Amazons Vision and Strategy - Case Study Example

AMAZON BUSINESS CASE STUDY Name: Institution: Works Cited 11 1.0 INTRODUCTION Amazon.com is an e-commerce phenomenon company. The founder of the company Jeff broke the rules of selling of book through the internet rather than using the conventional distribution channels. The company is based in Seattle, the United States. Over the years, the company has grown from a simple bookseller site to a virtual Wall Mart (Ronen 2015).Amazon does sell not only the book but also other products such as CDs, Software, Office Products, Electronics, games, cookware, Toys, health products, foods, and hardware. The company over the years has grown at a tremendous rate. 2.0 Amazons Vision and Strategy The vision of Amazon according to the director of the company is to make sure that they relentlessly focus on customer experience through offering customers with convenience, low prices and wide selections of merchandise (Amazon 2015). Their main vision is to make sure that they offer one of the biggest earth selection of products and a completely customer centric company. The key features of Amazons website include customer reviews, editorial, and manufacturer information on the products. The website has a tailored to individual preferences including recommendations and notifications. Amazon has used free shipping offers that have greatly encouraged the customers. The level at which the free shipping has been set is to make sure that profitability for the company is still achieved. Amazon has changed and used free shipping to beat competition and promotion of its products (Amazon 2012). 3.0 Amazons Marketing strategies Amazon has shown to focus mainly on online marketing channels (Noren 2013). They direct their customers to their websites mainly through some targeted online marketing channels. These channels include the associate program, sponsored search; email marketing campaigns, and portal advertising. Other major initiatives that the company uses include TV advertising and outdoor advertising, but they are mentioned and monitored specifically. Use of customer loyalty marketing tools such as free shipping and offers have also been used as marketing strategy widely over the world. Although the cost of shipping has been high and has not been added to the marketing expenses they still offer the services as they view this as a good marketing tool that runs through the world (Amazon 2012). 4.0 History of Amazon’s Growth and Business Model Evolution Measures against the revenues per visitor, Amazon have shown great performance. This is one of the key measures used to measure any commercial website (Evans 2014). Whether it is a media site, search engine, transaction per retailer, social network or financial services. The graph bellow shows the performance of different companies as compared with Amazon over the years. Source: (Amazon 2012). 5.0 Amazon partnership strategies Amazon has grown its share price highly, and this has enabled the company to partner well with some of the well-developed companies from a wide range of sectors. Amazon has also been also able to acquire many related companies. Some of the companies that Amazon has been able to partner with include Drugstone.com, which is an online pharmacy, Living.com, Pets.com, Winehopper.com, HomeGrocer.com, Kozmo.com and Sothebys.com (Chaffey 2013). Another important partnership form that is offered by Amazon is called the Amazon marketplace; this enables its customers and many other retailers to be able to sell their new products and books alongside the regular retail listings (Amazon 2015). The “Amazon Merchants@” program enables third-party merchants to sell their products via Amazon. Amazon earns their fee either through their fixed fee or the sales commission per every unit. 6.0 SWOT analysis of Amazon 6.1 Strengths 6.1.0 Cost of leadership strategy: the main aim of goal leadership strategy is to make sure that the company produces products with the lowest price as compared with its competitors (Evans 2014). The strategy to achieve this goal is through the use of economies of scale. Amazon had to be able to provide a wide range of products to be able to achieve this goal. Having a wide range of products with the lowest prices in the market enabled Amazon to become the largest online retail shop (Ronen 2015). 6.1.1 Superior quality services and products: Amazon produces the best quality of service and products. They are completely reliable and convenient; they also offer one of the fasted and safest shipping facilities. Amazon has developed a good brand and a great reputation (Ronen 2015). 6.1.2 Strategic acquisition: Amazon has been able to successfully acquire new firms for them to bring new products, services, assets, capabilities and skills to their business. Due to the strategic acquisition, Amazon is now able of offering cloud services and has developed a good information management and customer relationship management skills (Bezos 2014). 6.1.3 Efficient logistics and distributions: Amazon has a particular number of fulfillment warehouses found in each of its marketplaces. These warehouses have been situated geographically well spread in each country to allow goods to be dispatched easily and at lower cost (Bezos 2014) 6.2 Weaknesses 6.2.0 Only online presence: Amazon has lacked much of the physical presence, unlike other retailers such as Wal-Mart and Target People. These competitive retailers have an advantage since customers can see and touch the products and buy them at that instant (Ronen 2015). 