T.,n.d.).

A facility of membership has been incorporated to facilitate customers the major delivery niche during the important seasonal times and advantages for members can pilot to provide a distinction under consumer service prospects around seasonal times which may result in trade through this facility(B.T.,n.d.).

Threats:

Online business attracts more competitors, Amazon offers a big numbers of products, otherwise it may affect by price competition (M.T.L,2010).

Losing the high position in other markets because of the international competition (M.T.L,2010).

Different seasons in different cultures can not afford (M.T.L,2010).

Increasing on-line conveniences from high street brands with conditionally better economies of scale proposes Amazon may not be able to contend on resembling service and product price. Thus, with no explicit differential to the competition the prospective customer sales will migrate (B.T.,n.d.).

The cost increase on transportation which is paid for the third party will impact customer view negatively Amazon (B.T.,n.d.).

The universal economic circumstances force the trade prices down and consumer potential for promotional agreement will be the focus area for all the products, with undersized economies of scale and purchasing power of consumers may not be that strong to carry such offers (B.T.,n.d.).

Limitations of SWOT:

Although SWOT analysis is used as a company’s strategic model by analyzing the internal factors such as strengths, and weaknesses and external factors like opportunities and threats, it has some limitations as well attached with it. One of the major disadvantages of SWOT analysis is that it does not provide managers the guidance to identify its strengths, weaknesses, opportunities and threats. The actual boundary between opportunity and threats also looks blurred at times. Depending upon the type of the organization, opportunity looks like threats for it sometimes and vice versa (Simmering,n.d.). Apart from this there are few more limitations of SWOT which are not in control of the management. These limitations have been categorized into internal and external limitations. The internal limitations include lack of research and development activities, defective products because of underprivileged quality control, poor relations with the partner industries, lack of expert and proficient work force. Whereas external limitations comprise of increase in price, raw materials, government policy, economical environment, searching of a new market overseas (M.S.G,2009). Amazon also needs to look forward to overcome the not clearly defined SWOT and analyze it with a different perspective to remain the market leader of online business.

Things Managed Badly:

Amazon online site may be down because of its complex IT setup, this problem occurred for two hours in June 2008, and they pointed the reason for this as their complicated computing infrastructure, but as Shawn White, director of operations it was most likely caused by the human error. Some engineers might have made the mistake by making a particular change without knowing the after effect. The network attack is also one of possibilities like “distributed denial-of-service (DDOS) attack” that struck Amazon and other secure sites in the year 2000. Traffic issue causes slowing down and may be one of the potential causes of Amazon’s security related problem (Shankland,2008).

Future Prospects of the Company:

The smart cell phones influence companies directions, online retailers have started to work on software for the phone. Amazon has offered an application for iPhone and blackberry, but that is just a small stuff. Amazon need to create a program for e-book readers and offers the titles through it. Amazon sells digital CDs both music and movies, it should focus on selling mobile-software which is growing very fast, the expectation of the mobile application would be $ 25 billions by 2014 whereas it was less than $1 billion two years ago. Amazon can make mobile bookstore software for different types of smart phones (Kharif,2009). Amazon has no plan to open a physical store for picking items (Holton,2009). The future strategy for Amazon is to maintain the customers through increase privacy and convenience (Spann,et al,2004).

Interpretation of Strategic Advantages:

Amazon’s innovative approach of online marketing undoubtedly put it in the fore-front in terms of cost leadership. But, the company needs to look for other ways of obtaining the competitive advantages as well. The competitors are also finding the ways to achieve the cost optimization to compete with it. Even this technology is not that defendable in the long run seeing the adoption of advanced technology by many other competitors. Amazon needs to look for not only maintaining its existing customer base but also needs to look for market niche by constantly analyzing the threats of its close competitors. The other most important part of the company is to keep its skill work force and not let them go out. The company needs to revise and upgrade the salary based on the regular period of time with respect to the performance of its employees, as the current salary of its employees may not be at par with its competitors. This is the reason company gives certain share to its employees to fulfill the deficit of the salary. Finally, the constant innovation should be the key focus for the firm. If Amazon adopts the changes as per the quickly pace of the global market and its competitors it will definitely remain as the market leader of the online business.

Conclusion:

Amazon has developed an unprecedented customer support only in the span of last 15 years with its unique business model of online business. This not only allows the company to have a cutting edge advantages over the competitors but also makes it a cost leader in its business. It overpasses all the supply chains to reach to the consumers through it innovative e-commerce approach. This allows the company to have a control over its distribution channel and so is able to cut down the prices of its products. The company hires the distribution channels and warehouses in the areas where the cost of dumping inventory is extremely low and forward it’s saving to the consumers in the form of the competitive prices. But, Amazon needs to keep focusing on the research and development of better and more innovative way of serving to the customer, which will not only maintains its market leadership in the online business but also allows it to be all time favorite to millions of its loyal customers around the globe.