E-Commerce Company Analysis - Amazon - Case Study Example

Case Study: Amazon.com al Affiliation: Amazon.com is amongst the largest online stores globally. Thus, the biggestchallenge that this company faces, as the largest e-commerce business, is reliability. This implies that even the smallest amount of outage has substantial financial corollaries and impacts on customers. The Amazon.com, which provides a platform for many websites globally, is facilitated on an enormous infrastructure of thousands of servers and many technological components. This paper examines this e-commerce company’s analysis in the context of its strengths and weaknesses. Introduction Amazon.com is a thriving company which is amongst the Fortune 500 Company based in the United States. It is an e-business whose main corporate administrative center is located in Seattle, Washington. Thus, this firm is the biggest electronic store in America. The corporation was brought into being by Jeffrey Bezos in 1995. The doors of the company were initially opened from a two car garage in Bellevue, Washington. It was nothing beyond an electronic bookstore at the time it got going and the inventory was stockpiled in Bezos two car garage. Amazon.com company has moved on to spread out and offer the world’s biggest miscellany of books, CDs, electronics, toys, house pieces of equipment, DVDs, home fittings, apparel, kitchen appliances amongst others. Shoppers still grade Amazon.com as the élite online merchandising website. This was in harmony with their internet shopping experience in the course of the 2011 holiday shopping time of year. Impact of Demand and Supply Amazon.com can stockpile all their stock for the whole of U.S. market in the region of five storehouses instead of several hundred retail channels that would be considered necessary for comparable coverage in the old-fashioned channel. On the contrary, bulk customization has increased in momentum with the development and growth of the Internet for the reason that firms can permit customers to interactively postulate customizations of their product offerings. It has turned out to be more crucial for businesses to comprehend just how to deal with customization in an efficient way. This has made it possible for the company to deal effectively with demand and supply of its products. The Internet has made available an extra channel for dissemination of goods. With the primacy of business to consumer in addition to business-to-business e-commerce, a number of businesses including Amazon have had to work out an all-inclusive circulation network for their business (Bakos, 1998). Without a doubt, the customer base is in addition scattered and not in a single place and in many instances, customers may purchase commodities that may demand to be supplied to a different place (such as a gift). Disregarding the costs and concerted efforts associated to dissemination and conveyance have proved critical to a number of early powerhouses in this online business. In certain terms, firms that have however been most impinged on by this were over the internet grocers (like Peapod and Webvan) and home conveyance businesses (like Kozmo and HomeRuns). This mainly happened for the reason that these businesses had to deal with a number of tight distribution schedules which most customers had a preference in addition to other logistic intricacies, which made it tremendously arduous to gain adeptness by means of interactions in distribution and conveyance. From a supply chain perspective, the assimilation of outmoded and Internet distribution networks is appealing for the reason that it insinuates profit gains, stock cutback, and improved customer service. On the other hand, a number of the outmoded channels are not essentially centrally regulated. The postulation is that when a client is not able to attain the product from the online store, they are prepared to wait. In the event that there is more than enough inventory at the retailer outlet at the closing stages of the business cycle, then it is utilized to satiate the demand. Retailers personally make the inventory (Hoffman & Novak, 2000). Choices in a decentralized structure, nevertheless the manufacturer makes determinations on connection to inventory at the online store. When the networks are not amalgamated, then an option of buy-back treaties can synchronize the system. In an amalgamated supply chain (Where surplus inventory from the old-fashioned channel is employed to satiate surplus demand from the online store), and in the event a transfer compensation structure is initiated in addition to a buy-back structure, the devolved system can be synchronized through a detailed computational study. Competitive Advantage Competitive advantages in the virtual world of business are in many cases centered on assets that are informational in nature. These informational assets are difficult to shelter from ersatz. For this purpose, the ability to sustain competitive advantage in varying business systems is probable to hinge on the operative leverage of corresponding physical assets, which are difficult comparatively to replicate than are informational assets, specifically if they are amassed and incorporated over an elongated period of time. A new player desiring to replicate them would encounter substantial entry hindrances, as well as high cost of capital, economies of scale, as well as learning (Porter, 1980). For illustration, Amazon.coms main competitive advantage is the capability to dispense minimal cost inventory for example books by saving on storage, warehouse, and cost arising out of inventories. Conversely, Amazon has not long ago embarked on building corresponding physical assets to compete efficiently with competitors like Barnes and Noble (Amazon.com, 1999). Amazon has initiated a number of physical distribution channels across the United States, and a