Amazon is an online company that provides buyers and sellers with a platform to buy and sell products. It is the largest online retailer. The main problem Amazon was dealing with is that it was generating large revenues but its profit margin was very small. In addition, the growth of the number of e-tailers competing with Amazon threatened the companys long-term profitability. In addition to these, Amazons global expansion was approaching the limits, hence its programs to encourage e-tailers to buy and sell via Amazon (Behr).
Amazon chose to use Linux as its operating platform to reduce IT costs (Behr). By cutting back on costs, Amazon could raise its profit margin. After the implementation of Linux as the operating platform, Amazon saved twenty percent of its IT costs. Linux is an open source software that does not attract licensing fees. This means that Amazon saved all the money it previously spent on software licensing.
Amazon relies on an internet platform to conduct all its businesses. This means the Amazon store exists on servers. In order run this store, users log in to the Amazon website and access its virtual store. Linux supports several Amazon value chain activities, which include operations, marketing and sales, and services.
Amazon operations include all administrative activities in Amazon. The marketing and sales functions refer to the advertising Amazon does, and all online efforts it makes to find new clients. Services refer to the actual activities relating to the buying and selling of products on the Amazon website.
The main factors that influenced the switch to Linux by Amazon were to cut costs and to enjoy greater control over the expansion of Amazons systems. After implementing the Linux operating system, Amazon saved twenty percent of its software costs. This came from savings made from licensing fees. In addition, as an open source software, Linux allows users to expand it in any way that improves its functionality. This capacity to adapt the operating system to meet unique needs also made it attractive for Amazon.
The first issue Amazon needed to consider before switching to the Linux operating system was the cost of acquiring the new software. Since Linux is an open source software, this cost was minimal. Secondly, Amazon needed to consider the cost of running the software. Linux depends on a dedicated community of developers therefore there was no direct cost on Amazon.
Thirdly, Amazon considered the capacity to operate the software and the technical support it would need. On the technical side, Amazon considered its plans for future expansion, and the compatibility of the Linux operating system with its existing system.
Amazon experienced a cost saving in its IT costs because of switching to an open source platform. It saved the money it initially spent on acquiring software licenses from commercial vendors (Behr). Secondly, it ability to exert greater control over the development of its software platform grew because of the freedom to expand and adjust the operating system when needed.
The main conclusions from this study are that it is possible to change the financial performance of a company by using available resources. It is risky, but it is also rewarding. Secondly, acquiring the new platform freed Amazon to concentrate on optimizing its business model by finding more retailers willing to use Amazon. This will serve to increase the companys revenue.
The 2 ecommerce platforms chosen for analysis are Amazon and e-Bay. I selected these two platforms because I was most familiar with them and had made online purchases before.
Amazon
I first purchased a motivational book from amazon.com then went ahead to buy a DVD. I decided to return the DVD and first visited the returns centre in order to ensure that I was doing the right thing. I was surprised that it was quite easy to return an item as long as it is open. I was lucky enough not to have opened my package. In the Return center, the company had laid out a pictorial representation of the returning process.
First, a customer needs to go to this returns center and print the label which would be attached on the package; I printed my return label. The second step was to prepare a package in which to place the item and the third step was to seal the box and attach the return label at the top of the package.
The last step was to ship the package through my local courier. When I took the package to DHS, they told me that I needed to pay shipping fees and I realized that there would be a number of other hidden payments in this process. So I went back to the company website under Amazon Help to find out all the charges involved.
I found out that since mine was a media item and it had not been opened, I would get a refund of 80% of my purchasing price. However, because I was returning something out of my own liking rather than a mistake made by Amazon, then I needed to pay for the shipping. I also found out that the reason why I was not getting a full refund was that there was a restocking fee which would be deducted from my desired item.
I had returned my package after a period of two days so this was well within the 30 day limit that the company places on returned items. I received my refund through the same method that I had used to pay for the service and this was through my credit card. It came after three days.
All in all, I felt that their return policy was quite fair; it was reasonable for me to pay shipping charges since they had not committed any wrong. Furthermore, refunds came in on time and I liked the fact that they only deducted 20% out of the original purchase price. This was quite fair because all goods lose value as soon as they leave a businesss premises.
The reason why Amazon is doing so well in this highly competitive world of ecommerce is their customer focus. The company has created forums for conducting web reviews in which customers rate items and give their comments about the items. In fact, I bought the self help book and DVD only after looking through customer reviews to find out if it would be worth my while.
Additionally, the website has provided a content search platform in which one can analyze book content. I was therefore able to buy my book only after ascertaining that it contained only the material I was looking for. Amazon also impressed me with the bonuses they give on credit cards and shipping and it was great that the book cost much less here than it did in some other book stores.
I was impressed by their click ordering because I did not have to follow such a long process in order to get my product and I received it on time. The company has such a large inventory of items and it is almost impossible to miss ones favorite book or item.
For an ecommerce website to do well it must have an air tight marketing strategy. I saw an advertisement for this motivational book on another website I was visiting. In fact, Amazon ads can be found in almost all types of websites so it is quite easy to get external information about the service.
The website is user friendly because payment options and terms of use are clearly written. I thought their customer service was top notch and this was even increased by the fact that I could track my product movement. The company has a contact us link on almost all sections of their websites. I did not wait long before someone could attend to me. In fact, it is the personal service that illustrated how professional the company was.
EBay
My purchases from E-bay were for a commemorative coin and a watch. I decided to return the coin and found that their return policy was quite different. Since this is a flea market, all sellers had their own return policies. I went back to my seller and read his return policy. He had stated that customers must return items within 7 days of purchase, but this was not inclusive of shipping time.
