Amazon is one of the largest online marketing platforms in the world. Like many online marketing platforms, the idea behind Amazon is mutual benefit resulting from increased volume of customers (Lee & Carter, 2012). It offers both the opportunity to manufacturers and business people to sell their products as well as sell its products. Amazon is currently trying to pursue a long-term strategy, and this is a good approach. The company should not focus on short-term profits rather it should capitalize its brand name in a better way. The company is still in the growth phase. Therefore, it should follow a growth-oriented strategy.
Amazon is focusing on customer satisfaction and retention, according to the case. This strategy is also commendable as customers are the primary source of revenue. The customer base of the company is strong, and this shows that customers are responding to the policies of the company. There are also specific problems in the long-term strategy of the company. The company has not accumulated enough cash that should have, and it is not prepared to face any unseen economic disaster. Any unexpected economic problem can drive the company out of business, and this is a severe concern in the short run (Bidgoli, 2010).
The lower profits of the company through services are also a concern. The company should try to earn more and more revenue through advertising. This is an area where the company is lacking. Google and Yahoo are making use of their brand name and presence to earn massive advertisement revenue. Amazon should do the same thing and should attract companies by selling places on its websites. This is an area where the company is lagging, and more can be done in this regard. The long-term growth strategy is good enough, but short-term cash accumulation should also under focus (Bhasin, 2018).
Amazon also enjoys First-Mover advantage and has made numerous innovations and significant research and developments (e.g., “one-click” shopping) to improve customer experience, hence, gaining support from the online community. Amazon is the first company to develop most of the currently known technologies in online retailing. The company is also the most visited retailer online and the premier online place for members to contribute their work (Rasmusen & Yoon, 2012).
Amazon is an electronic commerce company and is one of the largest internet-based shops in the country. The company started as a bookstore and has been selling its books online since 1994. Over the years, it started diversifying to selling CDs, video, DVDs, MP3, VHS, video games, electronics, food, jewelry, toys, and furniture. Diversification aimed to increase the profits of the company and its branches. Over the last ten years, the company has been experiencing slower sales growth and evaporation experienced in profit margins. The company has always depended on revenue gains to drive the prices of the stock higher (Steenkamp, 2017).
Over the ten years, the company has experienced a shrink in their gain, that is, from $274M to a loss of $241M. This is because the expenses of the company are increasing over the years, that is, from $74.5B to $89B (Amazon). For example, last year the company reported revenue of $20 billion and its operating income fell by 19 percent.
The Amazon Company has a divisional structure because it deals with many services and products. Different products have their different departments, and the department heads have the responsibility of ensuring that their departments are operating profitably, and they have enough resources. The organizational structure of the company is composed by the founder and CEO Jeffery Bezos at the top and board of directors composed of eight members. The CEO is in charge of the chief technology officer, the chief financial officer, and all departments.
The first key core competency of the company is customer obsession where a company focuses on customers then works backward. The leaders of the company believe that if they fail to listen to the customers, they will fail. The second important element is technology. Amazon uses technology to provide high value to its customers, for example, online selling of books provides easy access to customers and reduces unnecessary costs thus providing high value for customers. Thirdly, the company ensures that their products are produced in bulk to reduce the cost of operations. By practicing economies of scale, the total costs is distributed to each product thus lowering the cost of production (Bhasin, 2018).
Amazon has the largest market share, which has been achieved by focusing attention on effective marketing communication strategies to improve customer experience. Also, the company creates awareness of its products to customers by use of technology such as online selling and advertising. The strategies of the company such as the use of technology, economies of scale and customer focus help the company to be more competitive than their competitors in the market.
Strategic control in marketing management refers to controlling the overall strategy and assessing its importance and efficacy of marketing from time to time. Marketing managers have to assess whether their strategies are working or not regularly. It is also essential for managers to analyze whether their marketing strategy has the desired effect or not. All this comes under strategic control in strategic marketing management (Douglas & Craig, 2010).
Tactical control, on the other hand, refers to tactics used by the managers to achieve their strategy. Managers also have to assess the tactics that are used to attain strategic goals. Tactical control, therefore, is about managing the course of action while strategic control is all about determining the overall strategy. Strategic controlling happens at a higher level than tactical controlling.
Amazon is currently using the internet to market its brand name, and it has been successful in making people aware of the brand. However, any change in the marketing environment can force the company to alter its strategic marketing plan entirely. For example, if countries restrict the internet, then it will change the marketing environment drastically. This is not something impossible because many of the Middle East countries have dictator regimes and they can impose such restrictions. If there is a ban like this, then the Amazon will have to change the medium of its marketing. The company will have to search for avenues through which the message is sent across to customers (Johansson, 2010).
