PESTEL and Porters Frameworks of Environmental and Industrial Analysis - Assignment Example

? E-business strategy and design exercise Executive Summary The discussion conducted in this paper emphasises the concepts of e-business in the modern business with the illustration of one of the largest online retailers, Amazon.com Inc. Correspondingly, the e-business strategy of the company has been assessed taking into account the global business environmental factors into consideration, further divided into three sections. In the first section, a PESTEL analysis have been conducted to make a critical assessment of the business environmental factors witnessed by Amazon along with the application of Porter’s Five forces Model in order to examine the company’s industrial growth prospects as well as competencies. The value proposition of the company has also been explained in this section. In the second section, few of the areas where improvement need of Amazon have been identified were assessed and correspondingly, suggestive measures have been recommended on the basis of the evaluations made in section 1. In the third and final section of the paper, the e-business strategies of Amazon along with its management issues have been explained. Introduction E-business has emerged as one of the pivotal concerns for every contemporary business that strives to mark its presence in the global realm and obtain competitive success over its long-run performance. In the present market scenario, most of the global companies have realized that with the adoption of the e-business strategy, they can develop their business model in a manner that satisfies the varying needs and diversified concerns of international business partners as well as customers. If the meaning of e-business is to be termed in general sense, it can be justifiably described as the use of internet or the virtual space in the operational activities of the business to gain a leading position within the targeted market (Turban et al., 2010). When focusing on this subject matter, Amazon.com Inc has often been regarded as an example of best practices in its industry whereby its e-business model has been quite beneficial and productive in adding value to its services among its customers (Damani & Damani, 2007). Amazon, an American multinational, is one of the renowned and largest global e-commerce retailing companies. Amazon has been a pioneer in the application of e-commerce business model that runs its functions through virtual space entirely. It is not only involved in the selling of books and other products, but also renders due significance on gathering the valuable suggestions from the buyers so as to define its customer satisfaction and industrial leadership competencies. It records various movements of its buyers such as the number of visitors who visit its site and how much time do they spend on it while purchasing from a particular category of its product line. All these movements of the buyers are utilised by the company in order to analyse the buying behaviour of consumers in various targeted markets to identify its developmental needs along with its growth potentials. Through the advanced technologies of the e-business, Amazon has been successful in introducing the one stop shopping trend successfully (McGraw-Hill Education, 2013). Section 1 Effective technological tools Amazon has been operating with a mission and a vision to serve its customers as per their conveniences and in a productive manner for the company. Undoubtedly, in doing so, the company has to witness pressures from various international business forces that can be comprehensively addressed through the application of a PESTEL analysis framework. Political. From a critical point of view, it can be observed that because the e-retail industry is yet in its developing phase within the global context, governmental interventions and political limitations bestowed on the industry as well as faced by Amazon correspondingly, is less. Subsequently, the international sale procedure of Amazon involves various risks mainly in terms of the requirement for import and export licensing that varies from one nation to another as per their technological advancements. Nevertheless, as the company uses the virtual space to operate in the global paradigm, governmental interference from its host countries can still be observed to be pertaining at a lesser degree (Wrigley & Lowe, 2010; Amazon.com, 2004). Economic. There are certain economic factors persisting in the targeted global business market of Amazon such as the continuous and varying changes observable in the foreign exchange rates, local economic conditions as well as infrastructural advancements of the countries to facilitate the setting-up of similar unconventional business model. However, customer purchase capabilities and other economic factors like national stability, imposes limited effects on Amazon’s growth prospects owing to the diversity of customer groups targeted by the company through its pioneering e-business model (Wrigley & Lowe, 2010; Amazon.com, 2004). Social. The social factors are very much favourable for Amazon in the current market prospect. It has long been successful in meeting the needs of the people with its varied range of products, satisfying customers from the niche market who prefer quality to price-sensitive customers in developing nations. In addition, with the gradual expansion and diversification of its product line, the company has also been successful in capturing the attention of the customers with each and every new product; thus, reducing social barriers to a substantial extent (Wrigley & Lowe, 2010; Amazon.com, 2004). Technological. Global technological climate has always been quite influential for the development of the company. To be noted, with every new technology innovation, the company is somewhat forced to reframe its business model and integrate change in the most effective way so as to stay ahead of its competitors in its long-run performance (Amazon.com, 2004). Considering the current market scenario, with the rapid innovation in the technology factors, the company faces non-negligible challenge of continuous innovation and technology advancements in its e-business model (Wrigley & Lowe, 2010). Environmental. Examining the environmental factors from a critical perspective, it can be observed that as Amazon operates through the virtual space, it engages minimum environmental risks when compared to its competitors operating through the traditional business model. Rather, the possible environmental risks are found to be directly impacting the technology partners associated with Amazon, through its value chain, implying minimum influence on its e-business success prospects (Wrigley & Lowe, 2010). Legal. Regulatory influences on Amazon have been quite noteworthy in the recent phenomenon. With rising concerns about customer welfare and data security with regards to the information transmitted by customers