He specified that a refund would only be possible after the good had arrived back to the seller and that Return of merchandise authorization was needed. I therefore contacted the seller and told him that I changed my mind about the product and wished to return it to him. The customer was expected to pay for shipping and he asserted that this would be done through PayPal.
After contacting him for authorization, he first told me that I had already exceeded the 7 day limit so I should not expect a refund but I requested him to be lenient with me since I was going to buy more collectables from him in the future. He told me that he could give me credit for future purchases that was equivalent to 50% of the coins value- I received a gift certificate.
I negotiated with him and he agreed to increase it to 70%. I also had to pay for shipping. I am yet to buy more items from him so that I can investigate whether he will stick to his assertion or not. I thought this return policy was more stringent because the duration was only 7 days.
I also felt that he should be willing to send refunds since the items are not breakable or easily spoilt like electronics. There is room for improvement here even though the concerned collectables seller tried to accommodate me as much as possible.
I was impressed by the companys web design; Products were categorized so that it would be easier to find what I was looking for. I also found that prices, photos and descriptions of the items were well done such that vital information could be found at a glance.
However, sometimes the descriptions can be different from the actual commodity since these are mostly second hand commodities. I found that the customer service was not as powerful as it was at Amazon because most of the work is left to independent sellers in the eBay village. In fact, I got most of my information from blogs and external parties when trying to find out about return policies.
This site is unique in that I could access so many commodities and so many sellers at one place. Everything from clothes, to phones, furniture, electronics and many more were available from this particular online shop. So the convenience was definitely something worthwhile.
I could imagine that many other customers from around the world were buying and bidding just like I was at EBay yet I could carry out my transactions very quickly. The company must have very effective servers to monitor these transactions.
However, I did not like the fact that most items needed to be bided on. It wastes a lot of time because the seller must decide which price is most convenient. Although there were items that had fixed prices, these represented the smaller percentage.
Conclusion
Generally, Amazon appeared to be more user friendly because it is owned and run by a single firm. On the other hand, EBay is operated by a series of sellers from around the world; they all have their different offerings, conditions and expectations so synchronization is a challenge here. Both websites have great variety and conduct transactions quickly.
Amazon.com is a company that trades on a wide range of online products such as books, consumer electronics, clothing, and household products, videos, and music. The company is a leader in on-line services. The company has over 900,000 associate programs that it utilizes to connect or having its contents (Cottrill, 2001).
Amazon can be influenced by its strength and more so the weaknesses, and threats and opportunities as well. The objective of the firm is based on its competitive advantage, actions, and responses in implementing business strategies of expansion through customer based innovation.
Over the past years, Internet security and systems have advanced. Therefore, the inequality of technology distribution worldwide undermines the potential of technology-based companies (Cottrill, 2001).
Due to competitiveness of the industry, the sales of these companies will be limited to the best performing nations that have indicated an average of 50% of technology penetration against countries at the bottom that have recorded less that 5% of internet penetration (Patton, 2001).
A larger percentage of the global population without access to the Internet services are affected by similar conditions; even though, their potential of becoming potential in the industry is very high (Seybold, 1996).
Creating an environment of technology for the affected group could be easier than creating the necessary human capital to implement the use of such infrastructure. This condition has gone beyond budget limitation of institutions and needs an approval of a popular culture (Mintzberg et al, 1998).
There is need for technological awareness for customers and business in a crucial business environment in order to encourage Internet penetration through socio-political resolutions (Seipel and Quinn, 2000).
In the case of Amazon.com, availability of incentives to understand the technology based business has advanced to profit-based opportunities (Seybold, 1996). Benefits in the industry are attributed to the core stakeholders that could discourage the reliance of customers dependence on the online shopping; hence, causing unintended costs that may accrue to the providers of online services (Seipel, and Quinn, 2000).
For instance, in countries where the Internet penetration is less, foreign direct investment is required to stimulate the demands for the online business at a crucial level. This direction would be limited to countries where Internet penetration is high while other countries could be reached through improved political ties by involving trade pacts.
Thus, a strong lobbying by the government may boost the online industry or a pre-determined priority by a nation to influence changes in the key institutions that support conditions to organize rational market segmentation to underdeveloped or developing nations.
This will enhance technology diffusion influenced by the hierarchies in politics that depends on a citizen- driven model of demand since it is able to contain the societal ideologies at the face of development and economic issues towards a theory of sustainable national dominance (Merrill and Co 2001).
The five forces model analysis is very direct to the Amazon.com since the intensity of competition in the industry and the potential to make profit is a direct factor to consider in industry analysis.
These factors include the threat of new entrants, suppliers bargaining power, threat of substitute products, and the extent of rivalry among the competitors. Concerning Amazon.com, the threat of entry in the market is low to medium. Amazon.com is the first mover in the online business in bookstore. It is a good example to other entrants in the industry.
A factor that distinguishes Amazon.com from other firms is the capital intensive and constant upgrade of its services through various acquisitions and alliances that nurture the commissioned based websites, as well as, the continuous developments in technology and innovation. Therefore, copying such would need relationship building, which is not possible when there is an established relationship by the first mover (Patton, 2001).
In the case of untapped technology patterns, there is need for significant capital and a sound strategic plan proposal in order to move another party. In these cases, recognized industry players would be standard requiring the deal of a significant amount of time and money to be impractical to a new entrant.
For instance, switching costs is not high for clients who provide a breathing space for industry players such as e-bay and Wal-mart to exploit auction market of Wal-Mart by using its website to demonstrate real experience in online shopping at reasonable prices (Regan, 2000).
Thus, Amazons unexploited and low valued market segment is available to small entrants coupled with sub-optimal but effective returns from the entire e-commerce industry. Moreover, anticipated reprisal from the niche competitors may occur if Amazon poses a threat to the former treasured small share of the market.
