Amazon's Macro Environmental Situation - Case Study Example

Amazon.com Situational Analysis Distribution Situation Amazon deals directly with its clients with no intermediaries. Since most of its products are obtained online, the customers visit the website and look for the product they would wish to purchase. Online payment is done through virtual accounts. Among the reasons that makes Amazon to adapt this distribution channel is the convenience this shortened channel has. It can easily deal with customers all over the world (Dent, 2011). In addition, the cost of delivering the product is minimized, since the products do not have to pass through middlemen who would also wish to make a profit for distributing. By this, the customers pay less for the product while the company expands its market due to the fair price offer that the reduced cost will lead to. Since the business is allowed in all countries, the company does not have any political hindrances that would probably arise upon introducing some middlemen. Since the products can be sent through the internet, there is no need to include the wholesalers and retailers. Moreover, the customers get the product as desired. Dealing directly with the customer makes the company aware of the features which consumers would wish to get in the product. Complaints that the customer would have are easily established as they contact the company directly. By this customer interaction, the company will produce excellent quality products that customers will enjoy consuming. This has an advantage of attracting more customers, and encouraging relational purchasing (Nash, 2000). Its key competitors use this method of distribution. The delivery of similar products is done directly to customers. This could be due to its efficiency, and the easiness in reaching its potential customers. Time usage is reduced. As there is no involvement of traffic, time spent is minimized, hence advantageous to both Amazon and consumers of its products. The quality of the product is not interfered with. Since the product is given directly to the customer, there are no distortion would happen to it, and hence it is received in the best quality possible (Rosenbloom, 2009). Digital rights management (DRM) is the restriction on the sharing, donating or selling a book subject to some technical and legal restrictions imposed. Violation of these could lead to criminal accusations. Kindle’s DRM prevents against violation of these. It is also used to restrict the customer from using products from competing companies. Amazon can remotely view the books that are in the device. The company can also delete some of copies in the device; hence, it still has control on some of the activities even after selling Kindle to customers. DRM has various impacts on the EBook market. One of the EBook formats that are affected by the impact of DRM is Doc. This is a text document that is used by almost every PDA platforms. These can be read by iSilo, TiBR, TealDoc, among others. Another format is the EPub which is based on XML and XHTML. It is defined by Open EBook Forum. Palm Reader, which is also known as EReader, can be read on various devices that include cell phones and desk computers (Andrew & Freeman, 2001). Kindle format has support for various platforms. It is limited to Kindle software. PDF is another format that initially provides a standard form for editing and storing printable documents. Among the other formats are FictionBook, Sony, Plucker and iLiad PDF. All these have distinct features. Among the impacts of DRM on EBooks is the restriction against piracy. EBooks can now be safely profitable to the publisher and author. The control on the copies is unlike the previously situation whereby before the introduction of DRM, only few copies would be sold while the rest are copied. This would narrow down the market base of the book. Therefore, this has been a positive impact on the producers of the EBooks (Van, 2006). Some people have feared using EBooks that are controlled by DRM fearing the companies controlling this would restrict some of the things they would like to enjoy from the book. For example, some people would prefer purchasing a book, which they would later donate or share with a friend after reading. Some software even shows the company the notes that the reader is taking to know the areas that the readers enjoy most in a book. This makes the reader uncomfortable, because some books would be about personal living and emphasis on some areas would make personal life exposed, which is not fair for them. In addition, this affects the profitability of EBooks. Some readers would purchase a book and dispose it soon after reading. These occasional readers would be discouraged since they are restricted from accessing a variety of books. They need a platform where they can have a variety of electronic books at their disposal. Likewise, the frequent readers might require accessing a book as much as they want, everywhere they are. Therefore, they would be discouraged from DRM managed EBooks, since they would have to renew or reinstall the application every time they change the device which they are using to read EBooks. Amazon is using DRM to ensure to limit the number of people accessing a certain purchased book. It is also using it to know what are the most purchased books and sometimes the details that are most relevant. This could mean that they would have more customers purchasing a book, rather than few purchasing the book to be copied. Therefore, DRM is essential to the distribution of the company’s products. However, it also has an impact in some countries, where there is no Kindle penetration. Macro Environmental situation Macro environment analysis determines the outside influences that may have an impact on the company. These can be subdivided to technology, economic conditions, legislation and societal values. These cannot be controlled by the company, and rather affect the company’s market in an immense way. The extent to which the company is influenced depends on how powerful the causal event is. The company should know the probable risks that could hit it, so that to protect against collapse, because some of these factors are that severe. One of the external factors that affect the company is the competition it faces from the manufacturers of similar goods (Taylor, 2007). These are mostly Apple and Samsung, who innovatively come up with new customer-friendly products that may capture the market, limiting that of Amazon to a certain level. It is being predicted of some vibrant products by competitors in the market that would adversely affect the company. To counteract this, the company must have better offers to customers in terms of price and product delivery. In addition, the economic recession that is being observed is a factor that affects the business. Customers have a low purchasing power, making them unable to get the product. It is also making it expensive for the company to pay for expenses, due to high inflation. The increased interest rates discourage the company from taking loans that would help in its expansion. Technology has to be up to dated. The company has to keep up to the expected technology in the market so that it will not be out phased. This includes even using the decent materials that are in the market, as they produce their products. This makes it easier and cheaper to produce quality marketable products. This also includes updated database management for smooth operation of activities. Piracy is a challenge to the market of Kindle. There are people illegally downloading EBooks onto the device. Publishers and authors would accuse Amazon Company as being a facilitator for piracy. However, the company has little it can do to prevent this, considering the growth in intellectual knowledge among the people who would hack into the product, and modify some features. The company also gets a loss from piracy, considering the amount of sales volume that will be lost (Hunnewell, 2008). Regulations come in what would affect the company’s activities. Piracy being prohibited would see some penalties imposed on the company when the devices are used as an enhancer for piracy. In addition, laws can be introduced that would be against some of the dealings the company partakes. This acts both ways, with some being in favour of the company. Some of the laws that would work for the company are strict measures on individuals participating in piracy, and better tax conditions that would relief some of the company’s expenditure, hence more profitability (Browne, 2001). Therefore, some of the trends observed in the outside market are influential on the company. Some counteracting measures can make the company not to be negatively affected by the factors, or reduce the effect of the factors. Amazon should quickly maximally optimize the situations that favour them. In doing this, the company reduces on the expenses that it could have spent, maximize the revenue received, and hence increase profit. Customers become more satisfied and comfortable using the company’s product. Conclusively, the company’s readiness to possible uncertainties is crucial in the existence of a company. References Andrew, M., Cope, B., & Freeman, R. (2001). Digital rights management and content development: Technology drives across the book production supply chain, from the creator to consumer. Altona, Vic: Common Ground Publ. Browne, D. J. (2001). Heinemann business studies for AS level. Oxford: Heinemann. Dent, J. (2011). Distribution channels: Understanding and managing channels to market. London: Kogan Page. Hunnewell, L. (2008). Internet piracy. Edina, Minn: ABDO Pub. Co. Nash, E. L. (2000). Direct marketing: Strategy, planning, execution. New York, NY: McGraw- Hill. Rosenbloom, B. (2009). Marketing channels. S.l.: South-Western. Taylor, J. B. (2007). Economics. Boston, Mass: Houghton Mifflin. Van, T. J. M. (2006). Digital rights management: [protecting and monetizing content]. Amsterdam: Focal Press. Read More