E-Business of Amazon - Term Paper Example

 E - Business Amazon Amazon (History, Product & Services) “Considered a pioneer in online retailing, Amazon.com, Inc.. an American electronic commerce company, founded by Jeff Bezos in 1994, expanded during the late 1990s to offer the "Earth's Biggest Selection" of books, CDs, videos, DVDs, electronics, toys, tools, home furnishings and house wares, apparel, and kitchen gadgets” The debut of Amazon on the web was in 1995 and incorporated s a public company in 1997. In 1998 it diversified its operations and entered the online music and video business. Again in 1999, Amazon expands into selling toys, electronics, tools, and hardware. Currently it employs more than 7800 employees and as per the statistics of 2002, it has reported $ 3.9 billion sales. (Amazon.com, Inc) Though the company has started as an online bookstore, currently it has products such as music CD’s, VHS, DVD, computer software, video games, electronics, apparel, furniture, food toys, etc apart from books. It has started film production also in 2008. Amazon has several websites custom made for countries like Canada, Germany, France, China, UK, Japan etc. The company did not focus on profits for the initial five years and spend much of its revenues in expansions in the initial years. This business strategy brought immense dividends to the company as per the recent statistics. E - Business Amazon 2 Amazon - Marketing plan E-business strategies E-business strategies of Amazon are mainly focused on net customers. Since most of the Amazon business depends internet for the execution of the business, their strategies like advertisements mainly focusing on the internet users. The so called “Niche Marketing” strategies are mostly adopted by Amazon.” Amazon.com has redefined its niche from people looking for good value books, to one of time-pressed consumers looking for one place to find most things with easy service and reasonable prices. Amazon.com certainly doesn’t offer the lowest priced books on the Internet. One of the great advantages of the Internet for online retailers is that it allows a dispersed market niche to be served profitably. Where there are not enough customers in a single geographic market to support a traditional store, online those customers can be brought together from all over the country or the world.” (Marketing strategy) These strategies have some negative impacts as well. Since the customers have different tastes based on the age, sex, region, culture etc it is very difficult to cater the entire customer requirement at one place. If a company is going after everything, then it is very difficult to provide equal focus to all its activities at a time. Moreover the centralized control may also lose. Amazon’s attempt to diversify into other market segments such as music collection, toys, food, apparel etc should never cause any harm to its primary book business. Such activities may result in losing brand identity. E - Business Amazon 3 The success of e-business lies in how long a customer spends time in an e-business website. In order encourages the customer to stay back in the site, the site should provide interesting things based on the customer requirements. For example, in a sports website we can anticipate more visits from the youths and the kids than the elderly people. So such sites should provide information like downloading or hearing music, watching small movies, online games and video games, electronic goods etc. Amazon should think about incorporating such facilities to its site in order to target the youths. A SWOT analysis of Amazon Strengths Strength of the e-business mainly depends on the uniqueness of the idea. If the idea is unique then there is every chance of becoming a leader in that business since nobody so far tested such an idea. Amazon’s kindle technology (an e-book reader which downloads content over "Whispernet") is the best example for this. Kindle supports wireless reading of e-books and also Amazon recently announced the modified version of kindle-2 Customer relationship management, Supply chain management and most modern information technology are some other strength of Amazon. The company carefully identifies the customer requirement by asking the visiting customers to sign up for a customized web page. From there onwards they are able to track the customer interests E - Business Amazon 4 in their site and hence they are able to offer suggestions for the customers. “Amazon is a huge global brand. It is recognizable for two main reasons. It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people. It was an early exploiter of online technologies for e-commerce, which made it one of the first online retailers. It has built on nits early successes with books, and now has product categories that include electronics, toys and games, DIY and more” (SWOT Analysis Amazon). Weakness Reputation plays a vital role in determining the weakness of a company. If the company has bad remarks from the customers, then the business will be suffered. The current diversification of Amazon looks like creating problems for them “As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the number one retailer for books. Toy-R-Us is the number one retailers for toys and games. Imagine if Toys-R-Us began to sell books. This would confuse its consumers and endanger its brands. In the same way, many of the new categories, for example automotive, may prove to be too confusing for customers” (SWOT Analysis Amazon). The free shipping cost strategy has immense effect on its profit loss. In 2005, Amazon reported a 44 percent drop in third-quarter