Amazon Strategies

Amazon is a giant online retailer that started as an online bookstore and further dominated other category’s online retail space in the market. The company has made massive expansions across the globe to service international markets with a broad category supported by localized portals and globalized logistics platforms (Moody’s Analytics, 2015). Amazon Company has become super-successful because of some reasons which include its unrelenting growth pace and its consistent improvement in customer experience. This explains why the company has cruised through tough competition to remain at the helm of e-commerce business in virtually all categories (Imran, 2014).

Apart from quality, customers are attracted by the cost of shopping products. They will go for anything of quality with lower cost to achieve cost-savings or buy more. Free shipping is a sells boosting strategy started 11 years ago in USA which achieves a reduction on the cost of shopping for Amazon’s customers (Anamika, 2011). The customers shop online and their items get delivered to their doorsteps without extra fee charged. Further, the free delivery window cements the customers’ loyalty to the retailer.

There is nothing the customers appreciate like efficient services. Achieving quicker delivery timelines benefits the retailer by retaining its customers and the reputation of efficiency. Notably, orders fulfilled in time have a higher success rate than those delayed for a couple of days and are likely to fail in delivery. Amazon is drastically reducing the time it takes for an order to be delivered to the customer’s doorsteps. It’s employees has made unwavering commitment to this effect enduring many hours hard work and pressure to deliver the levels of customer experience expected by the company.

Technology has become increasingly critical to the success of any globalized company. Reasons are numberless and include but not limited to; efficiency due to automation, efficient and fast communication; labor cost savings among more benefits. Amazon Company has exploited most of the advantages that come along with technology by using it to the fullest. This has improved on its efficiency and ability to manage its broad portfolio of business that would require much involvement (Imran, 2014). To this effect, the giant retailer utilizes Big Data Analytics tool to map preferences and consumer behavior which helps them to market their products effectively. Big Data has been completely embraced by Amazon to level of marketing it as another service offering.

Technology also can be customized and leverage to produce user- experience (Kapoor & Joon, 2013, p. 275). While shopping on the Amazon website, the clients will have a customized experience. They will  get a list of items recommended to them and displayed on the pages they navigate; which is according to their browsing history, and mapping products they are likely to purchase in the future.(Chen and Guo, 2014). This has essentially portrays Amazon can predict wants and needs of its consumers and tailor its strategies to fulfill the need.

Free shipping delivery window

Amazon e-commerce portfolio has grown to be the largest and most successful world’s leading online retailer. The company believes and actions its policy of “Go global & act local. The giant e-commerce retailer has global footprint and continues to extend its network on every opportunity available. Amazon can take advantage of several opportunities in its prospective markets and ensure its supply chain networks deliver value for money both to itself and its stakeholders ( Zheng, Han, Li, Dong, Yan and Qin, 2009, p. 275).

The giant retailer continuously pumps funds to promotions and deals for its customers. This strategic decision aims to glue its customers to the Amazon website in earnest to grab deals (Lewis & Dart, 2010). Consequently, the company reaps big from huge volumes and continuous sales.

Cost leadership is the practice of a company having the lowest price of products and services in the market. This firm uses this strategy and aim to deliver maximum value to customers at the lowest price without compromising on quality. Cost leadership is attained when the company enjoys huge profit margin and therefore invest part of it to attain more sales (Bhasin, 2017). However, this strategy is arguably counter-productive basing on the law of diminishing returns.

The e-commerce giants are reducing the distance from where they are situated to their customer base so as to be able to service them effectively. This move ensures more orders are fulfilled and customers made happy and attain value for their money. The fulfillment or orders are one crucial determinant of the reputation of a business as being reliable. This is one factor that has been a failure to many online retail businesses due to opening to deliver the orders made and therefore spoiling customer experience. Amazon is not giving anything to chance. Its expansion internationally for both products and services ensures a broad range of customers are served. The company is on a scaling project to ensure it services its prospective customers across the globe and also provide innovative services market (Vespa, 2010).

Amazon has invested in awarding its loyal customers with basically and coupon while processing their orders in the website. This business strategy is used to generate more sales to the company because the coupons and vouchers results in discounts on their purchases. Further, the company uses Promotions and flash sales deals to lure and keep its customers glued to its website. This ensures that Amazon customers are often on the website to check for existing deals and grab opportunities for shopping experience.

Technology

Amazon rolled out a plan to deliver orders processed on a material day to clients or customers within the country. This strategy has gotten it right assessing by the success rate of deliveries. Customers appreciate the efficiency of same day delivery making the company retain its customer’s. Moreover, customers are not forced to visit the physical bookstores or wait for days for their orders to be fulfilled but rather expect same day deliveries (Barkin, 2010).

Amazon has continuously had a tight grip on innovative approach in order that cements its dominance above its rivals. This service basically entails buying professional services and scheduling local delivery. The company has recruited professional service providers that are vetted before confirming permanent employment.

Amazon Company has developed and structured a solid logistical network that serves its entire supply chain efficiently. The company has extensive and highly reliable system that ensures its stakeholders which include the customers receive value for their money and have competitive edge over its customers. Using superior logistics and distribution systems, the company has been able to actualize better customer fulfillment and this has resulted in Amazon deriving competitive advantage over its rivals.

