Amazons Core Value Proposition - Essay Example

E-Business and Value Chain Summary This project is based on analysis of e-business models employed in the operations of Amazon, QXL ricardo plc and Daum. Amazon is analyzed as a storefront e-business model of which allows the company to provide different services directly to users of their website. It is also noted that Amazon operates a shopping cart system used in selection of the most preferred merchandise. Amazon’s core value proposition is based on provision of easy access to specific goods and services through personalization of customer information, which is stored in the company database for the benefit of repeat customers. The source of revenue for Amazon is mainly from direct sales of items ordered and processed by customers. QXL ricardo plc operates through auction model of e-business where bidders and sellers are connected to undertake different transactions. Commissions are identified as the main source of revenue and are based on what has been agreed upon between site administrators and seller of merchandise. QXL ricardo plc has introduced a number of innovations such as live auctioning which resulted in combination of internet and television in the process of auction to involve viewers therefore attracting more users. Daum Communication Corporation is the third business organization analysed and operates using portal model of e-business with horizontal portal being specific system used to offer content from different areas potential users of company portal are interested to visit. Core value proposition for Daum is based on user access to a range of content on different topics and services offered by Daum. Duam earns revenue from sales of different services and products while also providing an advertisement and database-marketing platform. Introduction Analysis of different business models is an essential practice which helps in understanding available methods of doing business more suitable for a company to sustain its operation through generation of revenue. It is possible to use business model to identify how a business makes money and therefore be able to determine its position in the value chain. In order to tap into potentials presented by scientific and technological development of internet and computer technology, companies have developed different business models. These business models that are web- based have taken advantage of benefits of personalized service, high-quality customer service, and improved supply chain management that can be generated from conducting an e-business. To understand how different e-business models function, this report will investigate operations of Amazon, QXL ricardo plc and Duam Communication Corporation which are e-business companies based on different business models. Amazon Amazon is one of the most globally recognized e-business especially when considering application of shopping-cart technology in this model of business engagement. Amazon generates revenue from operating an online retail store where consumers of different products can easily access their preferred items. Since entry into online retail market in 1994, the retailer has rapidly grown to be among most successful business organization in the world where it serves over 17 million customers in about 160 countries. When Amazon was introduced in to e-business market platform, it operated as a mail-order book retailer but their line of products has extended over the years to include electronic cards, videos, music DVDs, electronics and beauty items. Amazon.com operates a system where consumers can easily access company catalogue and navigate through millions of products to identify their preferred products (Deitel, Deitel and Nieto 73). For Amazon, their core value proposition involves offering a rich database on company server which allows customers on client side to search for products in a variety of ways based on a method called client/server application (Tomsho 45). Customers are also involved in creating value through establishment of an online interactive forum within company website. As a highly networked e-business, Amazon has developed online communities to drive its direct online sales through formation of ‘community of interests’ (Amit and Zott 507). This platform allows customers who have purchased from them to get back to their website and write book reviews based on particular books they had purchased. Such platform improves sales as it potential customers get to read review and merits of purchasing a particular book. The database customers access by logging into their website present customers with options including product specifications, availability, shipping information, stock levels and on-order information. Customers can easily cross-reference available products where for instance a novel may be listed under a range of categories that might include fiction, best-sellers and recommended titles to use in search engine. Repeat customers also get additional value as their information is personalized into their accounts since the database stores all previous transactions. Maintaining customer history ensures the company has customer information such as past items purchased, shipping and credit-card information which when customer returns to the site ensures they are greeted by name and lists of recommended titles presented to them according to available information on previous purchases (Deitel, Deitel and Nieto 73). Introduction of personalized services at Amazon is an innovative approach to the retailer’s approach in