E-Business Trends of Amazon - Case Study Example

Table of Contents: Executive Summary: 2 Background of Amazon.com: 3 e-Business Trends: 4 e-Business Pattern 5 e-Business Design: 7 Enterprise Applications: 7 Customer Relationship Management: 8 Supply Chain Management 8 Recommendations: 9 Conclusion: 9 Reference List: 11 Executive Summary: The goal of Amazon.com is to become world’s most customer centric organization, a place where customers can visit and browse and find anything and everything they might want to buy online. The goal also includes offering customers maximum variety at lowest price. Amazon.com offers a large number of new and used items in categories including books, movies, music and games, digital download, computers, electronics, grocery, health, beauty, toys, clothing, shoes, sports accessories, auto tools, etc. Amazon.com has become the market leader in its market segment by efficiently using its CRM methodologies combined with technological backup and supply chain management. Introduction: The world is changing like never before, customers are becoming more and more demanding and competition in business is very stiff. In such a scenario, many companies have taken their business to the virtual world. The traditional way of doing business, called ‘brick and mortar’ cannot help businesses grow at the pace required. Companies are looking for new ways and platforms to grow the business at a rate that matches the growing expectations. To do so, companies have started launching business thru the web world. They have opened a whole new segment and a new platform to run their conventional business. Many businesses like buying and selling goods, grocery retail and bookstores are now available online. In this report we will be looking at one such business: Amazon.com Inc. Background of Amazon.com: Amazon, now a multinational e-commerce organization, started its operations in only USA when started. Its operations, spread across the world are controlled from Seattle, USA. Amazon.com is now US’s biggest retail chain having business online only[1]. It has outgrown its competition more than three times. The company was incorporated in 1994 by an American businessman Jeff Bezos, and its online operations started in 1995 with a book store. During the years it has expanded its operations in DVDs, clothing, consumer goods, software, consumables, furniture, etc. The company has also expanded its operations outside US and launched dedicated websites for UK, Japan, China, France and Germany. When the company started its online business, it started with a bookstore. It had a bog advantage that while the real bookstore can offer a limited number of titles, an online version of the same can offer extra titles without much investment. The organization was named Amazon after the longest river in the world. Its logo displays an arrow going from A to Z, which signifies that company wants to diversify its portfolio and to include a product from every letter in the alphabet.. The arrow is in shape of a smile which signifies happy customer. When launched, Amazon’s strategy was very different than other e-commerce companies. Most of the companies in the dot-com era looked to make immediate and large profits, whereas strategy of Amazon was not to expect short term profits and keep the long term view in sight. Amazon suffered some losses, but it grew steadily, while other companies were growing at a very fast pace. Many investors and stockholders lost interest in the company it was growing at a very slow rate and did not attain profitability soon. When the dot-com boom came to a sudden halt and number of organizations in the virtual world closed their business after the bubble busted. Amazon survived this and it started earning profits in the year ’01, the profits were not significant, only 5¢ per share. Since than company has been earning profits, but its cumulative profits are still negative. e-Business Trends: Amazon.com has always tried to be on the leading edge of technological developments, it has setup its software and process development centers across the world. These centers are located in UK, Ireland, India, South Africa, Romania, Japan, China and US. The website has also undergone transformation during the years to keep up with the changes in the business environment. A number of other similar companies have come up and started business in the same market segment as Amazon. Amazon.com has collaborated and has done acquisition of number of companies from across the sectors. This has given Amazon its diversified business. Some of the collaborated with whom Amazon collaborated are pets.com which is in the business of supplying pets at doorstep of customers[2], wineshoppers.com which is a kind of online wine shop, sothebys.com which is a very popular auction site, living.com which gave customers option to choose from its wide range of furniture online, drugstore.com which is a virtual pharmacy store providing 24 hrs services, homegrocer.com which is a e-grocery retailing portal, and many other businesses. The business model consisted of purchasing equity stake in the company and sharing profits. Amazon charged a fee to these partners for placing and promoting links on its site which routed customer traffic to their sites. Another source for revenues is by charging the publishers for placing their titles at prime locations on its webpage. Amazon.com has defined clear missions defined and it is communicated very clearly in following points: Improve the number of visitors to the website Spread the communication and increase number of informed customers Encourage customers to make purchases repeatedly Endorse items which provide increasing profits Improve the brand image of Amazon.com e-Business Pattern All the businesses operating in today’s world can be divided in two broad categories. They are namely: Brick and mortar: This segment of companies includes companies which do their business thru their physical setup only. The only point of contact with the customers is by its offices or stores or outlets. This name of the group can be misleading since the building construction may not necessarily be actually made from brick and mortar. The companies are not operating thru the online portals. Some major drawback of this business model is that the operating costs of the business are high, target population is limited and the variety of products offered can not be very large. Examples of such companies are local grocers and garment stores. Click and brick: This segment of companies operates from both thru the internet platform and from a traditional platform. Most of these companies are either the traditional businesses starting online business or online stores starting physical stores or outlets. In this case customers have option of doing their transaction either online or by actually visiting the store. The customer can book the order on the web portal of the company and then find the nearest store by using tools like store lookup and then collect the item by visiting the store. This mode of