Amazon: Business Model Analysis

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Amazon is one of the worlds most extensive and expensive companies. In 2020, Forbes ranked it 4th in the list of the most valuable brands after Apple, Google, and Microsoft, with a valuation of $135.4 billion (Swant, n.d.). In one year, the company was able to double its performance. In 2021, Kantar Group placed Amazon first in the top 100 ratings, valuing the company at $254.2 billion (Barker, 2021). All this testifies to the excellent approach of top managers to their work.

Vision and Mission

Amazon views vision as the guide for the companys development and cultivation of specific ideas. Its vision has two parts:

The central ideology, which reflects the purpose and values of the company;
An envisioned future that includes goals and objectives (Amazon, n.d.).

Amazons vision is customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking (Amazon, n.d., para. 1). This vision was written during the companys founding and has guided Amazon to this day. Its mission statement emphasizes the lowest prices, best selection, and experience (Cuofano, 2022). The company wants to provide its customers with the maximum benefit in terms of price and variety of goods.

The reduced prices can be attained by a low operational cost. For this reason, the entire logistics process is essential to attain this goal. Second, Amazon offers a broad choice for all its clients (Cuofano, 2022). It is achieved by the company offering a wide range of products on its website. As a result, users want to use the companys website when they shop online. Third, Amazons mission emphasizes that transactions and operations performed by the user must be convenient (Amazon, n.d.). Thus, comfort becomes an integral element of all services offered by the corporation. Amazons mission emphasizes three essential elements: low prices, the best selection, and maximum comfort.

It can be said that the mission and vision of the company are too idealized and challenging to implement in practice. They are formulated more from a marketing point of view than for actual implementation. In fact, low prices, high quality, and convenience might be hard to combine and require much effort (Sharma, 2021). Nevertheless, Amazon is still trying to offer the best prices, which allows it to have no branches and well-established supply chains.

SWOT Analysis

Strengths	1) Amazon has a strong reputation as a retail giant offering the lowest prices and the largest range of products.	2) Optimized, fast delivery system, and robotic warehouses.
Weaknesses	1) Amazons business model is easy to copy, depriving the company of a share of the profits.	2) Amazon has shallow margins due to high costs.
Opportunities	1) Entering markets in more and more countries around the world.	2) Possibility to monopolize the U.S. food market.
Threats	1) A large number of fake products can harm a person.	2) Ship calls due to poor working conditions.

Strengths

Amazon is growing faster than the rest of the U.S. e-commerce firms. The company manages to earn high profits from online sales. The success lies in the strategy of low prices, merchandising solid, and third-party sellers on the platform. Amazon has perfected its delivery network with the launch of Amazon Air (bulk carrier), Prime Now, and Amazon Logistics. Amazon uses about 200,000 Kiva robots to search, collect and distribute orders (Edwards, 2020). Robots significantly simplify work in difficult conditions and save time.

Weaknesses

Amazons key competitors, Walmart, Barnes & Noble, eBay, Ne, and Oyster, challenge Amazon by copying the e-commerce business model. For example, in 2020, Walmart created a Walmart Plus subscription following Amazon Prime (which also offers users free shipping), while eBay is implementing a low-price strategy. Therefore, customers can easily choose another marketplace where prices are even lower. Despite the advantages, the company has the lowest margins in the e-commerce segment (Sharma, 2021). This is due to the high advertising costs, promotional products, and logistics. In the second quarter of 2021, Amazon announced online sales revenue of $53.2 billion, which is below the market forecast of $57 billion (Sharma, 2021). The fact that the company did not make a decent profit points to room for improvement.

Opportunities

Considering the companys capabilities, it is worth saying that Amazon has a good chance of becoming a global monopolist. Almost twenty countries worldwide have their own Amazon marketplace, and the company provides delivery services in over 100 countries. A promising industry is a food, which is the second largest category in American retail. The numbers could rise due to lockdowns during the pandemic, and Amazon will have a great chance to capture a niche and increase its profits through online sales of food products and delivery.

Threats

Among the threats, the most significant is that third-party sellers are selling fake products on Amazon. The company is under pressure from the government, which demands responsibility for the damage caused by counterfeit goods (Bright et al., 2019). In 2020, a U.S. court ruled that Amazon was liable for personal injury and property damage from an explosion caused by a counterfeit battery purchased from the marketplace (Greene, 2020). In such a way, the deterioration of the companys image might become one of the significant threats to the company in the future.

Warehouse workers often go on strike demanding health protection and higher pay for hazardous work. For example, in 2019, employees at an Amazon warehouse in the U.S. said they were fired in retaliation for protesting inadequate protection against COVID-19 (Business & Human Rights Resource Centre, 2020). In 2021, African-American Charlotte Newman, who worked at Amazon as a manager, filed a lawsuit against the company for sexual harassment by the director (Collins, 2021). All these facts indicate that Amazon should consider the best conditions for its employees.

5 Step Planning Process

The planning process consists of several phases critical for the desired outcome. The first stage is to set the foundation for the whole work. Since Amazon is already an established corporation, its development path is also provided. It can be recommended to improve recruitment strategy to enhance working conditions and avoid the threats described in SWOT.

The second stage should contribute to the development of the goals and objectives of the company. It is recommended to base these goals and objectives on SWOT analysis. For example, it is possible to eradicate low-quality products in the marketplace without increasing prices.

The third stage includes forming strategies to achieve the goals set earlier. To provide Amazon with only safe products, sellers must undergo specific product verification and testing by Amazon personnel. It can be recommended to work only with verified and trusted partners.

The fourth stage is the implementation of the strategy in the company. This phase is driven by strategic management and may require establishing a new business structure. The recommendation implies aligning the new strategy with the current issues to resolve them.

The fifth stage is to observe the work of the new strategy and correct unwanted deviations. It can be recommended to record changes as a way to control all alterations.

In conclusion, implementing a strategy to eliminate harmful products is possible. To do this, first of all, creating a unique body within the company will be necessary. Its responsibilities should include screening all new sellers who want to list an item on Amazon. This procedure will help to strengthen the image of the company significantly.

References

Amazon. (n.d.). Who we are. Web.

Barker, M. (2021). Amazon retains crown as worlds most valuable brand. MarketingWeek. Web.

Bright, D. Cortes, A. Hartmann. E. Parboteeah, K. Pierce, J. Reece, M. Shah, A. Terjesen, S. Weiss, J. White, M. Gardner, D. Lambert, J. Leduc, L. Leopold, J. Muldoon, J. and ORourke, J. (2019). Principles of management. Rice University.

Business & Human Rights Resource Centre. (2020). Amazon may have violated labor laws by firing worker involved in protest, New York attorney general says; incl. company response. Web.

Collins, T. (2021). Black Amazon manager sues the tech giant, execs alleging discrimination and harassment. USA Today. Web.

Cuofano, G. (2022). Amazon mission statement and vision statement in a nutshell. FourWeekMBA. Web.

Edwards, D. (2020). Amazon now has 200,000 robots working in its warehouses. Robotics and Automation. Web.

Greene, J. (2020). Burning laptops and flooded homes: Courts hold Amazon liable for faulty products. The Washington Post. Web.

Swant, M. (n.d.). The worlds most valuable brands. Forbes. Web.

Sharma, A. (2021). Amazon net profit doubles on strong online shopping. The National. Web.

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