Marketing environment can also change if any search engine companies like Google and Yahoo can come in the retailing sector. This will change the dynamics of marketing as it is through search engines that Amazon is currently running its marketing operations. Google and Yahoo may use techniques to hinder the marketing plans of Amazon, and if that happens then, the company will have to change its marketing plan (Lasserre, 2012).
It is critical to monitor any marketing campaign so that it can be ensured that it is yielding the desired effects on the customers. Monitoring is an important responsibility for a marketing management specialist. Marketing is something very fluid. Consumer demands change on a daily basis. Therefore, it is critical to monitor whether the advertisement and marketing have the desired effect on consumers. For this reason, monitoring is vital when it comes to marketing management. Amazon also has to observe the changing patterns of consumer demand so that it can make sure that marketing has the desired effect (Leonidou & Hultman, 2018).
Evaluation is another crucial element of strategic marketing management. Time to time it is essential for marketing managers to evaluate the effectiveness of the marketing campaign. This is to ensure that the marketing campaign is still useful or not. Clients may change their preferences, so it is important for marketing managers to evaluate marketing strategy. Amazon also has to evaluate its marketing strategy and campaign time to time. There are different times at which the demand for various items is high. This is where evaluation plays its part (Lee & Carter, 2012).
Control involves keeping a check on both the marketing budget and reach. It is essential to know the economic worth of a marketing plan. It is important for Amazon to conduct a cost-benefit analysis for any marketing strategy. Marketing today costs a great amount and Amazon have to make it sure that it is spent in the right way. Sometimes online companies can get over the market, and this can become a financial burden (Leonidou & Hultman, 2018).
The marketing strategy gives Amazon a competitive advantage. The company acquired most of the e-commerce and IT start-ups as a way of differentiating itself. As a result, their customers obtain high-value services from the diverse technology and expertise of these partners. They have also received economies of scale since these start-ups have allowed them to diversify their products (Schlegelmilch, 2016a). They can keep their prices low which is an advantage to consumers. In the end, the loyalty of customers is increased, and they keep on coming back to shop.
Their integration of the marketing strategy and distribution of products allows them to deliver to their customers in time and at low costs. They infiltrate warehouses and improve their performance, enhancing the distribution channels which is a bonus to the company as well as the customers (Schlegelmilch, 2016b). Their customers obtain satisfaction from timely delivery and packaging and the efficient distribution lines safes on the cost.
A high number of repeat buyers due to the quality of services, complemented by rising numbers of first-time customers resulting from a robust advertisement. Survey has shown that Amazon boasts a 55% of repeat buyers, this underlines the fact that customer satisfaction which is always based on the quality of services and products, is at the core of the Amazon marketing strategy (Lee & Carter, 2012). To add on this, amazon.com is an appreciating brand, thanks to the much efforts in advertising.
The marketing strategy has led to a shrink in the profit margins. Amazon focuses much on retaining its customers; giving them a reason to shop with them another time. To achieve this, it has incorporated high delivery services in its marketing which reduces the number of profits (Lee & Carter, 2012). As if that is not enough, they want to keep their prices to keep the customers and attract more. Thus, their profits have grown small as a result of these marketing strategies.
Their marketing strategy does not favor all of their products leading to product flops. Dealing with some products, the marketing strategy does not cater to all of them. For instance, the fire phones in the US is one such historical big flop. The other flop is the kindle fire which did not produce a flair in the market as expected. These are all weaknesses of their marketing strategy which fails to accommodate all of their products, and this affects the whole business.
The marketing strategy used is open to competitors; they can unravel it so easily. E-Commerce is an open market where anyone can access whatever they want in the market. The existing competitors can easily figure out the marketing strategy and their strengths and use this to own advantage reducing the market share for Amazon (Schlegelmilch, 2016a). Those entering the market are also likely to adopt these methods and maybe perfect on them which is a threat to Amazon survival.
Amazon family is formed by the five parties. First, we have the third party sellers who are considered the 1.3 million active sellers. Second, we got the enterprises that are a small and medium business that can sell their products to customers (Palmatier & Sridhar, 2017). Third, we have got the customers that are 76 million counted and are still growing on a daily basis. Then, we have the developers who use the Amazon to develop their apps and programs. We have got artists in different fields that can use Amazon to promote and sell their products. And we cannot forget other branded websites that use Amazon website to sell their products. So, what we have mentioned can be considered as the strength of the company, but the main downfall for the company is that it does not have online stores in other countries. As some products cannot be shipped to other countries, so this is a significant fault (Phadermrod, Crowder, & Wills, 2016).
