The company chosen for this assignment is the Amazon Inc. It is a company based in the United States with its operations all around the globe (Dess, Lumpkin & Eisner, 2016). The company belongs to the e-commerce industry, which stands for electronic-commerce industry, which involves selling the products on a website, making use of the Internet.
The website of the company – www.amazon.com
Amazon.com Inc, which is an e-commerce and computing based business, has its headquarters based in Seattle, Washington. The company was found by Jeff Bezos on 5 July 1994. The technological giant is the largest internet seller globally. The company started as a bookseller but later on, it became video, MP3, audio book, software, games, clothing, electronics, toys, furniture and jewelry (Hollensen, 2015). The company also sells its own products like the Fire Tablets, Echo, Kindle and others. The company has separate websites for different countries within which it operates. These range from Italy, Spain, India, Canada, Australia and China.
The company was found because of a `regret minimization framework` conducted by Jeff Bezos. He left his job in 1994 as a vice president and began working on a business plan, which turned out to become Amazon.com.
The name of the company was Cadabra Inc but later on changed to Amazon. The company went online during the year 1995 as Amazon.com. The idea to create the company came to Bezos after he read in an article that the e-commerce industries grow rapidly at the rate of 2300%. He started it with around 20 products that he thought could be marketed online. He concentrated on selling books, which would be easy to send (Klaus, 2013).
The company was sued by Barnes and Noble in 1997 claiming that the claim that it was the largest bookstore was false as it was not a book store at all (Amazon, 2015). It was a broker. It received similar allegations from various allegations from other companies like Wal-Mart also for stealing its trade secrets.
Initially the company suffered from a slow growth rate however later on it started growing post 2011. It had 30000 employees in United States itself and a total of 3,00,000 employees worldwide.
Recently, the company had build convenience stores and developed curbside locations for food pick up (Amazon.com. ,2018). They have opened a new concept where the company delivers fresh food services too. Amazon Go and Amazon Prime have also been launched by the company (Kotler et al.,2014).
Jeff Bezos is the current Ceo. The company has been doing extremely well and its share prices are priced at 1290$. In the last year the company reported a revenue of 135987000$ and profit of 2371000$ in 2016. (Refer to Appendix 1for Financial Statements)
Michael Porters five forces model is a strategic tool, which is utilized to analyze the external environment of the business. The given section tends to elaborate on the porter`s five forces model of the company Amazon Inc.
As the e-commence industry is an extremely competitive industry , it is extremely popular and very profitable hence the rivalry in this industry is extremely high. Traditional brands have also entered the race and thus the rivalry has increased. There are various competitors of Amazon like Alibaba in China, Flipkart in India and others. Apart from these big retailers, Amazon faces competition from other small retailers who sell particular products like electronics, apparels and auto parts. These factors tend to increase the competition in the industry.
Entering the online market is extremely easy. Creating an online store is not difficult but matching to the level of Amazon is not easy. Matching to the level would require too much time and effort. The retail industry has been faced with quite a few changes with the age of digital era. New brands have entered the new field (Laudon & Traver, 2013). Taking on Amazon would require high amount of powers like distribution, logistics, marketing and brand name. Reputation also challenges the ability of other firms to match up with the standards of Amazon. Hence, threat of new entrants is extremely low.
As Amazon is an established company in the industry , the bargaining power of the supplier is extremely low. Amazon has a large supplier base and has a specific set of rules for their management. The company also ensures that the practices undertaken by the supplier brands are ethical and abide by the policies (Dekker et al., 2013). They leave no chance for their suppliers for forward integration. The switching cost for the suppliers of Amazon is extremely low. The supplier power is extremely low in the given that they are in no position to determine the price.
Amazon puts a lot of stress Amazon lays a lot of stress on customer satisfaction and product quality. It ensures that the products are received on time and any returns or replacements are properly handled to convert first-timers into repeat customers (Aguirre et al., 2015). The buyers switching cost is low. In addition, buyers are well aware of price comparisons and competitor pricing . Hence, the bargaining power of the customers is extremely high.
Amazon has various substitutes like Wal-mart, other branded outlets, online stores and local markets where the company sells the product. Since the offerings made by Amazon are unique, the threat of substitution is high.
Amazon Inc leads the e-commerce industry and applies an innovative approach to the online retailing. They have been re-inventing the essence of ecommerce. To attract the customers they tend to come up with new ideas for the development of the business. They have come up with a variety of ideas like Amazon Home services whereby they provide local and professional services to the consumers. They have also taken out Amazon Go. The Go store is a shop whereby the customers can pick up what they want and walk out without any queues. Available in Seattle, Washington and just for Amazon employees. They have also introduced Amazon Echo, which is a smart speaker with personal assistant software. They also have Amazon Dash Bond and Fire stick for users. In simple terms, it can be said that the company aims to become the ultimate preference for all the customers by providing whatever they need.
The given recommendations can be given to the Amazon Company;
Amazon is one of the biggest countries around the globe. The given case study gives an I insight into the company and helps the student to understand the mechanisms of online industry. It has provided the background of the country, competitor and external environmental analysis along with the company’s generic strategy. The given case study was extremely useful in strengthening the knowledge of the students by giving them real life examples.
References
Aguirre, E., Mahr, D., Grewal, D., de Ruyter, K., & Wetzels, M. (2015). Unraveling the personalization paradox: The effect of information collection and trust-building strategies on online advertisement effectiveness. Journal of Retailing, 91(1), 34-49.
Amazon, E. C. (2015). Amazon web services. Available in: https://aws. amazon. com/es/ec2/(November 2012).
Amazon.com. (2018),Amazon.com: Online Shopping for Electronics, Apparel …. Retrieved 24 January 2018, from https://www.amazon.com/
Bresler, M., & Lubbe, I. (2014). Marketing management.
Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse logistics: quantitative models for closed-loop supply chains. Springer Science & Business Media.
Dess, G., Lumpkin, G.,& Eisner, A. (2016). Strategic Management (8e). Boston: McGraw-Hill Irwin.
Floyd, K., Freling, R., Alhoqail, S., Cho, H. Y., & Freling, T. (2014). How online product reviews affect retail sales: A meta-analysis. Journal of Retailing, 90(2), 217-232.
Hollensen, S. (2015). Marketing management: A relationship approach. Pearson Education.
Keller, K. L., & Kotler, P. (2016). Marketing management. Pearson.
Klaus, P. (2013). The case of Amazon. com: towards a conceptual framework of online customer service experience (OCSE) using the emerging consensus technique (ECT). Journal of Services Marketing, 27(6), 443-457.
Kotler, P., Keller, K. L., Ancarani, F., & Costabile, M. (2014). Marketing management 14/e. Pearson.
Laudon, K. C., & Traver, C. G. (2013). E-commerce. Pearson.
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