Business to Consumer - Essay Example

?Amazon: E-Business case study B2C (Business to Consumer) Contents Contents 2 3 Choice of Amazon 3 Business Model of Amazon 4 BOAT perspective of E-commerce: Amazon BOAT Analysis 6 Business Organization 7 Business Architecture 10 Competitive Advantage of Amazon 13 Reference List 16 Description Amazon.com is the largest virtual bookstore in the world. It is run by Jeff Bezos who is also the founder and CEO of the company. A graduate from Princeton Bezos was the youngest vice-president of the Banker’s Trust in New York. The company was first incorporated in 1994 as Cadabra and then went online with the name of Amazon.com (McGraw-Hill, 2013) The initial success of Amazon, a virtual book store, had shocked the long-established physical bookstores. Presently the website operates in USA, UK, Mexico, India, China, France, Canada, Germany, Italy, Spain, Australia, Brazil, Japan and Poland (Securities and Exchange Commission, 2013). Jeffery Bezos had initially listed twenty products that he considered to start his business with. Later the choices were curtailed to include only five items. Finally the choice was restricted to books only as it was inexpensive to ship and also had very high demand. The increase in the popularity of internet in doing business and the rising figures of the number of people who uses internet as an option of transaction prompted Bezos to choose E-commerce over physical store locations (GCSC, n.d.). The company website also features Amazon.com Marketplace, Z shops and Auctions. Through Amazon.com Marketplace the customers can sell the products that has been already used by them, the Z-shops allow the interaction with independent third party sellers. The business now allows every type of customer interaction. Choice of Amazon The company since its inception has gone on to become the largest virtual book store. This coupled with the business strategy and that has allowed the business to become a global success is the reason Amazon has been selected for the case study. The uniqueness of the business model and the features, which have allowed it to surpass competitors, is the chief topic of discussion. The company manages its inventory from multiple fulfilment centres that act as the distribution channels. Initially there were two centres of location Seattle and Delaware. The company followed this with a strategy of a steady rise in the distribution centres both inside America and Europe. Since 2005 it has aggressively increased the number of the distribution centres. At present the company has 52 centres in North America alone covering an area of 41.2 million square foot (MWPVL International Inc, 2013). The e-business case study provided a variety of options to choose the industry. The choice of Amazon has been made because of the position of the company in the market, the unique characters of the business strategies it implements and most importantly to highlight the technological aspect that has been an integral part of the business since its inception. Business Model of Amazon e-Business: The concept of e-business not only includes the transaction by customers on a website, it also includes the huge responsibility of retaining the customers and collaborating with the business partners (McGraw-Hill 2013). In 1994, the emergence of Netscape and the facilities provide by it made purchasing via internet a very convenient option (LeClaire, 2013). Amazon uses both Business to customer and Business to Business models in its organization. In the former type the sellers are the organization and the buyers are the business and in the second type the buyers and sellers are both organizations. Amazon mainly deals with the individual consumers so in this case study the business to consumer model of the e-commerce has been chiefly discussed. The Business to Consumer model involves a large number of buyers buying the products and Amazon making sure that each product reaches the consumers in a timely manner. Amazon.com uses the shopping cart technology to expand its business. Amazon currently offers millions of products to 17 million customers spread over 160 countries (Software Ucv, 2013). Shopping cart is one of the most common forms of technologies used by the business. Amazon uses a database on the server side that allows the clients to choose from a variety of products, which implies that Amazon uses a client server application. This database contains detailed information of every type of details about each product it houses. The use of advanced technology allows this kind of shopping experience and helps in attracting new customers. Shopping cart allows the clients to place the various products they wish to buy in the cart and later before the exact payment they can change or delete the items added. The scope of Amazon e-business also includes activities like shipping, handling and maintenance of inventories. Objects traded: The objects sold on Amazon have evolved incredibly with the growth of the company. The broad category of products sold by the company includes retail goods, consumer electronics, digital products and computing articles. The easy shopping and wide range of products through the website has also doubled the Prime membership of the customers buying from the website which is expected to increase to three times in the next year (Tuttle, 2013). The newest venture of the company has been to include grocery shopping in its list of products, which is expected to generate newer sources of revenue. Amazon has even launched its own range of private products from 2005 under the trademark “Pinzon” (Del Rey, 2013). This includes selling of electronic goods like AV cables, DVDs in AmazonBasics among other line of products launched by it (Murph, 2009). With the development of the company the Zshops and Auctions