1. Introduction Vision and Mission



Download 84.57 Kb.
Date23.05.2017
Size84.57 Kb.
#18750

Amazon Analysis

2014
8/7/2014
motion.jpg


Contents

1. Introduction


2. Vision and Mission

 

3. Governance, Stakeholders & Shareholders



3.1 Governance

3.2 Shareholders

3.3 Stakeholders
4. Industry Analysis

4.1 Summary of  E-commerce

4.2 PESTEL

4.2.1 Political

4.2.2 Economic

4.2.3 Social

4.2.4 Technological

4.2.5 Environmental

4.2.6 Legal

4.3 Current Industry Performance

4.4Future Industry Outlook
5. Resources and Competencies

6.SWOT Analysis

6.1 Strengths

6.2 Weakness

6.3 Opportunity

6.4 Threats


7. Porters 5 Forces Analysis

7.1 Threats of New Entrants

7.2 The Bargaining Power of Buyers

7.3 Bargaining Power of Suppliers

7.4 Substitute Products

7.5 Threat of Rivalry


8. Job Opportunities

8.1 Prospects and Pay

8.2 Benefits

9. Industry Metrics

10. Possible strategy

10.1 Corporate Level Strategy

10.2 Business Level Strategy

10.3 International Level Strategy


11. Conclusion

Executive Summary

The main goal of this analysis is to understand Amazon's current business performance and strategy, so that we may provide recommendations and solutions to maintain its level of

competiveness. Through the internal, external, and financial analysis of the business, it is quite

clear that Amazon's business model has proven to be successful. However, our group has

some recommendations which can assist Amazon in maintaining and gaining as competitive

advantage in markets both foreign and domestic. Utilizing acquisitions, differentiation, and being first to market will give Amazon the advantage to edge out any competitors and to stay ahead of the curve. This will help in maintaining core market demographics and acquiring larger shares of emerging markets.



Within the international e-commerce market, Amazon's development of the Chinese and Indian market will prove to be vital for overall growth in the decades to come. The rapid growth of consumers within these markets has surged due to the growth of internet infrastructure, mobile devices, and disposable income. The potential associated with these markets is astounding. China's e-commerce market alone is currently over 5 1/2 times bigger than that of the U.S. There may be some hurdles trying to enter these emerging markets, but it's an opportunity that should not be missed. The recommended strategies will take time some time to implement. We project a timescale of 14 - 24 months to fully implement the suggested strategies within the analysis.
1. Introduction

Founded in 1994 by Jeff Bezos in Seattle, Washington, Amazon.com is currently the world's largest E-commerce company. Amazon is one of the pioneering retail companies to sell merchandise over the internet. Initially Amazon began as an online bookstore, its first book was shipped from Bezos' garage, but rapidly diversified its sales inventory by incorporating  products such as DVD's, CD's, software, toys, apparel, jewelry, video games, and electronics. In the first two months of business, Amazon sold to all 50 states and over 45 countries. Within two months, Amazon's sales were up to $20,000/week (Spiro). With the rapid progression of the internet, Amazon would soon offer other services such as the streaming and downloading of music and video content and other electronic media.  Amazon.com made its first public offering on May 15, 1997, just three years after its inception, trading on the NASDAQ stock exchange under the ticker symbol AMZN at $18.00 per share.

Today Amazon.com has numerous branches of the company engaging in sales in other countries such as Canada, United Kingdom, Germany, Japan, India, Austria, France and China. This gives Amazon a better opportunity to meet the needs of their customers and target consumers of various demographics across the globe. Amazon holds a strategic position in the  dynamic E-commerce sector by continually growing it's services and product lines in order to achieve its overall mission and vision. Their vision is simple, to be the most customer centric company on earth. By increasing the company functionality Amazon in turn improves their overall operational efficiency and effectiveness. 
Providing a broad variety of choices, discounted rates, and trustworthy brands are part of Amazon's core competencies.  The company, under the supervision and blessing of Jeff Bezos, is in the process of investing money into new warehouses, with the objective of delivering goods to its customers within two working days. The expansion also offers an unparalleled product selection and bring more convenience to end users. In 2012, Amazon added 20 shipment hubs and grabbed a greater market share valued at $42.3 billion according to ComScore.Inc (Kucera, 2013). Despite the overall cost of the warehouse expansion plan, the benefits of the project aim to reduce the transportation cost total 4.5 percent of the worldwide sales compared against 5.4 percent in 2012 (Kucera,2013). Amazon also offers a membership loyalty program called Amazon Prime. Only customers based in the United States, United Kingdom, Germany and Japan can enjoy free and discounted express shipping services of Amazon Prime.  

The main key to Amazon’s success has always been a customer-centric approach and constant innovation. This innovation throughout the years has centered around providing Amazon’s customers with the best possible online shopping experience from mouse click to doorstep. Innovations such as; 1-click shopping, significantly simplifies the ordering process; recommendations, based on customers browsing and buying habits; the Kindle, delivers traditional paper media digitally to handheld devices; frustration free packaging, allows customers to easily open packages without the use of sharp objects; and most recently drone delivery, with the goal to deliver packages within 30 minutes of being ordered using unmanned aerial vehicles. The ongoing innovation within the company has kept pace with the frenzied growth Amazon has experienced throughout the years.


