How Amazon-com Use Their Digital Channels to Achieve Success - Case Study Example

How Amazon.com use their Digital Channels to Achieve Success Executive summary Amazon.com is one of the few existing Internet brands and the most successful globally. One of the major reasons for the successful performance of this company is the effectiveness of its management, led by the founder Jeff Bezos. Bezos adopts transformational leadership, which besides helping to establish good relations within the company and between the company and the external environment, enables the company to adapt to the rapidly evolving technology, particularly the Internet. The purpose of this paper is to examine Amazon’s management resources, which have steered the company to become the most successful Internet brand. The paper addresses the capabilities of the company’s leadership which have enabled it to cope with the ever-changing external environment. Specifically, the paper explains Amazon’s online strategy and addresses the changes and innovations that have enabled the company to cope with changes in Internet technology. Introduction The Internet is one of the major areas that have developed tremendously with the evolution of information technology (IT). To cope with technological developments and to compete effectively, companies increasingly exist in the online world (Bass, et al, 2008, p. 6). As well, IT development has opened opportunities whereby customers are able to do online shopping from online stores of companies existing online, rather than going to shop in physical retail stores and shopping malls (Bass, et al, 2008, p. 6). One of the largest and most competitive companies that exist online is Amazon. Through its online business, Amazon has been able to attract a huge number of customers from over 150 countries. Amazon.com is the main website of Amazon company in which it displays its products which comprise of millions of books DVDs, music, and videos. The site also displays other products offered by the company such as household items, apparel and clothes, electronics, drugs and cosmetics, among others. These products are also displayed in websites of affiliate companies. Based in Seattle, Washington, Amazon opened its website on World Wide Web in 1995 and operated at a loss until 2002 when it attained its first annual profit (Daft, 2003, p. 137). Since then, the company’s profits have grown tremendously and the company continues to sustain competitive edge in the online market. One of the major drivers of successful performance of Amazon has been the effectiveness the company’s management which has steered the organisation to cope with the rapidly changing market needs as technology evolves. The main goal of this report is to analyze how Amazon.com uses their digital channels to achieve success. Specifically, the paper analyses the nature of the company’s management structure and management strategies which has helped to steer it to success. Precisely, the paper provides a description of how the management strategies have steered this company to cope with effects, influences and changes in the online business environment. In the course of this evaluation, the paper assesses the impact of IT on the company’s success. Generally, the report expresses how management theory can be utilised to enhance effective performance of modern organisations. Amazon’s management resources and capabilities In today’s business environment, effectiveness of an organization’s management team as well as management strategies and networks highly influence capacity for successful performance (Robinson & Menon, 2009, p. 73). As noted earlier, one of the major reasons for the successful performance of Amazon for many years has been its effective management team led by the founder and Chief executive Officer, Jeff Bezos. According to Robinson and Menon (2009, p. 73), Amazon’s management upholds four views of leadership namely; transformation view, paradigm shift, power and social responsibility. However, the company’s management has always capitalised on a transformational leadership approach which enhances good relationships within the organisation and between the company staff and online clients and consumers (Robinson & Menon, 2009, p. 73). One of the unique characteristics of transformational leadership is that it has a positive impact on the development and performances of the followers. According to Bass and Riggios (2006, p. 42), transformational leadership skills are often not ingrained in an individual’s personal traits, but are learned. However, some individual traits make it easier for a leader to display transformational leadership behaviours. For instance, studies have shown that the trait of agreeableness is positively associated with such leaders. Another common characteristic of transformational leaders is that they have a strong ability to recognise the emotions of others and to understand their behaviours. As a transformational leader, Bezos has always displayed these traits and thus it is not surprising that he has been able to accomplish change in Amazon by building networks of positive relationships. Bezos has continuously been innovating new strategies which help the company to meet its goals. His leadership focuses on inspiring company staff to believe in his as well as in their potential, to always work hard and focus on creating a better future for the company. His approach has thus created constant change in both the company and the staff as technology and market change. According to Daft and Vershinina, (2010, p. 584), Bezos’s leadership has always focused on enhancing change in the company’s mission, structure and strategy as market needs change. Importantly, Bezos has been the central figure behind the company’s continuous innovation of new products and technology, which is one of the key areas of the company’s successful performance. Bezos does not rely only on tangible rules to control specific tasks and issues within the company. Rather, he focuses on intangible qualities such as ideas, vision and shared values within the organisation to build effective relationships, find common ground to enlist the company staff and to give larger meaning to different activities in the change process. It would not be excessive to say that transformational, visionary leadership is the real magic behind the tremendous success of Amazon.com. According to Daft and Vershinina (2010, p. 584), the passion and enthusiasm of the online business in Bezos enabled him to secure millions of dollars financing from numerous investors. As noted, the company did not perform well for several years after it was established. However, according to Vershinina (2010, p. 584), Bezos continued to inspire employees with his vision of a new and uncommon kind of retailer as the company continued to struggle. Eventually, the company managed to achieve profitability and leadership in the business in 2002. Since then, Bezos has kept Amazon innovative with bold moves. A good example of this was the move to use Amazon’s operations, logistics expertise and technology to provide services to other services to other companies and entrepreneurs (Vershinina, 2010, p. 584). The leadership of Amazon places accountability of success in the hands of each of the company’s employees. According to Vershinina (2010, p. 584), employees of the company