Amazons Strategic Dominance - Case Study Example

Amazon’s Strategic Dominance Name of Student: Course: University: Amazon’s Strategic Dominance The Amazon Inc. has managed to build a name globally by effectively applying all the relevant strategies that businesses in its niche should apply in order to be successful. This online store has over the years managed to stay ahead of its competition by creating the best ecommerce environment for buyers and sellers to interact without major any trust issues[Ste16]. The company is able to realize its huge revenues by having its operations being grounded on customer satisfaction. They always give the customers a reason to purchase or sell items nowhere else but on their site and they enhance this by having the customers control those prices. Amazon also manages to have the associated costs subsidized in order to ensure that prices don’t end up getting inflated. This along with having a takeover strategy geared towards the quick adoption of Amazon in the very competitive environment has seen the company enjoy its success as the largest online store in the world. Since its incorporation on May 28, 1996, Amazon.com has been remained dedicated to offering a variety of products and services through its well established websites[Tho16]. The company manages its stocks by making orders from vendors and by having other sellers, termed as third party seller, supply their merchandise. The company is strategically segmented in order to tap into as many markets as possible. There is the North America segment, the International segment and the Amazon Web Services (AWS) segment[Tho16]. The North America segment has its focus directed towards the sales of products through the North-America-focused websites which include: www.amazon.com, www.amazon.ca , www.amazon.com.mx . The International segment directs its focus towards the sales of products through the company’s internationally focused websites which include: www.amazon.de, www.amazon.in , www.amazon.co.jp, www.amazon.fr, www.amazon.es and www.amazon.uk[Tho16] . The AWS section on the other hand its efforts directed towards the provision of storage, computer and database services to start-up companies, academic and government institutions, and other related enterprises[Tho16]. The competition is very stiff Amazon faces stiff competition in the three major categories in which it operates, namely the media segment, electronics segment and the general merchandise segment. In the media segment, Amazon faces its competition with Netflix, eBay, Time Warner Cable, Apple with its iTunes, Google with Play Store, and Liberty Interactive which is a media producer[Inv16]. Most of the competitors that Amazon has in the supply of general merchandise and electronics are majorly brick and mortar-based business enterprises. The major competitors in this category are Family Dollar, Delia, Systemacs, Walmart, Staples, Target, RadioShack, Big Lots, Best Buy and Sears amongst budding enterprises who are building the muscle to compete over time[Inv16]. In the online section, Amazon faces stiff competition in the supply of general merchandise and electronics from Zulily, Wayfair Inc., Alibaba Group, JD.com, Vipshop Holdings, Overstock.com, LightInTheBox Holding Co and PCM[Inv16]. In the supply of other services such as web services, Amazon faces very stiff competition from a number of the world’s well established corporations such as Oracle, Google, Acenture and Citrix Systems, PC Connection, CDW, Insight Enterprises and Salesforce.com [Inv16]. Amazon’s stability and effectiveness is majorly based on its effective application and adoption of strategies that are key to its realisation of success is its operation. Amazon’s Blue Ocean Strategy In order to create a Blue Ocean Strategy company, strategic sequencing has to be applied. There are several components of strategic sequencing which include: the buyer utility, price, cost and adoption in that very order. It is paramount to have all these components coming in this listed sequential order in order to have the successful creation of a Blue Ocean for any company. It is possible to have a company with these components already but in their failing to have them coming in this order may lead to the company not having to achieve the best possible desired results[Aus15]. Amazon has successfully managed to link up these components in their specified order, a factor that contributes to the company’s success. For the buyer utility component, Amazon has a well-developed site from which their customers can make purchases or even sales of their own items[Che16]. This goes hand in hand with ensuring that there is a wider variety of items listed in their website. This creates a compulsive force to keep the customers streaming to the company’s website. The buyer utility component is not in itself sufficient in creating the much needed attraction to give Amazon an edge over its competitors. They thus ensure that their prices are set in the right manner. Even without having to rely on the influence of demand, Amazon makes the provision for fair prices in order to attract customers to their site. There is an allowance for the customers to come up with their own accounts through which they can manage their sales at relatively lower prices as compared to current market prices. This allowance of the amazon’s customers to set up their prices in order to create the best deal for the buyers largely contributes to the price component of the Blue ocean strategy[Che16]. Costs are the third component. Costs play the larger role in the determination of the prices of the items that are available for sale. Amazon has most of the costs being determined by its customers. In most cases, however, with most of them being able to acquire their merchandise from major suppliers, the costs are usually cut off to a great extent, which in turn caters for the lower prices[Che16]. The final component of the Blue Ocean Strategy sequence is adoption. This refers to how well companies are able to address their hurdles in the execution of their business ideas. This is a very crucial component as the company’s success quite depends on how strategically placed handling the stumbling blocks it encounters on the way. Amazon