e-business. This is because personalization of information through searches customer patterns and trends among clientele performs a role that would otherwise be done by a sales representative team. Consequence of this approach is that the organization is able to drive sales without need for human interaction in terms of employing sales representatives who will identify customers with needs for particular services or products. Therefore, Amazon has been able to cut costs that would have been undertaken to hire additional staff to handle marketing and promotion of new products (Deitel, Deitel and Nieto 73). The process of purchasing a product at Amazon involves performing simple steps that begins at Amazon.com home page and identification of type of product one wants to purchase. For instance, if one wants to purchase a specific book, it can be located using Search Box in top-left corner of home page. On search box, select Books which should then be followed by typing title of the book into window a process that leads to product page designed for the book. To purchase chosen item, pick “Add to Shopping Cart” option on top-right corner of the page for processing of information about items and listing of all products in shopping cart (Deitel, Deitel and Nieto 73). There is also an option to change aspects such as quantity of items selected but if one is ready to order, one proceeds to checkout. For first users of this service, they are prompted to fill out an identification form with personal information such as name, billing address, shipping address, shipping preference and credit-card information followed by a request to enter a preferred password to be sued in accessing account data in all future purchases. The customer then places the order after confirming that the included information is accurate. Another advantage of personalized information is when repeat customers access company database using 1-Click SM system that allows such a customer to reprocess information on payment and shipping entered in previous transaction (“About 1-Click Ordering…”). For repeat customers their orders can be processed by just one click of the mouse. This is a convenient way of making purchases and is an excellent example of how internet technology has been used in an intelligent manner to create a database application that makes online business transactions faster and easier. Based on different aspects of operations conducted by Amazon, the company can be categorised as one caring out business under storefront e-business model. Storefront e-business model involves companies that combine transaction processing, security, online payment and information storage in a database created to enable merchants sell their products on the Web (Deitel, Deitel and Nieto 72; Anumba, and Ruikar 13).In this business model, buyer and seller interacts directly through internet in operations by companies commonly referred to as B2C (business-to-consumer) companies. As is evident in operations conducted by Amazon the role of business owners in storefront e-business model is to organize an online catalogue of products, process orders placed on Website, process payment through a secure system, ship products to customers and manage customer accounts and data in them. Along with operating a storefront e-business model, Amazon also operates under shopping cart form of business where technology allows customers to accumulate merchandise they want to buy as they proceed to identify more products they wish to buy with shopping cart being supported by a product catalogue hosted on merchant server. Consequently, although Amazon has followed storefront business model as well as operating in a B2C approach the company has included innovative practices through personalizing customer information that benefit both customer and business (Deitel, Deitel and Nieto 72). QXL ricardo plc Another e-business company is QXL ricardo plcwhich is a result of merger between QXL from Unite Kingdom and Ricardo based in Hamburg, Germany (Sabbagh). The company provides an online platform where buyers and sellers meet to conduct sales transactions involving different products. For the organization to be successful in attracting any sellers to its website, it must apply an effective strategy that attracts potential buyers while also maintaining a high number of repeat buyers. QXL ricardo plc therefore operates auction model of e-business as it provides a platform where users log-on and assume role of either bidder or seller. Logging as a seller allows one to post an item they want to sell followed by specifications about minimum price for item and a deadline to end auction process. Bidder has to log in and search for a particular merchandise to determine availability, monitor bidding activities taking place at the time then place a bid. QXL ricardo plc has incorporated a number of European languages to facilitate its consumer-to-consumer and business-to-consumer auctions in various European countries and currencies. online website presents buyers with a platform to bid on merchandise and services such as computer software and hardware, consumer electronics, household electrical devices and sports equipments from across Western Europe (Chen 155).While sellers are attracted to a site with many potential buyers, buyers will also want to use a site where there are multiple sellers to increase their freedom of choice. However, Amit, and Zott notes a single buyer does not have any immediate advantage due to presence of multiple buyers on the site (507). The authors note that presence of