SWOT Analysis of Amazon.com - Essay Example

AMAZON.COM Amazon.com is one of the most well-known internet-based booksellers. The main strength and unique image of the company can be explained by entrepreneurial nature of business and innovative ideas of its Jeff Bezos. Today, Amazon.com is a leading online bookseller which has 30 million customers around the world. SWOT analysis (strengths, weaknesses, opportunities and threats) (Johnson and Scholes 51). Strengths Unique image and leadership position allows Amazon to obtain a very competitive position on the global market. Amazon has a core of loyal supporters and developed lines of services to satisfy the needs of wide audience. Amazon advertises extensively on the internet to help raise awareness of their brand. Also, Amazon maintains high-speed growth introducing new products and services available online. Innovations and adaptation policies help to appeal to a particular target audience in diverse markets. The main weakness of Amazon is a negative image of online banking and financial transaction. Many customers do not buy products online afraid of fraudulent actions of companies. Undeveloped banking sector in less developed countries prevent the company from rapid international growth. The opportunities included: high potential to growth based on the technological change and increasing number of internet users. The choice of communications mix should be the most cost-effective solution for achieving the organization's communication objectives. Call centers and the Internet give online booksellers great opportunities to promote its services. Competition and possible legal changes is the major threat forAmazon (Amazon Home Page 2009). In his book "Competitive Advantage" Porter identifies five forces that drive competition within an industry (Johnson and Scholes 54). The threat of entry by new competitors is possible but they will create a real threat for Amazon. The intensity of rivalry among existing competitors has a great impact on Amazon facing with strong competition (Barnes & Noble and other small online companies). Thus, Amazon has positioned itself as a superstore. Pressure from substitute products will not have a great impact on Amazon's activity. Today, Amazon proposes a wide range of e-texts and CD-ROMs which can be regarded as substitute products. The bargaining power of buyers is crucial for Amazon. The aim of customers is to pay the lowest possible price to obtain books or other products that they require. The advantage of Amazon is that it purchase in such large quantities that its suppliers are dependent on the customers' business. The bargaining power of suppliers does not have a great impact on Amazon because most firms are highly differentiated and need an effective distribution channels for their products (Amazon Home Page 2009). For Amazon, the most successful of four growth stages was the Growth stage. This success can explained by a strong web culture and environment created by its team. In order to be effective Amazon is responsive to external environmental influences. Amazon operates within a dynamic environment and it requires a structure and culture that are sensitive and readily adaptable to change (Johnson and Scholes 55). Amazon's organizational climate influences the level of morale and attitudes which members of the organization bring to bear on their work performance and personal relationships. Also, strong web culture attracts millions of buyers to this store. Web culture is based on non-price competition and strong brand image (Amazon Home Page 2009). Amazon.com is a leading internet-based company operating on a global scale. Amazon.com becomes the first mover in the e-retailing market proposing a wide product range to diverse customer targets. E-business allows the company to connect customer service and good levels, increases customer satisfaction and decreases retention artistries. The main strategy is a virtual bookshop which helps the company to promote and sell its products to customers. Similar to traditional marketing, a virtual bookshop allows customers to review product details and analysis, read about the main characteristics and qualities. In contrast to traditional marketing, a customer sees only an image of the product (Amazon.Com. Inc 2009). The Amazon follows focused strategy based on low price and exceptional services. Amazon.com proposes a greater range of titles to choose from. Customers have twenty-four-hour access to book, table of contexts and reviews. They can order the book from any parts of the world and at comparatively low price. Also, e-business allows Amazon to establish a competitive price through lower transaction costs. Customer service therefore plays a pivotal role in e-business. Getting this role right, and to a standard of expertise that is superior to that of competitors and sustainable in the longer term, requires an in-depth understanding of the nature and nuance of customer service. Knowing customers means closing the loop between the messages sent to them and the messages they send back. The personalization of the service allows Amazon to create a core of brand supporters and increase its sales. Core information builds and provides access to the books catalogue (Amazon.Com. Inc 2009). The customer database also provides added-value information. Core handling and processing maintains payment services between the company and its customers whether they be readers, publishers, resellers or authors. This function also covers shipping and delivery administration. From this configuration, the process of publishing and book selling became much more dynamic than the linear model that was the traditional industry model. The Internet has allowed each party in the process to interact with each other with more intensity (Amazon Home Page 2009). In contrast to other retailers, Amazon has wide possibilities to gather information about target groups and is able to make customer-specific recommendations, analyze their demands and needs. The customer database is used as a marketing tool in targeting existing customers and pursuing potential new ones. Amazon services (web-site and delivery service) are accessible for a large number of households and individuals (Fast Company: Amazon. 