A variety of products and markets provides niche players an enforceable claim to underserved market segment over diversified industry players such as Amazon.com (Regan, 2000).
The power of suppliers and the threat of substitutes are low for Amazon since the industry makes small online sales. The players have an opportunity to offer technology and Internet availability to the Internet untapped global exposure. This offers the online business firms significant customers to suppliers especially the ones with global marketable products and services.
Therefore, customers using the industry technology are independent and segregated geographically from one another making their purchases insignificant to firms, whereas the purchases are supported by the firms general product shopping at prices that are discountable with delivery options (George, 2001).
This results into expensive switching costs while reducing the ability to purchase the required product with delayed decisions. Due to this, threat of substitute is regarded as sub-optimal.
Finally, competitive rivalry is average to high because of many players such as e-bay and yahoo. This increases competition and intensifies rivalry due to high fixed storage costs of the industry. Moreover, there is little product differentiation because competitors expect products that are actionable and other exclusive players rights to sell suppliers products, causing customers to switch costs low (George, 2001).
The supply chain actors and substitute products are derailed by the convenience of online shopping, leading to associated costs outside the industry transactions that are crucial to the profit and satisfaction levels (Thompson, 1998).
This difference between efficient and non-efficient transactions creates diversified industry players with many niche competitors that are competent enough to acquire a huge share of the profit due to the customized market service and intensified rivalry in the industry (Thompson, 1998).
It appears that Amazon.com does not have a predestined mission statement but the basic mission and goals of the company is to provide its customers with the best online shopping experience (Thompson, 1998). The goal of the company is to create the most customer-centered company to the present and future generation. The companys mission statement is to offer the best online shopping through the Internet.
Therefore, combinations of these aims at influencing technology and knowledge of its valued employees, in order to, provide the best services through the Internet. The company believes that the future of on-line business is based on the personalization and diversification of its products to provide the most viable solution to the demands of customers. Activities such as inbound logistics are greatly supported.
Amazon.com has a firm structure that makes its operations to be compressed in a commissioned based system provided to its enlarging associate partners. The firms infrastructure enables the Seattle headquarter to minimize taxes, as well as, the strategic outbound logistics situated in the Delaware Centre making inventories to be closer to other market segments such as Japan and other European nations (Thompson, 1998).
Therefore, the value chain combines the low cost and supportive environment and enhances an efficient procurement, storing, and delivery of products through the closure of inefficient stores and creating strategic and value adding ones (Hof, 2000).
Concerning resource competencies, close rival firms may have strategic and innovative leadership equipped with experience, and may attempt to pirate on Amazon.coms key employees, but this may not affect Amazon.com since patent do not accrue to individual employees but to the firm. The core competency of the firm is the strategic plot of expansion through customer innovation (Patton, 2001).
According to Online Privacy (2000), Amazon.com has invested in partnerships in firms such as Dell as well as other auction houses that may add to the gains of the company.
Furthermore, its borrowing capacity through offerings by the public is sub-optimal because of the uncertainties experienced in technological advancements that make the shareholders to be the key financer of the firms innovation as well as acquisition endeavors (Sullivan, 1999). In relation to financial resources, Amazon.com has patents and stocks of technologies that provide it with 20% share of the web development from the revenues.
The services are also backed up by the one click technology from Apple that has enhanced its browsing and searching convenience to customers. This innovation culture is promoted by hiring top executives who are highly experienced in areas of supply chain management, logistics, as well as, international relations to promote geographic expansion in various parts of the world (Sullivan, 1999).
In conclusion, Amazon.com has opportunities that lie in the modernization of the retail sector and the realization of a global market especially in the category of the top 20 in the efficiency (Thompson, 1998).
Threats that may be encountered in the firm lies within the bottom 200 characterized with political and cultural boldness that may take many years of the ideology cycle with negative economic recession because of the failure of the market actors to use and exploit the available resources effectively (Merrill, 2001).
The strengths of the firm would provide it with a sustained competitive advantage that can greatly influence the long run Internet penetration of the unexploited global markets.
The weaknesses on niche competition would carry valuable competencies because of the focus strategies that may possibly be applicable to win a share of the market. As a result, Amazon.com should be very selective when expanding its product line through costly acquisitions (George, 2001).
References
Cottrill, K. (2001). Online booksellers turning point. USA: H.W. Wilson Company.
George, T. (2001, September). Amazon to offer Adobe e-book reader. Information week Magazine. Manhasset, New York: CMP Media LLC.
Hof, R. (2000, August). Suddenly, Amazons books look better. Business Week. New York, New York: McGraw-Hill.
Merrill L. & Co. (2001, September) Global research highlights. New York, New York. (thetimes.com)
Mintzberg, H., Quinn, J., B, and Ghoshal, S. (1998). The Strategy Process (Revised European Edition). London: Prentice Hall.
Online Privacy: Its Time for Rules in Wonderland. (2000, March 20). Business Week. New York, New York: McGraw-Hill.
Patton, S. (2001, September). What works on the web? CIO Magazine, 90-95.
Regan, K. (2000). Whos afraid of an Internet sales tax? E-Commerce Times. Retrieved from the World Wide Web: https://www.thetimes.co.uk/
Seipel, T., and Quinn, M. (2000). Ax falls at Amazon.com. USA: Knight-Ridder.
Seybold, P. (1996). Customers.com. New York: Random House, Inc.
Sullivan, J. (1999). E -commerce scores yet another customer. Baltimore Business Journal, Vol 1 (2), 1-5.
Thompson, J. (1998). Strategic Management; Awareness and Change. London: Thompson Business Press.
