Amazon Activities and Their Improvement - Case Study Example

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Introduction

General overview

There are many companies, which achieved unexampled success. One of such companies is Amazon. This company is developed business that began as large developed bookstore. And now it is biggest store that offers great variety of products. Expansion that was the main source of insights and revenues forced company to develop in variety of directions (Beke, 2010). Website still offers books, movies, and other media content, however, there is also electronics, apparel, autoparts, etc. All these products can be easily acquired through the corporate site. Shoppers can also use the website to download media content after the fact of purchase. Thus, Amazon.com is the storage of e-books and music. In the process of development, Amazon has developed own e-reader that customers can use for their reading purposes. This device can easily get access to the store and help to read books from the Amazon site. Amazon also offers variety of services like self-publishing, advertising, hosting, etc. All these things increase the company’s position in the market of retailers and e-shops (Beke, 2010).

Operations

One more source of revenues, which Amazon is constantly acquiring is services to third-party sellers, who want to offer some products to their customers (Beke, 2010). Amazon earn fees from such sellers and comsissions, associated shipping fees, subscriptions and even more non-retailing services, which are useful for many customers. Amazon has its technology infrastructure and it offers access to such technologies to many startups and even large companies like Airbnb and alike (Beke, 2010).

Applications

Amazon has the most productive audiobooks unit that is the largest producer, seller of audio-books. Customers have downloaded millions of such media content. Furthermore, Amazon is introducing even more features to customers, which offer them ability to switch from the reading in Kindle to the listening of the audio-book. Furthermore, this Whispersync service offers saving of content across variety of devices, which support some kind of videogames and other entertaining applications. It utilizes the multiplatform games, which can be run in multiple devices (Currie & Rowley, 2010).

Geographic reach

Company has multiple countries, which are the main customers of Amazon, however, 60% of sales are from the North America. Important markets are Japanese, German and UK. Each markets contribute 10% to the overall sales. Company does its businesses in most European countries, however, it is not still so developed in Europe. Company Appstore works in 200 countries around the globe, thus, it has quite good geographical reach with strong and weak regions. This is compensated with the high amount of sales in the America and UK.

Marketing

The main channel of products advertising is online marketing channels, which include sponsored searches, email campaigns and variety of forms of portal advertising. Company spends around $3 billion on advertising that is quite high for developed companies. Furthermore, here also included promotional costs. Company is working hard on the development of its brand and awareness, thus, it is clear that company cares about customers and their opinion towards the company.

SWOT analysis

Amazon, being the online retailer has quite high strength comparing it to the brick & mortar competitors, who work for online markets. It is so due to the online expansion of Amazon activities and aggressive advertising in the main markets. That is why many target customers are aware of the brand and know that Amazon can offer good solutions. Amazon is often compared to the Walmart that has almost the same activities in the world-wide perspective. It relies on the online sales, however, too strong focus on online sales is both positive and negative issue. There are many issues, which are the result of such concentration on online sales, which will analyzed in the following SWOT analysis.

Strengths

Three-pronged strategy

The main strengths of the company are associated with three-pronged strategy that includes focus, differentiation, cost leadership. All these features are actually good in acquiring competitive position, especially cost leadership, since most companies, which work in the industry has high expenses and relatively low profits, due to the abundance of associated companies and strength of competitors. Company is focusing on this strategy to support this course of action. Thus, shareholders can easily acquire value from the company.

IT development and e-commerce

Company invests considerable resources on the IT development and e-commerce. The main priority from this perspective is improvement of internet presence of brand and better e-promotion and marketing to reach more customers in internet, rather than brick-and-mortar customers. Company creates easy and comfortable platforms to sell products and to offer third-party sellers to sell to contribute to the main sources of profits.

Strong brand awareness

The main strength of company is based on the strong brand awareness, since customers know Amazon for superior activities in selling books and other associated content. Thus, customers have no doubts that Amazon can offer them good solutions.

Distribution systems

Company has superior distribution systems and sustainable logistics, thus, it can easily deliver any products to customers even to the distant countries. Furthermore, it can work even with countries, which are not in the list of partners, thus, more customers can be reached that is the strong competitive advantage, due to such strong differentiation.

Weaknesses

Strong differentiation

The main weakness is associated with strong differentiation from the initial products, which were sold before. It is good to introduce new products and to make Amazon to be one-stop store. However, working in the accustomed and known environment is always better. And that is one of the main critical issues, which should be addressed.

Excessive focus on online retailing

One more critical issue and weakness is excessive focus on online retailing, since such single-minded approach can decrease the space for further development due to the development of other companies, which conquer brick-and-mortar market. Expansion also can be seriously undermined, since it requires to develop few actual shops and due to the lack of experience and strategies, it can encounter serious issues.