Their two major threats are online security and the lawsuits due to the unpaid taxes. When it comes to the financial performance their past ten years were not that perfect facing a lot of loss in their grows, going from $247million to $241 million and the main reason for that is their expenses. The big responsibility that the heads of different department in the company have to make sure their department is generating revenue. What they need to is to listen to the customers more to be successful, then focusing on their technology. So, in conclusion, we can see that the company is working to gain profit but their operation cost is taking that revenue to a loss (Phadermrod, Crowder, & Wills, 2016).
Amazon’s Porter’s five forces include the threat of new competitors, threat of substitute product, the bargaining power of buyer, the bargaining power of seller and competitive rivalry (Bruijl, 2018).
The threat of new competitors is great for Amazon because the services the company is offering can easily be replicated by competitors. This danger is quite large also because the virtual world has made companies launch easily. The only solace for the company is its brand name that is quite famous. This will benefit the company when new entrants come in the market.
The threat of substitute product is also high for Amazon as the services can easily be copied. The company is an online retailer, and it is not doing anything extremely unique. This is a threat because customers can be stolen by a similar online retailer.
The bargaining power of the buyer is relatively high in the online retailing industry. Buyers can switch to other companies if they want to buy stuff, so nothing is stopping them. The services Amazon is offering is not such that it can attract customers like a magnet. Initially, it was something new, but gradually many companies have come up. This has increased the bargaining power of buyers.
The bargaining power of sellers is relatively small in the industry. This is because of the companies that exist in the industry. Amazon has some bargaining power as it is an old name so it can charge more from customers than the rest of the company but this amount cannot be considered high because substitutes are available easily.
Competitive rivalry is high in the industry and Amazon is facing problems from fierce competitors who are trying to capture the market and clientele of Amazon. Online retailers are also trying to offer lower rates, and this shows that competitive rivalry is high in the online retailing industry.
Porter’s value chain analysis explains the working of an organization as a system. The system is made up of many units, and each unit is adding some value to the customer.
The value chain model tells us that every activity can be seen as adding value to the final product or service. This model helps a company or services break down its overall business into units and in this way firms can focus individually on every activity. The model is valuable in giving firms a method through which maximum value can be achieved (Abbasi, 2017).
This model can also help us better understand organization operations associated with strategic marketing management. When it comes to marketing management, there are also primary and secondary activities. Marketing management should be seen as a system with many subsystems.
Inbound logistics require collecting thins necessary for a marketing plan. Operations involve designing the marketing campaign itself. Outbound logistics requires making relations with the mediums through which marketing will be done. This is an important step in marketing management so that marketing campaigns can run smoothly. Marketing and sales may refer to the marketing itself that will be inducing the customers to buy the product or service. Service involves making sure that the marketing campaign is running in an effective manner (Sivula & Kantola, 2014.
Procurement may refer to the resources that are needed to design the marketing campaign. Human resource management involves hiring and firing the people involved in making the marketing plan. Technological development and infrastructure involve using technology and infrastructural resources for developing a marketing campaign. In this way, strategic marketing management can be viewed as a value chain.
Customer analysis is fundamental because Amazon is not offering some high involvement product or service. It is a simple online retailing company, and its customers can easily switch to other places. It is important to understand customers so that their preferences can be realized. It is important for Amazon to know what customers like and what they not. For example, a movie of ‘The Da Vinci Code’ is likely to increase the demand of the book. This is why it should be on the main page of the company so that customers can easily access it. Also, it should be shown to customers that are of an age to enjoy the book. This sort of filtering is a must when it comes to any changes in customer demand. These small things can make a lot of difference, and this is why customer analysis is important for Amazon (Purnama, 2015).
Competitor analysis is also crucial in any online running company. The web is a platform that is accessible for everyone, and this allows many people to come and set up companies similar to Amazon. Also, the online retailing industry is growing because more and more people are now trying to buy things online. This is why Amazon is and is expected to face many competitors in the future. A thorough competitor analysis will tell the company whether the competitor is stealing the market share of the company or not. It will also give an idea to Amazon as to how other companies are responding to customer demand. This will give an idea as to how Amazon should change its approach. Competitor analysis also informs about the trends that are prevalent in the market. It tells Amazon what customers are demanding and helps the company if it has missed something in the customer analysis (Li, 2017).
Ansoff’s Matrix helps a company decide the product and market growth strategy it wants to pursue. The matrix is an excellent strategic marketing management tool because it tells a company where it stands in the market and turn, helps decide the marketing strategy that the company should adopt to gain maximum advantage. Ansoff’s Matrix also allows a company to decides upon the plan of the company and this can help a company prepare for future marketing expense that may incur (Darroch, 2014).