Wal-Mart V. Amazon.com: The Inside Story. (1999, February 22). Information Week. Manhasset, New York: CMP Media LL.
In the current world of digitalization, e-books and digital books have dominated. They finally leave the computer, as they are readable on external devices. The technology of e-book readers has taken e-book reading to an edge over the print media. The market is now flooded with various e-readers. Having a good e-reader is an essential part of making the reading enjoyable. But deciding on what model to buy is a confusing task.
Ebook Reader Becomes a Winner Take all Market
Among the brand names, Amazon will continue to be the market leader with 60%share of global shipments in 201. Barnes and Noble, and Sony have been fighting for second place with a narrow margin. North America has become the biggest market for e-readers. In the European market also e-book vendors have largely expanded their presence. It is expected that, by 2014, global e-book reader shipments will reach 63 million units. This kind of growth points out that it will capture the world market shortly. Without doubt one of the most hotly contested markets in the next few years will be for e-book readers (Mchaney 63).
Sources of Network of Externalities in the E-reader Market
When the value of a product and its technology service depends on other entities using it, it is called network externalities. Direct network externalities include telephones-commerce and the internet etc. In this context, the source of network externalities can be internet and e-commerce.
Amazon the Market Leader but Sony is Fighting Back
Amazons Kindle range is well known for being the first and foremost leader in offering wireless connectivity to users. Since then, Amazon has been known as the pioneers of the e-reading market. Kindle dominates in the market due to their ability in producing readers with wireless connectivity. Apart from this, it is known for its ability to handle 3G and WI-FI. Though Sony was the first to launch an e-reader, it still lags behind its rival, Amazon kindle& Users of the Sony e-reader have to connect their e-reader device with PC; this is the key mistake from Sonys side. Kindle offers free the wireless air downloads of books with cutting edge technologies Sony is fighting back.
The daily edition offers landscape orientation and portrait. Sony launched a five-inch screen device worth $200 and a six-inch touch screen model worth $300. Amazons Kindle 2 e-reader with six inches sells for $300, and a 907-inch screen costs $490. Both are without a touch screen. Compared to Kindle, Sony has another defect and it is in its access to content. Amazons leading position in the e-reader market helps the company to offer a variety of eBooks to its buyers. They are easy to download and can be obtained at a competitive price. For providing library access to end-users Sony has started its partnership with an e-book distributor. Sony will adopt an open EPub which helps customers to purchase or download books from stores of Sony. While Amazon uses a kind of file format that only helps users to read books. The device brand isnt as important as the content: success will increasingly depend on the strength of the relationship between reader and content provider (Maisto par. 9).
Conclusion
Without a doubt in the battle of dominance for the e-reader market currently, Amazons kindle was ahead of Sony. But with cutting edge technologies Sony will be fighting back to gain market leader position. Surely, e-book reader will become a winner take all market.
At the present, consumers are assailed by a variety of mass produced items ranging from shoes, clothes and food to electronics, bed covers and a plethora of other products that an average consumer may need. From the perspective of Kotha, mass production on a global scale of consumer products has enabled goods to be produced more cheaply resulting in consumers getting access to an assortment of items that they otherwise would not be able to afford (Kotha 23).
However, as of late there has been a trend in market production wherein aside from mass production, mass customization has been an endeavor where companies attempt to gain a market advantage over their competitors by offering product lines that enable customers to be more unique and thus appeals to a higher form of demand among consumers (i.e. the desire to be different) (Liu, Shah and Schroeder 681).
The different types of customization encompass a variety of retail products such as shows, clothes, food, and even beauty products. Utilizing a similar strategy to their mass produced brethren, these products also utilize the same delivery systems (i.e. FedEx, UPS, etc.) and ordering mechanisms (i.e. online websites) that have become synonymous with modern day methods of product retailing (Chinnaiah and Kamarthi 292).
However, it must be questioned whether this trend in product customization would actually be successful in the long run. It is based on this that this paper will utilize Amazon.com as the independent variable for examination with sites with customized applications for selling custom products will be the dependent variable.
Through a comparison of price, delivery time and amount of effort needed in order to purchase a mass produced product or a customized product, it is anticipated that this paper will be able to showcase the likely success or failure of these sites and correlate it with potential the success of product customization as means of generating sales.
Converse Customized Shoe versus Converse from Amazon.com
The first customizable product site to be examined is Converse.com and its Hi Canvas customized shoe application. Using the shoe designer application on the site, the shoe seen above was created with an initial cost of $75, a delivery fee of $5.95 and a delivery time of 2 to 3 weeks.
When it came to the information required by the site for delivery, it merely asked for the address and the shoe size needed. Overall, the process itself was actually quite easy and it can be seen that converse placed a lot of effort into ensuring that customers can easily get the type of product they want in a convenient fashion.
In comparison, Amazon.com sold a show with a similar design for $54.99 with free delivery and can arrive at your home within 2 to 3 days upon ordering the product. Amazon.com also allows users to choose the shoe size and the purchasing process is just as easy when compared to Converse.com. When examining both products, it can be seen that the quality is the same yet the mass produced version sold via an online retailer is far cheaper and you can get the product faster.
Truthartbeauty.com Customized Raspberry Eye balm versus Amazon.com Eye balm
It is surprising to note that when comparing the customized eye balm from truthartbeauty.com with a similar branded eye balm from Amazon.com, the one from the former was actually cheaper than the one from the latter. The product price of Amazon.coms Skinceuticals Eye Balm Rehabilitative Emollient for Aging Skin is $53 while the one from truthartbeauty.com was only $50.
Do note that the one from truthartbeauty.com contains significant levels of product customization resulting in a product type that is simply not available on Amazon.com based on the level of customization involved.
