Overview of the E-commerce Industry
Gone are the days when employees work on their desks for eight hours a day. Today’s employees want to utilize their productivity tools and interact with different individuals and groups in different settings. The technological advancement in wireless technologies has allowed workers and employees to access communication tools in new settings.
Research from Cahners In-Stat/MDR revealed that there are more than 78 million remote and mobile workers in the United States alone (Arora et al. 2001). It also states that the provision of access to mobile business applications and wireless access to the Internet to the workers and employees will be key priorities for business. On the other hand, a study by Access Markets International (AMI) Partners Inc. predicts that more than half (67 million) of the US domestic workforce will be mobile by 2006 (Bjorkman et al. 1997). This should create an enormous demand for wireless data/Internet solutions.
Analysis of the Macro Environment of the E-commerce Industry
The political trends that have emanated in the E-commerce industry simply verified that the people in most countries are aware of the possible benefits of the modernization of telecommunications and mobile computing. The overall economic outlook suggests that there are countries that are ready to embrace the new technologies that could be possibly brought about by Amazon.com. The large number or Internet users in various countries suggest that people in these countries have adequate knowledge on Information Technology to be able to patronize products being sold in Amazon.com
BUSINESS MODEL for AMAZON.COM
The subscription business model via an online bookstore has been widely used by most electronic commerce companies like Amazon.com, but the application of this model has started to spread up to this time. Instead of selling the products directly, Amazon.com nowadays is doing the process of selling their monthly or yearly access to a particular product or service. As a result, the company is able to convert a one-time sale of a product into a recurring sale of a service.
Effect on Amazon.com
Amazon.com surely benefits because of the fact that they are guaranteed of a constant revenue stream. This significantly reduces the uncertainty and the risk-taking of Amazon.com. Also, the subscription pricing structure of the company is carefully designed in order to make sure that the revenue stream from the recurring subscriptions could be significantly higher than the revenue coming from simple one-time purchases. This also induces the increase of the company’s sales through disallowing the subscriber’s option to either accept or reject any specific product. This triggers the reduction of customer acquisition costs, and allows the implementation of a personalized marketing or database marketing.
However, subscription business models also have their disadvantages. Amazon.com needs to invest to a large infrastructure in order to help in the management and monitoring of subscriptions.
Critical Success Factors
For Amazon.com to be a viable player in the electronic commerce industry, the following success factors are critical:
· Financial Stability
Financial stability is crucial especially in the pursuit of research and development activities. In the electronic commerce industry, it is important to remain updated with the latest technological developments to be able to stay competitive in the market.
· Product Performance and Price
Excellent product performance comes as a result of well-funded research and development activities. The strong performance of products in Amazon.com could also be linked to their cost-effectiveness. However, the company has to be aware of the positioning in terms of process so as to maintain satisfactory profits margin and remain competitive in the market.
· Marketing Strategy and Distribution
High brand awareness among the buyers has created the need for aggressive marketing, and access to strong distribution channels is critical for the introduction of new products.
Amazon.com SWOT Analysis
Strengths:
- has products that boast of a very powerful retail. This includes a reputation for value of money, convenience and a wide variety of products
- has grown significantly over the years, and has experienced global expansion.
- Its main competence lies on the use of information technology (IT) to fully support its international logistics system. Therefore, Amazon.com can see how their individual products perform within the United States, or even at stores at a glance. IT also supports the company’s efficient procurement.
- is able to deliver good customer care, as the limited amount of work would mean plenty of time to devote to customers.
- The company's lead consultants have established a strong reputation within the market.
- can afford to change direction quickly if its management finds that the company’s marketing strategy is not effective.
- has little deficits and overheads. Therefore the company can offer good value to customers on a consistent basis.
Weaknesses:
- is one of the world's largest company in electronic commerce but has a weak control of its empire, despite its IT advantages. This could lead to a decrease in productivity in some areas where they have the least control of.
- Since Amazon.com sells products across many sectors, the company may lack the flexibility that some of its more focused competitors possess.
- Operates globally, but its presence is located in only relatively few countries worldwide.
Opportunities:
- Taking over, merging, or forming strategic alliances with other e-commerce companies while focusing on strong markets like Europe or the Greater China Region.
- The branches of Amazon.com operate only on trade in a relatively small number of countries all over the world. Thus, this would open the opportunities for future businesses in expanding various consumer markets, such as those in China and India.
- Opportunities exist for Amazon.com to continue with its current strategy of establishing large branches worldwide.
- Amazon.com is continuously expanding, with plenty of future opportunities to exploit for success.
- The competitors of Amazon.com may be slow to adapt to new marketing strategies especially the ones that the company releases.
Threats:
- Being number one means that is the target of competition, the company to beat, both locally and globally.
- Being a global retailer means that Amazon.com might be exposed to political problems in the countries where the company has operations.
- The latest developments in information technology which could possibly change the markets might challenge the company’s ability to adapt to these changes
- A slight shift in focus of a large competitor might wipe out any market position that Amazon.com has achieved over the years. This could force the company to specialize in rapid response but good value services to local businesses. This would put so much pressure on the company’s consultancy staff to keep informed with the latest changes in technology where possible.
Amazon.com’s Competitive Advantage
Among the competitive advantages enjoyed by Amazon.com are:
· Economies of Scale and Scope in manufacturing and research and development arising from its numerous facilities situated in the United States and other countries worldwide.
· Unique Quality Technology owing to heavy emphasis on research
Amazon.com’s commitment to research & development activities has always been one of its top strategies to remain competitive in the market.
· Differentiated Products
Through the production and marketing of differentiated products originating from their research and development activities, Amazon.com is able to create its own firm-specific advantages. The continuous pursuit of research and development processes enables Amazon.com to produce a steady stream of originally differentiated products which makes it difficult for competitors to find substitutes. Because of this differentiated approach, the company is able to market their products worldwide, which enables them in turn to maximize the returns on research and development expenditures.
Amazon.com's competitive advantages could be sustained provided the company would continue to focus on its core competencies (inside-out approach). However, the company also has to be aware of the latest technological changes (outside-in approach).
STRATEGIC ASSESSMENT
Deriving from the gap analysis between the environment, strategy and capabilities, many strategic options would become imperative. It is therefore essential to evaluate these strategic options as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders.
A. Business Level StrategyThere is definitely a need to reconcile both the inside-out and outside-in capabilities. While Amazon.com’s business strategy involves focusing on its core competencies with market position following its resource base, the company will be put into a disadvantageous position should it choose to neglect both the macro as well as industry environment. Therefore, Amazon.com has to be aware of the latest technological changes, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as market sensing, customer linking, channel bonding and technology monitoring.
The advantages enjoyed by the company may come in the form of increased revenues. Knowing what the market demands and the latest trends could help Amazon.com fully exploit its research and development capabilities to come out with products which are not only cost-effective but also high in quality and performance. The strategic option can even be used as marketing tool where the focus is on staying close to your customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the company.
Nevertheless, the mentioned strategic option seems the most practical in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long the company’s core business is not threatened. By virtue of Amazon.com’s centralized control of its subsidiaries, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of Amazon.com’s operations.
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