Business model

Amazon has both good and bad business model that has positive moments, since it has many dozens and dozens of branches, which have different stages of maturity. Some branches are old and can produce substantial revenues, they are developed enough and use marketing and other promotion to make it more profitable, while startups in Europe can fail and produce only loses (Murphy & Topyan, 2005). It is hard to control such business model, managers can lose some points, which can lead to the substantial loses. Furthermore, excessive reliability on the 3P sales is not good way to produce stable revenues, since conditions of sales can be modified and it can repeal these sellers from the Amazon and it will lose strong revenue source and without this kind of revenues, company can get 0 margin activities, which can lead to devastating results. It is the main critical issue that should be somehow addressed.

Opportunities

Rolling out products

Company should roll out more products on its own brand instead of the 3P sellers’ brands. It can help to increase the opportunities of initial brand and can help to get even higher sales.

Online expansion

One of the main opportunities is associated with better online expansion in emerging markets, since they can provide even more customers and 3P sellers, which are both important for company.

Threats

Security issues

One of threats is associated with security issues, excessive reliability on the e-shopping make customers’ data exposed that can lead to serious misconducts and decreasing of corporate image in case of the strong hacker attack.

Pricing

Pricing strategy and its cost leadership ship can cause many lawsuits from competitors and vendors, since there are many legislative acts, which restrict monopolistic actions and price pressure on the competitors.

Prioritization of critical issues

The main priority should be given to the security of the data, strategy shift to higher recognition of brick-and-mortar shops in the emerging markets and better control over the activities through the development of business model that will unite the branches and will bring them framework to work with and share business information that will help to make better decisions (Murphy & Topyan, 2005). Otherwise, company can lose customers due to the disclosure and misapplication of personal info, lack of brick-and-mortar shops can lead to the threat of the fashion change, hacker’s attack and lose of scalability. Better business model is required, since now company has incoherent branches, which work almost independently. They should follow mission and vision of the company. Otherwise company is doomed to the failure in the long-term.

Value creation

To analyze the Amazon’s value creation as the driving factors of the company, one should start from the needs, which customers have and should be addressed by Amazon’s products. Due to the fact that company has many products, which are provided by the trusted vendors, company is offering variety of solutions and customers need something not expensive from the company that is famous enough to provide only quality solutions. Such company is Amazon. Thus, it works on the development of good relationships with vendors, it brings more opportunities for 3P to work with company to offer even more products.

Product strategy

The main product strategy that company has is associated with the expansion of range of products, which are offered through the introduction of 3P sellers, who have variety of products, which can be sold. Furthermore, they have made the sales through 3P sellers customized and comfortable. It helps customers to find products they need.

Pricing

Due to the cost leadership approach, company tends to the low-middle prices, since it works for emerging markets and it is essential to keep in mind that such markets need lower prices to provide some competitive opportunity.

Distribution

To sell and deliver products from both 3P sellers and own brands, Amazon uses the network of fulfillment centers and delivery stations, however, in US there are core facilities like Sortation centers, Prime Now Hubs, etc. All these facilities help to deliver the product in the timely manner.

Alternative strategies

Excessive differentiation from the initial product can provide hidden problems, which potentially can undermine the activities of company. Furthermore, there are many companies, which are engaged into the e-sales, thus, it can lose to the local e-shops, which know the market and products, which customers need there (Soucy, n.d.). Furthermore, Amazon has strong lack of experience in the sales of products, which are different from books and some kinds of media content. Current product strategy has many drawbacks, which should be addressed (Soucy, n.d.).

First option

Pros

Amazon can invest in the books instead of other products and make it as the primary source of revenues. Offering only books can be easier through the opening of special e-shops, which are associated with certain genre of the book, furthermore, company can work better with popular publishers, which have more books to offer. It can help to diversify the assortment of products, which are sold. However, this process may entail loss of revenues and decreasing of overall amount of sales, since company will shift to the new type of product

Cons

Main threat of such approach is associated with probable reaction of customers. They got used to treat the company as one-stop shop that has many products available, they have special applications on their mobile devices to access sites of Amazon and losing the opportunity to purchase wide variety products from the Amazon can result in serious disappointment of customers and worsening of overall corporate image. Furthermore, company has substantial revenues, which are acquired from non-books sales, which should be compensated by some other revenues, which are still unavailable. Book shops network establishment needs some time to be done and resources to cover all expenses, which company can barely find in case of total refuse to invest in other products (Soucy, n.d.).