are rewarded for putting both their minds and their hearts in their work. Bezos spends considerable time with employees, patting backs and giving pep talks. He personally keeps on reminding employees on the front lines that they are the heart and soul of Amazon and that only through their efforts can the company succeed. As a result of this support, the company’s employees have been able to work hard to steer the company to success. Amazon’s online strategy in the wake of IT evolution Since the company attained command in the online business, Amazon has always focused on sustaining competitive edge through continuous innovation and change, as the Internet continues to evolve. The company’s leadership has always ensured that its website is well updated and organised in a way that it provides more convenience to customers who wish to purchase products online rather than wait for delivery (Frisch, 2011, p. 56). The leadership ensures that the site offers the best customer experience through enhanced speed and convenience. For instance, according to Frisch (2011, p. 56), Amazon allows customers to rate the company’s products displayed on the website. This enables customers to make informed purchasing decisions. Some customers may purchase and others may not, depending on their views. On top of this, the company has an instant order update feature which provides past information about the product they are interested in (Frisch, 2011, p. 56). For instance, the feature provides information on whether the product they are interested in or they are ordering was ordered during the previous years. Amazon.com’s consumers do not have to call all local stores to find a product (Frisch, 2011, p. 56). Amazon has formed partnership with Borders, which enables the company to direct customers to the closest store that offers the desired products. Also, by partnering with other international and local suppliers, Amazon has been able to provide more options for their customers. Consumers are only required to provide a zip code. Amazon has been able to achieve this through the use of Z-shops. These are online business retailers offering similar products to Amazon and who set up online shops under the Amazon umbrella. According to Frisch (2011, p. 56), this strategy enables Amazon to get as much information as possible on consumer purchasing habits. Another long-term decision made by Amazon’s management is to enhance a competitive product pricing strategy. The products displayed on the website of the company are based on menu pricing. According to Byers (2006, p. 10) “in menu pricing, the seller sets the prices of products and buyers decide if they are or are not willing to pay the price.” Amazon focuses on offering the lowest price on products compared to its competitors. Basically, the company passes savings which are derived from its operating expenses to its customers in the form of lower prices for the products it offers. Third parties using the site are allowed to set their different prices for their products and sell them alongside Amazon’s products. The success of this company is also as a result of successful diversification of their offerings to different products and services (Lopez, 2009, p. 12). Apart from using its website, Amazon offers differentiated content through partnership and alliances with other wholesalers and retailers. As a result, Amazon has been recognised by the largest number of online customers as a global bookstore that offers high quality products and services. Amazon’s advertising and marketing strategy focuses on attracting the interest of the targeted customers and building its reputation as a strong brand. The company has been creating affiliate websites that display its products which help in expanding its business market. In addition to the above strategies, Amazon has a “1-Click” program which helps to streamline the buying process by storing customer information (Lopez, 2009, p. 12). In short, the company’s integration of online operations and physical stores leads to great efficiencies in operations and great satisfaction to customers. Summary In summary, Amazon is one of the largest and most successful companies that exist online. The company offers a wide range of products which are displayed and can be purchased from its main website, Amazon.com as well as in other websites of affiliate companies. The successful performance of the company in online business is undoubtedly attributable to its effective leadership in the wake of IT evolution, specifically the Internet. The management of Amazon adopts a transformational leadership approach which is a key factor in enhancing good relationships within the organisation and between the organisation and consumers. Bezos, the founder and CEO of Amazon has been the central figure behind this organisation’s continuous innovation and changes which have enabled the company to cope with changes in technology and to meet changes in market needs. Steered by the company’s management, Amazon’s online strategy has been quite effective to meet the changing market needs. The components of the company’s online strategy include offering the best customer experience, effective pricing strategy, offering differentiated products and implementation of Z-shops and the “1-Click” program. Generally, the successful performance of Amazon can be attributed to the effectiveness of the company’s leadership through continuous innovation to cope with changes in technology. Recommendations Generally, as Lumsden, et al (2009) explains, e-commerce is a continuously growing area as the evolution of internet technology continues. The ability of businesses to effectively compete in the global market is going to increasingly depend on their use of e-commerce. As noted, effective management as well as brand reputation are some of the Amazon’s important assets, which steered the company to become a market leader in the online business. In order to sustain this successful performance in the global market, Amazon has to maintain its current reputation by continuously observing and addressing the needs of its customers. The ability of the company to continuously gauge the needs of customers as market needs change as well continuous development and maintenance of good relationship with customers is essential to its success in the future. Precisely, the company must continue developing and initiating technological changes as internet continues evolving. References Bass, R M & Riggios, R E 2006, Transformational Leadership, California. Bass, R M, Bass, R & Bass, R R 2008, The Bass Handbook of Leadership: Theory, Research, and Managerial Applications, Simon and Schuster, New York. Byers, A 2006, Jeff Bezos: The Founder of Amazon.com, New York. Daft, K M & Vershinina, N 2010, Management-International Edition, Cengage Learning EMEA, New York. Daft, R 2003, Management, 6th edn, Cincinnati, Thomson South-Western, Ohio. Frisch, B 2011, Who's in the Room: How Great Leaders Structure and Manage the Teams Around Them, John Wiley & Sons, California. Lopez, S C 2009, A Qualitative Study of an E-Commerce Organization in Transitions, ProQuest, West Sussex. Lumsden, G, Lumsden, D & Wiethoff, C 2009, Communicating in Groups and Teams: Sharing Leadership, Cengage Learning, New York. Robinson, T & Menon, M 2009, Jeff Bezos: Amazon.com Architect, ABDO, Washington DC. Read More