Executive summary and an overview of the company
With the explosion of the internet or the World Wide Web in the last decade, many businesses and organizations have realized the need to tap into the internet resources to improve their businesses. There are many e-business ideas that are aggressive and geared towards improvement of products and services provided by these companies. Some of the companies have partially adopted the use of e-commerce strategies for some of their services and products, while some are purely e-commerce driven businesses. One such business is Amazon.com.
Amazon.com is an American e-commerce company that is based in Seattle, Washington. Founded in 1994 by Jeff Bezos, Amazon has risen to become one of the most powerful E-business companies on the planet. Bezos started the business out of his garage in Bellevue, Washington and named it Cadabra.com. According to Bezos, the initial objective of the business was to act as an online bookstore. Later in 1995, the business was renamed Amazon.com and continued as an online bookstore but later diversified their products to include DVDs, VHSs, Music CDs, Computer software, MP3s, video games, electronics, furniture, apparel, food, toys and many more (Amazon.com, 2015).
Over the last decade, the company has recorded some of the largest figures in sales amounting to over $30 billion representing a significant growth of 11% to 30% in the last two years (McGrath, 2013). Amazon has a simple business model that is essentially based on the buy, sale and transfer or shipment of goods anywhere in the globe. This model works well for the company given that they do not produce any goods, they are simply an e-retail company (McGrath, 2013).
The need(s) the company addresses and the customers it pursues
Amazon’s main business objective is to become the best place to find and discover any product or service and be able to buy these products and services over the internet. The company has continually broadened and enhanced its brand, their customer base and the electronic commerce expertise over the years. Amazon.com was initially founded as an e-book store for reading enthusiasts. However, the needs and scope of their products have expanded to include movies, video games, computer software, VHSs, Music CDs, DVDs, MP3s, electronics, furniture, apparel, food, toys and many other goods. The company mainly targets internet users who have a passion for reading and hence offering them convenient accessibility to a wide range of reading materials over the internet (Amazon.com, 2015).
The company addresses the needs of the online shoppers who need a wide range of goods and services at their disposal over the internet. Their main clientele are those online shoppers who have no time to visit shops and do shopping as is the norm in most societies. With the explosion of the internet, people can access goods and services over the internet at the comfort of their homes or offices. Amazon.com adequately satisfies the needs of such users (Chase, 2012).
It is the belief of the company that the sale of goods and services over the internet offers attractive benefits to its customers. Some of the benefits include the availability of greater and wider selection, ease-of – use, convenience, personalization and competitive pricing. In addition to making purchases, the users visiting the Amazon.com website are able leave reviews of products they bought, participate in promotions, interact with other customers and register for personalized services and check order status among other services (Amazon.com, 2015).
The role of the Internet in strategy:
The internet has played a major role in the laying out of various strategies in the company. Amazon entirely operates through the internet for all business activities. Consequently, the strategies in the company will be non conventional and will be entirely pegged on the internet. The role of the internet in strategy is discussed below;
Business strategy
Business strategy is the art and science of formulating the means by which a business will attain the long term goals and objectives. It can be simply described as the long term business plan. Business strategy often includes issues such as location of business, goals and objectives, types of products or services to be offered among others (Karakaya, 2012). In the Amazon.com context, the company carries out all its activities online, therefore, the internet played an important role in the formulation of the business strategy. To begin with, the entire business is based on the internet; all its activities are based and carried out over the internet. Consequently, the issue of business location is obsolete in Amazon.com. The Product catalogues and descriptions are provided over the company’s website for browsing by the customers who then make purchases appropriately (Amazon.com, 2015).
Information Systems Strategy (IS)
Information system strategy is the assembly of information systems including hardware, software, people and procedures with the aim of attaining company objectives. Given the nature of the business, the company has deployed sophisticated information systems to be able to achieve their goals and objectives. The internet technology determines the nature of information strategy to be employed by the company. Due to huge number of products sold over the internet, the company requires reliable storage spaces for storage of data and information regarding the products and clients. This calls for high end information systems for management of the databases, business processes and other activities (Karakaya, 2012). With services such as Amazon cloud services, the company has been able to address the issue of mass data storage and use of information systems. The adopted information system strategy is only possible through the internet (Amazon.com, 2015).
Information and communication strategy
Any e-business basically utilizes the internet as a means of communication with the relevant stakeholders such as the clients, financial and credit companies. Amazon.com uses their website to offer their services and products and services to their clients via the internet. The clients then buy, browse and make payments for these products and services through the internet (Amazon.com, 2015). Over the last few years, one of the common technologies employed is the use of mobile computing and processing where the users can make purchases even from their mobile devices. Communication technologies that are predominant in this company include the use of e-mails, electronic coupons, internet promotions, e-newsletters among others that only use the internet (Karakaya, 2012).
