Amazon.Com’s European Distribution Strategy
AMAZON.COM’S EUROPEAN DISTRIBUTION STRATEGY
1. What are Amazon’s primary sources of competitive advantage? Analyze how they built their competitive capabilities over the years.
The following can be considered to be the primary sources of Amazon’s competitive advantage:
• Use of Internet: Amazon uses the internet as the sole method for selling goods to its consumers. Amazon’s competitors, such as Barnes and Noble, and Borders use brick and mortar as their main distribution channel. This method of using many store fronts is extremely costly. Thus, Amazon’s competitors are at a disadvantage because their costs are significantly higher than Amazon’s costs, allowing Amazon to sell the same goods at a lower price. • Amazon Uses Web-based Model to Personalize Service: Amazon attempted to use personalization to “build the right store for every customer.” Each customer had a Web page personalized based on his or her recent purchases. This is the equivalent of having a unique storefront for each customer in hopes of drawing in as many return customers as possible. • Distinctive Procurement Strategy: Initially, a very modest inventory in its warehouses and a heavy reliance on the wholesalers(Ingram and Baker & Taylor) helped Amazon to have a very rapid inventory turn (70 in 1996) and hence it had the growth in revenue needed for a company to grow in its initial growth stage. Once the volumes increased, the company established direct relations with Publishers to obtain better discounts but at the same time, it kept in mind the inefficiencies of the operations.
The following is the analysis of their competitive capabilities’ growth over the years:
1995 – 1998: Amazon Established:
• Responsiveness- Infrastructure and Systems: Amazon was responsive to the increased demand and sales offered by e-commerce. They increased the capacity of the existing Distribution Center (DC) and also established a DC in Delaware to closely associate with East
1. What are Amazon’s primary sources of competitive advantage? Analyze how they built their competitive capabilities over the years.
The following can be considered to be the primary sources of Amazon’s competitive advantage:
• Use of Internet: Amazon uses the internet as the sole method for selling goods to its consumers. Amazon’s competitors, such as Barnes and Noble, and Borders use brick and mortar as their main distribution channel. This method of using many store fronts is extremely costly. Thus, Amazon’s competitors are at a disadvantage because their costs are significantly higher than Amazon’s costs, allowing Amazon to sell the same goods at a lower price. • Amazon Uses Web-based Model to Personalize Service: Amazon attempted to use personalization to “build the right store for every customer.” Each customer had a Web page personalized based on his or her recent purchases. This is the equivalent of having a unique storefront for each customer in hopes of drawing in as many return customers as possible. • Distinctive Procurement Strategy: Initially, a very modest inventory in its warehouses and a heavy reliance on the wholesalers(Ingram and Baker & Taylor) helped Amazon to have a very rapid inventory turn (70 in 1996) and hence it had the growth in revenue needed for a company to grow in its initial growth stage. Once the volumes increased, the company established direct relations with Publishers to obtain better discounts but at the same time, it kept in mind the inefficiencies of the operations.
The following is the analysis of their competitive capabilities’ growth over the years:
1995 – 1998: Amazon Established:
• Responsiveness- Infrastructure and Systems: Amazon was responsive to the increased demand and sales offered by e-commerce. They increased the capacity of the existing Distribution Center (DC) and also established a DC in Delaware to closely associate with East