The problem with Truthartbeauty.com is that it requires members to go through a very rigorous process of registration before buying a product. As explained by Ribeiro, when it comes to an online shopping experience, customers want something that is easy and does not take much of a hassle to accomplish. The more hoops they have to jump through so to speak, the less likely they are to purchase a product or patronize a service (Ribeiro 42).
Evidence of the effectiveness of this approach was seen in the case of Amazon.com wherein its previous requirement of having customer register was eschewed in favor of making the process of product purchasing that much easier. In the case of this product, the level of customization involved that allows customers to get exactly what they want seems to be far better than the mass produced variety sold on Amazon.com
Zazzle.com t-shirt versus Amazon.com t-shirt
Zazzle.com is a site where you can upload your own personal designs to have a t-shirt printed with the design on it. This is a service not available on Amazon.com resulting in the potential creation of various unique t-shirts. After utilizing their online t-shirt designer, a single white t-shirt with the design seen below will cost $18.95 with a 4 to 7 day delivery. However, the delivery cost is pretty high at around $5 or more depending on your location. It can be free though if you order $50 worth of their merchandise.
In comparison, a white t-shirt bought on Amazon.com with a similar white and black design cost $5.79 with free delivery. The shirt that was found can be seen below:
Since it would have been possible to download a similar image and utilize it on Zazzle.com to produce the same shirt, it can be stated that the product customization of the site is a bit expensive. Not only that, similar to the case of truthartbeauty.com, an extensive registration process is also required on the site.
This of course detracts from the overall appeal of using Zazzle.com since it makes it far more difficult to get what you need. However, when it comes to someone that wants to look unique and utilize a design that they made on their own t-shirts, it can be stated that Zazzle.com provides exactly the type of service that a person like that could want.
Conclusion
When going over everything that has been presented to so far, it can be seen that mass produced products sold through a large online retailer at times far cheaper, get to customers quicker and are easier to obtain as compared to the various hoops that customers of customized product sites have to go through in order to get their products.
However, the level of customization involved in these sites that allows customers to get exactly what they want without having to settle for something less ideal is a definite drawing point and it can be concluded that so long as some customers want something that is unique to them and them alone, then these product customization sites will undoubtedly continue to be profitable in the niche markets that they are involved in.
Works Cited
Chinnaiah, Pratap S. S., and Sagar V. Kamarthi. Mass Customization And Manufacturing. Innovations in Competitive Manufacturing. 283-296. Print
Kotha, Suresh. Mass Customization: Implementing The Emerging Paradigm For Competitive Advantage. Strategic Management Journal 16.(1995): 21-42. Print
Liu, Gensheng, Rachna Shah, and Roger G. Schroeder. The Relationships Among Functional Integration, Mass Customisation, And Firm Performance. International Journal Of Production Research 50.3 (2012): 677-690. Print
Ribeiro, Liliana. Mass Customization: Modularity In Development Of Fashion Products. International Journal Of Management Cases 16.2 (2014): 41-45. Print
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 (6th ed.). New York: Course Technology Ptr.
Selecting a job is a challenging task for me, mainly because my choice will define the routine with which I will have to deal for several years or, in the best-case scenario, until retirement. However, some organizations have managed to retain their uniqueness and at the same time provide extensive opportunities for their employees to evolve, therefore, encouraging consistent growth. Amazon is one of these organizations; with its unique culture and focus on meeting the needs of all stakeholders, it is a perfect organization for working as a coordinator.
Location
The firm has numerous locations all over the world, including remote ones. Therefore, it offers its employees impressive flexibility. At present, the location in Seattle, WA can be deemed as especially important since it implies accessibility. Personally, I prefer working in a large city, where the infrastructure is well-developed and where living in the fast lane is a necessity. At the same time, I would prefer my office to be near my home so that the transportation process could be as comfortable as possible.
I would not mind relocating from the environment in which I currently am, mostly because I would enjoy an opportunity to have new experiences and learn new skills and information so that I could become proficient in marketing. Seeing that a change in location implies the necessity to cater to a different population, the identified alterations are bound to have a significant effect on my professional development.
Schedule
The same concerns the schedule; I am more than willing to have a flexible one, where my responsibilities and tasks may change based on the alterations in the environment and the factors associated with the needs of the target population. Even though a nine-to-five job seems a more reliable idea, it is also admittedly more boring. I would enjoy more excitement in my life, and I would be delighted to have a flexible schedule.
For instance, it would be truly exciting if the schedule changed due to regular travels. Business trips might seem a mundane and not quite interesting task, yet they offer a range of opportunities for engaging in multicultural communication and, thus, learning more about other cultures and their specifics. As a result, a better understanding of the needs of the target population will become a possibility, which is crucial for building an efficient brand image and raising brand awareness, especially for a company of the Amazon caliber.
Furthermore, I believe that it is crucial to promote the atmosphere of cooperation and mutual trust in an organization so that challenging tasks could be managed within a comparatively short amount of time. Therefore, I would like the job of my dream to foster qualities such as responsibility and the ability to negotiate with its employees. Furthermore, I would appreciate the setting in which work will have to be comfortable, with music slightly playing in the background, and managers having a sense of humor.
That being said, encouraging a laid-back attitude is not something that I would seek in managers since employers must challenge the staff to excel in their performance. Particularly, maintaining a delicate balance between providing employees with independence and supporting them throughout the project management process is something that I seek in organizations, and the organizational culture at Amazon is exactly when I need it.
Work Environment and Culture
As stressed above, opportunities for personal and professional growth are central to my idea of a perfect organization. Thus, I need to be able to use analytical skills related to marketing forecasts, e.g., the analysis of customers demands and the following suggestions for future changes to current brand products. Furthermore, developing new communication skills is what I look forward to especially eagerly.