E-commerce strategy
Amazon Company has laid out some effective e-commerce strategies that has enabled it become one of the best e-businesses in the world. These strategies are entirely dependent on the internet and are implemented through online information systems and strategies (Amazon.com, 2015). Some of these e-commerce strategies include;
Amazon allows their customers and clients to keep their site fresh through onsite product and service reviews. It has been observed that buyers do extensive online research before purchasing from a particular site. Offering the consumers onsite reviews ensures they get the information they need without going offsite. Including onsite reviews attracts customers to purchase from the website (Amazon.com, 2015).
Secondly, Amazon uses the cross-selling related products strategy to encourage customers to purchase or view related products. The company also offers free shipping for items bought by the customer within the United States. The customers will however pay some additional fees in case the shipping is outside the United States (Amazon.com, 2015).
The online user types for Amazon.com and the e-commerce considerations
The company serves three types of online users; the online shoppers, online sellers and web service consumers (McGrath, 2013).
Online shoppers are users who visit the internet to make purchases or browse for products and services such as movies, books, food, and electronics among others. These types of online users make majority of the company’s clientele. They mainly purchase products pay for the products and the products are shipped to them (Amazon.com, 2015).
Online sellers are users who provide the goods and products that are sold by Amazon. These users enter into an agreement with the company to sell the products on their behalf and retain a small fee for the service (AMazon.com, 2015)
Web service consumers on the other hand are users who need online information services a=such as cloud computing and online storage services provided by Amazon.
Amazon Retail
The retail of Amazon is where all products and services that are available to the clients are displayed for the customer browsing and review. The customer makes purchases by selecting the desired products and making subsequent payments using a master card, Visa card, Credit Card or PayPal. The amount is deducted from the account and the item/ items are scheduled for shipping (Chase, 2012).
Amazon market Place
Amazon offers another platform for merchants and sellers to showcase their products to prospective clients. In turn the company takes a commission for providing this platform. The commission is based on the selling price, the shipping credits and referral fees (Amazon.com, 2015).
Amazon web service
Amazon web service offers web services to clients with huge cloud computing needs and online information system needs. Such web services are computer related, database, Content delivery, deployment & Management, E-commerce, payment billing and Networking services among others (Amazon.com, 2015).
Technological advantage of e-business to Amazon
The e-commerce has had many advantages to the company since its inception. There are many technological advantages of e-commerce to the company some of which include;
Low overhead costs
The company has realized a reduced overhead costs due to the use of e-commerce. Costs associated with purchase of computers, telephone costs, rent for business premises are eliminated by e-commerce. Other costs eliminated include employee salaries since we do not need the shop attendants, cashiers among other employees (McGrath, 2013).
Cost effective marketing
Marketing can be done onsite in the company’s website as well as through other online platforms. Amazon can easily market their products and services through their online platforms. They already have a strong online presence hence the cost of marketing is greatly reduced (McGrath, 2013).
Flexible business hours
E-commerce offers flexible business hours with less financial strain as compared to normal brick and wall businesses. Since business is done online, there is no opening or closing time. Services are available 24 hours a day (McGrath, 2013).
The impact of Internet regulation to e-business companies
E-business companies provide consistent and steady online content and products that guarantees them steady income and profits. Through the electronic and online platforms many e-commerce companies have made a fortune through the internet (Karakaya, 2012).
With the introduction of internet regulations such as the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) will definitely have a negative impact on these companies. If not handled and implemented fairly, the new regulations could force these companies including Amazon to spend huge amounts of money on lawsuits and settlements related to piracy and intellectual property rights (Amazon.com, 2015). Amazon sells numerous products through their website and that of its affiliates. To prevent such cases, the companies may have to incur additional costs in policing vendors to prevent selling of pirated content via the company’s website and affiliate websites. Additionally, adhering to the new internet regulations could significantly reduce the company’s profits and prevent them from providing the content demanded by the consumers (Shaw, Blanning, Strader & Whinston, 2012).
E-Commerce Metrics of an e-business company.
There are mainly four e-commerce metrics that determine the success of an e-business company. These include;
Understanding the lifetime value of a customer: These involve the calculation of the customer lifetime value to the company and how that impacts on the Returns on Investment (ROI). It is calculated using all the interactions that the customer makes with the company (Shaw et al, 2012).
Monitoring customer satisfaction: E-commerce has numerous tools for monitoring customer satisfaction by tracking psychographics, purchase history, demographics and drivers behind the online visitors to the company’s site (Shaw et al, 2012).
Measuring the funnel: online tools can be used to measure the sales funnel in company sites. These tools such as Google analytics can be used to measure; landing pages, conversion rates and types of visitors to the site (Shaw et al, 2012).