The E-commerce marketplace is brutally competitive, and Amazon has continued as an early adopter of technologies that provide it advantages over its competitors. An example of this is the Kindle e-reader line of products, Amazon's most popular selling product. Kindle tablets and e-book readers ultimately have became Amazon’s top sellers. In 2012, Amazon officially opens the Kindle stores in Brazil, Canada and Japan to promote many popular books which include titles in the local languages (Kucera, 2013). Amazon will also soon open distribution of Kindle Apps in nearly 200 countries, including Australia, Mexico, India, South Africa, South Korea, and even Papua New Guinea and Vatican City. For consumers, this means that they’ll soon be able to access a large and growing catalog of apps and games from Amazon, and for developers, this means Amazon and developers will quickly have a much larger audience to download and enjoy their apps and games. This also holds true for the newly introduced Fire Phone.
With Amazon's mission focused on customer experience, Amazon is paying great attention to customer oriented information coupled with proprietary software that tracks the customer product searches and purchases. For the returning customers, Amazon's database keeps track of all customer private and confidential information such as product preferences, email address, passwords, mailing address, mobile contact number, credit cards, the reviews of the purchased products and so forth. (Bakos, 2011) When you arrive at Amazon's homepage, you'll not only find special offers and featured products, but also recommendations based on your searches and purchases if you've been to Amazon.com before.

Customer tracking is part of Amazon's bread and butter. Amazon's aim is to know you by name and try to be your personal shopper. This embedded marketing techniques that Amazon employs to personalize the customers experience are probably the best example of the company's overall approach to sales. Allowing the Amazon.com cookies, customers receive a myriad of useful features that enhance their overall shopping experience. Features such as recommendations based on past purchases, lists of reviews, and guides written by users who purchased products customers looking at.

The other main feature that puts Amazon.com on another level is the multi-leveled e-commerce strategy it employs. Amazon.com lets almost anyone sell almost anything using its platform. Since 2000, users have been able to find straight sales of merchandise sold directly by Amazon, or goods listed by third-party sellers such as individuals, small companies and retailers. Users can also find used goods, refurbished goods and auctions. Amazon derives about 40% of its sales from affiliate marketing called "Amazon Associates". Worldwide, Amazon has "over 900,000 members" in its affiliate programs. Some of these "Associates" include heavyweights such as Target and Toys 'R Us.

In addition to the affiliate program that lets anybody post Amazon links earn a commission on click-through sales, Amazon now offers a program that lets those affiliates build entire Web sites based on Amazon's platform. By using the Amazon Web Services (AWS) , affiliates can literally create mini Amazon Web sites if they so please. Affiliates who use AWS are able to access Amazon's huge database of products and applications for their own purposes. As long as any purchases go through Amazon, Amazon Associates pull products directly from Amazon's servers, write their own guides and recommendations. Amazon Web Services is expected to have revenue of $3.8 billion in 2013 and could be worth $19 billion to $30 billion if it were a standalone company (Dignan, 2013).
2. Mission &Vision
Amazon.com, Inc. is one of the largest global online retailers. It offers a wide range of

merchandise, including books, apparel, electronics and other general merchandise products

through its website www.amazon.com. Amazon also operates through various international

websites. The company has operations in North America, Europe and Asia, and is headquartered

in Seattle, Washington. Amazon.com has had a clear focus and a solitary mission since it began.

Founder Jeff Bezos has publicly referred to the Amazon.com mission statement as the guiding

force behind his leadership decisions many times in the company's 18-year history. It can be

concluded that the success of Amazon.com as the top Internet retailing company in the world is

due at least in part to their unwavering commitment to this mission and the daily execution of it.

The mission and vision of Amazon.com is “Our vision is to be earth's most customer centric

company; to build a place where people can come to find and discover anything they might want

to buy online.” 
3. Governance, Stakeholders & Shareholders

3.1 Governance

Jeff Bezos, from the start has made it very clear that the customer is their main priority.

Hence, the stakeholders that matter the most to Amazon and Jeff Bezos are its customers. The

board of directors consists of 9 members. Jeffrey P. Bezos, the president of Amazon since 2000,

and the Chief Executive Officer since 1996. Tom A. Alberg, director since 1996, also managing

director at Madrona Venture Group and Principal at Madrona Investment Group. John Seely

Brown, director since 2004, and Advisor to the Provost at the University of Southern California.

William B. Gordon, director since 2003, Jamie S. Gorelick, director since 2012, Alain Monie,

director since 2008, Jonathan J. Rubinstein, Thomas O. Ryder, and Patricia Q. Stonesifer

directors.

3.2 Shareholders

Institutional and mutual fund owners account for the majority of share holdings. Some of

the top institutional holders include Capital World Investors with 31 million shares and Price (T.

Rowe) Associates Inc. with 21 million shares. Growth Fund of America Inc. and Fundamental

Investors Inc. hold 5% shares. Jefferey P. Bezos remains a major direct holder with 83 million

shares reported August 4, 2014.