additional buyers attracted to the same commodity is instead detrimental to desires of a particular buyer as this might prevent a purchase of particular merchandise by buyer. Given that online auction business model has historically been dominated by eBay (Deitel, Deitel and Nieto 75), QXL ricardo plc has had to introduce new approaches to conducting business in order to rival this dominance. For instance, the business, which had traditionally functioned in a consumer-to-consumer (C2C) approach, had to launch its business-to-business (B2B) auction format to increase number of buyers and sellers who prefer the site. The B2B auction format was launched in form of recardoBiz.com site which offers flexible price trades, trade information, and discussion forums for buyers and sellers interested in different merchandises (Dubosson‐Torbay, Osterwalder and Pigneur 8). After buyer and seller have agreed on prices for merchandise, terms and conditions under QXL ricardo plc site operations allows them to agree on payment and delivery method. It is after price of merchandise and process of payment has been agreed upon that administrators of QXL ricardo plc determine financial compensations they will get from sales. QXL ricardo plc therefore earns revenue from commissions resulting from sales of different merchandise on their website. The percentage earned is determined through prior agreements on percentage from actual sale that will be withheld by the company. To improve level of trust towards the website, the company has included a rating system for both repeat sellers and buyers that ensure people get back to their history when conducting future business on the website. The rating system is an effective measure in increasing the buyers’ trust in “fairness of transactions and therefore fosters stickiness” (Amit and Zott 507) while also preventing repeat sellers from cheating. However, this is not an innovative approach for QXL ricardo plc as competitors such as eBay also have a similar initiative to ensure sellers and buyers and refrain from cheating in process of transacting. Where QXL ricardo plc claims be an innovative leader is in combining auction process conducted over the internet with other device such television and mobile technology. In this regard, QXL Ricardo plc was the first online auction company to conduct live auctioning through television. This was a step towards embracinginnovative practices in product offerings by demonstrating a willingness to combine other technologies such as TV and mobile devices with the Internet.QXL.tv a subsidiary of the company pioneered the concept of live auction and continues to be leader in the field based on networks ability to convey real-time interactive auctions through a multi-platform technology to a global viewership (Dubosson‐Torbay, Osterwalder and Pigneur 8-9). Daum Communications Corporation (Daum) The third business organization for this project is the Daum founded in 1995 with headquarters in Jeju, South Korea and a provider of on-line advertising and transaction services in Korean industry. Among range of services provided under Daum are search services that include information on weather, movies, everyday lifestyle information in addition to specific information on areas such as real estate, maps with direction to particular destinations and shopping. Apart from PC based services, Daum also provides mobile services on internet enabled handsets and Smartphone where services offered includes a search engine, email services, maps, news, stock market updates, and coffee shop services, update on traffic, real estate contents, and weather forecasts. Apart from these services, Daum also provides other services such Daum blog, content services comprising Daum Finance, Daum Sports, Daum Entertainment, and Daum TV, on-line ad sales and marketing and CRM solution (“Daum Communications Corp”). Based on activities undertaken by Daum, the organization follows a portal e-business model. The portal model follows concept that it is possible for a website to offer almost everything that consumers might need from an online platform. Given range of activities that Daum allows visitors to the site to access, the site can further be categorized as horizontal portal as opposed to vertical portals, which offers specific information that covers a single area of interest (Currie 25). Given that portal industry is an area that is evolving at fast rate, Daum has been up to speed with evolution as seen from transformation of PC-based online portal service provider into provision of anywhere and everywhere media based on provision of content on all types of digital devices, including mobile, Digital View and Smart TV. Establishing its presence in all digital fronts in addition to creating a portal where users can access almost everything is an area of strength for Daum as users are attracted to the site that guarantees easy access to a range of important information. Consumers increasingly prefer sites that provide convenient access to information on different areas of their lives since they will not have to waste time searching for particular information from alternative sites (“Sustainable Management”). Although the organization has been innovative in creating a system that offers multiple solutions to different needs of users while also increasing accessibility through introduction of services in different platforms such as mobile technology, competitive nature of the portal model of e-business calls for such moves. This is not a unique innovation as other portal service providers are