introduced by the company was merged into Amazon Marketplace which offered the users to sell their used products on the website (Amazon.com, 2013). Time Horizon: Time scope refers to the collaboration between the parties in a business. The time scope actually measures the scale of collaboration between the parties in a business which can be annual or monthly or instant. There can be four different types of time scope namely static, dynamic, semi-dynamic and ultra dynamic. A static collaboration implies that the decisions made by the business are a permanent scale. Semi-dynamic collaboration represents a periodical time frame and involves creation of batches of commodities. Ultra dynamic time frame allows an order to be changed after it has been placed which implies that these kinds of collaborations can end as fast as they start. In this regard, Amazon uses a dynamic time frame. The rationale behind using this is that dynamic collaborations are decided at an operational level and these are particularly useful in placing orders by individuals. It is true that Amazon enjoys the loyalty of a wide group of customers for prolonged time periods. However, the products which are bought are mainly placed as individual orders. These products do not come in batches and once the order is placed they cannot be altered. This means that a dynamic collaboration is the best method that can be used by Amazon. BOAT perspective of E-commerce: Amazon BOAT Analysis Business The idea of e-commerce is a relatively new discipline and the definition of a business model in this area has not yet been developed completely. Business models in e-commerce can include three streams, which are critical in this kind of internet-based business. This includes value stream for the buyers and business partners, the revenue stream and the logical stream (Mahadevan, 2000). It has been already established that Amazon is the largest virtual book retailer. This implies lot of publishers of the books who choose to establish their virtual presence have the option of either establishing their own website or putting up their books on Amazon for sale by paying a certain fee to the Amazon website. This is a classic example of Business to Business model which allows both the business houses to earn profit (EservGlobal, n.d.). The key advantage of this type of model is that it allows efficient interaction between the supply chain, manufacturing and procuring process. It also initiates the timely and correct delivery of products. Amazon also includes the classic example of Business to Customer model of E-commerce. This happens because the customer can directly place the order from the website and in this case, a part of the final sale revenue goes to the website. In this kind of an interaction the chief concern is the security of the customer as the customer needs to provide the credit card or debit card numbers. Amazon however makes sure that the customer enjoys full security in all the transactions. Business Organization E-business has both inter-organizational and intra-organizational structures that explain the relationship of the business with between organizations and within organizations respectively. In an inter-organizational business structure, the various parties involved are the consumers who require the product or service, the provider who provides the service and the intermediary who acts to provide the product from the provider to the consumer (Mahadevan, 2000). The status of the organization in the business depends on its relative position. For example, an intermediary can be an intermediary in a retail business and a provider in a payment-handling scenario. An e-business can have more than one intermediary depending on the type of its business. The intra-organizational structure implies the various front end and the back end operations that are essential for the proper functioning of the business. The front-end operations include those operations, which the customers can interface with the business, and over these aspects they can exert certain control (Napier, 2006). The back-end operations of the business are those aspects that are intangible to the customers, the factors they do not deal with directly. In an e-business, there can be various operations of back-end operations like, accounting, marketing and management of the inventory, order tracking and managing the customer support process. The front-end operations are just the reflection of the data that are stored and processed by the back-end. For example, if the customer makes a purchase then the payment details for the product made via credit card (front-end action) needs to be transferred to the card-processing centre for authorization or the data needs to be processed by any internal processor (back-end operation). The front end of the Amazon Business constitutes of building up a webpage for the consumer who can use it to purchase the product. The backend operations include the systems that fill the details of the products, the marketing strategy to enhance the popularity of the business, the other possible deals on the related products and so on. The e-business implements various business function models in their business organization. Porter’s value chain operation is important to understand the business function models. The interaction between the front-end and back-end actions using Porter’s value chain to explain the business function models that are used by e-business is illustrated in the following figure: Figure 1: Front end operations and Porter's Value Chain (Source: Grefen, 2010) Figure 2: Back end operations and Porter's Value Chain (Source: Grefen, 2010) The two diagrams in the picture above integrate the Porter’s value chain model with the e-business. The provider of the business includes front-end actions like marketing and sales