3.3 Stakeholders

The company has four primary customer sets. Amazon provides business transactions

through their retail website. It’s designed to enable the sale of millions of unique products, and

some of these products sold by Amazon themselves. Consumers, sellers, enterprises, and content

creators are affected by Amazons transactions.
4. Industry Analysis

4.1 Summary of  E-commerce

Every year the world of online retail is growing at a rapid rate. With the expansion of globalization, online business is leading the way for a digital economy. From this worldwide phenomenon new concepts have emerged, such as electronic business (e-Business) also know as electronic commerce (e-Commerce). This new concept of electronic commerce is quickly become the norm. Operating in a highly competitive economy based on information technologies and telecommunication has required organizations to adopt these new business models.

The e-Commerce Industry is comprised of companies that produce and sell software to businesses and corporations of all sizes. The wide range of products and services offered work to improve and expand customers’ information technology (IT) capabilities, by enhancing such internal tasks as inventory management, tracking purchases, and operations management.

Advantages like convenience, variety of options are readily accessible within few clicks, lower costs, lesser paper work, 24 hours a day 365 days shopping, market for niche products help drive the popularity of E-Commerce.



4.2 Current Industry Performance

American e-commerce sales in 2013 of an estimated $395.3 billion (about a 20% increase over 2012). This figure includes online retail sales, travel sales and digital downloads, but not sales of tickets to events or online gambling. Global Internet retail sales exceeded $1.25 trillion in 2013.

China posted phenomenal growth in e-commerce, up 64.7% in 2012 over 2011 to reach $210.4 billion, and rising to rank second in the world behind the U.S. In 2013, China’s total e-commerce revenue was expected to be $283 billion, according to Morgan Stanley. Plunkett Research estimates global travel sales online at $350 billion for 2013.

Fig. 1

4.3 PESTEL Analysis

4.3.1 Political Factors

Due to US Supreme Court decision and with Amazon’s agreement.  Amazon will start to collect sales tax in a growing number of states as it expands its warehouse network.



4.3.2 Economic

Although many industries struggle during weak economic periods, e-Commerce companies, overall, fare relatively well. E-Commerce companies can receive large orders during lean economic times, and a few may even post record revenue and profits. In addition, several companies within this group derive a good percentage of their profits from outside the U.S., which can help them during hard economic challenges.



4.3.3 Social

Increasing in online social networking, opportunities to increase market share. Millions of users can be reached through use of these Facebook and Twitter.  At the same time gaining new customers through advertisements that Facebook offer.

Ethical and religious factors.  Some cultures Internet use is not allowed due to the fact that at some point contents may damage their cultural, ethical and social beliefs customer-centric, one store per customer. Amazon uses social media for market penetration and market development in a very cost-efficient and cost effective way.

4.3.4 Technological

Considered the most important factor that affects E-Commerce business. Increasing speeds and better connectivity provides huge options for Amazon to increase its business. With such speeds Amazon can offer its users many online features such as online video and music download for far less price as compared to actual possession of these products. Mobile market growth is another exciting trend to watch in terms of e-commerce statistics. The popularity and widespread use of smartphones and growing usage of tablets has greatly affected the industry. In 2013, US mobile commerce revenue amounted to more than 38 billion US dollars. This type of e-commerce includes mobile media and content, retail services, travel purchases and various other services.



4.3.5 Environmental

Three main categories of environmental effects of e-commerce can be distinguished.



First-Order effects- The production and use of PCs, mobile phones, servers, routers cause material flows, use hazardous substances, and lead to energy consumption and electronic waste.

Second-order effects- E-commerce is transforming economic processes and markets.

Third-order effects- E-commerce’s causes structural change of the economy and affects lifestyles and consumption patterns, which, in turn indirectly affect the environment.

4.3.6 Legal

Different E-commerce laws apply in different countries. The most significant legal issues that arise with regard to conducting business over the internet are those involving jurisdiction. Many bills and acts have been passed to resolve legal issues and make electronic transaction more authenticated, such as the Electronic Transaction Act. It enables contractual dealings, such as offers, acceptances and invitations, to be conducted electronically, and also allows people to use an electronic signature to satisfy any legal requirement.

E-commerce has a tremendous impact on copyright and related issues, and the scope of copyrights is affecting how e-commerce evolves. It is essential that legal rules are set and applied appropriately to ensure that digital technology does not undermine the basic doctrine of copyright and related rights.

4.4 Future of E-Commerce Market

According to eMarketer’s latest forecasts, worldwide business-to-consumer (B2C) ecommerce sales will increase by 20.1% this year to reach $1.500 trillion. Growth will come primarily from the rapidly expanding online and mobile user bases in emerging markets, increases in e-commerce sales, advancing shipping and payment options, and the push into new international markets by major brands.

In 2014, for the first time, consumers in Asia-Pacific will spend more on ecommerce purchases than those in North America, making it the largest regional ecommerce market in the world. This year alone, B2C ecommerce sales are expected to reach $525.2 billion in the region, compared with $482.6 billion in North America.