I hope that my work as a marketing coordinator at Amazon will help make a difference in how the companys brands are perceived among the target population. For this purpose, I will need to introduce a balanced approach to data collection and its further analysis. i.e., spend half the time communicating with people and the remaining half working a desk job, which is the combination that I prefer.
Job Function and Employer Information
I am happy to build skills in any industry. However, when considering particular industries that are of special interest to me, I must mention the areas such as retail and, particularly, specialty retail, where Amazon operates. With the opportunities for working with a vast number and a huge range of goods, the identified industry opens a plethora of chances for creativity. Therefore, working in large corporations that require coordinating a range of processes and performing several tasks at once is what I want to do.
Salary and Benefits
Finally, the issue of payment needs to be brought up as a crucial component of my desired job. Even though I am open to exploring financial opportunities, I would prefer to have an annual salary. Furthermore, a total of at least $50,000 a year is my current salary standard. While inspiration and flexibility are crucial to me, the financial aspect of my job is also essential since I need to invest in my professional growth. Finally, it is important to me that the compensation levels should be linked to my performance directly. Thus, I will remain motivated to perform to my best abilities and develop new skills.
Conclusion
Becoming a marketing coordinator at Amazon is an important step in my career. I hope that I will manage to get my dream job and receive numerous opportunities for professional growth. As long as I have my priorities in line, I will be able to attain success.
Companys Objective: The Company aspires to be earths most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.
Companys Strengths and Weaknesses
Strengths
Well Known Global Brand
Amazon is a well-known brand in online retailing. The reach of the internet knows no boundaries, therefore amazon.com diversified in a range of products, which further helped in strengthening its image internationally. A strong brand image helps in taking on the competition and also provides a competitive edge to the company in the online retail industry and helps in attracting more dedicated as well as curious customer traffic.
Amazons ranking amongst the top 100 global brands ranking has consistently improved over the years from 68 in 2005 to 65 in 2006 and 62 in the year 2007. The company registered similar improvements in its brand value from $4,248 million in 2005 to $4,707 million in 2006 and subsequently to $5,411 in 2007. Amazon has put a lot of effort into the personalization of the online shopping experience. The online search-find-obtain experience is one such innovation from Amazon.com. To further strengthen the brand value, the company has started exploring overseas markets as well. It has a good localized presence in Canada, France, Germany, China, Japan, and the UK.
Tie-up with other Reputed Brands
Amazon has entered into partnership agreements with other reputed brands like Canon, Nikon, Sony, Panasonic, Blackberry, Casio, Fuji, HP, Olympus, etc. which not only makes it a reliable online marketplace but establishes it as a company offering quality at reasonable prices.
Unique Business Model
The online retailer operates on a unique business model which enables buyers and sellers to interact over safe technology platforms. Such interaction helps in saving transaction costs as no intermediaries are present. Such an arrangement works quite perfectly for products that are otherwise very difficult to find in the marketplace e.g. vintage products, end-of-life products, etc.
Focus on R&D
Amazon has a dedicated team of professionals, and a good amount earmarked for research and development activities. During 2006, the company invested about $662 million in R&D with a consistent increase in the amount over the years. This helps the company in maintaining its leadership position in the market.
Weaknesses
Declining profit margins: The operating profit margins of the company saw a declining trend over the last couple of years. Though there are some indications of improvement in the year 2007, the situation remains grim in view of increasing competition and cost pressure.
Weak performance in some promising markets: Though Amazon.com diversified in a couple of markets outside the US by entering into strategic tie-ups and acquisitions, the picture is not that rosy as it was visualized. For example, Company entered the Chinese market by acquiring Joyo.com in 2004, but the competition became more prominent from another domestic player dangdang.com in China. China, having a huge customer base, is stated to be a market full of promises, and China Internet Network Information Center (CNNIC) also states that online shopping in the country is expected to grow by 190% in the coming year. But, Joyo.com has a weak market share of 12% against 18% of dangdang.com (Datamonitor, 2007).
Declining cash flows: Amazon.com has seen a decrease in cash flows over the years. Cash from operations declined from $733 million in 2005 to $702 million in 2006, but it is heartening for the company that the Free Cash Flow figure became more than double for 2007. The settlement and litigation proceedings pressure was also a reason for the decline in cash flows.
Opportunities and Threats for Amazon.com
Opportunities
Chinese Market: China has now opened up its economy and it promises to be a market with vast potential on account of more than 1.3 billion consumers. Since Amazon.com has already established itself as a reputed brand in the Chinese market, therefore, it stands to gain from the experience of these 2-3 years and create a niche for itself in the market.
Growing emphasis on E-commerce: All around the globe, theres a growing curiosity and emphasis on e-business and related technologies. This augurs well for the company, as its core competency is in the field of e-business and online retailing only.
A number of Acquisitions and Partners: Over the years, Amazon.com has been able to strike strategic deals with a number of reputed partners and online ventures in different markets, which promises to provide the company enough opportunities in respective markets. In the recent past, the company acquired dpreview.com, the webs most comprehensive site for digital camera information and reviews. In May 2007, the company acquired Brilliance audio, the largest independent publisher of audiobooks in the US.
Digital Music Store free of copy-protection technology: Companys new venture providing free MP3s and a range of other music formats, promises to bring in a revolution in the market. This will help Amazon.com in offering millions of songs, free of copy protection technology, which allows them to be played on any personal device. The company has obtained the license to the digital catalog of EMI, a music company. Until now, Digital Rights Management (DRM) prevents buyers from making multiple copies of the music. Therefore, the companys sales are bound to increase when it provides DRM-free music to patrons.