profit, the result of a substantial, one-time legal settlement, higher income taxes and shipping promotions. The amount paid for lawsuit settlements and tax bills further reduced the profit of the company. E - Business Amazon 5 “Amazon agreed to pay $40 million to Chicago-based Soverain Software to settle two lawsuits tied to online-payment technology. The company's tax bill, meanwhile, ballooned. Amazon spent $21 million in income taxes for the quarter compared with $3 million a year ago. All of these expenses sliced into Amazon's third-quarter profit.” (Monica Soto Ouchi, 2005) Amazon is currently lacking some of the modern technologies like real time chats in its site. Real time chats always provide an opportunity for the customers to interact with Amazon instantly and can clarify their doubts. ” Add interactive components-real-time chats, message boards, online events, and similar opportunities that enable visitors to network and communicate with others of similar interests and/or to express their opinions and comments. The current technologies like real time chats, message boards, and online events will further enhance the customer interests in the site.” (Starting an e-business: What’s involved?) Opportunities Diversification of business to other areas such as music, apparel, food, toys games, film production etc created lot of opportunities for Amazon. It was succeeded in entering big foreign markets like China and Britain. Moreover the custom made websites for countries like China, Britain, and France etc have added more dimensions to the company activities. “Amazon announced a deal with the British Library, London, in 2004. The benefit is that customers can search for rare or antique books. The library's catalogue of published works is now on the Amazon website, meaning it has details of E - Business Amazon 6 more than 2.5m books on the site. In 2004 Amazon moved into the Chinese market, by buying china's biggest online retailer, Joyo.com. The deal was reported to be worth around $75m (£40m). Joyo.com has many similarities to its new owner, in that it retails books, movies, toys, and music at discounted prices.” (SWOT Analysis Amazon) Amazon can consider entering the Indian markets also because of the huge population and vast development in India. India is supposed to be one of the rapidly developing countries in the world and lot of foreign institutions has already entered the Indian market. Threats The main threat for any business is coming from the competitors both from domestic and international. “Those domestic (US-based) rivals unable to compete with Amazon in the US may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets. The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures such seasonality may not be enduring.” (SWOT Analysis Amazon) The liberalization policies have opened up markets and barriers for entry for the foreign entrepreneurs have been liberalized by many countries. Other threats mainly coming from substitute products. For every quality product, there will be a cheaper E - Business Amazon 7 duplicate product. Moreover because of the immense competition the buyers are gaining more power than the producers and hence the product or service providers forced to compromise more. In order to reduce competition most of the business tycoons will consider mergers as an option. Small companies will be dissolved in the big company in this strategy to raise the collective strengths. For example Microsoft is trying desperately to take control of its competitors Yahoo and Google. So Amazon also should consider in terms of such business strategies. They can consider taking control of toy business companies like Toy-R-Us or book selling companies like Fabmart. Online and offline marketing strategies “Amazon.com has created adequate trust and credibility among consumers, and most people provide the company with adequate information about themselves so that they can conduct their repeat purchases with significant ease.” (S. RAMESH KUMAR) Most of the Amazon ad strategies are based on online marketing alone. The company should consider giving more ads in the offline media as well. Public relations campaigns and sales promotions should be organized to attract consumers. Online marketing strategies require offline strategies as well. The advertising of online businesses must be given on offline components such as print, TV or radio. Since most of the population is still unaware of computer and internet usages, online ads may not reach such persons. Moreover the internet users are less compared to the non-users. So online advertisements will only reach a specific segment of the society. E - Business Amazon 8 Amazon - Customer relationship management (CRM) plan Customer relationship Management is the knowledge of customer needs which will help the entrepreneur to increase his sales and services. It is important to understand the current trends in the market and the customer feedbacks regarding the product and the services. Since customers are the valued segment of any kind of business, the success of a business lies on the customer responses to the product or services. Most of the company activities are swings around the customers because of their role in deciding the success of a business. The World Wide Web provides an opportunity to concentrate on an individual basis. In most of the other businesses the strategies often target a group of people from the society. Customizing of product and services is difficult in such cases. The customers have different tastes and different beliefs based on their gender, age, and educational level. In other businesses