Comparing Amazon and Borders Books - Essay Example

Comparing Two Similar Businesses Comparing Two Similar Businesses Introduction Strategic management and decision making process play the central role in determining the levels of success of a business concern. Adaptability to changing market situations is another factor that would influence an organization’s long term sustainability. This paper will critically compare two similar companies, namely Amazon.com and Borders Books, in terms of their business approach, management tactics, and marketing strategies. Amazon.com and Borders Books Amazon.com is a multinational electronic commerce company headquartered at Seattle in the United States. The company was founded by Jeff Bezos in 1994. Initially, the company commenced its operations as an online bookstore. Bezos adopted an unusual business plan initially and he did not expect a profit for first four to five years. Even though this ‘slow growth’ plan caused dissatisfaction among its stakeholders, it assisted that company to survive the dot-com bubble burst successfully. Finally, the company earned its first profit in 2001. Currently, Amazon.com is the largest online retailer in the world and it deals with a range of product lines including DVDs, CDs, MP3s, video games, software, electronics, furniture, food, jewelry, apparel, and toys (Kindle: The world’s best selling e-reader). Like Amazon.com; Borders Books, a US based company, was known for its dominance in international book and music retail sector. The company was founded by brothers Tom and Louis Borders in 1971.Later in 1996, a sister company called Book Inventory Systems was founded to support the operations of Borders Books. Initially, the Borders Books began its operations with used books and progressively it expanded the business. Although the Borders Book had been successful since its establishment, the company started to experience profitability declines since 2004. Although books and music were the core business of Borders Books, it also dealt with other business areas such as magazines, board games, encyclopedias, zunes, calendars, and gift packs. While analyzing Amazon.com, it is obvious that the company adopted Customer Relationship Management and Information Management tactics to promote its internet marketing and sales. In contrast, the Borders had not focused on a specific management approach to enhance its internet marketing operations. Borders Books just tried to increase its sales volume rather than ensuring customer satisfaction. Evidently, this difference in management approach assisted Amazon to survive all market difficulties whereas Borders Books filed for bankruptcy in 2011. Reasons for Amazon’s success As discussed earlier, the Amazon came to profitability and today it dominates the online retail market despite its initial struggles. While analyzing the corporate history of Amazon, it seems that improved technology, multi-level sales strategy, and continuous innovations are the major reasons for the company’s success. The Amazon’s business operations are based on a Linux based core technology. The organization had acquired “world’s three largest Linux databases with capacities of 7.8 TB, 18.5 TB, and 24.7 TB by 2005” (Layton, n.d.). The company’s technology architecture is capable of managing millions of back-end activities everyday and dealing with nearly half a million queries from third party sellers. In addition, the organization deploys Netscape Secure Commerce Server to effectively meet the safety concerns of customers’ credit card details. Finally, the company has developed technology to record customer behavior so that it can recommend items to satisfy customer interests. Similarly, the organization follows a multi-level sales strategy. Initially, the company focused on Business-to-Consumer relationships and Business-to-Business relationships. Then, the company gradually turned to Customer-to-Business strategy to meet customer values. Currently, Amazon promotes Customer-to-Customer transactions also. This multi level business strategy aids the organization to meet interests of different customer and supplier groups. The company also invests hugely in research and development and it greatly promotes innovations. Amazon’s innovativeness assisted the company to successfully survive contingencies like the global financial crisis 2009. Amazon Kindle was one of the popular innovations of the company. Reasons for Borders’ failure Even though Borders had been profitable until 2004, it ended up in Chapter 11 in 2011. Overinvestment in music sales, thoughtless store openings, and late entry in e-books market are identified to be the three major causes of Borders’ failure. In the words of Austen (2011), the Borders Books heavily invested in CD sales during 1990s; and this move costed the company a lot because people stopped buying CDs and switched their demand to iPods by the end of 1990s.Ultimately; the policy caused the company to lose a significant portion of its market share. Borders Books opened several stores as part of its business expansion strategy. It was estimated that nearly 70 percent of Borders’ bookstores was competing with local Barnes and Noble. The company offered a glut of book stores without realizing that people were turning to online shopping. Similarly, the Borders Books could not foresee the development of e-books. As a result, the company could not develop its own e-reader to confront with competing products like the Amazon Kindle. In addition, the organization did not open an online book store until 2010. While comparing the two companies, it is clear that Amazon easily adapted to changing market situations on the strength of its innovativeness whereas Borders Books failed to foresee the rising market trends. In short, the Borders’ lack of foresightedness and adaptability ended up in its bankruptcy. Recommendations In order to be flexible enough to easily adapt to changing market conditions, a company must maintain a proactive management team. Thus, the company can effectively foresee the emerging market changes and thereby potentially respond to them. It is recommendable for firms to invest more in research and development activities because modern customers give more preference to innovative product features. Furthermore, companies must try to introduce an innovative product to the market before their competitors do. It is advisable to give specific focus to competitors’ product features and marketing strategies. Finally, organizations have to develop specific mechanisms to collect timely customer feedbacks and improvement suggestions. Conclusion In total, Borders’ lack of adaptability to changing market situation resulted in its failure. In contrast, Amazon is proactive in online marketing activities and product development. A firm must always be innovative and flexible enough to adapt to changing market conditions. For this purpose, an organization has to develop its own effective management approach. References Austen, B. (2011). The end of Borders and the future of books. Bloomberg Businessweeek. Retrieved from http://mobile.businessweek.com/magazine/the-end-of-borders-and-the-future-of-books-11102011.html Kindle: The world’s best selling e-reader. Amazon. Retrieved from http://www.amazon.com/ Layton, J. (n.d.). How Amazon Works. N-Cap Users’ guide: Evrything you need to know about using the internet. Retrieved from http://www.nu.e-association.ca/cim/dbf/how_amazon_works_english.pdf?im_id=54&si_id=305 Read More