The ecommerce giants have an edge over its competitors and thus presented with many opportunities to exploit. Amazon is working around the clock to cement their monopoly strategy. The multinational e-commerce company can exploit the grocery sector. Despite costs involved in keeping foods and grocery fresh, many consumers are purchasing their groceries online. Consistency in this trend will give Amazon an opportunity to dominate this section of business as well.

The company has rolled out an online payment system to align payment transaction by its customers. This move is made to counter security and privacy concerns that are at the top of issues to consumers (Xia and Zhang, 2010). This development further improves on the company’s margin realized from own payment gateway.

Since the company enjoys a strong brand reputation, Amazon has the opportunity to increase products under its own brand than rather selling and stocking products made by its partners. Further, the company has the opportunity of expanding its global footprint and open additional sites in the emerging markets, which would most definitely give it an edge in the competitive online retailing market (Gawer & Rebecca, 2007, p. 20).

Amazon Company faces various risks caused by both internal and external factors that threaten its dominance and stability in the market. Stiff competition from rival retailers like Wal-Mart which boosts of one of the largest truck fleet in USA, a nation-wide network of nearly 5000 stores and more than 150 distributor’s centers are some of its fierce competitors (Cennamo & Juan, 2013, p. 13340). They are discussed as below;

Globalization strategy

Firstly, Amazon faces tough competition from its strong local competitors in both countries and the stringent regulations which makes its possibilities of succeeding in the long-run really difficult. The company is already re-investing all of its revenues and potential profits back to business and its expansion projects which ultimately does not seem to be paying off. It is costly to establish, develop, and maintain international operations and websites, and promote its brand internationally (Chen and Guo, 2014). Conclusively, Amazon’s global activities and operations may not be profitable on a sustained basis.

The company has established itself in the market as a cost-leadership. Further, Amazon has owned the culture of trading its customers to huge discounts un-comparably to other ecommerce retail business (Stone, 2013). In a situation of recession and the company decides to raise its products and services prices, buy its customers will have to shift to alternative e-commerce platform where they provide their buying needs.

The company will find it difficult to maintain its huge growth rate into the future without massive investment in other categories like groceries to add on its sales. Amazon has undoubtedly dominated the books and electronic categories in the market and needs to realize its ambitions of stabilizing the grocery category (Gulati, Dovev, & Harbir, 2009, p. 1220). The company has the challenge to overcome its past failures. Amazon has previously invested handsomely in projects that flopped miserably (UBS Global Research, 2014). Such incidences negatively impacted on its financial health considering that huge amount of funds were injected. Pets.com and Living social flopped.

Amazon is faced by the risk of losing its competitive edge. The company has enjoyed its dominance because of its quality, speed of delivery and low priced products and services (Zhu and Liu, 2016). Moreover, the company has grown the tendency to accumulate market share rather than profits. However, the market is dynamic and its competitors are gaining strategies to outdo Amazon (Sun, Liu, Chai and Sun, 2012). If this comes to fruition, there will be price wars which will definitely dent Amazon’s reputation.

Data breach is a crime attack inevitable to all e-commerce organizations Amazon not an exceptional. The incidence happens when hackers try to access the company’s information to use to their favor or wreck the victim online operations (Lewis & Dart, 2010). Insecurity posed by hackers and identity threat act to repeal potential online customers because of fears of being victims of fraud. These attacks leave the consumers vulnerable because their data exposed. As far as the company is concerned, Amazon needs to move with speed to address consumer concerns and ensure that online security and privacy are guaranteed (Li and Agarwal, 2015).

Cut through competition for promotions

Further, dosing (overcrowding a server until it crashes, making it unreachable) is occurring. In fact, it was recently that a mass dosing attack hit big names like PayPal, Reddit, Play station Network, and more. When a company online operations and site goes down, the company suffers massive losses which include loss in revenue of downtime and time wastage on downtime (Woodside Capital Partners, 2015). Amazon would consequently be affected by both data breaches and the attacks.

Amazon risks losing its core competencies due to opening more increased broad category of products and services as part of its diversification strategy. The deviation from its core competence of retailing books online to allowing it-self to venture into newer focus areas has been counter-productive to the company’s bid to stabilize and realize profits. While this might be a good strategy from the risk diversification perspective, Amazon has to be cognizant of losing its strategic advantage as it moves away from its core competence (Edelman, 2014, p 86).

The company operates with near zero margins business models that have seriously dented its profitability, and even though the company has high volumes and huge revenues, this has not translated into meaningful profits for the company.

Amazon Company has faced lawsuits in recent years from publishers and rivals in the retail practice industry. This hostility has been generated by the aggressive pricing strategy adopted by the giant retailer thereby causing ripples within the industry (PWC, 2014). The unrelenting focus on cost leadership that Amazon follows has become a cause of problems for the company because of the competitors being upset with Amazon taking away the business from them.