it is difficult to cater the needs individually. But in e-commerce customization of business is possible up to certain extent. For example most of the outsourcing jobs such as data entry, data editing, essay writing, etc can be customized based on the customer requirement. Amazon has launched two new interesting tools to improve relations between customers and their favorite products. First the Plog is a personalized web log that appears on your customer home page. Every person's Plog is different (hence the name), and the posts are sorted so the most recent entries appear at E - Business Amazon 9 the top. Each post also gives you the opportunity to provide feedback to the sender as to whether you liked the post or not. Your Plog only appears if you are logged into Amazon.com and is visible only to you. Then, AmazonConnect is an unprecedented program for authors whose books are sold on Amazon. Authors who participate in the AmazonConnect program can send messages to readers who have bought their books on Amazon or have signed up to receive their posts. Messages from AmazonConnect authors will appear in Your Plog on the Amazon home page. (Thomé, 2006) Amazon - Architecture plan Just like the architect of a building the e-business also requires an architect to execute the business strategy correctly. As in the case of a building construction, here also the e-business architect provides solution for the customer demands in the most efficient manner. The most difficult process of e-business lies in the translation of business languages into technical terms of the computer and the internet. The architecture of the website must be done in such a way that it should be easily accessible to even ordinary customers. Most of the people do not have the patience to wait for longer times to upload the web pages and hence the web pages should not be filled with too many graphics and other items which require longer time to execute. The communication between the customer and the entrepreneur is taking place through the website and hence such communication methodologies must be easily understandable to the customers. “An e-Business needs to have a forward-looking application E - Business Amazon 10 architecture that deals with the following critical requirements: Easy-to-use interface Integration of intra-business processes, Innovative methods for adding value, Customer- and solution-oriented procedure, Plan for growth and change” (Meghraj Thakkar) Amazon has all the above ingredients to execute its business successfully. Their website offers customer s to search though their books for some specific areas they are looking for. This facility provides the customer with an opportunity to have an idea about the book before taking decisions about purchasing. Amazon should consider incorporating such reading facility to all its books in stock. At present only limited books are allowed to look into. Amazon - Enterprise resource planning (ERP) plan “Enterprise Resource Planning is the coordination of all activities of a company (so-called vertical activities such as production, procurement, or rather horizontal activities such as marketing, sales forces, management of human resources, etc.) around the same information system. (Enterprise Resource Planning) E-business environment is also not different from the normal business environment. Here also the resources needed for production, procurement of materials, machineries needed for production, money needed for the business, man power needed for the business, all should be preplanned. Amazon provide best example for Enterprise resource planning. They ensure sufficient inventory of books every time. The customers should not be dejected because E - Business Amazon 11 of the out of stock books. Every time when the book goes out of stock the customer may explore other sources. So production and procurement of the books are preplanned well in Amazon. In case when the book goes out of stock for some reason Amazon was able to provide accurate information regarding the non availability of the book and the anticipated date of arrival of the book to the customers. Most of the Amazon’s machineries or equipments such as the computers, hardware & software and internet connectivity etc are sophisticated and well maintained. Upgrading of technology is taking place every year in Amazon to keep in pace with the ever improving technological world. Amazon websites are carefully designed using modern software and web designing tools so that the customers don’t need to wait too much time for downloading the pages or searching through the books. It is also important to appoint professionally skilled employees to respond to the customer’s queries. The employees must be well trained in professional management technologies and also they must be well aware of the modern software and hardware which is required for the effective management of e-business. Amazon has all the above ingredients. Their skilled manpower is really an asset for them. Amazon has a clear view of how information and communication technology can support the e-business and they are able to use that view to identify specific areas of opportunity or need within the business. The business processes within the organization Amazon, are simply the groups of activities that they use to accomplish the organization’s work. “Today, many of these processes require information and E - Business Amazon 12 communications technology systems support. One method of identifying specific processes that require information and communication technology support is the value chain method. This method examines how the