Threats
Increasing Competition: The level of competition is increasing from the existing retailers like Wal-Mart, Tesco, etc. Such retailers have the added advantage that they have a strong physical presence. In addition, such retailers are now firming up their online presence as well, by entering into strategic partnerships with some companies. This promises to pose a good competition for Amazon.
Dependence on vendors: Amazon takes its supplies from a number of vendors, with whom the company enters into agreements from time to time. In the absence of any long-term agreements, these vendors hold the key to the profitability margins of Amazon.com. In case such vendors are attracted by rival companies, things might become difficult for Amazon.
Legal Wrangling: Amazon.com has been contesting a number of legal cases of patent infringement. Such court battles not only take a huge sum of money but also invite some adverse publicity for the company as well. In the recent past, IBM also filed two patent violation cases against Amazon.
Stakeholder Analysis
For any organization to work, a number of stakeholders have to pool their efforts. The key stakeholders for Amazon.com include the employees, the customers, the financial institutions, the media management team, the shareholders, and of course the general public.
Current Problems
The major problems being faced by the company include;
The host of legal proceedings.
Pressure on profitability margins.
The increasing dominance of the rival companies in some markets.
Regularly updating the levels of security for online transactions.
Making the logistics appear more cost effective.
Recommendations
It is no secret that today we are living in an era where customer convenience is of utmost importance. If a company is able to provide quality products to the customers at reasonable prices and at the doorsteps of the customers, then the company will be able to have a long-lasting relationship with customers. The company can acquire a competitive advantage over its rivals on account of marketing efforts, brand building, value creation, innovation, operational efficiencies, etc. But more important is to sustain the advantage.
Therefore it is very important that Amazon keeps investing in value configuration i.e. keep thinking about newer methods on how value is created for its customers, how the most important business processes function to create value for customers. Some of the value addition gradually takes the form of threshold competencies for the organization, and the consumer starts expecting these value additions from the company. The process of value creation encompasses managing quality in the entire chain of processes leading to the production of the final product or service.
The significance of creating a merger has grown exponentially with the rise in the globalization movement. Facing a range of major threats in the global economy, companies require the support of partner organizations to increase the extent of their competitiveness and minimize risks associated with economic and financial challenges. For this purpose, the use of a merger should be deemed as a viable solution.
In this paper, the phenomenon of a merger as an economic concept will be scrutinized. Specifically, the concept of a merger will be defined, followed by an example of a successful merger performed in the global economy recently. Afterward, drawing from the example mentioned above, as well as exploring the concept of a merger using scholarly sources, key factors that make a merger successful will be identified. Finally, a hypothetical merger between two well-established organizations operating in the global market will be considered as a possibility, supported by detailed arguments that prove the reasonability of the described hypothetical merger.
Successful Merger
As a phenomenon, a merger is far from being an innovative solution, yet the rules for performing it successfully have not been crystallized into a final set of guidelines yet. According to Chathuranga (2015), a merger is a combination of two or more firms in which the liabilities and the assets of the selling companies are mainly absorbed by the buying company (p. 7). However, the phenomenon of a merger has recently been expanded into the concept of the companies involved in a merger sharing their controlling powers more charitably. Overall, the notion of a merger seems to have become significantly looser with time due to the shift in power dynamics between organizations and the need to explore innovative approaches toward managing transactions within a merger (Zhang et al., 2015). The observed trend can be described as fairly positive since it opens new opportunities for challenging the status quo in the global market and implement innovative managerial solutions.
When seeking the examples of a successfully performed merger, one may bring up the case of Vodafone and Mannesmann (Al Suliman, 2015). Due to the high economic potential that both organizations had at the time, coupled with the compatibility of their risk management approaches and available resources, the merger turned out to be a stupendous triumph for both parties involved. By the time when the merger took place, Vodafone had gained the attention of a vast number of people, attracting highly diverse buyers (Al Suliman, 2015). Pioneering in telecommunications with its cutting-edge technology, Vodafone has managed to build quite a reputation for itself (Al Suliman, 2015). Mannesmann, in turn, had built a reputation as a tube manufacturer before the merger (Al Suliman, 2015). Therefore, both companies had enough resources to offer each other in the process of merging.
Factors Contributing to Success of Merger
In hindsight, the evidence supporting the success of the merger was present from the very beginning, with each of the organizations having a plethora of resources to share and provide to its partner. Indeed, the collaboration of Vodafone and Mannesmann is a perfect example of a successful merger, given the circumstances under which the agreement took place. For example, diversification of companies portfolios can be considered an important factor since it provides more opportunities for firms to collaborate and join their efforts in producing a homogenous service (Friedman, Carmeli, Tishler, & Shimizu, 2016).
In addition, having a projection which both organizations can work in order to rebrand themselves and gain the following of a larger audience can also be considered an important contributing factor. As the example of Vodafone and Mannesmann has shown, creating a brand product allows companies to cement their new image in the global market and focus on targeting new audiences, expanding the range of their influence, and seeking out new opportunities.
The necessity to expand into a larger market, preferably the global economy, should also be perceived as an important contributing factor that defines the success of a merger, in the case of Vodafone and Mannesmann, the formerly required representation in the German economy setting, which the latter could provide (Al Suliman, 2015). Thus, the described three factors typically represent the conditions under which a merger is likely to produce the desired effect.