6.2.1 Selling zero margins: many of the products in Amazon are sold at a zero margin. This is done to gain the market share and push the competition out of the market (Amazon 2012). In a short term, this is a strong tactical move but, in the long run, this move has hurt the firm’s profit (Bezos 2014) 6.2.3 Negative publicity: Amazon has in the recent past attracted a lot of negative publicity due to its avoidance of taxes. In countries such as the UK and the US have been seen to earn most of its revenues from is where complaints are. They have also been criticized due to their poor conditions of their warehouses, price discriminations and anti-competitive actions (Noren 2013). 6.3 Opportunities 6.3.0 Online payment systems: Amazon could take a step and introduce a current payment system that is similar to PayPal. This could be a great opportunity to attract the customers who are always on the move and are not able to provide credit card information (Bezos 2014). 6.3.1 Release more own brand products and services: having succeeded in attracting a large market, Amazon could benefit a lot by producing more of its products (Evans 2014). 6.3.2 Increase services and product portfolio through the acquisition process: The fact that Amazon has acquired many any other companies already enable them to extend their products and services easily. 6.3.3 Open more online stores in other countries: To sustain the current growth rates, Amazon could open many other online marketplaces in other growing and large economies in the world (Bezos 2014) 6.4 Threats 6.4.0 Online Security: Amazon stores risk a lot in terms of protecting the customer’s personal information (Evans 2014). The information includes bank accounts details that are a target to the online theft. 6.4.1 Lawsuits: Amazon has already attracted much of the negative attention in the UK and the US due to lawsuits taken up by tax authorities against the company (Bezos 2014). 6.4.2. Legislation against tax avoidance: Amazon’s profit is likely to be highly affected by legislations that required companies such as Amazon to pay a fair share of their taxes due to tax avoidance. 6.4.3 Regional low-cost online retailers: the regional online retailer offering low cost on products could easily outrival Amazon due to faster and cheaper shipping (Chaffey 2013). 7.0 Amazons Financial Analysis Over the years, Amazon has had a tendency to polarize people, it is one of the most relentless, ruthless and ferocious company that has beaten all the odd in the 21st century (Bezos 2014) 2014)). The challenge is that since it was launched the company has not recorded any meaningful profits as it is expected. The chart below shows the growth of Amazon over the years (Chaffey 2013). Amazon releases its revenue in three major segments; these are Media, Electronics & General Merchandize, and the other which refers to the AWS. The AWS attracts 17% of the segment operating margin. This was offset by the operational expenses that were recorded to have left $265 of the operating profit for the AWS (Hughes 2015 2015). 7.1 Amazons revenue and operating profit breakdown As seen in the chart above AWS play a major role in the Amazons operating profit. It is also important to note that its stock price fluctuations are influenced by the AWS also. The northern part of America has the largest share of the profit and also the share profit for the AWS (Hughes 2015). Over the last three years, the revenue of the company has compounded to an annual rate of about 20.8% over the last three years (Evans 2014 2014). The Amazon’s stock is trading at a price sales ratio of about 2.8x against the industry average of 3.4. The Amazon Stock should be held to allow the rates to grow and avoid many losses (Chaffey 2013 2013). 8.0 Recommendations Amazon has established a great customer loyalty, and this is a great advantage for the company, it highly recommended that the company invests in this resource heavily (Hughes 2015). Developing of a reliable online payment system is another perfect opportunity that the company should invest. There are very many customers in the world that do not trust any release of their bank details, and this puts off many customers (Chaffey 2013 2013). Amazon should also develop strategic alliances with competitive organizations such as Apple (Hughes 2015). These alliances will allow Amazon to be able to sell competitive products at a cheaper price. With such alliances, the company will grow its profit margins. Amazon has also been depicted to be not making much of the profits, and this makes the company highly vulnerable, increasing the profit margins on the products slightly will enable the company to beat the market and also run a profitable company (Chaffey 2013 2013). 9.0 CONCLUSION Amazon is clearly one of the most well developed online retailers, although they face many challenges such as low-profit margins. They have developed a good reputation and loyalty from the customers making them the most reliable online retailers. Achieving such great reputation is a great deal for the industry and the market, Amazon has therefore developed a stronghold in the online industry that makes them inevitable Works Cited Read More