has clearly managed to address this component by having earned enough loyalty and trust from its customers by having all customer needs prioritized. E-bay, who are Amazon’s competitors have struggled with adoption especially with customer loyalty due to their inconsistency in service provision[Chr161]. Branding has also been a major stepping stone to Amazon’s global dominance Branding makes a business enterprise unique and dominant. Amazon’s concept branding has defined its uniqueness in the market. The company owes several factors to its harmonised and effective branding strategy. Below are the major ones: Amazon has its brand identity rooted through their story from origin Even after having grown to be one of the most recognized organizations globally, amazon maintains its origin story as a major asset in the establishment of its brand positioning which is customer-centric. Its common knowledge that the company’s founder, Jeff Bezos, Had allocated some funds allocated towards the establishment of a bookselling company situated at what used to be a garage. The company’s ascension, amid major setbacks, to any international online store selling almost any item can only be beheld with the awe of a fairy-tale[Lor15]. Its brand story creates the image of effective customer care techniques that have been applied all along, implying that the company is bound to maintain its levels of customer care even with its expansion to being a global enterprise. People make purchases with emotions hence a brand rooted on the company’s story since origin is bound to build emotional connection[Lor15]. Amazon has its brand differentiation highlighted at any opportunity that presents itself. Amazon’s original tagline was “Earth’s biggest book store”. This was In relation to its capability to supply its customers with books. With time and immense growth, another tagline was formulated, with regards to it’s the expansion that saw it be in a position to serve more customers with more products and services at hand. Its new tagline, “the world’s largest online retailer “, is different from the original one and with the change comes the brand differentiation and a new implication of the company’s scope of service provision[Lor15]. Amazon had its operations in the first five years directed towards having their customers enjoy lower prices in order to stay ahead of the competitors. With time, amazon has been able to come up with other money saving features including the most prominent one, Amazon Prime program which grants Amazon’s customers a free two-day shipping service and unlimited music and movie streaming at very subsidized prices. This creates an image of a company that is customer-centric and one that is inclined towards the enhancement of the shopping experience[Lor15]. Amazon keeps its customers informed on opportunities to save money by having email notifications, public announcements and onsite callouts. This creates online experience for its customers that is better than that of its competitors. Amazon has managed to Remain Flawlessly Consistent with Their Brand Promise. It is the duty of every business enterprise at every level of service provision to remain consistent with their brand promise. Amazon’s brand promise: consistently deliver an exceptional customer experience. Simplified as it is, it takes a different turn all the same when it comes to the business part of it. With Amazon’s footprint being global, it is quite a challenge to have them stick to their brand promise. Amazon is all about the provision of the best customer services. They centre their operation on customer experience. Their website allows for unmatched product selection, has a very efficient search engine that enables customers to quickly access their desired item and provide the best reviews about products , all of which their customers can trust[Lor15]. Customers are also presented with an opportunity to voice their opinions and product experience as well as having a round the clock team that is available to handle issues they have with regards to their transactions. The secret ingredient to Customer Loyalty Amazon’s effectiveness at handling customers has seen them beat the producers of those products in the sales rates and successful transactions within a given period. A case in example is the Apple Company’s sale of their iPhone 6 phones. Even with Apple having given their best shot to deliver on customer satisfaction, Amazon still came ahead in the sales battle where they made more sales and had better customer satisfaction ratings. This is just an example of how Amazon manages to keep its flow of customers. What exactly does Amazon do in order to keep its customers returning to their website every time they need to make online purchases? Amazon’s 0.16 marketing strategy Every time one makes their purchase at Amazon, and there is a price fall over the time of the transaction, Amazon ensures that the difference is transferred to ones account to figures as low as 0.16 cents[Cho15]. To many, this would appear as a very unsound financial strategy as the time, finances and effort taken to make the calculation and transfers to customer’s accounts is apparently one that leaves little gain to the customers. This however is the main point that makes amazon stand out from its competitors. The 0.16 cents strategy is a clear show of the honesty that Amazon handles its clients with. Honesty caters for the feelings that customers build at heart, even when the refund they receive isn’t large enough to make a tangible differences in the figures in their accounts[Cho15]. The Amazon Prime Even with most consumer loyalty programs not being guaranteed to work, Amazon steps in with their highly effective Amazon Prime program that enables Amazon maintain its customers while still generating their revenues at the end of the venture[Inv16]. The program sees tens of millions of members actively using their Amazon accounts every time the program is running. Initially, the program had customers pay as low as $79 for a month to cater for a 2 days of free shipping[Cho15]. While the shipping isn’t free in real sense, the customers were in a way made to feel as if the shopping was free. The shipping rates have since then been made free to