Fig. 2http://www.emarketer.com/images/chart_gifs/167001-168000/167671.gif

5. Resources and Competencies

Physical Resources

Amazon owns and leases their corporate headquarters in Seattle, Washington. Additionally, they own and lease corporate office, fulfillment and warehouse operations, data center, customer service, and other facilities, principally in North America, Europe, and Asia. Due to having such bases around the world with their leases not expiring for another 10-18 years, Amazon can carry on with their work



Online Retail

The online retail line of business includes those products sold by Amazon as a traditional retailer, most commonly as a low-cost retailer. The company started as an online book seller, rapidly expanding into music and movies, and ultimately into electronics and household goods. Amazon also serves as the channel for other retailers to sell their products and taking a cut of every purchase. Amazon maintains its status as a destination website, but does not have to maintain inventory on slower selling products. This strategy has made Amazon a leading long-tail retailer, expanding its available selection without a corresponding increase in overhead costs.



Internet Services

Amazon has begun now provide services like Amazon Prime, which provides free two-day shipping on retail purchases, on-demand video streaming, and free access to the Kindle library, all for an annual fee. (Amazon Web Services). Originally developed as a side business, Amazon decided to lease out its own server space to other companies and individuals. While not a core part of the company's strategy, Amazon found itself managing a large number of servers and internet services, and it was a fairly small effort to manage those services for others.



Human Resources

Amazon employed approximately 88,400 full-time and part-time employees in December 31, 2012. (Amazon.com, 2012) However, employment levels fluctuate due to seasonal factors affecting the business, mainly during Christmas and Easter when Amazon sees a hike in its sales and profits.



Intangible Resources

Due to the base being in Seattle for so many years, it is much easier for Jeff Bezos to oversee the operations without moving from one headquarter to another which most companies, now-a-days prefer, to split the work load.

Patents on Kindle technology along with the brand name provides a good reputation among its competitors and customers alike, leading to a Goodwill value of good proportions.

Competencies

Are the skills and abilities by which the resources are deployed effectively through activities and processes. Threshold competencies are activities and processes needed to meet the minimum requirements and therefore continue to exist whereas Core competencies underpin competitive advantage and are difficult for competitors to imitate or obtain. Amazon gains core competency through this unique resource and also by providing services and building relationships with its retailers, suppliers and acquisitions which no other competitor can imitate.



Buying Power

The company has dominated online retail with a fairly standard traditional retail business model over the internet, use its buying power and financial resources to dominate the marketplace.



Diversification

One attribute to Amazon's high-profile success is in their ability to embrace transformational growth. Amazon has the unique ability to launch and run entirely new types of businesses while simultaneously extracting value from existing businesses. Amazon survived the dot-com bust because it had a viable and innovative business model built around a market-changing customer value proposition and a radical profit formula. First Amazon changed the sedate book industry, then it quickly expanded beyond books to include all sorts of easily shippable consumer goods.. Amazon then devised a new value proposition, offering a commission-based brokerage service to buyers and sellers of used books. After the success of in brokerage, Amazon then moved into developing a model to serve an entirely different customer, third-party sellers.

By identifying a new area of potential growth by finding another new customer, Amazon, in 2002 launched a web services platform (Cloud Computing Services). A web service that provides resizable compute capacity in the cloud. One of the key benefits of cloud computing is the opportunity to replace up-front capital infrastructure expenses with low variable costs that scale with your business. With the Cloud, businesses no longer need to plan for and procure servers and other IT infrastructure weeks or months in advance. Instead, they can instantly spin up hundreds or thousands of servers in minutes and deliver results faster.
6. S.W.O.T. Analysis

Amazon has many great strengths and innovative opportunities that are the driving force

for its continued success, but these are also accompanied by weaknesses and potential threats.

To address the potential options and strategies the company has, a detailed S.W.O.T. analysis

should be performed.

6.1 Strengths

When we focus on their strengths as a company, Amazon has created an incredibly

powerful, globally recognized brand image, with a solid reputation in e-commerce. Operating

with a cost leadership strategy, Amazon strives to offer a wide range of products and services to

consumers, at lower costs than that of their competition. Their success with this strategy is

focused around their economies of scale. Amazon doesn't just sell a few things, they sell

everything; if it's online, you can find it on Amazon. One major strength that Amazon has, is the

high quality products and services that are offered by the company. Buyers can shop from the

comfort of their home, purchasing items that are quickly and efficiently delivered, often with free

shipping. Concerning their shipping abilities, Amazon has one of the most efficient logistics

systems in the industry. The company has enormous facilities that are tactically placed in

locations that allow for quick deliveries, saving the company on the overall cost of shipping. In

order to stay ahead of their competition, Amazon has been actively acquiring companies that

help boost their overall offering of products and services. If there is one thing to be said, it is

clear that Amazon loves to acquire businesses that will help boost and secure their position in the

marketplace. From their acquisition of online rare book sellers, to high tech industrial robotics

companies, Amazon is truly setting themselves up to be the household brand name of choice for

consumers.

