Question about Strategy of Amazon

Solution Preview

---

Introduction

Amazon.com is amazing online super mart selling numerous items including book for which it is famous for. Now it is one of the world's leading online retailers with over 17 million customer accounts in over 150 countries. The company sells books, music, DVDs, videos, toys, electronics software, video games, home improvement products amongst others. Through its marketplace services- amazon.com auctions, zshops etc. the company has created web-based marketplaces where buyers and sellers enter into transactions involving a wide range of products.

As the company states in its 199 10-k:

"We offer our customers a superior shopping experience by providing high value through selection, convenience, ease of use, low prices, product information and an intense focus on customer service. We are a proven technology leader, having developed electronic commerce innovations such as 1-click technology, personalized shopping services, easy to use search and browse features, secure payment protections, and wireless access to our stores."
In their 2005 SEC filing, Amazon describes the vision of their business as to:
"Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise."

1. Analysis of Strategic Factors

SWOT Analysis
Analysis of External Environment

Socio & Economic Factors
One has monitor the economic trends like GDP trends, Interest rates, Money supply, Inflation rates, Unemployment levels, Disposable income. It has to identify the growing target segment and introducing new products and services to meet their needs.
They have to provide convenience, quality, speed and top notch products and services
to attract new customers and to retain the loyal existing customers as well. In today's modern and fast-paced world, people are constantly looking for ways to help them better manage their time. People strive to make their life better, and this home based shopping has the potential to fulfill all of these needs. Thus there is opportunity in targeting busy individuals who don't have the means, energy or time to visit the physical malls globally.

- Technological Forces
Technology is continuously changing and improving. Amazon had embraced the latest technologies, but now it has to do it more to provide superior services at less cost. It has to handle the issues of privacy, security effectively.

-Political Legal regulations

As an organization it should also be aware of economic, tax and business laws. One should also be aware of foreign trade regulations, attitude towards foreign companies as Amazon is a multinational company.

- Alliances
There is lot of opportunity for the alliances with the manufacturers, retailers, suppliers and other websites. Infact they have made lot of alliances like with the Target, Toys-R-Us etc.

Competition
Industry Analysis
The Online retail industry including books have become a fierce business which involves discounts, varied selections and fast delivery in which all the companies are challenging each other.

Buyers

The consumers of this industry can be found in every corner of the globe. The online shoppers has increased dramatically in recent years due to the convenience of shopping in the comforts of the home and the accessibility of the Internet. These developments have made it easier for consumers to log on and buy on the Internet. Consumers also tend to compare prices among the retail leaders such that buyers are able to buy products with very big discounts compared to ones bought in "actual" retail outlets. The bargaining power of the consumer is based on the competitive strategies of each active firm in the industry. Thus, consumers can challenge one firm for charging more than the other one such that the firm will beat the price of the competing firm.

Suppliers

Suppliers range from the publishing and media houses to electronics' manufacturers. For example, Amazon buys all their books, videos and audio CDs from the multi media houses and publishing giants such as Time Warner, Doubleday etc.

Substitutes

The substitutes for it and other online bookstores are the "actual" book retailers and music stores such as Barnes and Nobles, Virgin Megastore, Tower Records, Sam Goody and other small mom-and-pop outlets. With the rise of online retail, there will be little impact from these substitutes. One impact would be some consumers who would like to hold or listen to their purchases prior to buying and those who are into the whole "shopping experience". Barnes and Nobles have jumped into online retail and have succeeded into diversifying into the new e-commerce industry.

Degree of Competition

Due to the shift of focus for Amazon, it has become the "Earth's biggest anything store". The other competitors have expanded from just online book retailers Barnes and Nobles and Borders to top audio retailers CDNOW.com and online auction house EBAY.com.
They have also competition with yahoo, Google, msn etc.

External Factor
OPPORTUNITIES
Economic development of Asia and other developing countries
Trend of consumerism and online business increasing
Opening up through WTO
Opportunity of Alliances
Business 2 Business transactions are also increasing considerably.
Threats
Increasing government regulations
Strong regional competition
Technological changes and emergence of new technologies
Foreign trade hindrances
Cultural differences especially in foreign country.
Legal, security and privacy issues
External Factors Weight Rating Weighted Score Comments
Opportunities
Economic development international and the opening up through WTO

0.20 4.00 0.80 Currently in the USA -recession But in other parts of world is experiencing growth (global economy)

Trend of Online business increasing 0.30 4.00 1.20 Lifestyle changes, population, Demographics favor retailing and consumerism.
Threats
Increasing governmental regulations and obstacles to expanding international 0.10 2.00 0.20 Anti trust regulations harder to handle and foreign trade regulation. Cultural differences in foreign countries.
Strong Regional Competition 0.15 2.00 0.30 Increased competition through Ebay, Yahoo, google
Technological changes and challenges of privacy, security 0.25 1.00 0.10 Using the Internet effectively to increase the reach and reduce the cost. To handle issues of privacy etc.

Totals 1.00 2.60

Strengths:
1. Customer Intimacy

The degree of customer intimacy, community building, and one-to-one marketing is the forte of Amazon. While it can be argued that Amazon has successfully created a "community feel" with its customers, and by virtue of its omnipresence and comprehensive information management systems have garnered superior knowledge of consumer purchasing habits. Thus we can say that Amazon excels at customer intimacy. This can be supported by the fact that it is one of the most popular websites globally. It is successful in providing complete end to end consumer experience---right from the promise to satisfy his need to its delivery. ...