Amazon vs. Borders Books - Essay Example

? Amazon.com vs. Borders Books Amazon.com vs. Borders Books Amazon.com is currently one of the topmost online book sellers in the world. It was started in the mid-1990s and was not profitable in the first few years. However, with innovative business strategies, it overcame the initial challenges and became the leader in online book selling. On the other hand, Borders Books was the second largest book seller in America. It was started in 1971. Until 2004, Borders faced little problems and was running profitable; however, after 2004, it started to face many management and business problems which forced them to file for Chapter 11 in 2011. This paper compares and contrasts the history, business approach, management, and marketing of Amazon.com and Borders Books in order to know more about the reasons of Amazon’s success and Borders’ failure. History and core business of Amazon and Borders “Amazon.com was founded by Jeff Bezos in 1994 in America” (Amazon.com, Inc., n.d.). It is a multinational company at present with headquarter at Washington. In the beginning, Bezo’s primary intention was to make Amazon a big company in online book selling. It should be noted that internet technologies were started to develop more rapidly during this period and Bezo correctly calculated that online book selling has tremendous potentials. However, he faced several unexpected challenges during the initial periods which forced him to diversify the business into other areas such CDs, videos, DVDs, electronics, toys, tools, home furnishings, house wares, apparel, and kitchen gadgets etc (Amazon.com, Inc, n. d). Amazon was registered as a public company in 1997 and in 1998; it started online music and video business. In the subsequent years, the company diversified further to other business portfolios such as toys, electronics, tools, and hardware etc. In 2008, the company entered in the film production business also. They have several customized websites for each country and region at present. Borders Books was founded by brothers; Tom and Louis in 1971 while attending their undergraduate course at Michigan University. Borders met with immense success from the beginning itself and it started to grow much more rapidly than expected. During its expansion process, Borders bought many small and larger book selling firms such as Wahr's. Having seen the huge growths of Borders, Kmart acquired it in 1992 and renamed the company name as Border Group. It started international expansion during the latter periods of 1990’s and started its first international office in Singapore in 1997. Subsequently the company was expanded to many other overseas countries and was in good shape till 2004. However, it started to face many problems from 2004 onwards and currently one the verge of destruction. It filed bankruptcy suit for closing its 200 stores in 2011. Comparison of the management approaches each company took to Internet marketing and sales Amazon formulated many strategies to keep the visitors for longer periods in its website. They were aware of the fact that spending more time by surfers in their website may definitely increase their sales. They did everything possible to tie up the visitors in their website. Since majority of the internet surfers are teenagers, Amazon focused more in catering the needs of the teenagers while they visit Amazon’s website. In short, Amazon’s internet marketing strategies were primarily based on the teenage community. Advertising, E-retailing, Channeling, , Affiliation, Franchising, Subscription etc were some of the internet marketing approaches developed and implemented by Amazon management for exploiting the market opportunities. On the other hand, Borders committed so many strategic blunders which brought many challenges to the existence of the company. For example, “Borders made a major strategic error in 2001 when it handed off its online business to Amazon”(Wahba, 2011). Instead of exploiting the opportunities in online business, Borders tried to stay away from it. They thought offline business alone may help them to make more profits. Moreover, management Gurus at Borders calculated that it is necessary for the company to limit its focus on its core business area which is offline book selling. They assumed that more time spent for internet marketing may affect their offline business. In short, Borders did everything opposite to the necessities of the modern business world. 3 reasons for Amazon’s success despite not turning a profit for the first five to six years Amazon did not focus on profits for the initial five years and spend much of its revenues for the expansion process in the initial years. The above strategy helped the company to cement its place in online book business. It helped the company to develop necessary infrastructure required for the future development prospects of the company. In short, amazon gave more emphasize to long term goals and therefore initial losses were not much affected them in the long run. The second reason for Amazon’s enormous success is its Online and Offline business strategies. Online auction is one of the major business strategies implemented by Amazon to attract customers. It brought many benefits not only to the company, but also to the customers. Auction helped the customers get products from amazon at an affordable rate. The customers were able to place their bids and change it based on the bids of others so that they could get the products at a reasonable bargaining price. “The site, which includes person-to-person and small-merchant