Discuss about the Competitive Business Environment for Amazon.com.
In today’s globalized and competitive business environment, each and every organization needs to implement effective strategies to stay competitive in its perspective industry. Developing effective strategies is an important process in order to overcome the challenges faced by the company. Amazon.com prides itself as one of the major organizations to take the advantages of the online and develop an international strategy that has turned it into a key force in terms of technology and increased collection of products and services (Freeman, 2010). The company is operating its business operations in the industry as a leading player in e-commerce industry. This report includes the discussion about different strategies which are used by Amazon.com. In addition to this, it includes different challenges which can be confronted by the organization in the future. At the end, some strategies are recommended which can be used by the leading e-retailer to overcome the challenges.
Amazon.com is a multinational corporation that was established in the year 1994 in United States. The organization was founded by Jeff Bezos in Seattle, Washington. Amazon.com is one of the largest e-retailers that are offering its products all over the world. The organization is the largest retailer in the world in terms of total sales and market capitalization. It has initiated its business as an online bookstore only and after that it has expanded its business in offering other products such as consumer electronics, CDs, DVDs, software, furniture, video games and other items. Through its online website, the organization is offering its products and services in different nations like Australia, Italy, Spain, United States, France, United Kingdom, Ireland, Mexico, China, Japan and Canada (Amazon.com, 2018). In addition to above products, the company is offering some services as well like online shopping, cloud computing and content development. As per the report published in the year 2016, more than 230,800 are working with the Amazon.com (Amazon.com, 2018). The primary competitors of Amazon.com are eBay, Wal-Mart stores, Best Buy, Alibaba Group, eBay, Netflix and International Business Machine.
The company is using various marketing and global strategies to increase its revenues and profits. By keeping in the mind the worthy customer services which they provide to their customers that they deserve. The way in which this organization has leveraged the technology as a major source of competitive edge and attained various advantages of the economies of scale with leveraging the combination between external factors and internal resources has produced many competitors who propose to copy and improve their business model. It can be stated that Amazon.com is a high profile e-commerce business that has been very successful in creating its brand, segmenting its business and expanding business globally. The company is able to intensifying the competition, increasing its market capitalization and attaining the household item status (Reimers and Waldfogel, 2017). The company has adopted various effective strategies to operate its business operations in e-commerce industry. By using creative and effective strategies, the company is able to stay competitive in the global market.
The top management of Amazon.com knows very well that how it can stimulate the desires of customers to purchase its products and services. To increase its market presence, the company is adopting several strategies in modern business environment (Vijaylaxmi and Srinivasa, 2015). These strategies are divided in different categories like generic strategy and intensive growth strategies. The strategies of Amazon.com are given below:
The generic strategy of Amazon.com for competitive edge for on the basis of Michael Porter’s framework indicates the approach that this organization uses to create its business amongst tough competition in online retail industry. As a leading online retailer all over the world, the company is able to prove itself as highly competitive, even against major players like Wal-Mart. Under its generic strategies, Amazon.com uses cost leadership strategy to gain competitive advantage. In this strategy, one of the major objectives of company is to minimize its operational costs. For instance, the company uses highly-updated networking and computing technologies to maximize the operational efficiency that transforms to minimized costs (Baack and Boggs, 2008). Looking at the nature of e-commerce, Amazon.com takes the benefits from process automation that is often used to purchase the scheduling, processing and other operational activities. These advantages enable the company to reduce the costs of its online retail and other services.
By adopting this strategy, the company aims to attain its strategic objective to develop e-commerce competitive edge through improvement of IT infrastructure. However, it can increase the cost of operations to the company (Wells, Danskin & Ellsworth, 2016). In addition to this, Amazon is making investment in research and development process so that it can enhance the performance of its information technology resources. The cost leadership strategy of Amazon.com pushes the company to decrease its pricing level. This strategic objective of the company has a large impact on the company’s marketing mix. By setting comparatively lower prices, it is able to attract a large customer base. Through the cost leadership as generic strategy, the company gains the competitive advantage to assist its vision and mission statement.
The intensive growth strategy of Amazon is totally responsible for the growth and expansion of its business. For example, the offering company’s services outside the United States indicate business plans for its global expansion. Through successful implementation of intensive growth strategies, the company succeeds in international e-commerce industry (Baack and Boggs, 2008). The company uses different intensive growth strategies in the competitive business environment, which are given below:
As a leading player in e-commerce industry, Amazon.com adopts market development as its major intensive growth strategy. Under this strategy, the company aims to enter and grow its services in new and emerging markets. In the beginning of its operations, Amazon.com offered its online retail services to the customers in United States only. Now, it runs its e-commerce websites in over 10 nations inclusive of India, United Kingdom, China and Canada (Wells, Danskin & Ellsworth, 2016). The company considers its each and every market which develops growth opportunities for Amazon. At Amazon, the above generic strategy creates the competitive advantage which enables the firm to adopt the market development as its intensive strategy. The major objective of this strategy is to establish a new e-commerce site which corresponds to new country markets which are added to the international market reach of Amazon.com.
