How Does Amazon.Com Use Their Digital - Essay Example

How does Amazon.com use their digital? 1. Introduction The methods used for the development of business strategies are not standardized. In fact, it has been proved that different approaches can be used in regard to the development of strategic decisions under the influence of internal and external organizational environment. Particular emphasis has given to market needs and trends, as factors that can influence business strategies, either in the short or the long term. Each firm can use a different approach for securing its growth. Amazon.com has decided to emphasize on digital channels for increasing its competitiveness in the international market. The specific practice of Amazon has been proved quite effective, if taking into consideration the firm’s success worldwide. The involvement of digital channels in the success of Amazon is explored in this paper. It is proved that the choice of digital channels as a tool for promoting organizational success can be quite justified in current market, which is characterized by strong competition and continuous changes on market trends and consumers’ demands. 2. Digital channels and organizational success – the case of Amazon.com 2.1 Amazon.com – overview Amazon.com was established in 1995 (Schneider 2011, p.45). His creator, Jeff Bezos, tried to identify the potential commercial benefits of Internet (Schneider 2011). He found that Internet would be an excellent tool for promoting the selling of books, a product that was quite popular at that time (Schneider 2011). In this context, Amazon.com was created as ‘an online bookshop’ (Schneider 2011, p.45). Today, the customers of Amazon.com are estimated to 60 million worldwide (Scheider 2011). In addition, the business objectives of Amazon.com have been changed. Today, Amazon.com is used for selling a variety of goods, not just books as in the past (Schneider 2011). The strategic choices of Bezos have been proved quite effective; within just 8 years the firm managed to achieve a profit of $5 billion (case study). By 2008, the firm’s customers reached the 76 million (case study). The firm’s practice to emphasize on ‘low price, convenience and variety of merchandise’ (case study) has highly contributed in the rapid growth of the organization. 2.2 Evaluation of Amazon’s strategy using the literature The success of Amazon.com has been highly related to its strategy. Reference should be primarily made to the product to which Amazon.com was initially related: books. After reviewing the selling potentials of this product, Bezos, came to the assumption that books had an important advantage compared to other products: they could attract the interest of buyers under the terms that ‘they are appropriately presented through the website’ (Schneider 2011, p.45). Also, due to their size, ‘books are difficult to be held in stock at high numbers’ (Schneider 2011, p.45). Even a quite large bookshop cannot stock more than 200,000 books (Schneider 2011). Being able to offer to customers a high range of choices in regard to the particular product has been a distinctive characteristic of Amazon.com (Schneider 2011). The potentials of Amazon.com to secure a high range of available titles for its customers have highly enhanced the firm’s performance (Schneider 2011). In other words, the success of Amazon has been secured by focusing on the type and range of product offered to the public. In addition, emphasis has been given on the marketing tool used for the promotion of this product to the market. When Amazon.com appeared, Internet was considered as a quite promising tool of communication. The value of Internet for communication and commercial purposes was verified in the years that followed. The strategic choices of Amazon.com could be evaluated using relevant literature. For contemporary management theory, the behaviour of organizations is considered as influenced by a variety of factors, related to different scientific fields, such as ‘psychology, economics and sociology’ (Griffin 2011, p.16). Reference can be made, for example, to the Maslow’s Hierarchy of needs theory (Figure 1, Appendix). The particular theory promotes the idea that the needs of individuals need to be covered following an hierarchical order, as indicated in the pyramid of Maslow, from bottom to top (Figure 1). Amazon.com offers goods addressing the following needs of individuals: esteem needs, need to know and understand and self-actualization (Figure 1). Also, due to the low prices of the firm’s products, people are given the chance to cover these needs at a relatively low cost, a fact that has contributed in the firm’s success. The decision of Bezos to focus on books, and later on other products that are popular to the public, is considered as quite justified. Also, by securing the high variety of products available to the public, the chances for covering the needs of people, as described above, are increased. The strategy of Amazon.com could be also explained using the contingency theory of leadership (Figure 2, Appendix). This theory is based on the view that the criteria of leadership decisions are not standardized (Rahim 2011). Rather, these criteria can be differentiated under the influence of market trends (Rahim 2011). In Amazon.com this theory seems to be verified. Indeed, Bezos decided to focus on books due to the popularity of this product at the particular point of time. Also, Bezos chose a marketing tool that was popular and with many prospects, Internet. From this point of view, the strategic decisions of Bezos are fully aligned with the rules of the leadership contingency theory. 2.3 Digital channels in Amazon – types In order to understand the value of digital channels in Amazon it would be necessary to refer to the types of digital channels used in the particular organization. Amazon has been ‘among the first organizations introducing e-commerce as a business framework’ (Levene 2011, p.333). The firm’s website has structured in such way that two different approaches of business have been feasible: the firm acts directly as a seller of goods but also as an intermediary to the selling of goods (Levene 2011, p.333). Because of its extensive volume of products, the firm has developed two subsidiaries, ‘Alexa and A9’ (Levene 2011, p.333). These subsidiaries can be used ‘for search and navigation purposes’ (Levene 2011, p.333). The above two websites have highly supported the growth of Amazon, securing the limitation of time required for searching for a product and for checking the characteristics/ content of the product in order to decide whether to proceed to a buy or not. Another digital tool that has enhanced organizational growth is the ‘Kindle wireless reading device’ (Levene 2011, p.333), a device for ‘checking and downloading e-books’ (Levene 2011, p.333). Of particular importance, when referring to the digital channels of Amazon, are the Web analytics (Kaushik 2009). Among other benefits, Web analytics (Figure 3, Appendix) help to establish a link between the various online pages related to a particular product (Kaushik 2009). However, if they are not appropriately tuned, Web analytics cannot support organizational competitiveness. For example, when opening the website of Amazon, a link tends to appear in different parts of the website (Kaushik 2009). This link leads to the same page, a problem related to the lack of appropriate tuning. As in other websites also, in Amazon.com Web analytics is considered as a quite valuable tool, helping to identify ‘the impact of the firm’s website on its users’ (Cohen 2009, p.319). Other digital channels used by Amazon.com are the following: a) the Associates Central, a website that has been developed for helping the businesses/ individuals that have been subscribed as associates of Amazon to cover their needs in terms of effective marketing tools (Cohen 2009, 320). 