As Vast as the Amazon

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Table of Contents

Introduction
Overview
Problem Definition
Recommendations
Conclusion
References

Introduction

Certain businesses provide free services or discounted services as a means of attracting customers (Nasif & Minor, 2011). In so doing, they have the opportunity to sell their main commodities to these clients seeking free or cheap services. This case study provides a perfect example of such a company.

Amazon has been able to expand its business despite the fact that it does not profit from one of its services the S3. This paper discusses how Amazon is able to grow its business despite the non-profitability of S3.

Overview

Amazon has been described as the worlds largest online bookstore where people buy books over the internet (Oz, 2008). However, it later decided to offer another service. It provided its own network to allow individuals and businesses to store data.

An individual only needed to pay a small fee in order to access the storage devices. This storage service was referred to as S3, which is short for Simple Storage Service. With this service, an individual or business can enjoy service with any minimum fees or start-up costs.

S3 allows clients to increase the amount of data stored at any time and at no extra cost. The services are reliable since the clients can be 99.99 percent sure that they would be able to download or upload their data. The speed at which data can be retrieved or uploaded is very fast.

Several companies can use the services to store vast amounts of data that should be available to their clients from around the globe. With S3, companies could also back up their data. SmugMug, for example, backed up its clients photos in order to facilitate efficiency of the services.

Clients could access their photos even if SmugMugs servers were down and they would not even notice it. With the help of S3, the company could save half a million dollars that would have been used for the purchase of the disk drives.

It expected to save an additional half a million dollars since it could back up some of its unreliable disk drives. Therefore, the companys clients could enjoy uninterrupted services with no downtime.

Problem Definition

Despite the fact that Amazon offers great services of storage and backup of data, it does not do this for profit and does not expect to make money from it in the near future (Oz, 2008). It uses its technological advancements and resources to profit other businesses other than itself.

This is evident since other companies such as SmugMug save millions of dollars due to the services provided by Amazon. S3 benefits small companies in that it provides a large storage space at very low costs.

The costs are so low that companies prefer to use S3 rather than purchase their own disk drives. However, Amazon does not benefit directly from these services since it is not profitable.

Recommendations

Amazon seems to be wasting its resources while providing services that are not profitable. However, this is a business strategy that is similar to the use of free as a business strategy. Consumers usually like free or cheap services or commodities. Therefore, companies may attract more clients by providing such services.

In order for such companies to benefit from free or cheap (discounted) service, they usually have something else that they could offer to the clients (Nika, 1981). Therefore, such companies may ask their clients to do something in exchange for their generosity.

For example, Amazon may provide cheap storage and backup services but at the same time have eBooks for sale. In this case, Amazon may provide cheap services in order to attract as many clients as possible to the website. In so doing, it increases the number of clients visiting the website.

This way, they can be aware of the availability of books online. Authors may also be able to bring their books to the website for sale. Therefore, Amazon would benefit from selling the books while still providing cheap and non-profitable services.

Therefore, Amazon is trying to take strategic advantage of its resources. The physical resources that it is taking advantage of are its storage devices that have a large storage capacity. Its main agenda is to sell books online but it provides cheap storage services in order to attract more clients to buy its books.

Sometimes, providing cheap services helps promote ones products (Nika, 1981). This way, the beneficiaries may promote the services to potential customers. Amazon can only sell more of its books if it has more clients visiting the website. Therefore, S3 provides an incentive for more clients to visit.

Conclusion

Amazon is the largest online bookstore in the world. It is a company that sells books online. Apart from selling books, it also provides very cheap storage services whereby individuals or companies may store and retrieve their data at relatively low costs. This service enables businesses to replace its own storage disks with S3.

This service also enables clients to back up their data and retrieve them when they need to. However, Amazon does not profit from S3. Researchers argue that this is a great strategy for businesses that are looking to increase their customer base while selling other products (Nasif & Minor, 2011). Therefore, Amazon should continue to provide the services.

References

Nasif, N., & Minor, M. (2011). Free gifts and irrational preferences: An exploration for effects of promotional enticements on financial decision making. Advances In Consumer Research, 39(1), 292-240.

Nika, H. (1981). No such thing as a free gift. National Review, 33(15), 916-918.

Oz, E. (2008). Management information systems (6^th ed.). New York: Course Technology Ptr.

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