Introduction
Amazon.com is an American online electronic commerce company based in Seattle and is the largest online based company in the United States of America. Initially, the firm started as an online book store, but later it diversified to include videos, DVDs, MP3 downloads, video games, software and electronics among others. The company also offers consumer electronics such as kindle fire tablets, fire phone, fire TV, and Amazon Kindle e-book readers and it is the largest global provider of cloud computing services. The company was founded by Jeff Bezos as the president, chairman and CEO in the year 1994 (Stone 13). The company has retail websites for the United States and other countries around the globe including the United Kingdom, France, South America, among others. In order to increase customer comfort, the company also offers shipping services to customers in designated areas for its products. This research paper provides a case study of the world’s largest internet based commerce company, Amazon.com Inc.
Wilson and Blain (33) explain that as any other company, Amazon has had to work hard through hardships and downfalls in terms of losses and debts initially until 2001 when the company begun making profits. The leader and founder had the abilities to create strategies in establishing a successful business that has enabled the company to gain the largest online market share. In the period between 1997 and 2006, the company vested in building partnerships with other related businesses that resulted in leadership in the market. Therefore, it is evident that the company did not emerge at the top due to time and experience, but it was due to hard work and the willingness to dedicate efforts to work, innovation, diversification and technology. The company faces competitors such as Apple, Google, Yahoo and others and for it to remain competitive in the market; it has to ensure it minimizes its average costs to allow it meet short-term objectives.
According to Saunders (67), demand and supply are some of the most important aspects that determine a company’s success. For Amazon.com, creation of demand and maintaining a constant supply of the goods has been the strategy. The scale of the company has remained unmatched since 2001 in comparison to the competitors such as eBay; notably, the company avails new services and commodities to the market at a very high speed, which enables creation of demand; hence, manipulating the prices and markets. Additionally, the chief advantage is in its low pricing strategy, which manipulates demand of the commodities on the market. Demand is entirely dependent on the prices, and because of the cheaper services offered there is a constant flood of new customers; however, the entry of competitors such as Google cloud engine in the market has created a necessity to review the pricing at Amazon.com.
Despite the competition, the availability of more than 25 services at Amazon.com in its portfolio places the company at a more lucrative position than the competitors since consumers would want to spend where they have options than a cheaper service provider with less number of options. For instance, amazon.com provides both computing and storage, although a bit expensive, while another competitor offers only storage without computing, but cheaply. Amazon would be most preferred for the customer since it offers a basket full of services. The fluctuations in demand attract a situation where the company will retain a high demand in the inventory and purchases low demand titles from distributors in the attempt to respond to the orders from consumers. It institutes reductions in some costs such as inventory, facilitation, transportation and information costs to the consumers; hence, manipulating demand and pricing.
Initially, the cost of production was unmatched with the profits since the company only begun making profits in 2001; therefore, the initial business plan did not expect to make profits. The strategy at this point was to create storage where consumers in the future will have access to all they need. Building a massive storage has worked to the advantage of the company by lowering further costs of operation and creating a customer based infrastructure that is resistant to failures (Saunders, 135).
Technology
The company has specialized in technology expertise through provision of a one click system to the customers. The culture of experimentation has propelled the company to the top ahead of the competitors through the company’s standardized management of content. Internal development of technology with significant investment, an aspect that is not available for the competitors. The company has capitalized on proprietary knowledge and expertise in technology in implementation of various functionalities and features that have facilitated fulfillment and enhancement of customer shopping experience. The company has laid strategies that base the development on continuous innovations through creation and enhancement of specialized software unique to the company (Kamel and Johnson 447).
Economy of scale
The scale of the Amazon.com has remained unmatched over years. The company has huge cost efficacies in the super computer’s list with a combination of high volume and low cost procurement schemes due to the company’s superior bargaining power.
Additionally, Kamel and Johnson (447) elucidate that the constant technological advancements and innovations in terms of design, management and operations at the company’s data centers contribute immensely in price reduction and when the company is not adding new services and commodities, it is reducing the prices on the already available commodities on offer.
Marketing
The company has focused on online marketing channels through directing the customers to the websites through a number of marketing channels and associate programs and sponsored searches. Additionally, the company’s superior advertising portals and email marketing options have been helpful initiatives in marketing the company and retaining its competitive advantage. Other worldwide marketing tools in the company include free shipping and Amazon Prime, and have been effective in pushing the company to the top due to the low price advantage and the entry of Kindle, which is the lowest priced e-reader on the market.