organization adds value to its products and services. More specifically we can see which business processes either add or reduce value for the customer” (Marian STOICA, PhD) Amazon was able to read their customers correctly using their customized web pages for the customers. Amazon - Supply chain management (SCM) and Competitive tracking plan Supply Chain Management (SCM) controls the movements of goods or services from a supplier to a buyer. In order to efficiently manage a supply chain the demand of the goods and the availability of the goods must be evaluated properly. Moreover the SCM should control the warehouse and the logistic operations properly to ensure the product reaches the consumer in time. In order to function properly, the SCM must forecast the demand of the goods and based on that it should advice the production team regarding the quantity of goods produced and also the time schedule of the requirement. “Price competition in the brick and mortar world at least relies on the difficulty of consumers to effectively and quickly compare prices, coupled with the issue of physically having to go to each store to even find if the item is in stock.  The online world has none of these characteristics, and even, has websites, whose sole function is to make the comparison of commodity products easier and faster.” (Online Retailers mirror Brick and Mortar worst practices to stimulate sales) Amazon offers free shipping E - Business Amazon 13 cost for its customers and hence in most cases the customer was able to obtain a book from Amazon with a lower price compared to its competitors. Price comparison is an easy task for online customers. The prices of the goods are just a finger click away in online business. In offline business mostly the customer needs to visit many shops for the price comparison. Thus online purchasing provides the customer with an opportunity to get good products for cheaper rates with less physical efforts. Competitive tracking plan The main competitors of Amazon are Barnes & Noble, Columbia House, eBay, e-Toys etc. In order to tackle the challenges from the competitors Amazon puts links of the competitors like eToys in their website to provide the customers an opportunity for the price comparison. “It is better by installing browser plug-ins like previously mentioned Price Advance or BookBurro, which offer price comparisons to competitors (or in the case of BookBurro, links to your local library) on product pages.” (Pash Adam, 2008) The battle between ebay and Amazon is getting intensified every day. “On Mar. 30, Bezos cranked up Amazon's auctions in direct competition with eBay. Analysts hadn't expected Amazon to announce auctions for several more months, but it did so just one day after eBay announced plans to make a $1.1 billion secondary stock offering.” (Hof Robert D. 1999) It is necessary to identify the competitors and their products and activities to fine tune the e-business. Ultimately it is the competitor who forces your customers to think differently. If the customer happens to meet a competitor with E - Business Amazon 14 cheaper price and better quality and services, he will definitely rely the competitor for his further business activities. So the level of competition and the quality of the offered services must be evaluated and possible remedial measures should be taken to counter such competition In some cases, the competitors will offer cheaper prices for the same product. Since nobody can compare your product with the competitor’s product physically, most of the customers will tempted to go after cheaper price offers. In such cases it is extremely difficult to convince the customers because of the lack of physical evidences. In such cases, money back guarantee offers are often required. Then only the customer will get an opportunity to compare the products. Conclusion Amazon.com has the monopoly in online book business. It has expanded to other areas also. Because of scientific management techniques, Amazon succeeded in keeping it monopoly intact so far though competitors like eBay, Barnes & Noble, Columbia etc are trying to shake the monopoly of Amazon. The main advantage of e-business over conventional business is that it can reach the customers individually and can offer customized products and services up to certain extent. The main disadvantage of e-business is its inability to tackle false claims of its competitor because of lack of physical evidence it can offer to the customer. E - Business Amazon 15 Works Cited 1. Amazon.com, Inc. Retrieved on February 15, 2009 2. Marketing strategy, Retrieved on February 16, 2009 3. Starting an e-business: What’s involved? Retrieved on February 15, 2009 4. Meghraj Thakkar, Oracle Architecture and Design Issues for E-Business, Retrieved on February 15, 2009, 5. Enterprise Resource Planning, Retrieved on February 15, 2009, 6. Marian STOICA, PhD. Enterprise Resource Planning – the Backbone of E-Business, Retrieved on February 15, 2009, E - Business Amazon 16 7. Online Retailers mirror Brick and Mortar worst practices to stimulate sales Retrieved on February 15, 2009, 8. SWOT Analysis Amazon, Retrieved on February 15, 2009, 9. Monica Soto Ouchi, (2005) Amazon weakness worries Wall Street, Retrieved on February 15, 2009, 10. S. RAMESH KUMAR, Combining on-line and off-line marketing strategies Retrieved on February 15, 2009, 11. Thomé Vincent, Amazon, Plog and CRM, Retrieved on February 15, 2009, E - Business Amazon 17 12. Pash Adam, (2008) Amazon Includes Links to Competitors, Retrieved on February , 2009, 13. Hof Robert D. (1999) eBay vs. Amazon.com, Retrieved on February 16, 2009 Read More