Date

Revenues (B)

Books and media content sales (m)

Percentage of non-book products sales

Q1.2017

107,1

6,28

100

Q2. 2017

90,5

10

80

Q3.2017

80

8,5

70

Q4. 2017

70

9

60

Q1. 2018

60

10

50

Q2.2018

65

11

40

Q3.2018

50

12

30

Q4.2018

50

13

30

Q1.2019

50

13

30

Q2.2019

50

13

30

Q3.2019

55

13

30

Q4.2019

60

13

30

Q1.2020

60

13

30

Q2.2020

60

14

30

Q3.2020

65

15

20

Q4.2020

65

20

10

Second option

Pros

Another option lies in compromise, to increase sales of books and to sacrifice half of the sales of non-book products. It is the best option for company, since it can help to get resources for shift in the structure and to survive competition that can take advantage of the temporary decline of sales and corporate image. Benefits from this strategy are apparent, company can fully engage in accustomed activities, sign more contracts with vendors and publishers to get more content, acquired revenues can be spent on the development of e-reader that will help to utilize the reading and make it more comfortable for customers to use the main product.

Cons

There are almost no cons from this strategy, since it uses non-book products, but only decrease amount of sales. It can help to get enough resources for expansion and new books and media-content that will be sold (Soucy, n.d.).

Date

Revenues (B)

Books and media content sales (m)

Percentage of non-book products sales

Q1.2017

107,1

6,28

100

Q2. 2017

90,5

7

80

Q3.2017

80

8

70

Q4. 2017

70

9

60

Q1. 2018

60

10

50

Q2.2018

65

10

50

Q3.2018

70

10

50

Q4.2018

75

10

50

Q1.2019

80

10

50

Q2.2019

82

10

50

Q3.2019

85

10

50

Q4.2019

90

10

50

Q1.2020

90

10

50

Q2.2020

90

11

50

Q3.2020

90

12

50

Q4.2020

90

13

50

Third option

Pros

Third option lies in the extensive opening of brick-and-mortar shops, which will be totally specialized in books. This will help to make better customer experience, it will also have to confront local competition in the form of the old brick-and-mortar shops. Furthermore, it will help to sell products, which were the primary one, without sacrificing of e-sales and sales of non-book products.

Cons

However, the main shortcoming is associated with costs of the opening of new shops, since it will require associated expenses to launch considerable amount of shops to stay competitive. Starting from US, company can expand its activities and get revenues in the long term, however, in the short-term substantial loss of revenues is expected.

Date

Revenues (B)

Books and media content sales (m)

Percentage of non-book products sales

Q1.2017

107,1

6,28

100

Q2. 2017

90,5

10

100

Q3.2017

80

8,5

100

Q4. 2017

70

9

100

Q1. 2018

60

10

100

Q2.2018

65

11

100

Q3.2018

50

12

100

Q4.2018

50

13

100

Q1.2019

50

13

100

Q2.2019

40

13

100

Q3.2019

30

13

100

Q4.2019

30

13

100

Q1.2020

30

13

100

Q2.2020

30

14

100

Q3.2020

30

15

100

Q4.2020

30

20

100

Strategy implementation

Thinking about the strategy that predetermines compromise between extensive diversification of the products and application of the new proven business model, this one can provide substantial benefits within a few years. Furthermore, this strategy can help to minimize the risk of the new entrants, which can easily enter the market and start almost the similar activities. Single minded activity cannot be 100% effective, since business model should be flexible and should be ready to react to the market changes and other issues, which can affect the business. Otherwise, company can encounter serious problems with sales and revenues. It is better to have some alternative in the sphere of products to concentrate on them in case of the problems in the market. In the current state of company, it has no alternative option except the 3P sellers. Latter can help to survive the changes in the corporate structure and in the product assortment.

Tactical actions

Encouraging sellers to work with Amazon is also effective tactical action that can make this additional source of revenues even stronger. Implementation of the strategy lies in the gradual decreasing of sales and increasing of HR efforts to explain the reason of such changes in the company. Furthermore, Amazon can start few pilot projects in the form of brick-and-mortar shops, which will sell books for middle to low price in the emerging market to make company survive such changes. Company should decrease sales of non-book products to 50% marker to achieve the goal and then it should invest more resources on promotion of books and associated products to increase customers’ awareness of the new company focus and products, which will have even broader assortment.

Risks

Considering the risks, decreasing of the revenues can make serious damage in case of the aggressive actions from competitors, furthermore, probable negative reactions of customers can seriously undermine the company’s activities. Thus, it should invest in HR to ensure that customers understand reasons of changes and will not be disappointed with such changes. It is essential to keep good corporate image, since it is the one of the main opportunities of Amazon. Using developed brand, Amazon can be successful in the market, even selling middle quality products that is quite good characteristic of business in the unstable environment.