Risk-taking and experimenting has been at the core of the philosophy of Jeff Bezos, founder and CEO of amazon.com. Amazon has been at the forefront of e-commerce and e-retailing from the outset. The company itself was some sort of experiment, a very big risk taken by Bezos. It was a well thought-out and carefully planned and calculated risk that eventually not only paid-off and succeeded but also set the standards for e-retailing in the world. As Princeton University President Shirley M. Tilghman describes the company, “it is hard to imagine life without amazon.” Amazon has reinvented the retail trade and changed the way we think about shopping .
Long-term over short-term returns
An important aspect of amazon’s strategy is its greater concern and emphasis on the long-term goals over the short-term ones. “When it comes to the tech giant he built from scratch, Bezos has always prioritized long-term gains over short-term profitability, a philosophy that's yielding palpable results” . The whole concept of the company is anchored on this belief. Through the years, amazon has introduced or rode on new trends that eventually became the mode of doing things. Amazon was among the most aggressive major retailer that sold e-books. Today, it is one of the dominant forces in the market segment. The Amazon Kindle accelerated the development of the e-book market and the company’s Kindle books sales.
Some investors find unconventional and feel uncomfortable with Bezos’ willingness to lose money in the short term for long-term gains . However, amazon has proven this tact effective. The company may have lost money initially on the Kindle. This investment has proven to be truly wise and profitable. It led to the development of e-book segment of the market which amazon eventually dominated . Arguably, it has also led to the development of a new technology market—the tablet, led by iPad of Apple .
Studied out of context from the whole, some investments like Kindle and Prime may not seem to be very profitable . Its founder has been described as “disruptive” in the industry . However, they have sustained the organizations growth . The Kindle has enhanced the company’s (and the entire market’s) sales of e-books. Prime seems to have helped improve customer loyalty and encouraged further transactions .
Fulfilling Needs through Evolving Channels
Bezos’ has shown a very profound understanding of customer needs and behavior. He is an avid reader so he knew exactly how customers would want to acquire books. With his knowledge of and vision for technology, he knows how to tap new channels to deliver goods to existing channels.
Amazon has been in the business of distributing entertainment and information materials. Its founder is very certain and familiar with this market. It is a need that will continue to exist. What has changed through the years is the medium, the production and the distribution of these materials. Books and videotapes originally were sold in brick-and-mortar stores. Amazon changed all that. Now the medium of these materials have evolved. From print and videotapes, they are now available in various digital formats including those for mobile devices. Through innovation and long-term planning, amazon has been ready to penetrate if not always dominate new market niches.
Gearing Up for the Future
Control is another important dimension of amazon’s development strategy. Amazon tries to penetrate or develop new markets by way of acquisition or putting up its operations. It is expanding by integrating operations forward or backward. It also tries to expand the market sideways by entering new niches.
The acquisition of Kiva and Zappos has allowed the company to enter market niches and prevent these companies to become competitors should those niches grow. It already established its presence in cloud computing. Its alliance with Alloy Entertain enables to company to be ready in case it needs to develop its own content. Bezos on his own also bought The Washington Post . This acquisition again can give amazon an edge in news and information content development.
In the end, these efforts would make amazon ready for and present in new markets that may eventually develop. So, whichever direction the market goes, amazon would something ready to move in that direction.
Conclusion
Amazon is following a very sound strategy. It is ensuring that it maintains its dominance in the market by introducing innovations (like Prime) that would enhance its existing services. At the same time, it is investing in new ideas and business concepts (like Kiva and Zappos). Its new investments may not turn out to be profitable in the short term. However, these investments could serve in expanding its existing markets and strengthen its hold on existing markets. This was what happened with the Kindle. While the Kindle may not be as profitable as other amazon.com products services, it has allowed amazon to expand its book market to include new media. It revolutionized the whole idea of distributing and reading books. Arguably, it has helped develop a new segment in the technology market—the tablet—that Apple, Adroid and other devices have pursued.
The great thing about amazon’s strategy is that it is already present in new technology (like Kiva). Should such markets be developed, amazon would have first-mover presence in these fields. Should these investments fail, amazon would still benefit from the exercise of developing new ideas.
In the end, amazon’s efforts and investments could lead to its overall market dominance in both the content development and distribution fields. It is also a learning organization that keep it well informed of new markets as a result of it many successes and failures.
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