auctions, includes thousands of items for auction by more than 100 merchants. Anybody can post anything in 800 different categories at Amazon’s auction area” (McNaughton, 1999). Efficient supply chain management (SCM) is the third success factor for amazon. It is the process of controlling the movements of goods or services from suppliers to buyers. Amazon customers never faced any trouble with the shortage of any items they ordered. In other words, Amazon always kept sufficient stocks based on the demands. SCM systems in Amazon are one of the most efficient, sophisticated and advanced one in the world. Bacheldor (2004) has pointed out that “Homemade applications handle nearly every aspect of its supply chain: warehouse management, transportation management, inbound and outbound shipping, demand forecasts, inventory planning, and more” (Bacheldor, 2004). 3 reasons for Borders failure The major reason for the failure of Borders is its lack of ability to adapt with the needs of the changing world. As mentioned earlier, at a time when online business was growing rapidly, Borders stopped their online business activities by selling its online book selling business to Amazon. Current generation are increasingly relying on internet for their purchasing needs. Borders failed to know that truth and instead of expanding its online business activities, they stopped it completely. “The bookseller suffered a series of management gaffes, piled up unsustainable debts and failed to cultivate a meaningful presence on the Internet or in increasingly popular digital e-readers” (Spector & Trachtenberg, 2011). “Borders was hobbled by store leases that ranged between 15 years and 20 years. That hamstrung its ability to get out of poor locations” (Spector & Trachtenberg, 2011). Another reason for the failure of Borders is its leasing habits. It established stores in poor locations without proper evaluations of the business prospects. They failed to realize the fact that a substantial portion of the current readers are depending internet for their reading requirements and the number of book buyers are getting decreased as time goes on. Too much overseas expansion was another major reason for the failure of Borders. The company thought that internationalization of business is necessary to reap the profits of globalization and they established many units in overseas countries. However, many of its overseas units brought more loss than profits. The extent to which the management of each company adapted to changing market  conditions  The management of Amazon adapted wonderfully to the changing market conditions whereas Borders failed to do so. While Amazon was quick to realize the opportunities in online business, Borders failed to recognize it. Amazon has introduced customer friendly websites to attract the online customers whereas Borders relied heavily on the abilities of sales staff in selling their books from its store. Amazon produced innovative websites with the help of modern technologies to communicate effectively with the customers. Interactive components-real-time chats, message boards, online events, etc were some of the facilities available in amazon websites. On the other hand, Borders stayed completely away from its online customers which was a major blunder committed by the company. 3 ways a company should build in flexibility to back up its decision-making process  so as to adapt to changing market conditions  Social networking sites are getting rapid acceptance among the people and business people can use it for marketing their products. The feedbacks obtained from social networks can be used effectively for decision making. Competitive tracking plan is another way of building flexibility in decision making. It is necessary to identify the competitors and their products and activities to fine tune the business strategies. It should be noted that competitors can force a company to think differently. For example, majority of the mobile phone manufacturers all over the world are currently producing touchscreen phones in order to counter the threats from Apple’s iPhone. Change Management is the third way through which a company can build flexibility in its decision making. At present customers are dominating and the companies are at the receiving end because of globalization and the subsequent increase in competition. Building relations with the customer is the all-important business function at present. Conclusions Amazon was excellent in realising and seizing business opportunities whereas Borders failed to assess the market conditions properly which resulted in its bankruptcy. Amazon realised the changing customer requirements and implemented many online and offline marketing strategies to exploit it whereas Borders tried to survive with the help of traditional marketing strategies. References Amazon.com, Inc.(n. d). Retrieved from http://www.fundinguniverse.com/company-histories/Amazoncom-Inc-Company- History.html Bacheldor, B. (2004). From Scratch: Amazon Keeps Supply Chain Close To Home. InformationWeek . Retrieved from http://www.informationweek.com/news/software/productivity_apps/showArticle.jhtml?articleID=18300054 McNaughton, K (1999). Amazon auction launch boosts shares. Retrieved from http://news.cnet.com/2100-1017-223611.html Spector M. & Trachtenberg J.A.(2011). Chapter 11 for Borders, New Chapter for Books. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052748704329104576138353865644420.html Wahba P. (2011). Borders files for bankruptcy, to close 200 stores. Reuters. Feb 16, 2011. 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