Determine the marketing ROI: E- businesses rely on search engines, affiliate programs and other channels to market their online presence. The most ideal way of determining the marketing ROI is by calculating the margin per order and the customer’s life time value. Most e-commerce businesses make a mistake of calculating the ROI based on one purchase order. Accurately determining the ROI helps the company to improve market efforts (Shaw et al, 2012).
E-Commerce Security of an e-business company
Security of an e-business in paramount and must be given a high priority in regards to strategy and even budgetary allocation. An e-business must combine both security infrastructure and information systems with an aim of strengthening the security of the business and that of its clientele. Data, information and applications must be protected by secured facilities and extensive networks and security monitoring systems (Shaw et al, 2012). Using Amazon as an example, the basic security and protection services that must be provided by the company include distributed denial of service (DDoS) protection and password brute-force detection on customer accounts. Other security measures include;
AWS Identity and Access Management: this tool allows the level of access to be unique to each individual. Each user has unique credentials to use while accessing the online platform. This eliminates the need for shared passwords that could create vulnerabilities to the company website and customers at large (Amazon.com, 2015).
Secure customer access points: The customer access point also known as API end points allows secured HTTP access (HTTP) (Amazon.com, 2015).
Built in firewalls: these helps the company to control access to company resources by allowing the company to set firewall access rules from public to private (Shaw et al, 2012).
Amazons AWS Direct Connect service allows the company to add an additional layer of network security to the instances through private subnets (Amazon.com, 2015).
Customer data and information that is stored in Amazon, Oracle RDS and Red shift are automatically encrypted using the advanced Encryption Standard (AES) 256. This is a secure symmetric-Key encryption standard (Amazon.com, 2015).
Additional security is provided to customers in order to comply with US ITAR regulations through the use of AWSGovCloud. This option provides an environment where the customers can run ITAR compliant applications (Amazon.com, 2015).
These are some of the security measures taken by Amazon.com to provide security for their services and their customers in a bid to ensure reliable service provision.
Other e-businesses in the world adopt similar strategies that are basically aimed at securing company resources and the customer data, information and applications.
Limitations to Global e-commerce.
E-commerce has revolutionized the way business are done globally and provided a level ground for both established and small business alike to compete. The internet provides a more even competing ground for all businesses all over the world. However, there are some limitations to global e-commerce;
Structural limitations and barriers such as language barriers: Most websites and e-commerce sites are in English hence limiting global consumption in areas where English is not used. Additionally, studies have shown that business users are most likely to purchase when the website speaks their language (Shaw et al, 2012).
Cultural limitations and barriers: cultural barriers and norms can hinder the use of the internet services. For instance, in Confucian nations particularly in the East Asian states, business in only conducted on a personal basis. There is also low credit card penetration in most countries particularly in the developing countries (Shaw et al, 2012).
Personal computer ownership: there is still low number of personal computer ownerships but this figure is greatly improving in the recent past. There is also a major problem of low internet speeds in most countries of the world which greatly limits e-commerce (Shaw et al, 2012).
Knowledge barriers: Setting up and e-commerce business and maintaining it effectively requires adequate knowledge and skills. This is lacking in most countries and thus greatly limits the establishment and the subsequent use of e-commerce in most countries (Shaw et al, 2012).
Internet Access Charges: most countries in the world still charge a lot of money to access the internet; this could greatly deter users to embrace e-commerce. Additionally, internet access rates greatly vary across different countries. Hence, there is unevenness and limits e-commerce globally (Shaw et al, 2012).
Legal constraints and Government regulations: A red tape and government regulation stalls e-commerce in many countries. In addition, E-commerce is global but the laws and regulations are local hence causing disparities. Most government regulations are fragmented hence affecting e-commerce (Shaw et al, 2012).
Finally, there is the major issue of difference in Currency, Value Added Tax (VAT) and economic culture that may cause problems to e-commerce companies (Shaw et al, 2012).
Reference
Amazon Web Services, (2015). Built-in Security Features. AWS Security Center, Amazon.com. Retrieved from: Http://aws.amazon.com/security/
Chase, J. (2012). The Age of Amazon. Entertainment Weekly, (1234), 19-20
Karakaya, F. (2012). Business-to-Consumers eCommerce: How Companies Use the Internet. Service Science Research, Strategy and Innovation: Dynamic Knowledge Management Methods: Dynamic Knowledge Management Methods, 227.
McGrath, M. (2013). Amazon Shares On Fire After 24% Revenue Increase. Forbes.Com, 4
Shaw, M., Blanning, R., Strader, T., & Whinston, A. (Eds.). (2012). Handbook on electronic commerce. Springer Science & Business Media.