On the membership side, Amazon has developed a lucrative and very loyal following

with their PRIME membership service. Prime members enjoy the option of receiving free 2-day

shipping on many of the items that are sold. Prime members also have access to the Amazon

instant video, music, and eBook services as well. If it says Prime next to it, you can watch it,

listen to it, and read it for free.

6.2 Weaknesses

One of the main weaknesses revolving around Amazon is the fact that despite how large

and popular they are, the business is still online. Since there are no Amazon retail stores, the

company has to always be on top of promoting their brand. Other companies like Best Buy,

Target, and Bed Bath and Beyond, offer both options to their customers. As a business that

operates with a cost leadership strategy, Amazon bends over backwards to offer the lowest

possible prices on items, in order to keep their competition at bay. Since this strategy can

potentially result in the loss of revenue, companies often try to find ways to recoup these losses

by expanding their business into new avenues. Amazon in particular seems to be doing quite

well as they continue to expand their wide range of product and services through tactical

business acquisitions.

6.3 Opportunities

Amazon is extremely impressive when it comes to the opportunities the company has.

The successful release of their new Fire phone, Fire TV, and the corresponding store app, has

shown that Amazon can pick and choose to play ball in almost any field they want. In situations

where the business venture might not work out and a competitor does it better, Amazon can just

as easily buy out the competition. One example of this, is their acquisition of Zappos. When

Amazon tried to create a company that could compete with established companies like Zappos,

their results were dismal. Instead of modifying their business model, Amazon simply bought out

Zappos, for $928 million dollars. Another large acquisition Amazon made was the purchase of

KIVA systems, for $775 million dollars. KIVA systems specializes in the production of

ecommerce robots, which operate in product fulfillment facilities. Amazon was quick to see the

opportunity in the acquisition of KIVA systems. Originally, workers would have to drive all over

the large distribution facilities to pick each item to be shipped. Now, this job is taken care of by

the robots made by this company. The little automated bots zoom around the facility to the shelf

with the product on it. The robot will then lift the whole shelf and drive it over to the human

worker for the item to be retrieved. It then returns the shelf and drives off to go recharge itself.

This type of automation makes Amazon's distribution facilities run at their maximum potential.

Amazon is in the process of testing out the implementation of their new business

category, the Amazon DASH grocery service. Consumers using the DASH service can have

groceries delivered right to their door, saving people valuable time that it normally takes to go to

the grocery store. As if offering groceries wasn't enough, Amazon has been testing out a "same

day" delivery option, and have also contracted with the USPS to have their packages delivered

on Sundays. Receiving packages on a Sunday exclusively from Amazon, definitely sets the

company apart from their competition. Amazon is also looking towards venturing into their own

fleet of parcel delivery trucks under the Amazon "last mile" service, since their DASH grocery

service already has their own fleet in operation as well. Assuming that Amazon is able to bring

their last mile service to fruition, they would no longer need to use companies like USPS,

FedEx, and the UPS. Instead, they would have the freedom of being able to create their own

delivery schedules, making the company even more self sufficient.

6.4 Threats

The larger Amazon gets, the bigger their target becomes for their competition. That being

said, it seems that Amazon has been actively preparing for any threats to the business that could

potentially arise. With the wide variety of products and services that Amazon offers, it isn't easy

for a company to compete against them. However, one company in particular could prove to be

a formidable opponent. This company in discussion is Alibaba.com. Based out of china, Alibaba

has cornered the overseas ecommerce market, and has shown considerable interest in doing

business in the United States with the recent filing of their U.S. IPO, which will likely be the

largest filing in U.S. history. That should be enough for Amazon to take immediate notice,

before the company has a chance to gain a foothold in the U.S. marketplace. There are clear

differences that set these two giants apart from each other. Items sold on Amazon are packed in

logoed Amazon boxes and are distributed by the company through their massive fulfillment

centers. Alibaba on the other hand, acts in the same way as companies like eBay does; in the

sense that they bring buyers and sellers together in their marketplace. The company never

actually touches the items they sell, because they are sold and shipped by the seller. As a result

of this, Alibaba has experienced having to deal with a lot of counterfeit activities from various

sellers, which could prove to be a detriment to the company. Consumers don't take the purchase

of counterfeit items lightly, and all it takes is a little negative word of mouth to tarnish the image

of a company.

7. Porter's Five Forces Analysis

Amazon is clearly at the top of their game when it comes to the overall quality and

offering of their business. However, in order to maintain the lead in the market that they

currently have, is it necessary to frequently analyze the position they hold in relation to the

market. One valuable method to use in this situation is Porter's Five Forces analysis.

7.1 New Entrants

The threat of new entrants into the market is something that all businesses need to be

aware of. Amazon in particular does a great job of suppressing this type of threat to their

business. The brand recognition and customer loyalty that Amazon has over other competitors is

almost too strong to compete with, as they continue to provide new and innovative services to

their customers. There is no way any new company can hope to gain a foothold against Amazon

in any capacity. After all, if there was a company with a game changing innovation, you can bet

that Amazon would buy out that company like they did with Zappos, to effectively shut down the

potential threat.