cater for customer satisfaction. The strong point of this program is that it targets the very weak point customers give a business enterprise: shipping prices. Free shipping enhances more purchases. Survey reveal that customers shop twice as much on Amazon as they do on other online stores with the free shipping rates being factored in. Amazon also pays some selected customers some amount of money to have them spread word on Amazon Prime[Lor15]. The Maintenance of Traditional Values Businesses at times lose direction when it comes to the field of customer service. Stiff competition causes most of them to embark on creativity and innovativeness in order to handle customer care related needs. This leads to most enterprises deviating from the customer’s requirements. Amazon’s clients testify to the customer service techniques being easy, hassle free, fast and efficient. This absence of complications in the customer care techniques has led to Amazon scooping coveted customer choice awards such as the National Retail Customer’s Choice Awards[Cho15]. Customers who are loyal to a given brand generally present to a business higher standards on the overall since they are well aware of what the business can provide for them-they already have the experience of quality services and products and are in turn expecting better. This can lead to a scenario in which this can escalate to a point where loyal customer maintenance costs exceed the profits generated by a business. This is on the larger part left for the business to make the analysis if the maintenance of such customers is worth it[Cho15]. Amazon has worked into combating this scenario by identifying the very loyal customers who are actually regular or those whose transactions earn them some tangible amounts of money. Research shows that only 20% of loyal customers can be viewed as being good to the business and these are the ones that Amazon holds onto and these have proven very beneficial to them[Cho15]. The Pricing Strategy that drowns that presents no thriving opportunity to its competitors. Other Online stores are yet to come up with a way to cripple Amazon’s pricing strategy. Amazon continues to trample on its competition indefinitely with its strategic pricing strategy. With its daily update of prices on a large collection of its products, its competition can barely suffice to claim the lead on pricing. There are basically three approaches that Amazon applies in order to keep ahead of its competition: Competitor driven pricing, cost-driven pricing and value-driven pricing. Competitor-driven pricing This approach involves gauging what competitors in the markets are doing with regards to pricing and ensuring that one is in line with the current market prices[Ang15]. The only factors that have to be put into consideration is if the competitors involved have similar business objectives, an enterprise has a cost structure that is consistent to that of competitors and that they assume that their customers know what they are faring on with their pricing. Amazon’s competitor-pricing strategy is always in line with the above considerations thus are on this basis able to keep abreast in the competition. Amazon’s competitors may however not effectively apply this on themselves to beat Amazon since Amazon boasts of a large customer base and more finances for that matter[Jam15]. Cost-driven pricing This pricing strategy involves a business enterprise taking their own costs and marking those up to some level[Ang15]. That then forms the basis for the pricing. The challenge experienced with this form of pricing is the fact that the enterprise question may not end up including all their costs, the costs that are finally set up may be very different from those other competitors and also due to the fact that customers care less about an enterprise’s costs but rather have their attention on the value of the product. Amazon beats its competitors in this pricing strategy since its customer loyalty and satisfaction strategies ensures that their products have lower prices as compared to the competition even with the factor of costs factored in. This approach is also more prominent in Amazon since some of their customers buy products as soon as they are on stock , then after a given time period, they mark the products up by a given amount with the hope that that business venture will ultimately lead to the generation of profits[Jam15]. Cost-driven pricing The basis of this approach is on the basis of establishing the value that the customers attain by purchasing the products one is selling[Jam15]. The basic assumption with this approach is that one’s products are differentiated positively from available alternatives so that one can proceed to have higher prices fixed on the products that they are selling to their customers. Amazon’s customers are able to generate revenues on this basis owing to the fact that most of them are able to get their merchandise from wholesalers or manufacturers at lower prices[Jam15]. Amazon uses the dynamic pricing approach[Ang15]. Under this approach, the task is to ensure that one has their products priced competitively. Dynamic pricing is used by retailers to ensure that they have their pricing optimized by making changes in prices in real time. This should be based on internal factors as well as market factors. This very flexibility in prices is what retailers use as basis of playing the offense and defence game. Amazon is able make massive real time changes in its products which ensures that they are able to keep winning customers over to their side. This has always presented a challenge to the other online stores that rank lower than Amazon or are competing against Amazon since such flexibility is in a way bound to affect the revenues that they can create. That is the basic manner in which Amazon has managed to dominate over its competition in the supply a wide variety of products through its web platform. References Ste16: , (Penhollow, 2016), Tho16: , (Reuters, 2016), Inv16: , (Investopedia, 2016), Inv16: , (Investopedia, 2016), Aus15: , (Australia, 2015), Che16: , (McBryer, 2016), Chr161: , (Wiggins, 2016), Lor15: , (Carter, 2015), Cho15: , (Ying, 2015), Ang15: , (Valentine, 2015), Jam15: , (Thompson, 2015), s Read More