Amazon can take a lot of help from Ansoff’s matrix as it informs the company about the growth phase in which it exists currently and also shows the next phase the company will be entering. Ansoff’s matrix tells Amazon that the next stage is of product development where the company will have to produce a new market to capture customers of the existing markets. It is said explicitly in the case study that many retailers in the market have replicated the services offered by Amazon. This is why the next phase will of creating newer services for clients. Ansoff’s matrix helps Amazon plan for the next stage as in product development phase cash would be required to start a marketing campaign which will create awareness for the new product. Also, the company should now look for a new product because other companies are copying Amazon and have similar services in place (Kipley, Lewis, & Jeng, 2012).
Balance scorecard is a strategic management tool through which performance can be measured, and managers can monitor the activity of the employees. The fundamental purpose of balance scorecard is to keep the actions of employees and managers aligned with the overall business strategy and vision of the company (Danaei, Hemmati, & Mardani, 2014).
The learning and growth perspective emphasizes the role of employees in the firm. This perspective views employees as the main asset of the organization. This perspective argues that knowledge seeking is extremely important for employees and they should be learning continuously. Amazon can apply this model by educating its employees by informing them about the needs and demands of its customers. By doing this Amazon can provide better services to the customers. This knowledge of customer base will allow employees to react and respond to customers in a way that is desirable for employees.
The business perspective focuses on the internal business process of the company. This perspective calls for metrics that ensure smooth functioning of organizations according to its aims and goals. Amazon should try to set parameters within its organization so that managers know whether the company is going in the direction they want or not (Baker, 2014). These performance metrics can be very helpful for Amazon because the company is still going through problems. This will ensure that the company is going in the right direction and business operations do not deviate from the mission and vision of the company.
The customer perspective, as the name suggests, focuses on customer satisfaction. It views that the main aim of a firm should be to concentrate on the customer because they are the primary source of revenue for any company. This perspective argues that customer satisfaction is an important indicator of future growth and stability (Bhattacharya & Srivastava, 2018). If customers are not satisfied, then the company is not expected to grow in the future, even though the financials may look good. Amazon is doing well according to this perspective because its financials are bad, but customers are satisfied. This shows that the company is set to grow in the long run.
The financial perspective focuses on the financial performance of the company. This perspective attempts to measure the performance of the firm through an economic lens. This includes both cost-benefit analysis and risk assessment. In this regard, Amazon is not doing well because its financial performance is quite weak. According to this perspective, the company is not working in the desired manner and may require improvement (Aras, 2016). Amazon should also try, according to this perspective, to focus on short-term profits as well because consecutive losses will not lead the company anywhere. The short-term focus of the company is on customers, but it should be on financials.
Conclusions and Recommendations
Given the manner that Amazon is and has been operating, there is still very high potential to retain is the best bookseller trademark and the online choice for book lovers. This trend, however, is not easy to keep and more focus should be done on the current weaknesses as well as improving the positive trends.
Regarding online security, as much as it is an issue that does not only affect Amazon, a separate department cyber watch spread over different user spheres can suffice. Such a department can pose in areas where books are in great demand such as universities and get to know firsthand, the main weaknesses as perceived by users, and thus act to correct them.
Tax evasion and non-compliance is a trend that can have very negative publicity to a company. Despite the online presence of the company and the widespread nature of its services, the company should seek ways of formalizing the tax procedures and ensuring that they are always within the legal confines. This will tend to increase their clients and avoid negative publicity which might steer some customers away.
Establishing a physical base in countries in which the company cannot afford free shipping is also a good idea. Such a base can even be regional such that shipping to nearby locations becomes more cost-effective. This will tend to appease the clients who might have wanted to order from Amazon but shied away owing to shipping costs.
In undertaking these suggestions, I believe that Amazon can positively improve its image and thereby increase the annual level of profits
Conclusion
As seen in the above analysis, Amazon stresses keeping the customers they have. This influences the kind of marketing strategy they employ. It also means that they spent less on acquiring new customers. This can work both to their advantage and against them. Amazon over the last ten years has experienced an increase in its revenues, but the operating costs of the company keep on increasing thus making the company to operate at a loss. The hierarchical structure of the company is the best for such a big company because every manager is made responsible for their department. The core competencies such as customer obsession use of technology and economies of scale make the company more competitive in the market. Amazon should use social media to advertising their products and reduce their advertisement costs. It should also abandon free shipping options to reduce their operating costs.
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