2009). A single customer may be retained by more than one supplier within the same product or service category, and thus the retention rate being measured is "non-exclusive". Thus the retention rate measured by the supplying organization that has the customer's major account will reflect a greater 'share of wallet' than the organizations that have the customer's minor accounts. Client retention is important because it helps to know customers "one by one", and it allows the firm to meet particular needs of the clients and find specific ways to solve their current problems. Also, client retention makes it possible to develop a basic long-term goal and objectives of an enterprise, and adopt courses of action and allocate resources necessary for carrying out these goals (Amazon Home Page 2009). Similar to traditional marketing, Amazon follows a 'co-op money' strategy (Fast Company: Amazon. 2009). The main benefit of Amazon is that it does not spend additional costs and money on implementation of this strategy because being advertised simultaneously the company received 'co-op money' from publishers for promotion and advertising of their products. Amazon finds investors which help the company to expend its business and enter new markets (kitchenware, cosmetics and healthcare). This strategy helps the company to survive and remain competitive. To build a loyal group of clients, Amazon considers time as the important factor of delivering service (Amazon.Com. Inc 2009). Amazon has ESP's strategy. Internet selling is information-driven. Similar to traditional business, Amazon spends a relatively high level of cost on inventory and supply chain operations. This strategy guarantees availability of goods and on-time delivery. Components of the demand chain include: the marketing and promotion of products and services; the acceptance of orders for these products and services; the process of paying for these orders; the actual delivery of the products and services; and the support for the products and services (Fast Company: Amazon. 2009). A web page has become the most popular tool to reach the customer, because it's major advantage in that it is featured at the location where many of the final decisions and actual purchases are made. Techniques used here include: temporary price reductions; extra value offers, including offers relating to future purchase; premium offers (incentives), including free mail-in premiums, self-liquidating premiums and banded free gifts (relevant for electronic services). The benefit of e-marketing is that the web-site offers its participants a forum for exchange of common interests and sense of belonging (Amazon.Com. Inc 2009). The mission statement of the company would be "We evolve with technology and the Internet remaining a leader in bookselling and online retailing field". Amazon spends a relatively high level of cost on inventory and supply chain operations. This strategy guarantees availability of goods and on-time delivery. Components of the demand chain include: the marketing and promotion of products and services; the acceptance of orders for these products and services; the process of paying for these orders; the actual delivery of the products and services; and the support for the products and services. The benefit of e-marketing is that the web-site offers its participants a forum for exchange of common interests and sense of belonging (Fast Company: Amazon. 2009). Similar to other companies in this industry, e-business strategic decisions developed by Amazon are concerned with the acquisition of sustainable competitive advantage, which involves the setting of long-term corporate objectives and the formulation, evaluation, selection and monitoring of strategies designed to achieve those objectives (Amazon.Com. Inc 2009). The case of Amazon shows that the Internet-based companies borrow some ideas and tools from traditional marketing but implements them in new environment. For these reasons Amazon tracks changes in individual and collective customer spending; that is, to monitor fluctuations in spending and to identify any patterns of behavior that digress from the customer norm. Information technologies have provided additional incentives for firms to adopt such strategies and expend their operations worldwide. Works Cited Amazon Home Page. 2009 Available at: www.amazon.com Amazon.Com. Ind. The New York Times. 2009. Available at: http://topics.nytimes.com/top/news/business/companies/amazon_inc/index.html Fast Company: Amazon. 2009. Available at: http://www.fastcompany.com/fast50_09/profile/list/amazon Johnson, G., Scholes, K. Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall, 1998. Read More