Finally, Amazon faces tough competition from local e-commerce retailers who are more agile and nimble. This means that the company cannot lose sight of its local market conditions in the pursuit of its global strategy.

Conclusion and Recommendation

Amazon is a multinational ecommerce retailer that enjoys a rich brand of its products and services because of its growth and cost-leadership strategies. Although the company boosts of having the highest customers and huge revenues, the company’s profits are razor thin. Amazon has its task cut out as far as its present and future strategies are concerned. The key point gathered from the report is that Amazon has to focus on profitability and not volumes alone if it has to be competitive in the future where volumes and market leadership are not alone to add value to its stock. The company should roll out its expansion plans to the markets perceived to be receptive and worth a chance. The company needs to balance its strategies in order to realize profits and sustainable growth.

Cost leadership strategies

References

Anamika S. (2011). Top 10 benefits of online shopping. Hub Pages. Retrieved on 26 may, 2017 from https://anamikas.hubpages.com/hub/Online-shopping-sites-benefits

Barkin, E. (2010). Jetting to greener pastures. Customer Relationship Management, 14(4), 30-36.

Bhasin, H. (2017). Marketing strategy of Amazon: Amazon marketing strategy. Retrieved on 26 may 2017 from https://www.marketing91.com/marketing-strategy-of-amazon/

Cennamo, C., & Juan, S. (2013). Platform competition: Strategic trade-offs in platform markets. Strategic Management Journal 34(11) 1331–1350

Chen, J. and Guo, Z. (2014). Online Advertising, Retailer Platform Openness, and Long Tail Sellers.

Edelman, B. (2014). Mastering the intermediaries: Strategies for dealing with the likes of Google, Amazon, and Kayak.Harvard Business Review 92(6) 86–92.

Final.pdf>

Gawer, A., & Rebecca H. (2007). Platform owner entry and innovation in complementary markets: Evidence from Intel. Journal of Economics & Management Strategy 16(1)1–34.

Gulati, R., Dovev L.,&  Harbir S. (2009). The nature of partnering experience and the gains from alliances. Strategic Management Journal 30(11) 1213–1233.

Imran, A.A. (2014). A study on Amazon: Information systems, business strategies and e-crm. Accessed on 26 may 2017 from https://www.researchgate.net/publication/261440748_A_STUDY_ON_AMAZON_INFORMATION_SYSTEMS_BUSINESS_STRATEGIES_AND_e-CRM

Kapoor, R., & Joon, M. L. (2013). Coordinating and competing in ecosystems: How organizational forms shape new technology investments. Strategic Management Journal 34(3) 274–296.

Lewis, R. & Dart, M. (2010). The new rules of retail: Competing in the world’s toughest marketplace. New York, NY: Palgrave Macmillan.

Li, Z. and Agarwal, A. (2015). The impact of platform integration on consumer demand in complementary markets: Evidence from Facebook’s integration of Instagram. Working paper.

Moody’s Analytics (2015) Amazon.com Inc. Credit Rating [Internet], New York, Moody’s Investors Service Inc. Available from: <https://www.moodys.com/credit-ratings/Amazoncom- Inc-credit-rating-600042665?lang=de&cy=ger>

PWC (2014) US Technology Deal Insights – Analysis and trends in US Technology 2015 [Internet], New York, Pricewaterhouse Coopers LLP. Available from: <https://www.pwc.com/us/en/transaction-services/publications/assets/pwc-us-technology-deal- insights-2014.pdf>

Stone, B. (2013). The Everything Store: Jeff Bezos and the Age of Amazon. Little, Brown and Company.

Sun, H., Liu, Y. Chai, Y., and Sun, X. (2012). A Novel Architecture Towards Trusted E commerce Cloud. Los Alamitos: IEEE Computer Society.

UBS Global Research (2014) Amazon.com: Trading Profits for Revenues (Part 2) (July 24, 2015) [Internet], Zurich, UBS AG. Available from: <https://www.thomsononeim.com/v- hom.asp> [Accessed may 2017].

Vespa, M. (2010). Online shopping: Helping or hurting local economy. Central Illinois News Center. Retrieved from https://www.centralillinoisnewscenter.com/home/Online-Shopping–111008209.html

Woodside Capital Partners (2015) Global Technology M&A Trends and Analysis – 1H 2015 [Internet], London, Woodside Capital Partners Inc. Available from: <www.woodsidecap.com/wp-content/uploads/2015/07/WCP-Global-Technology-MA-Report-

Xia, Y., and Zhang, G.P. (2010). The impact of the online channel on retailers’ performances: An empirical evaluation. Decision Sciences, 41( 3), pp. 517-546.

Zheng, Q., Han, Y., Li, S., Dong, J., Yan, L., and Qin, J. (2009). E-commerce architecture and system design, in Introduction to E-Commerce (Q. Zheng, Ed.). Berlin: Springer Berlin Heidelberg, pp. 271-303.

Zhu, F. and Liu, Q. (2016) Competing with Complementors: An Empirical Look at Amazon.com  Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 15-044. Available at SSRN: https://ssrn.com/abstract=2533616 or https://dx.doi.org/10.2139/ssrn.2533616