business is very successful because of its advantages. Some important advantages are reduction in capital cost, expanding the customer base, operating from multiple platforms helps in attracting different segments of target population. The existing infrastructure which a company has can be leveraged to excel in the new business platform. Traditional retailers also launch their business online to achieve economies of scale. E-portal: The companies which does not have customer interaction points in physical form and provides customer interaction only thru online channels, but requires physical setup for its support function are included in this group. Typical companies in this group attract customers to its webpage and after the customer place the order online and makes e-money transfer, use its supply chain and the physical infrastructure to deliver the goods to customer’s doorstep. Pure e: The companies which have no physical presence and dose not own any physical building and operate its business in the internet zone only are called pure e companies. Amazon.com falls under the category of e-portals. It offers its diverse product portfolio to the customers on its webpage, and after the order confirmation it is delivered to customer’s doorstep. e-Business Design: Since its inception Amazon.com has tried to be on the cutting edge of technological developments so as to provide better services to the customers. Amazon.com collects and uses data from customers about their past purchases and their search preferences. The collected data is used in data mining and used for a application which provides customers suggestions about the products they might like. Also used are the features like search inside book, which allows customers to search a particular keyword inside books and the feature returns the book page for this search. This can lead to many copyright violations. To avoid this issue, the search engine returns the page as an image which restricts printing this document. This application allows searching from more than 15 million titles[4]. To ensure that the entire book in not available to a user by searching a few keywords, there is a limit to the number of pages a user can view in a book. Users can also buy online access to an entire book online. Enterprise Applications: For ensuring that the complex supply chain and the customer interaction experience run smoothly and effectively, a number of enterprise applications are used. XML bases services are run on the Amazon Web Services (AWS)[6]. Most of the applications used are cross-platform application integration capable and developed using Microsoft .net and java platform. Web based Amazon SQS service are used for storing and processing customer data. All the applications and the entire database is designed so as to provide redundancies for backup and is configurable as required. Customer Relationship Management: Apart from the data management from customer interactions, another CRM initiative includes providing customers opportunity to rate each book and write reviews on each page of the website. Other customers can use this reviews and ratings to find a product of their choice. In the year 2002 it happened that because of a software problem[3], names of some reviewers appeared on the web page with the posts which were posted anonymously. It appeared that the author and publishers themselves wrote a positive review about the book on the website. To tackle with this issue, Amazon now provides an option to the customers to comment on the posts and reviews. Another feature allows the reviewers badging, which means that they can select whether to include their real name with the review or to include just a popularity meter by which customers can search a product. Supply Chain Management When managing products from each letter of the alphabet and supplying it to the customers across the globe, an effective supply chain becomes an integral part of the business. Amazon.com has collaboration with more than 140 publication houses and number of other suppliers and partners for supplies and distribution. Managing the process of procurement is another challenge. The effectiveness of the supply chain of Amazon.com reflects from the fact that in the entire year of 2008 it shipped more than 99% of the orders on time including the peak season and holidays [1]. In numbers it counted to over 4 million orders across 200 countries. It also supported the busiest day in the year effectively, which included delivering 960000 items in a day, that means 11 orders per second. It weighted over 400 tons and one truck left the Amazon warehouse every seven minutes. Recommendations: Amazon.com is one of the oldest and most successful companies in its segment. The company has survived the dot-com bubble burst and tries to give customers value for the money. Only thing the company lacks is a physical presence. Amazon is a well known brand and it can be utilized effectively to launch a chain of outlets. This move can help the company to enhance the reach to customers and gain access to the new market segment. Finally this can also help in enhancing the supply chain of Amazon by enabling the customers to collect the purchases from the stores near them. Amazon.com is a market leader in many countries it operates from, but in worldwide share, it is still behind some of the other companies like ebay. To tackle this, and to achieve leadership in all markets, it is essential that company provides customers what they need even before they ask. This can be done by implementing more sophisticated and integrated CRM applications and being more proactive about customer needs. Conclusion: Amazon.com has been in business since very long time and has made its mark in providing satisfaction to customers. This experience can be further enhanced by providing more attention to the customer need traits and by providing better services like outlets and stores. The business goal of Amazon.com is to provide customers most rewarding experience and make available anything and everything a customer wants and also provide it at a competitive rate. As more and more companies start supporting their businesses by their online operations and customer support, competition will become stiffer. Amazon.com will have to keep providing customers better experience each time to continue being a market leader. Reference List: [1]About us from Amazon.com website :available at www.amazon.com [2]G Linden, B Smith , Amazon. com recommendations: Item-to-item collaborative filtering, J York - IEEE Internet computing, 2003 [1]Robert Spector, get big fast‎, Business & Economics – 2002 [3]Kenneth C. Laudon, Jane Price Laudon , Management information systems: organization and technology in the networked, Business & Economics – 2000 [4]Gregory T. Huang , Amazon Plows Ahead in E-Books, Electronics, and Retail—An Update, 2009 [5]Amazon.com Case Study | Managing the Digital Enterprise: available at digitalenterprise.org/cases/amazon.html [6]Paul A. Greenberg, A Tale of Two Giants: Amazon and Kmart, 2003. Read More