2.4 How digital channels have contributed in the success of Amazon? Digital channels can offer to customers and book-sellers subscribed to Amazon the chance to check rapidly for products of specific characteristics and to limit the time required for developing a transaction. Indeed, Amazon’s success is highly based on the range of books available to the public (Mould 2006). Due to this characteristic, Amazon is able to keep its attractiveness high (Mould 2006). Peng (2009) also notes that the key advantage of Amazon towards its rivals is its ability to offer a high range of products at low prices. Digital channels have also benefited Amazon at the following point: using the firm’s digital channels customers in Amazon are able to search for a product within quite short period of time (Fletcher et al. 2004). In fact, digital channels offer the chance to identify a product within seconds (Fletcher et al. 2004). Initially, such options were available only to businesses, through the business-to-business online channels (Brynjolfsson and Kahin 2002). Amazon has been among the first firms that introduced ‘the business to consumer interaction’ (Brynjolfsson and Kahin 2002, p.120). From this point of view the digital channels have significantly helped to the enhancement of customer loyalty in Amazon. As noted above, Amazon.com is highly based on web analytics, a tool used for serving various needs of businesses operating online, including ‘PR needs, fraud protection and news media tracking’ (Sheldrake 2011, p.35). Using Web-analytics, Amazon.com is able to track the products that each of its customers has reviewed and store the relevant information for future reference (Sheldrake 2011); for example during the search for a product a subscriber can check his past reviews and save time if products of similar characteristics need to be identified (Sheldrake 2011). The above view is further verified through the following fact: Amazon can offer to its customers the chance to develop all phases of the selling process, including the search for the book needed, the review of the book, the ordering and the buying of the book at a quite low price, compared to the rivals (Levene 2011, p.333). Because of the above, book-sellers who are interested in reaching a high number of customers are willing to be subscribed to Amazon as the firm’s website is considered as the most successful portal for reaching customers (Mould 2006). Thus, digital channels, as also the other features incorporating in the firm’s website, are critical for business success. Digital channels in Amazon play another role. They are used for monitoring the performance of book-sellers (Mould 2006). The ‘feedback system of Amazon’ (Mould 2006, p.64) is used both by book-sellers and customers. Each of these parties can state his view for the behaviour of the other party in regard to the sale involved (Mould 2006). Without the digital channels the operation of the above system would be quite problematic. It should be noted that today digital channels have become a key requirement for organizational success (Rayburn 2012). Reference is made in particular to firms that have an extensive customer base, such as Amazon (Rayburn 2012). In this context, digital channels cannot be considered, at least not solely, as a tool for responding to specific customer needs, such as the need for identifying quickly a product among a firm’s existing products (Rayburn 2012). Rather, emphasis should be given on digital channels as tool for promoting innovation, a strategy that can secure organizational growth (Rayburn 2012). For Amazon also, digital channels have played this dual role: responding to customers’ demands and promoting innovation; the second role of digital channels is more related to organizational growth. 3. Conclusion Amazon’s choices in terms of adoption of new technology can be considered as quite effective. The practice of the firm to emphasize on digital channels in order to secure its growth has been proved as fully justified, taking into consideration the high market competitiveness and the lack of standardization of consumers’ preferences. Indeed, digital channels have helped Amazon to establish its position as a global competitor in terms of book-selling. In addition, it seems that digital channels have allowed the expansion of the business, above the online book – sales. The literature published in this field has been used in order to justify the strategic choices made by the organization’s leader. The success of Amazon in the global market has been related to the need of consumers to select among a high range of products of a low price and to interact with the seller, as these issues are effectively addressed using digital channels. References Bouyssou, D., Dubois, D., Prade, H. and Pirlot, M., 2010. Decision Making Process: Concepts and Methods. Hoboken: John Wiley & Sons. Brynjolfsson, E. and Kahin, B., 2002. Understanding the digital economy: data, tools, and research. Massachusetts: MIT Press. Cohen, S., 2009. Amazon Income: $a : how Anyone of Any Age, Location, And/or Background Can Build a Highly Profitable Online Business with Amazon. Florida: Atlantic Publishing Company. Fletcher, R., Bell, J. and MacNaughton, R., 2004. International e-business marketing. Belmont: Cengage Learning EMEA. Gelinas, U., Dull, R. and Wheeler, P., 2011. Accounting Information Systems. 9th ed. Belmont: Cengage Learning. Griffin, R., 2011. Fundamentals of Management. 6th ed. 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Electronic Commerce. 9th ed. Belmont: Cengage Learning. Sheldrake, P. 2011. The Business of Influence: Reframing Marketing and PR for the Digital Age. Hoboken: John Wiley & Sons. Appendix Figure 1 – Hierarchy of Needs theory of Maslow (source: http://www.edpsycinteractive.org/topics/conation/maslow.html) Figure 2 – Contingency theory of leadership, as developed by Fiedler in 1967 (source: http://facultyfp.salisbury.edu/fmshipper/MGMT625/overview_of_fiedler.htm) Figure 3 – Web analytics – roles (source: http://sefati.net/web-analytics-tools-to-improve-the-success-of-your-site/web-analytics-diagram/) Read More