7.2 The power of buyers

Amazon would not have been able to achieve their level of success, without having the

customer base that they do. The power of buyers in relation to Amazon is very high. Buyers have

the freedom to shop online from thousands of businesses. This is one of the main reasons for

why Amazon uses a cost leadership strategy. They stand out from the crowd by offering high

quality products at low prices. Fast shipping and nearly impeccable customer service add to the

attractiveness of the company as well.

7.3 The power of suppliers

As a cost leader, Amazon relies on maintaining strong relationships with their suppliers.

Suppliers do have a fair amount of power considering they can raise their prices on products as

they see fit. However, this is rarely an issue, considering the fact that Amazon can choose from

thousands of suppliers that are eager to business. Even though there are many options for

potential suppliers, Amazon is very selective when it comes to picking the right company to do

business with, as the products and services they offer to their consumers are of consistently high

quality.


7.4 The threat of substitutes products and services

Amazon has done very well in branching out into multiple categories of successful

products and services. As a company, they have, and still continue to make Amazon the

company of choice to do business with online. Even with the expansive list of offerings they

have for consumers, there is still the option to shop at other locations, either in person or online.

The key factor here is that people are free to shop anywhere they choose. The old saying "you

get what you pay for" is very true here. Amazon backs everything they sell with superior

customer service and great shipping rates.



7.5 Competitive Rivalry

There are many businesses that try incredibly hard to compete against Amazon, but do

not have the cash flow, resources, suppliers, and loyal customer base needed to impact their

business in any way. Ebay has always been the first company I personally go to when I try to

find a better deal on an item. More often than not, I end up purchasing the product through

Amazon anyway, because the services offered by the company are unmatched by the sale of the

other company in consideration. In my opinion, the main rivals that will always be a fierce

competitor are the businesses have retail stores, as well as the option to shop at their store

online.

8. Job Opportunities

8.1 Job Prospects and Pay

Amazon's mantra for its workers is “Work Hard, Have Fun, Make History”. History is what they are making with the rate in which Amazon is hiring workers. Because of rapid expansion into existing and emerging markets, Amazon's CEO, Jeff Bazos, vision of being customer-centric has spurned the rapid growth of its workforce. This vision requires people on the frontline to handle roughly 300 orders per second(Sims). To support such a massive infrastructure to fulfill the volume of orders and request, Amazon has hired over 110,000 employees since 2008 to present day. Form warehouse workers in their "Fulfillment Centers", customer support, and IT professionals, Amazon current employs over 132,000 workers worldwide(Cook).



employees.png

Fig. 3

Amazon has facilities across the globe including Canada, Mexico, Brazil, South Africa, the Middle East, Australia, China, and India just to name a few . In the United States alone there are 41 Fulfillment Centers with another 41 abroad. Each one of these Fulfillment Centers can employ anywhere between 1000 to 2000 employees with an average hourly wage of $12.30(Glassdoor). Amazon recently made some headlines for its treatment and pay of its warehouse workers who are said to over worked and underpaid. According to some reports Amazon post a 12% higher than national average in the payment of its warehouse workers, but an average hourly wage of $12.30 per/hr is less than the national average of $13.50 for warehouse workers. IT professional and skilled labor on the other hand make an make an average of $91k in salary (PayScale).



capturepay2.png

Fig. 4 (Hourly Pay)
capturepay.png

Fig. 5 (Salary Pay)

8.2 Benefits

The low hourly wage does not take into account for the benefit package that Amazon provides to its regular full-time employees. Amazon offers a selection of four different medical plans that includes dental, vision, and prescription drug benefits.  For employees financial security, the company provides a 401(k) savings plan with a company match up to 50%, as well as company paid basic life and accident coverage. For employees with dependents assistance needs, Amazon has care referral services, child and elderly care assistance, even pet care. Employees may also earn vacation time with up to six paid personal days per year(Amazon Jobs).

As further compensation to its full-time employees, Amazon also offers employees Restricted Stock Awards. One of the advantages restricted stock has is motivating employee to think and act like owners. When a restricted stock award become vested, employee who received these stock in turn becomes an owner of the company. With becoming part owner of Amazon, the employee has the ability to vote at the annual meeting. Amazon also offer want they call "Career Choice" in which they will pre-pay up to 95 % of tuition for courses related to in-demand fields, regardless of whether the skills are relevant to a career at Amazon(Amazon Jobs). All these details can be found on the Amazon jobs web site.
9. Industry Metrics

Amazon is known for its “culture of metrics” which has assisted Bezos to become a better leader by keeping the company's focus on its customers. Amazon uses close to 500 measurable goals tracks its performance. Almost 80% of these goals pertain to customer objectives. Bazos habitually keeps an empty seat at meetings to represent what he calls "the most important person in the room", the customer(Anders). This data allows Amazon to do many things such as weed out projects that turn away customer and which risks on innovative and emerging technologies to take.

