Assignment 2: Amazon.com's E-Business Model - Essay Example

During the fourth quarter of 2010, the company recorded high sales volume with an annual revenue of 38% (Amacon.com, 2010). Pros and cons of Amazon’s growth and diversification of business and specialization The adoption of business diversification by Amazon is very important because has enabled the business to expand its market share. This is important in overcoming the issue of seasonality where some products could be selling while others are not. This is because the demand for the various products varies differently as well.

Diversification boosts the image of the business due to its extensive presence in the markets of various products and customers can choose it as a one-stop-shopping place. Lawless (2009) states that the main disadvantages of business diversification are difficulties in attaining greater brand recognition and meeting the needs of customer in the various market segments. An increase in operations and products offered has increases the complexity of the business and a resultant strain on the management.

This could limit Amazon’s growth, damage their financial reputation and negatively affects the businesses operation results. Amazon should therefore consider dealing with a few related products in order to endure total commitment to its development and use. Alternatively, they could split the company into different brands that will fully concentrate on their specific product lines. Those competitors who have specialized in a single or few products have greater chances of securing better terms from vendors and devote more resources to marketing.

They are also to achieve better brand recognition and adopt more aggressive pricing. The company should have therefore specialized in a short range of products to counter strong competition through customer needs satisfaction. One advantage of specialization is that the business will devote more resources in the development of its specific market inventory and fulfill orders (Lawless, 2009). Impact of splitting Amazon into a family of brands It is possible for Amazon to split into a family of brands each having its own public face but a running under the same parent company.

Examples of these brands could include Electronics, Supertoys or Amazon books. If this happens, the complexity of management process will be reduced and this will enable the company to develop and expand faster. This is mainly because each of these brands will be singly devoted to expanding its market share using the most appropriate ways. Each one of them will seek to achieve better business terms from vendors and aggressive pricing. They will also be able to sufficiently monitor the trends of products and prices of their competitors.

Subdivision of Amazon.com into brands will reduce pressure on operational processes, finances, personnel and other resources. It will also eliminate complications arising from the mix of product sales by Amazon.com and other sellers, mix of suppliers and different payment times. Each brand will have a limited range of products to offer and this means they will be able to achieve a good brand positioning for their limited products. If they maintain and expand their network of sellers, they will record increased levels of sales and profits for each of the brands.

By giving maximum concentration to a specific market segmenting, each brand will be able to focus on the needs of their specific customers.