and outbound logistics and service whereas the consumer side includes the inbound logistics and procurement. The implications of these aspects on e-business are depicted in the second column. Similarly, the back-end business operations can be related to Porter’s value chain as well. The aspects of operation, procurement, technology development, human resource management and firm infrastructure forms a part of the back-end operations. The integration between the front-end and the back-end processes are very important for the overall business development in any standard e-business framework. Business Architecture Business Architecture represents the blueprints of the e-business industry. The automated support systems, which takes care of the entire business aspects of the organization needs rapid development for the successful performance of the business. Business architecture forms the central point of connection between the business aspect and the technology aspect of the business. There are various types of business architecture namely the market level architecture, the party level architecture, the system level architecture and reference level architecture. The party-level architecture represents the structure of the business at the level of individual parties. They represent intra-organizational architecture. The system level architecture represents the structure of individual business of individual e-business enterprise. An individual component represents the functional component that is essential for the functioning of a particular business function. The market level architecture has both the components of the party-level and system-level architecture. The market-level architecture is the level of integration among number of business software of the participating organizations. This architecture is essentially an inter-organizational one. The reference-level architecture is a more abstract concept than the other type of architecture as it describes the non-organizational aspects of a business. Business Architecture is an integral part of the business development as it establishes the relationship between the strategy of the organization and the way it is organized in terms of the business process, business domains and business functions. It is the business architecture, which helps to distinguish between the technical aspects, activities related to the management and commercial lines and the production related aspects. The existing value chains in the business can be identified with the help of business architecture and this in turn is helpful in allocating the responsibilities within an organization. The complexity and the coherence of the business require well defined business architecture for the prospering of the business. The Business Architecture in e-commerce refers to the competent management that is required to address the complexity and the efficient development of the business. Architecture can be placed along the dimensions of aggregation and abstraction in e-commerce. The dimension of aggregation measures the size and scope of the business and its components. The dimension of abstraction measures the strength with which the components in the business are defined. In practice their can be three aggregation tiers namely the market level architecture, party level architecture and system level architecture. The first one explains the level of collaboration between the multiple parties, the second one measures the collaboration within the boundaries of a single party and the third one measures the internal structure of the business (Grefen, 2010). In the field of Information Technology, the business application architecture has evolved from desktop-centric installation to client server based applications and finally to services oriented architecture. In order to tap the benefits of the ever evolving IT departments Amazon had launched the Amazon Web Services in 2006 so that not only Amazon but also other organizations can benefit from the experience of Amazon. Through the operation of this system, Amazon manages its elaborate services (Varia and Sajee, 2013). Business Technology Amazon was launched as an internet based business from the very onset. The success of the company since then has largely been dependent on the technological advancement of the Information Technology system. This means that the business technology is an integral part of the development of the business. The Amazon website uses both B2B and B2C models in its functioning. Amazon launched a series of application software and took the path of constant technological evolution to reach its current market position. The various technological innovations that have contributed to the overall development of the website includes Amazon Simple Queue Service, Amazon Simple Notification Service, Simple Workflow service, Simple e-mail service and the website’s most ambitious one called the Amazon Cloud search. This software allows the customers to take off the load of operating and scaling a search platform. With this technological development, Amazon had freed its users from the hassle of hardware provisioning, data partitioning or software patches. These developments were crucial for the development of the website as the full business structure is hinged on the usage of technology (Varia and Sajee, 2013). Concisely the technological improvement of the company has come a long way from once being a platform that operated on human edited list of products to a improved system of computer generated recommendation search engine. Competitive Advantage of Amazon To understand the competitive advantage of the Amazon website it is important to understand the basic business the website conducts. Amazon had started out as a virtual retailer of books only. Over the period of time the rising revenue of