also employing similar approaches in their bid to attract more users. Apart from revenue from sale of merchandise and marketing operations, advertisement is another major source of revenue for Daum. Advertisers are sources of revenue for the organization, as they have to pay for viewership of their services by users of the portal. To generate high numbers of users, Daum must therefore promise users provision of everything they need in addition to provision entertainment through contents such as Daum Sports, Daum Entertainment, and Daum TV. Operating as a horizontal portal is also an area of strength as services offered attracts a wide audience based on needs of every user who are attracted to the site which acts as a gateway to multiple contents and services (Canzer 102). Additionally, the organization must mix both paid and free services to be able to generate revenue and therefore remain competitive in an industry where there is competition from global players such as Yahoo!, About.com and Hotbot.com (Deitel, Deitel and Nieto 78). Therefore some of free services includes provision of text, image, audio and video content to users in order to increase flow of users to the portal. Users are also provided with paid services for premium contents to ensure the organization generates revenue from selling service and products. Offering free services does not mean a loss for Daum as these free services lead to involvement of users in value creation through participation in rating their experiences of different products while also getting a chance to take part in blogging platforms provided by the portal. It is however from sources such as advertising on the portal and database marketing that Daum earns most of its revenues from B2B model where different organizations would like to advertise their products and services on the portal while also benefiting from analysis of different markets created by Daum. This respect, Daum functions in a similar manner to traditional media and entertainment industry based on content, entertainment, and creation of a community with this functions being compared to that of both online and offline providers of content such as video, audio, image and text. Conclusion This project has analysed business models employed by Amazon, QXL ricardo plc and Daum where it has been determined that although the three businesses apply e-business approach in their functions, each one has a specific e-business model which informs operations undertaken by the organizations. Based on analysis of operations undertaken by Amazon, the retailer has been found to operate a storefront model of e-business. Storefront e-business model allows Amazon to provide different services directly to users of company website. The company also operates a shopping cart system, which has been found to be most effective in determining number of purchases one wants to make. Amazon’s core value proposition is based on provision of easy access to specific goods and services through personalization of customer information that is stored in the company database to benefit repeat customers. Source of revenue for Amazon is mainly from direct sales of items ordered and processed by customers. Subsequent section of this report is on operations of QXL ricardo plc which runs an online platform where buyers and sellers are connected to undertake different transactions. Based on approach taken by QXL ricardo plc in conducting its operations, the company has been determined to run an auction e-business model. In this model, sellers log on to company website to post their merchandise determine lowest price and period for auction process with buyer also looking to have best price for an identified product. The business earns revenue from commissions that have been agreed upon with seller of merchandise with a given percentage of proceeds from sales going to owners based on understanding.QXL ricardo plc has over the years implemented innovative concepts in their operations as seen from introduction of live auctioning which resulted in combination of internet and television in process of auction to involve viewers in operation. The last organization analysed in this report is Daum, which bases on the number of services offered on company website has been found to operate a portal model of e-business. Further it has been determined that the organization runs a horizontal portal system due to the fact that services offered are based on content from different areas that might interest potential users of the portal. Core value proposition for Daum is a promise to users of the portal that they will access all information they need from the portal based on range of services offered by the company. The organization earns revenue from sale of different services and products while also providing an advertisement and database-marketing platform. Although there are some innovations such as introduction of multiple platforms for offering it services, these are necessary for the organization to remain competitive in Korean online portal industry as competition from other organizations increases. Works Cited “About 1-Click Ordering: 1-Click ordering places your order automatically and lets you skip the shopping cart”, Amazon. n. d. Web. 5 Aug 2014. “Daum Communications Corp”. Bloomberg Businessweek. 2014. Web. 5 Aug 2014. . Amit, Raphael, and Christoph Zott."Value creation in e‐business."Strategic Management Journal, 22.6‐7 (2001): 493-520. Anumba, Chimay J., and Kirti Ruikar. e-Business in construction. 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