when using such shopping sites, Amazon needs to abide by various legal statues that further differ from one nation to another. Piracy issues have also been affecting the smooth functioning of Amazon, binding its e-business model through various legal guidelines in the global paradigm (Wrigley & Lowe, 2010). Business environmental analysis Apart from the above mentioned environmental factors, Amazon’s global presence and its competencies thereafter has strongly been affected by the industrial structural elements. In order to assess those elements the Porter’s Five Forces Model has been applied in the following elaboration. Competitive rivalry. Presence of competitors in the global e-commerce retailing industry has increased manifold in the recent years owing to limited entry barriers and governmental interventions. Economies of scale are also observed to be pertaining at a lower level in this industry currently that has increased competitive rivalry in the e-business sector. The direct competitors of Amazon currently include Barnes, eBay and Noble.com. Now-a-days, many other auction websites are emerging as competitors to Amazon (Mennen, 2010). Bargaining power of buyers. Bargaining power of buyers is also observed at a high degree for Amazon, owing to the availability of a wide variety and large volume of international customers and only a few major players to suffice their demand in this industry. To overcome this risk, Amazon offers low price goods to its customers along with better services being focused on differentiating its offered commodities from that of its competitors (Mennen, 2010). Bargaining power of suppliers. Considering, the suppliers’ bargaining power, it can be identified that there are many supplier organisations operating in the value chain designed by Amazon, which allows them to have a strong impact on the pricing strategies practiced by the company. It also causes challenges for the company to differentiate its services and products from its competitors as common suppliers often tend to operate simultaneously with other major e-retailers (Mennen, 2010). Threat of new entrants. Amazon faces a low threat of the new entrants as they are one of the oldest companies in the e-business holding a major proportion of market share. It has been offering its customers with a wide variety of products for a long time that has further enhanced its brand value to a substantial extent, reducing the threat of new entrants for the company (Mennen, 2010). Threat of substitute. The risk of substitute is quite high for Amazon as most of the online companies also tend to operate through physical stores, established at various destinations throughout the globe, offering a similar range of products and services but with greater convenience to shoppers who rely on traditional marketing channels (Mennen, 2010). Value proposition Emphasising the value proposition of Amazon, it can be observed that the company’s strategy to apply a 24/7 service model rewarded it with greater competitive advantage in the global marketplace. It has been through this initiative that the company has been able to mitigate limitations in terms of geographical divergences and attain a higher profitability by serving a large volume of customers worldwide. It also offers its customers with low prices and high value of customer services as it believes that only valuable services can compel the customers to make repetitive purchases in their online retail web-site (Bovet & Martha, 2000). It not only provides its customers with all the products but also delivers due attention in effective packaging and delivery of those products as its prime brand positioning tactic. In order to comply with its vision to serve the customers as per their convenience in a profitable and time saving manner as well as to attain its objective to earn maximum customer satisfaction, continuous innovation and technology advancements has been a crucial facet in the applied value proposition strategies of Amazon. For instance, Amazon introduced Sprint PCS Internet-enabled smart cellular phones, which provided its customers with wireless shopping facility and thus, contributed to its augmented brand value (Digital 4Sight, 2000). Section 2 The company primitively dealt with online books retailing immediately after its establishment. Since the year 1998, it expanded its business from merely selling books to other retailable products and also diversifying to the entertainment industry with online music stores. In order to attain its determined objectives of maximum customer satisfaction, enhanced brand loyalty and continuous business growth, Amazon has been making effective use of various e-business tools to identify the risks associated with its operations and mitigate those subsequently. For instance, with the emergence of alternative online products, the level of risk faced by Amazon has also increased relatively. In the current market economy, there are many companies entering into the e-retail market with huge variety of products and/or services that at a certain point overlaps with the offerings made by Amazon. Few of the major competitors to Amazon include Barnes and eBay. Thus, for the efficient continuation of the business, Amazon must implement particular business tools such as advanced technologies that can facilitate the company to differentiate its products from that of its competitors gaining advantages with reduced substitution effects and enhance brand image within the global plethora guided by the values of innovation and efficiency. To be noted, Amazon bases its competencies on its e-business model with complete assistance of internet. Correspondingly, the websites must be properly designed for providing innovative services and also the necessary information regarding the offerings made, reducing barriers for any customer who possess negligible experience for online-shopping. Amazon may also adopt such sustaining technology, which will refer to the introduction of a newer product or services by the company and also aid customers who are new to this unconventional mode of shopping. This innovative technology will help Amazon in attracting a relatively newer customer base and increase its existing market share, thus diminishing competitive rivalry pressures currently identified in its business model. Amazon can also take the assistance of a range of diverse tools in the form of advanced kiosks. Fundamentally, it is the publically accessed computer system, which provides with interactive browsing of information to its customers. Although it is an online shopping business, it can aim to provide extra assistance to the customers in accessing complete information of products along with any other inquiry through tie-ups with international call-centres. With the implementation of this e-business tool, Amazon can achieve its competitive advantages and also get the opportunity of focusing on the several online channels building stronger customer relationship