Amazon uses various key performance indicators(KPI) such as perfect order percentage, order defect rate, pre-fulfillment cancellation rate, late ship rate and percentage of orders refunded to keep a track of its consumers, sellers and distributors (Kundra). Many of these metrics are specific to Amazon and complied throughout their history as an e-commerce business. They have also applied these metrics to their affiliate stores and sellers that utilize Amazon to sell their goods. Particular metrics such as Perfect Order Percentage (POP), Order Defect Rate (ODR), and Negative Feedback Rate are all metrics that Amazon uses to assist in creating the shopping experience form click to doorbell.

9.1 Perfect Order Percentage (POP)

Perfect Order Percentage (POP) tracks the number of perfectly accepted, processed and fulfilled orders. A perfect order is one that is accepted, processed, and fulfilled without incident. This includes things such as incorrect or unclear listings, late shipments, invalid or missing tracking information, and cancelled orders. Amazon has found that these factors are the most common issues that negatively impact POP metrics. This metric is calculated by taking the number of perfect orders from the past 90 days divided by the total number of orders received during that time (Amazon). A POP score > 95% is recommended by Amazon to all of its sellers. This in turn helps Amazon and its sellers to optimize their performance by identifying poorly performing products. .



9.2 Order Defect Rate (ODR)

Another metric specific to Amazon is the Order Defect Rate (ODR). This is the number

of orders with a defect divided by the number of orders in the time period of interest. The events defined as having a defect that negatively impact ODR. Factors such as Negative Feedback Rate, A-to-z Guarantee Claim Rate, Service Credit Card Chargeback Rate are the main contributors an unfavorable ODR. Sellers and affiliate accounts may be placed under review or suspended because of a high ODR(Amazon). The defect rate can be computed over any historical order period. Since many defects are reported several weeks after orders are placed or received, we typically only compute them for periods not earlier than 30 days from the present time period.

The overall purpose as stated earlier is to increase customer satisfaction throughout the entirety of the shopping experience. Amazon even has metrics that show that a 0.1 second delay in page rendering can in turn translate into a 1% drop in overall customer activity (Anders). These metrics give you a clear indication to Amazon on the satisfaction of its customers and determining what products and services to provide. There is a debate in which metrics Amazon should watch, but it's fair to say that Amazon and Bazos will look to an empty chair for its answer.



10. Suggested Strategy

10.1 Corporate Level Strategy

Our suggested corporate level strategy includes an aggressive move to identify emerging technologies. This includes in-house research and development and the acquisition of existing companies and start-ups. This will assist Amazon in identifying trends and new technologies that they can investigate and later incorporate into their business model. This includes the expansion if its infrastructure to incorporate these technologies in cloud computing, products, services, and logistics.

We also have identified a untapped market to Amazon's customer base. Currently Amazon does not have an market to sell movie, concert, and sporting event tickets, We feel that creating or acquiring a ticketing entity such as Live Nation or Stub Hub may pay huge dividends.

By providing such a service Amazon will be able to identify customer's preferences for events by analyzing customer data using current techniques. This will assist in the likely hood of a ticket purchase to an event that is suggested from customer specific data such as CD, DVD, streaming services, book purchases, and paraphernalia. This will help narrow and target potential buyers through notification of surrounding events.



10.2 Business Level Strategy

Our groups suggested business level strategy for Amazon is to continue to focus on innovative technology along with keeping costs low. This could be done by keep ahead of competitors by exploring innovative and emerging technologies. Through acquisitions, and investing in research and development, Amazon will be able to stay ahead of the curve when it comes to technologies and customer trends. Customers are always looking of a cheaper alternative to brick and mortar stores and even other e-tailors. By being a low cost leader, Amazon will be able to continue to provide its customers a cheaper option for products and services even after shipping cost is added. This is accomplished by creating efficacies in the supply chain and will create an overall completive advantage.

Another suggestion is to offer differentiation through innovative products and services while keeping the cost down. The Kindle, Fire Phone, Streaming Services, and AWS (Amazon Web Services) gives customers the alternative options to products and services that they normally use. By not marking up the products relative to its production cost, Amazon is able to get more of these products and services into the hands of customers that will repeatedly use them. This in turn will help to create a residual revenue stream from the use of serviced on these products. These products conjunction with the customer review system will helps to improve the overall customer experience.

10.3 International Level Strategy

Our suggestion for an international level strategy is to expansion into emerging markets especially throughout China and India. China’s e-commerce market alone has the potential to exceed that of the U.S., Canada, Mexico, South America, and Europe combined. This may be accomplished through identifying and acquiring current companies within these marketplaces to gain a foothold. Affiliation with these companies can assist in building Amazon brand loyalty and recognition. This will also assist in expanding current infrastructure by incorporating the newly acquired systems into existing systems.


11. Conclusion

These strategies are a culmination of the analysis conducted on Amazon by our group. The company's current growth rate does not appears to be slowing down anytime soon. We believe that their current strategy places them on a trajectory to remain the world's largest e-commerce site despite the threat of current and future competition. By sacrificing high profit margins for rapid growth in hindsight may prove to be vital to Amazon's future. Amazons future will be solidified by expanding its infrastructure, diversifying through developing products and services, acquisitions, and being first to market in emerging countries. It is the belief of our group that the suggested strategies may be attained by Amazon within a 12 - 24 month time period.