number of customer service centers and in addition invested in service like Kozmo.com, a service which delivers to homes at present running in a number of key markets. On the contrary, the fusion of the long-standing and contemporary media, AOLs purchase of Time Warner, unambiguously exhibits a stratagem founded in endeavoring to attain collaborations amid corporeal and virtual assets. Nonetheless, a firm may not be in a position to advance completely the corresponding assets it requires or in essence may need. The business competencies depend on a specific path which change progressively by means of fine-tuning of firm-level procedures and are hindered by their own capacity. Subsequently, the acquirement or advancement of corresponding assets not relative to the firms main competences may be obstructed. Additionally, in times of spasmodic change, the central capabilities may essentially turn out to be central inflexibilities. In such instances, the business model ought to facilitate access to such assets by way of acquirements or partnerships. What the Future Holds For the purpose that the profits have proven to be elusive for Amazon.com, it stands at a critical position presently. Jeff Bezos has made a case that concentrating on profits would mean surrendering on expansion prospects besides it is not in the interest of Amazon.com. This has however changed with him saying that it is now the right time to lay emphasis on the core economics of their business even if what it entails is at the expense of growth. The biggest part of investments work for an extended period of time. The company, over the years, has amassed an enormous shortfall. Conversely, this has not halted the company from going ahead to making new acquisitions and establishment of new partnerships. Among the acquisitions and partnerships is a partnership with Target which happened in 2011. The terms of the agreement were that, Target coming to an agreement to use Amazon’s technology for the purpose of order execution and customer care services. It went ahead and obtained Egghead.com by 2001. This offered the company an extra avenue of reaching the customers. The company was also able to announce a partnership with Circuit City among other several partnerships and acquisitions. This meant that the customers could thereafter place an order for an electronic item at the company’s website and then pick it at the local Circuit City as a result of the partnership. The company goes on to add features on its website that are inventive. Like the “millions of tabs” feature and others which ensured that customers then had tab that was specially made for their particular needs. Amazon was there after able to include computers and e-books to its products on offer to its site. The number of its customers according to analysts has gone down. One of the analysis stated that any individual who looked to buy a book online had heard of Amazon. According to an expert working for the company, his solution was for the company to concentrate on best sellers and disregard slow moving books titles (Hansell, 2001). He saw this as a way of minimizing costs and leaning towards profitability. There is wide understood sentiment that the future of Amazon.com lies in being a technology provider. Elasticity of Demand The link between the elasticity of demand and the impact of revenue is crucial because businesses need to know the price elasticity of demand and the revenue impact in relation to a price change. Prices need to know this to fully comprehend the implications of raising or lowering prices. For instance in the year 2010, Amazon declared that it would drastically reduce the price the price of its new product, the Kindle. The reduction of the book reader was to come down from $ 259 to $189. In this perspective, the question would be asked if the reduced prices would lead to improved sales. And if so would the increased volume of customers lead to an increase or decrease of the company revenues? Conclusion In order for Amazon.com to have a competitive advantage over its rivals in the market, it will have to consider spreading out into related products which can be deemed as a good strategy. According to Porter (1985), the growth into product lines that are somewhat related can make use of transfer of proficiencies or sharing of business activities such as marketing and distribution channels. This would lead to competitive advantage against the company’s main competitors. Sharing can reduce overheads by accomplishing economies of scale and meritoriously making use of company resources. Technological companies can expand into areas related to the existing lines of products. A good illustration is when Amazon.com started selling computers in addition to selling computer components like disk drives (Hansell, 2001). The fact that Amazon.com has by no means have computer inventory, this ensures that the company efficiently reduces cost that would come with holding such inventory. The computers are sold directly from manufacturers’ warehouse and directly to the buyer. However, it must be observed that such a strategy cannot create increased profits without efficient utilization of its enormous customer base and other of its resources. References Amazon.com. (1999). Annual Report. Amazon.com Retrieved From: http://media.corporate-ir.net/media_files/irol/97/97664/reports/123199_10k.pdf Bakos, Y. (1998). “The Emerging Role of Electronic Marketplaces on the Internet,” Communications of the ACM, 41(8), p. 35-42. Hansell, S. (2001). “Amazon.com is Planning to Sell PC’s for First Time,” The New York Times. Retrieved From: www.nytimes.com Hoffman, D.L. & Novak, T. (2000). “How to Acquire Customers on the Web,” Harvard Business Review Porter, M. (1980). Competitive Strategy, New York: Free Press. Print Porter, M. (1985). Competitive Advantage, New York: Free Press. Print. Read More