Hypothesized Merger
Although the idea of a merger might seem rather accessible and sensible for any organization that enters a global economic environment, it is also fraught with multiple challenges. Thus, using a merger as the means of advancing any company in a particular market would be a mistake. However, some companies could consider merging in order to gain more influence. For example, a merger between Amazon and Netflix is a feasible merger given the recent need for the latter to gain influence among a wider range of customers. Since both cater to predominantly American audiences yet attempts to appeal to different cultures, the merger is likely to lead to an improvement in the companies performance. In addition, the merger will help to resolve the financial issues that both companies currently experience, with Netflix lacking new buyers and Amazon being in need of an improved e-commerce framework (Angwin, Mellahi, Gomes, & Peter, 2016). Given that both companies operate in the digital market, the merger will be performed seamlessly and allow both Amazon and Netflix to integrate changes into their framework immediately.
References
Al Suliman, M. H. (2015). In mergers and acquisitions-IT: Results of the absence of CIO in ex-ante planning and the absence of key IT staff in ex-post integration. Journal of Management Information Systems & E-Commerce, 2(2), 1-10. Web.
Angwin, D. N., Mellahi, K., Gomes, E., & Peter, E. (2016). How communication approaches impact mergers and acquisitions outcomes. The International Journal of Human Resource Management, 27(20), 2370-2397. Web.
Chathuranga, D. (2015). Analysis of the impacts of Merger and Acquisition on business development in Telecommunication industry in India: Case study of Vodafone & Hutch (Acquisition) and Indus & Bharti Airtel (Merger). Munchen, Germany: GRIN Verlag.
Friedman, Y., Carmeli, A., Tishler, A., & Shimizu, K. (2016). Untangling micro-behavioral sources of failure in mergers and acquisitions: a theoretical integration and extension. The International Journal of Human Resource Management, 27(20), 2339-2369. Web.
Zhang, J., Ahammad, M. F., Tarba, S., Cooper, C. L., Glaister, K. W., & Wang, J. (2015). The effect of leadership style on talent retention during merger and acquisition integration: Evidence from China. The International Journal of Human Resource Management, 26(7), 1021-1050. Web.
Key strength: The steady growth in net sales since 2012 from the US $61.093 million to the US $135.987 million (Amazon.com, 2016).
Key weakness: The lack of an accurate forecasting system; the company implements fixed amounts of expense and investments which may hinder a timely adjustment to environmental changes, e.g., decrease in sales and customer loyalty (Amazon.com, 2016).
Key opportunity: Established partnerships with such enterprises as America Online, Yahoo!, Excite, Netscape, AltaVista, @Home, etc. (Amazon.com, 2016).
Key threat: The level of competition is always intensive and continuously growing (Amazon.com, 2016).
Competition in the e-Commerce and Online Auctions industry
PESTEL: Technology is one of the major forces driving competition in e-commerce. This functional area comprises operations about digital content management, infrastructure management, computing services, order management, etc. (Killen, 2014). To keep up with the pace of advancement and ensure excellent information safety (e.g., confidentiality, reduced information distortion and loss, etc.), companies should constantly invest in technology.
Porters Five Forces: Rivalry. Intense rivalry triggers competition in the industry. The major of Amazons rivals include Alibaba, eBay, ASOS, and so on. Since many of these companies offer similar items, to maintain the leading position, the company should use smart pricing and marketing strategies, product diversification, etc. to attract new buyers.
Conclusion
Amazon has more strengths than weaknesses. First of all, the high level of competitiveness is supported by the low-price strategy. Secondly, the implementation of customer-oriented policies played a crucial role in Amazons development. The company invests in the improvement of customer services and marketing which largely contributes to the companys success and profitability.
Amazons current opportunities outweigh the risks. It has a high profitability level and a vast profile of business partners. Moreover, the company uses smart market entry strategies (e.g., alliances, licensing) to mitigate the legal and financial risks due to operating in unfamiliar distant markets such as China or India.
Macys
According to IBISWorlds Shopping Mall Management market research report (2017), there has been a decline in buyer traffic in the shopping mall market due to the growth of e-commerce. For several years, the major Macys strategic priorities were the attraction and retention of talents and aggressive pricing, yet the company fails to adjust to the shift in customers preferences and continues to promote the same old vision. Since nowadays e-commerce becomes dominant, a more innovative approach is required to revive the offline retailing. For instance, Loeb (2016) recommends arranging fashion shows and using space innovatively.
Target
Comparing to Macys, Target aims to expand the customer base by diversifying the product range and improving branding. At the same time, the companys management doubled down on the core Targets departments and products such as fashion and furniture which is considered to be the malls distinctive (Halzack, 2015). It means that Target recognizes customer preferences and interests and improves the marketing processes including analysis of customer needs and feedback. Additionally, Target has introduced effective pricing and shipping policies for the online business which helped to increase profits by over 30% (Halzack, 2015).
Organizational Culture
Organizational culture can be defined as a set of values, behavioral norms, and goals shared by staff members. Since corporate culture is an intangible asset, it can be managed through such practices as knowledge management, communication, value creation, etc. Communication may be considered one of the main success factors in organizational culture management. Through the establishment of open communication with subordinates, managers may increase team cohesion by introducing high standards of conduct, professionalism, and ethical values (Negin, 2013). Whereas the lack of efficient communication patterns within the organization may hinder organizational growth, employee productivity, and dissemination of important information.
There is no chance to convey organizational values, mission, vision, and other intangible and psychological elements of organizational performance without communication. Thus, it may be regarded as a means of strategic control. Not only communication allows the improvement of corporate culture but also encourages employees commitment to service improvement and overall business excellence.
References
Amazon.com. (2016). Annual report. Web.
Halzack, S. (2015). Business after a major rough patch, Target looks to be in the early stages of a turnaround. The Washington Post. Web.
Negin, M. (2013). Study the relationship between managers communication skills and staffs organizational Commitment. Interdisciplinary Journal of Contemporary Research in Business, 5(5), 198.