the company prompted the company to expand its business along various dimensions and even included third party sales into the business domain. The website has always sold the goods from its own warehouse. From the research made about the business of the website it has been found that the website is a platform from where customers can buy as well as sell products. The sellers, both individuals and retailers use the website for selling their products. This case study will however consider only the Business to Consumer model in e-commerce scenario only where individual persons interact with the website. The website has strategically launched various applications from time to time to allow the customers enjoy easy shopping for the customers. The loyalty if the customers enjoyed by the organization has catapulted it to be one of the top players of the game so much so that the company has now become the role model of a number of aspiring e-commerce models (Magee, 2013). The business success of the company can be fully attributed to the founding father of the company Jeff Bezos. The Business to Consumer model that has been followed by the organization has been an exemplary one. For example, Amazon’s Kindle Publishing has allowed the company to win millions of customers by the sheer brilliance of the application. This website application has attracted many aspiring authors to publish their books online and Amazon enjoys a commission from the sale, mutually beneficial for both the parties (Magee, 2013). Amazon had also improved its revenue from the idea of its recommendation to the customers. For example, any buyer buying a particular book can refer to similar books from the recommended books list which acts as a potential for new sale. The enormity of the organization has allowed the company to realize the cost leadership potential in its genre. Amazon makes sure it can offer the lowest possible price to its buyers and made this one of the strategic moves for better growth. The free shipping benefits offered by Amazon have helped to attract many customers (Mirow, 2000). The patent and copyright strategies followed by Amazon have also cemented its market position. Amazon had simplified the shopping experience from its website through use of “1-Click”for purchases and “Bid-Click” for the auctions. No sooner it had created these technologies than it had patented them. It had also patented the book recommendation software used by it to recommend similar books to the buyers. By applying these strategies it had cemented its position as the first mover and reaped the benefits ever since (Digital 4Sight, 2000). The customer friendly approach has been the integral strategy behind the exponential success of the business. The web pages are not over crowded with advertisements and effectively display the items that the buyer can purchase. Few features that has been adopted by the website to improve its business includes the reviews of the customers and the editors, customized web pages according to the preferences of the individuals like recommendations and notifications (Global Data, 2013). The Kindle fire tablet launched by Amazon provides fully-integrated end to end customer service. The customer centric approach followed by the company has allowed it dominates the markets. To reach this position few of the strategies that have been followed by the company includes: Building strategic partnerships with the Yahoo search engine. Buying banners on portals. Heavy offline promotional strategies. Constant evolution of the website and innovation. The key factors that have contributed to the success of Amazon since its inception are acquisitions, alliances and strategic partnerships. The acquisition by the company of Junglee and Planet All have secured its position in Europe and contributed to the customer base (Kha, 2013). The following factors provide a competitive advantage to Amazon over its other competitors: Firstly, the vast knowledge about the market and the industry contributed to the success. Bezos had a full understanding of the book industry with the knowledge of internet which worked wonders for the industry and place it before its competitors like Barnes & Noble and Borders. Secondly, the strong customer service provided by the company along with the vast range of the products had been significant for the rise. The applications are based on technology which cannot be duplicated fast by the competitors. Thirdly, the development of a strong and efficient system of logistics with vibrant distribution channels had greatly impacted the fast and safe delivery of the goods ordered by the customers. Amazon follows an in-house distribution channel for the shipment of its goods. All the distribution channels are equipped with advanced material handling technologies. Finally, the continuous innovation and cheering its customers with new applications have added to the customer base and the technological development of the website to ensure better customer satisfaction has contributed to the success of the success. Reference List Amazon.com, 2013. History and Timeline. [online] Available at: [Accessed 23 December 2013]. Del Rey, J., 2013. Amazon Expanding its Own Private Label Offering to Supermarket Goods. [online] Available at: [Accessed 23 December 2013]. Digital 4Sight, 2000. Amazon.com. [pdf] Digital 4Sight. Available at: [Accessed 23 December 2013]. EservGlobal, n.d. E-Commerce Models. [pdf] EservGlobal. Available at: [Accessed 23 December 2013]. GCSC, n.d., Business Studies E-Commerce. [pdf] Reward Learning. Available at: [Accessed 23 December 2013]. Global Data, 2013. Amazon.com, Inc. - Financial and Strategic Analysis Review. [pdf] Global Data. Available at: [Accessed 23 December 2013]. Grefen, P., 2010. Mastering e-business. 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