Amazon.Com: an Internet Giant Fine-Tunes Its Strategies

Amazon.com: An internet giant fine-tunes its strategy
Analyze Amazon.com using the competitive forces and value chain models. How has it responded to pressures from its competitive environment? How does it provide value to its customers? Porter’s competitive force model The Value Chain Model
Porter’s competitive force model
Amazon shares market with many traditional competitors like e-bay, yahoo etc which also work as online retailing stores. Internet being widely used around the world and businesses being dependent on it, there is an easy access and possibility of new market entrants as well. This is a threat for the company. E.g. Google is expanding into other shopping services and creating a threat for Amazon. There are huge competitors but there are no remarkable substitute services for virtual retail store yet. Customers of Amazon are in abundance making it one of the largest Internet retailers in the world even though the profits are dropping currently. But other fact is that there are many options for customers as well. If it’s not for Amazon then they will go for other sites easily. Customers hold the power. Similarly, there are great numbers of suppliers as well in the business ranging from companies like Nordstrom, The Gap, Target as well as the individual suppliers. But Amazon needs to have good relation with suppliers to keep doing business with them or the suppliers can also shift to other companies.
Value Chain Model
Primary activities are related to the production and distribution of products and services. For Amazon, this means products and services online, online auctions, warehouse and distribution etc. The secondary activities make the delivery of the primary activities. In this case, those activities are, hiring large number of employees, business innovations, online tracking etc.
Amazon has been facing high competition from many online retail competitors such as eBay and yahoo. As a response to pressure from competitive environment, it is focusing on differentiation of a kind. It is making new offerings like digital mapping service with street-level photographs, a grocery store for non-perishable items sold in bulk and selling short stories online for 49 cents apiece, along with additional expenditures to improve customer convenience and the shopping experience. Also it has continuously refined its business model and made continuous innovation in business strategy and information systems.
Amazon has been able to provide the value to its customers. It was one of the first large-scale retail companies to sell over the Web so customers got chance to have this amazing experience. It offered a virtual bookstore, tremendous than that of physical bookstore and it charged less than them. It provided them with value added services like e-mail and telephone customer support, automated order confirmation, online tracking and shipping information, and the ability to pay for purchases with a just a single click of mouse using credit card and personal information provided by pervious buy of customer. This way value was created.

Describe Amazon’s evolving business strategy.
When Amazon started for the first time back in 1995, it sold books to customers directly online, a huge selection of them, at a low price. And then it kept on changing. It went through continuous business innovation in business strategy as well as information. It provided superior customer service through e-mail and telephone customer support, automated order confirmation, online tracking and shipping information. It created ‘1 click’ idea which is ability to pay for purchases with a single click of the mouse using credit card and personal details provided earlier by the customers. It then started selling music, CDs, videos, DVDs etc in 1998 and worked more like the online Wal-Mart with the addition of electronics, toys, gourmet food, travel services, jewelry etc.
It expanded its warehouse and distribution and hired large employees hurting its vision to be a ‘virtual’ retailer. Later it again cut prices, offered free shipping and leveraging its technology infrastructure to provide e-commerce service to other businesses. It allowed other businesses to fully integrate their Web sites into its site to sell branded goods like Nordstrom, Target etc. It closed 8 of its warehouses and laid off 15% workforce and consolidated orders to reduce shipping costs and uses six sigma quality measures to reduce errors. It then entered into dry goods grocery business. There are many competitors but Amazon is countering them with strategies of its own. Now also it is still doing fine with discount prices and providing ease in shopping.

Why did the company change its strategy?
The company continuously innovated in business strategies and information systems. It changed its strategies because the market situation kept on changing. Being an online retailer it has to deal with so many other online retailers. Amazon had to compete with them so it needed to change its company strategies for the success as well as survival. From the virtual bookstore, it expanded to providing ‘1 click’ express shopping looking for bringing more convenience among the people. With so much of competition going on in the surrounding area, Amazon had to formulate strategies to remain ahead of the market.
Amazon expanded its warehouse and distribution capabilities and hired its large number of employees but when this move hurt the vision of virtual retailer with lean inventories and low head count, it cut prices, closed warehouses, laid off its workers and used quality measures as well. These were done to cut costs and increase profit as well as fit in its vision. When other competitors like Google increased its service, it didn’t miss out in providing more services to its customers. This strategy was to not let its competitors’ take away its share of market. For these reasons, the company changed its strategy.

Do you think Amazon can continue to be successful? Explain your answer.
Recently, the profits of the company have started to drop and there has been a question regarding if it will be able to continue being successful. I’d say, it can continue to be successful. Amazon has always been innovative in business strategy and information systems. In fact, its business innovations are driven by huge investments in information systems. Information systems are the basic infrastructure of a business in today’s world and continuous investment in them is required to keep an organization alive. Amazon already has the trend to invest in information system. Other good thing about it is that the business strategy goes through continuous innovation and strategies need to keep changing for any business to adapt to changes.
Also, Amazon is a trusted site which is used by so many people and many of them prefer the site over other sites, may be this is the old relation that is working in favor of the company. Like it has done in past, it will continue to work for the benefits of the investors and provide value to the customers. There definitely are so many threats from eBay, Google and various other companies but I think the company is flexible enough like it was earlier to deal with whatever comes. It can bring more innovative ideas and bring out the innovative strategies. It can keep providing value added services and making the customers satisfied. Amazon can continue to be successful.

References www.emeraldinsight.com www.themanager.org

References: www.emeraldinsight.com www.themanager.org