Extensive product offering
Amazon.com has championed market diversity and differentiation as a weapon against its competitors. The company offers the widest variety of commodities and services to the consumers, including retail goods, consumer electronics, digital content, Amazon games, art, instant video and Amazon Prime. These are the advantages that the firm has over competitors since consumers would opt for a company that will provide all the needs. For instance, Amazon offers computing plus storage and has a basket full of goodies in comparison to competitors such as eBay.
Entry barriers
There are a number of entry barriers to the market, which then acts as a protection to the Amazon.com. The companies has laid down strategies that raise entry barriers to competitors including high economies of scale, high total capital requirements to venture in the market production and strict government policies in market entry. Other entry barriers include high access to distribution for the company and the industry, and the high differentiation capability that the company has achieved despite being a barrier for competitors and require high level of technology.
Available substitutes
These include similar services that offered by competitors and other firms. They include the Apple Company’s provision of e-technology and content for tablet services. Other substitutes include Brick and Mortar retail stores, catalogs and rental services from other stores.
Market structure
According to Schepp and Schepp (177), the company market structure has three distinct business models, which include Amazon retail, Amazon marketplace and Amazon web services. The firm is in oligopoly market structure whereby players are few, but there is a price leader and follower. In its case, Amazon is a price follower, which determines its price of goods and services after leaders such as Apple Inc., Samsung, and Microsoft Company have dictated the price. Players in this market structure always use game theory to determine prices and fight competition.
Amazon retail
This marketing option started with books and expanded to electronic and other goods and eventually built an internet-based retail based business with a focus on best prices, unrivaled selection and convenience to the customers. Normally, the firm utilizes the online retail market, which helps it to reach a wide network of retailers; hence, increase sales revenue at minimal costs.
Amazon marketplace
This is a third party platform, which allows merchants to offer goods through internet-based shopping malls. The company charges commission depending on the sale price and the shipping credit. The company has augmented the services through different services namely “sell on Amazon, Amazon webstore, checkout by Amazon, and fulfilment by Amazon.” The market place is not restricted to online platform along as the firm has opened retail outlets in Settle and other places in America and Europe, which work as service stations for consumers of its products.
Amazon web service
This is a leveraged technological development by the company to offer retail services through a number of web services. Basing on the growth trajectory, the company continues to generate revenue on the services offered. The company has ensured diversification of services that guarantees consumer loyalty. However, the major challenges that the company face are finding new areas of growth and the ways to maintain long term profitability. Additionally, company has had remarkable challenges and is yet to overcome others. Swift reaction will enable the firm to maintain a competitive advantage through harnessing and maximizing its key competencies. Continued innovations in the emerging markets will ensure a bright future for the company.
Conclusion
Amazon is the largest electronic online company based in Seattle and which started as an online book store, but as competition increased in the market, the firm diversified its operations in such a way that it started kindle fire tablets, fire phone, fire TV, and Amazon Kindle e-book readers. Apart from that, the firm has employed cost-minimization and innovation strategies that have positioned it ahead of competition in the market. It belongs to the oligopoly market structure with a few players who use the game theory to determine prices of goods and services. Apart from the online market place, the firm has opened several service and outlet centres that has allowed it reach consumers and offer personalized services.
Work cited
Mellahi, Kamel, and Michael Johnson. "Does It Pay to Be a First Mover in Ecommerce? The Case of Amazon.com."Management Decision 38.7 (2000): 445-452. Print.
Saunders, Rebecca. "Live and Breathe Ecommerce." Business the Amazon.com Way Secrets of the World's Most Astonishing Web Business. Illustrated ed. 2. Dover, NH: John Wiley & Sons, 1999. 232. Print.
Schepp, Brad, and Debra Schepp. "MARKETING YOUR AMAZON BUSINESS 177." Amazon Top Seller Secrets Insider Tips from Amazon's Most Successful Sellers. Illustrated ed. Vol. 1. New York: AMACOM, 2009. 320. Print.
Stone, Brad. "The Everything Store." The Everything Store: Jeff Bezos and the Age of Amazon. Illustrated ed. Vol. 1. London: Bantam, 2013. 372. Print.
Wilson, Gretchen, and Mike Blain. "Organizing in the New Economy. The Amazon.com Campaign." WorkingUSA 5.2 (2001): 32-58. Print.