Sources
Amazon.com Inc.. (n.d.). Yahoo! Finance. Retrieved August 3, 2014, from http://finance.yahoo.com/q?s=AMZN

"Industry Analysis: E-Commerce." Industry Analysis: E-Commerce. N.p., n.d. Web. 07 Aug. 2014.

"Business Papers." Business Papers RSS. N.p., n.d. Web. 07 Aug. 2014.

"Amazon Strategic Management Analysis Report." Scribd. N.p., n.d. Web. 07 Aug. 2014.

O'Connor, Clare. "Amazon's Wholesale Slaughter: Jeff Bezos' $8 Trillion B2B Bet." Forbes. Forbes Magazine, 07 May 2014. Web. 07 Aug. 2014.

"Topic: Online Shopping." Www.statista.com. N.p., n.d. Web. 07 Aug. 2014.

"B2C E-commerce Sales Worldwide 2012-2018 | Statistic." Statista. N.p., n.d. Web. 04 Aug. 2014.

"Digital Buyers in the United States 2010-2018 | Statistic." Statista. N.p., n.d. Web. 07 Aug. 2014.

Ian Thomas (Survey Processing): (301) 763-2713, William Davie (Survey Methodology): (301) 763-7182, Deanna Weidenhamer (Seasonal Adjustment): (301) 763-7186, and Cb14- 83. QUARTERLY RETAIL E-COMMERCE SALES 1st QUARTER 2014 (n.d.): n. pag. Web.

Anders, G. (2012, April 4). Inside Amazon's Idea Machine: How Bezos Decodes Customers. Forbes. Retrieved August 2, 2014, from http://www.forbes.com/sites/georgeanders/2012/04/04/inside-amazon/

ChannelAdvisor. (n.d.). Amazon Strategies. Retrieved August 3, 2014, from http://www.amazonstrategies.com/2013/04/what-is-amazons-perfect-order-percentage-metric.html

Cook, J. (n.d.). Amazon to move warehouse workers to tech jobs with new 'career choice' program - GeekWire. GeekWire. Retrieved August 4, 2014, from http://www.geekwire.com/2012/amazoncom-move-warehouse-workers-technical-jobs-career-choice-program/

Digital KPIs - How Amazon uses them!. (n.d.). 360 Hot Topic -. Retrieved August 1, 2014, from http://360hot.tumblr.com/post/46747359063/digital-kpis-how-amazon-uses-them

Dignan, Larry. "Amazon's AWS: $3.8 billion revenue in 2013, says analyst."ZDNet. N.p., 7 Jan. 2013. Retrieved August 2, 2014. .

Forrester: U.S. Online Retail Sales to Hit $370 Billion by 2017. (n.d.). Mashable. Retrieved August 1, 2014, from http://mashable.com/2013/03/12/forrester-u-s-ecommerce-forecast- 2017/

Global Benefits and Stock. (n.d.). Amazon Jobs. Retrieved August 2, 2014, from http://www.amazon.jobs/benefits

Hourly Rate for Amazon.com Inc Employees. (n.d.). Amazon.com Inc Employer Wages, Hourly Wage Rate. Retrieved August 1, 2014, from http://www.payscale.com/research/US/Employer=Amazon.com_Inc/Hourly_Rate

How Amazon's new jobs really stack up. (2013, July 30). CNNMoney. Retrieved August 2, 2014, from http://money.cnn.com/2013/07/30/news/companies/amazon-warehouse-workers/

Indvic, L. (2013, March 03.). Forrester: U.S. Online Retail Sales to Hit $370 Billion by 2017. Mashable. Retrieved August 1, 2014, from http://mashable.com/2013/03/12/forrester-u-s-ecommerce-forecast-2017/

Inside Amazon’s ‘culture of metrics’. (n.d.). Business Management Daily RSS. Retrieved August 2, 2014, from http://www.businessmanagementdaily.com/31500/inside-amazons-culture-of-metrics



Kucera, Danielle. "Why Amazon Is on a Warehouse Building Spree." Bloomberg Businessweek. N.p., 29 Aug. 2013. Retrieved August 2, 2014. .

Sims, C. (n.d.). 6 things we learned from Amazon founder Jeff Bezos' stunning '60 Minutes' interview - Yellowhammer News. Yellowhammer News. Retrieved August 2, 2014, from http://yellowhammernews.com/buzzworthy/6-things-learned-amazon-founder-jeff-bezos-stunning-60-minutes-interview/



Spiro, Josh. "The Great Leaders Series: Jeff Bezos, Founder of Amazon.com BY Josh Spiro." Inc.com. Inc.com, 23 Oct. 2009. Web. Retrieved August 2, 2014.

Want to Motivate Your Employees? Try This Incentive. (n.d.). About.com Management & Leadership. Retrieved August 2, 2014, from http://management.about.com/cs/adminaccounting/a/restrictedstock.htm

Download 84.57 Kb.

Share with your friends:




The database is protected by copyright ©ininet.org 2022
send message

    Main page