in its global marketplace (Digital 4Sight, 2000). In present, Amazon needs to reduce its risk of competition from the other online companies which are possible with the implementation of the advanced technology and innovative e-business tools. Hence, apart from the above mentioned tools, the company can also focus on forwards as well as backward integration through its supply chain that would facilitate the company with reduced buyer and supplier bargaining power, taking the advantage of lesser regulatory intervention in this paradigm (Travis, 2003). Section 3 In the present scenario, Amazon is one of the renowned e-retail companies, which facilitate its customers with on-stop shopping facility. In doing so, the company uses a database on the server, which facilitates the customers in searching the products they require as per their conveniences. This particular database includes availability of wide range of products and its complete information regarding price and quality standards, current stock levels and shipping information (Robson, 1997). This database not only includes the details of products but also keeps the entire records of the earlier transactions along with the credit card information of its customers, rendering due significance to confidentiality and other associated ethical obligations. It keeps all the earlier transaction record so as to greet the customers with their name in their next visit, which creates a personal attachment of the brand with its individual customers; thus, enriching the customer loyalty for the company (Catedra Inginerie Software, 2009). Apart from all these innovative business tools, the advanced e-business strategy of the company also helps to mitigate complexities arriving from the usage of continuous technological advancements. Additionally, Amazon pays due attention towards recording and considering customers’ feedbacks with due significance. The adoption of these morally guided and objective-oriented advanced technology tools, Amazon has been able to differentiate its brand image from other online companies and gain competitive advantages thereafter (Putnick & Cunha, 2005). Certainly, an effective e-business design needs the management to keep in mind few major issues to attain the determined objectives successfully (Ward & Peppard, 2002). These major management issues might be the continually changing customer’s expectations, ability of the company to manage rapid integration of advanced information technology delivering utmost customer satisfaction simultaneously, setting up with the ongoing network and identifying the exact time required for assessing all these issues. The online shopping services are completely meant for satisfying the needs of the customers. Amazon thereby provides easy access to the internet along with complete information regarding its offerings. Additionally, the web technology is often hindered by the breakdown in its hardware and software. This breakthrough has essentialized Amazon to emphasize its IT team efficiency. With the assistance of the IT team, Amazon has been able to manage its services efficiently. The IT team also put their efforts in regular development of its innovative technology applications and develop other useful programmes so as to provide customer service in the most efficient manner along with increase the resources of the company to a substantial extent. Along with these issues, proper identification of the time required to adopt the changes in the management issues has also been considerably challenging for Amazon as a pioneer in the industry. The management has therefore been focused on implementing effective e-business tools and organizational transformation tactics to attain competitive advantage in the global sphere (Piccoli, 2012). Conclusion The above study was conducted with an objective to gain an insight of the challenges that contemporary organisation often face when practicing through innovative e-business model, taking the example of Amazon, which is regarded as a pioneer in the online retailing industry. In order to attain this objective, the study further utilised PESTEL and Porter’s five forces frameworks of environmental and industrial analysis. Based on the conducted environmental analysis, it can be affirmed that Amazon witnesses maximum risk in terms of the availability of alternative products currently emerging in the global market economy, causing more severe effects as they are also based on a similar business model applied by the company. Under such circumstances, differentiating its products and services from that of its competitors has become a major concern for Amazon. In order to cope up with these risk factors, Amazon has been consistently improving its services and product lines with the adoption of modern integrated technology and rendering due significance to customer convenience so as to attract and serve a larger volume of customers. Regardless of all these initiatives, Amazon has been lacking effectiveness in certain areas of its operational framework. For instance, as the study findings revealed, many of its business strategies have been copied by its other competitors existing in the market, while governmental interventions have also been observed as increasing currently in the global context that might raise the economies of scale within the industry in the near future. To cope up with the problem, Amazon had introduced an integrated technology named Sprint PCS Internet-enabled smart cellular phones, which enabled the customers to place huge orders with a different message tagged along with the order (Digital 4Sight, 2000). This particular strategy can also be observed to reward the company with strong customer relationship that further contributed to its enhanced brand value. Amazon also facilitates its customers with propositional value and 24/7 service facilities that rewarded the company with significant competitive benefits in the recent phenomenon. However, based on the understanding obtained through the study, in order to remain competitive and sustainable in the long-run, the company needs to focus on the major management issues currently faced by Amazon along with those, which might emerge in the recent future in terms of customer expectations changes, rapid integrated of information technology skills, identification of the time required for the changes and adaptation to the new network prevalent in the e-business model. References Catedra Inginerie Software. (2009). E-business models. Retrieved from http://software.ucv.ro/~cbadica/didactic/ce/documente/ModeleEBusiness.pdf Bovet, D., & Martha, J. (2000). Value Nets: Breaking the Supply Chain to Unlock Hidden Profits. United States: John Wiley & Sons. Damani, C., & Damani, R. (2007). Ecommerce 2.0: The Evolution of Ecommerce. United Kingdom: Imano Plc. Digital 4Sight. (2000). Amazon.com. Retrieved from http://www.andyde.com/amazon.pdf Kha, L. (2000). 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