In addition to above strategy, Amazon.com also implements product development as a supporting intensive strategy for the development of business. Adding and offering new products and services to attain significant revenues is the major objective for this intensive growth strategy. The company develops partly by adding new products and services over the time. For instance, Amazon currently offers Amazon web services and Amazon Basics products (Gmelin and Seuring, 2014). The cost leadership generic strategy supports this product development strategy by offering the firm with the low-cost business processes to launch new products and services. The major strategic objective of this intensive growth strategy is to make investment on research and development for quick product development and introduce new products in e-commerce market.
In this way, Amazon.com uses various strategies which are in the benefit of organization. By using efficient strategies and tactics, the company is able to enhance its business operations and increase its profitability in today’s competitive business scenario. Considering the company’s needs and desires of targeted audiences, the company is offering its services and enhancing its operations in the online retail industry (Pinkerton, 2013).
As mentioned above, Amazon.com is the biggest e-retailer all over the world. The organization is the largest online retailer by the revenues and it holds 4th position as the most valuable public company in the world (Kipley & Jewe, 2104). It has established a large customer base that keeps on increasing at a significant rate. However, the company has implemented effective strategies, but like every firm there may be some challenges which the company may face in the future. These challenges are stated below:
This is one of the major challenges which Amazon.com may confront in the coming future. It may face the challenge of brand loyalty and trust among customers towards its products and services. In the future, the online platform of Amazon will make it more complex for the shoppers to familiarize it with its online products and services. The people will be more comfortable with the shopping at physical stores. Each and every communication that customers have with the bricks and mortar retailers strengthens their brand, shelf stickers, plastic bags and delivery trucks, all assist building own-label trustworthiness in a manner (Shaw, 2014). This is the major that they can lose the loyalty and trust among online retailers like Amazon.com. While choosing different names for its product ranges might be an attempt to show its products as branded, the company can struggle to capture the loyalty customers as it wishes to win in each and every category.
Possibly, the biggest future challenge for the Amazon may be the risk related to hackers. In the future, the company may confront the issues related to the data loss and security breaches. There is no company that can completely guarantee that its security will not be breached. This is a big concern at Amazon that has the information of millions of credit cards (Johnson, 2016). The hackers can steal the confidential information of Amazon’s customers from company’s portal. As a leading online retailer, the company acknowledged that it utilizes third party technology also and that can be breached as well. However, the company is making efforts to develop different systems and processes to prevent itself this challenge of data loss, but these measures cannot provide complete security to Amazon’s website.
Competition is also one of the biggest challenges that an organization may face in the future despite of successful business operations and increased revenues. After the establishment of Amaazon.com, there are various organizations which have formed their existence either online or offline. The major online competitors of the company are such as eBay, Best Buy, Alibaba Group, eBay, Netflix and International Business Machine. Moreover, the company has Wal-Mart stores and Aldi Australia as its offline competitors (Peppard and Ward, 2016). In the future, these competitors can create a strong image if company loses trust and loyalty of its customers. The new offers of Amazon can differentiate it in United States, where the private retailers are limited, but in United Kingdom they cover half of the total market. With the introduction of Amazon Prime, Pantry and Fresh, it may face the risk of confused shoppers. By facing this confusing situation, the buyers can shift to the offline stores and supermarkets like Wal-Mart.
Thus, these are the major challenges which Amazon.com has faced in the future while operating its business in the e-commerce industry.
However, the company is operating its operations as a successful online retailer, but still it may face above challenge in the future. To overcome the above-mentioned challenges, Amazon.com should implement some more effective strategies. By using these strategies, the company will be able to regain the trust of customers towards its retail services (Murphy, 2014). The company should use diversification strategy as its generic strategy. The implementation of this strategy should be done in the combination of cost leadership strategy. The concentric diversification strategy will be based on the leveraging IT capabilities for the growth of business and ensuing cost leadership strategy should aim on providing the increased value for its customers at the lowest price. To attract more customers, the company should develop a user-friendly website so that a new customer can find his/her desired product easily (Bauer, 2012). The company should implement the diversification strategy with the objective to minimize the selling prices and operating costs. In the future, the company should grow its business operations through business acquisition. It will allow the company to deal with the threat of competition in the future. The company should adopt this strategy with the strategic objective to grow the online retailing business via a destructive acquisition strategy (Ritala, Golnam and Wegmann, 2014).
Furthermore, this firm should go ahead with the market penetration strategy so that it can generate more profits and revenues from the markets where it is currently operating its business. Currently, the customers are very much interested in the online shopping so it should to maintain this interest of customers. It should offer the products considering the needs and preferences of its potential customers (Newberry, 2015). This will be the major strategy that will support the rapid growth of company in the future. To overcome the threat of competition, the company should implement an attractive promotional campaign so that it can attract more customers towards its website and increase its customer base.
Considering the future challenge of security breach and data loss, Amazon.com should develop some systems by using advanced information technology infrastructure so that only authorized person can access the data and its official portal. It should provide effective training to the staff to use technology advancement. In addition to this, this organization should impose the penalties on the internal people if they assist to hack the confidential information of customers and its product offerings (Hollensen, 2015). In today’s world, the people are becoming very much concerned about the environment and its resources so organization should make efforts to become more sustainable and responsible towards environment. It will assist the organization to regain loyalty and trust of customers.
Conclusion
In the limelight of the above discussion, it can be concluded that Amazon.com is popular as one-click selling wherein the shoppers can buy anything which is for the sale on its website with just one click of mouse. By using effective strategies, the company is able to maintain its strong brand position among its customers. Cost leadership and market development are two major strategies which the company uses to increase its customer base and sales. Amazon is continuously growing with the improvement in its business model. These are the major strategies which assisted the company to become a leading player in e-commerce industry. The above report discusses some challenges which it may face in the future. It is founded that company is facing the challenges of losing brand loyalty and customer trust, security breaches and competition. These three are the major threats which may affect the brand image of company in the future. Furthermore, there are some strategies which can be used by the company to overcome the future challenges of Amazon.com.
From the above analysis, it is hereby recommended to Amazon.com that company should operate its business operations considering the needs and preferences of customers. It should adopt a global approach in its international markets where it can adapt global business model with its domestic delivery and supply chain. It will create an international business value chain where anyone anywhere can purchase the desired goods anytime. It should enhance its delivery system and decrease the shipping costs. This is the major reason why customers are shifting to other retailers. It should focus on its IT capabilities, core competencies and global value chain as well. It will make the Amazon’s future brighter than today. It will be able to maintain its current market leadership in online retail industry.
References
Amazon.com., 2018, Amazon.in, Available from https://www.amazon.in/. (Accessed on 30 April 2018).
Baack, D.W. and Boggs, D.J., 2008. The difficulties in using a cost leadership strategy in emerging markets. International Journal of Emerging Markets, 3(2), pp.125-139.
Bauer, C, 2012, An integrated decision model for strategic evaluation of the viability of new technologies. Germany: GRIN Verlag.
Freeman, R.E. 2010, Strategic Management: A Stakeholder Approach, UK: Cambridge University Press.
Gmelin, H. and Seuring, S., 2014. Determinants of a sustainable new product development. Journal of Cleaner production, 69, pp.1-9.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
Johnson, G., 2016. Exploring strategy: text and cases. UK: Pearson Education.
Kipley, D. & Jewe, R, 2014, Effective Strategic Management: From Analysis to Implementation. US: Cognnella.
Murphy, J., 2017, Analysis: Can Amazon make it in Australia? Available from https://www.northernstar.com.au/news/analysis-cam-amazon-make-it-australia/3172262/. (Accessed on 30 April 2018).
Newberry, S., 2015. Public sector reforms and sovereign debt management: Capital market development as strategy?. Critical Perspectives on Accounting, 27, pp.101-117.
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. UK: John Wiley & Sons.
Pinkerton, M, 2013, International analysis: Amazon marketplace makes debut in India, Available from <https://www.retail-week.com/topics/international/international-analysis-amazon-marketplace-makes-debut-in-india/5049895.article>. (Accessed on 30 April 2018).
Reimers, I. and Waldfogel, J., 2017. Throwing the books at them: Amazon’s puzzling long run pricing strategy. Southern Economic Journal, 83(4), pp.869-885.
Ritala, P., Golnam, A. and Wegmann, A., 2014. Coopetition-based business models: The case of Amazon. com. Industrial Marketing Management, 43(2), pp.236-249.
Shaw, B., 2014, Challenges to Amazon.com’s Growth Strategy, Available from https://www.aol.com/article/finance/2014/02/12/challenges-to-amazoncoms-growth-strategy/20828569/. (Accessed on 30 April 2018).
Vijaylaxmi, S. and Srinivasa T, 2015, Consumer Buying Behaviour for Electronic Products A Study of select items, International Journal of Research and Computational Technology, 7 (2).
Wells, J.R., Danskin, G. & Ellsworth, G., 2016, Amazon.com, 2016, Harvard Business School.
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