INTRODUCTION
Summary statement of the problem: Amazon.com Company, founded by Jeff Bezos, aimed to offer people a convenient way to buy books and other products online. While Amazon has achieved considerable success, it now faces several challenges. First, the company struggles with the expensive task of remaining competitive in its industry. Additionally, Amazon encounters high costs in maintaining the products it sells.
The Amazon Company is currently facing major challenges that put its future success at risk and require urgent attention. To address the costly competition, Amazon can offer exclusive products not found elsewhere to reduce financial burden. Moreover, collaborating with other companies to sell their products through Amazon can help offset maintenance expenses and generate extra revenue.
The text explains that Jeff Bezos established Amazon.com in 1994, starting the business from his garage in his Bellevue, Washington home. Nick Hanauer invested $40,000 in Bezos’ idea. When Amazon initially went online, its layout was simpler and less appealing compared to its current design. Consequently, the site received unfavorable reception from visitors, leading to a shaky start for the business.
A man named Tom Alburg invested $100,000 in Amazon in 1995. This investment allowed the company to improve its website and hosting capabilities. Amazon started attracting customers from all over the country, not just Washington State, and Jeff Bezos was amazed by this. Despite its rapid growth and increasing popularity, the company faced some challenges.
Over the years, the expectations and growth of Amazon have increased. In order to attract customers, Bezos realized that he had to develop more than just a bookstore (“History,” 2011). He introduced the feature of allowing buyers to write their own book reviews, which greatly contributed to the success of Amazon.com (“History,” 2011). This led people to view Amazon as an online community rather than just a shopping website (“History,” 2011). By 1997, Amazon.com had generated revenue of $15.7 million (“History,” 2011).
Amazon became a public company and expanded its website in the same year. It incorporated CDs and movies. The next year, in 1998, Amazon broadened its range of products to include software, electronics, video games, toys, and home improvement items. Despite achieving success, concerns arose about Amazon’s rapid growth as skeptics doubted its ability to maintain its position in a fiercely competitive market with increasing industry expenses.
Amazon has managed to maintain its competitive advantage in the industry by providing a centralized marketplace. This has been crucial for their ongoing success. To handle the challenge of managing a diverse range of products, Amazon partnered with various businesses to sell their merchandise on their platform. This innovative approach led to successful collaborations with well-known companies like Target, Toys R Us, Old Navy, and others (“History,” 2011).
Despite not being directly responsible for inventory through these companies, Amazon earns a share of the sales, generating profits for all parties involved (“History,” 2011). From its inception, Amazon has successfully recovered and now stands as one of the leading online vendors globally today (“History,” 2011).
ANALYSIS
Management – Amazon implements several corporate controls to maintain the organization’s integrity (“Company,” 2011). To begin with, they have established a code of business conduct and ethics that outlines the ethical guidelines that must be followed (“Company,” 2011). Additionally, they have implemented internal auditing and control measures to prevent any financial statement manipulation or illegal activities in the financial reporting procedures (“Company,” 2011).
Amazon is equipped with an audit committee that oversees various activities including the review of internal complaints (“Company,” 2011). The committee encourages organization members to confidentially report any instances involving doubtful accounting or auditing practices (“Company,” 2011). Furthermore, it assists the board of directors in ensuring the credibility of financial statements and compliance with legal obligations (“Company,” 2011).
Operations – Amazon is organized using a multidivisional structure, consisting of various divisions led by vice presidents who report directly to the CEO. These divisions, including business development, seller services, Amazon web services, worldwide digital media, worldwide operations, international retail, and North American retail, are overseen by officers within the company.
Each of these officers is accountable for supervising a particular department of the company and providing feedback to the CEO (“Company,” 2011). Despite its tremendous expansion, Amazon.com remains unwaveringly dedicated to the consumer (“Marketing,” 2012). Among the 452 goals set by the company in 2009, 360 directly impacted the customer experience (“Marketing,” 2012).
According to Amazon.com, their mission statement is to be the most customer-centric company for consumer customers, seller customers, and developer customers (“Marketing,” 2012). Journalist Jack Hardy highlights the six core values that drive Amazon.com’s operational strategies: customer obsession, innovation, bias for action, ownership, high hiring bar, and frugality (“Marketing,” 2012). Amazon.com is dedicated to achieving long-term growth by prioritizing consumer satisfaction (“Marketing,” 2012).
Marketing – Amazon.com’s marketing strategy is based on six pillars: freely offering products and services, using a customer-friendly interface, easily scaling from small to large, leveraging its affiliate’s products and resources, utilizing existing communication systems, and tapping into universal behaviors and mentalities (“Marketing,” 2012). A large portion of Amazon’s marketing is subliminal or indirect, avoiding expensive Super Bowl ads or mall flyers. Instead, Amazon relies on clever online tactics, strong partner relationships, and a constant emphasis on quality to reach a wide audience (“Marketing,” 2012).
Amazon.com has long considered Pay Per Click (PPC) advertising as the outcast of its marketing campaign. The ever-changing internet landscape demands a user-friendly website that captivates and retains users. To achieve this goal, Amazon.com invests substantial resources in problem identification, solution development, and continuous improvement of the customer’s online journey. The company firmly believes that reaching customers online is crucial, as they prefer shopping on the internet. Therefore, Amazon.com strives to perfect the art of easy ordering, considering it as their ultimate objective.
According to a report by “Marketing” in 2012, Amazon.com is actively working on improving customer navigation and exploration of their online retail mall. The company has partnered with various entities and signed contracts with them. In addition to operating its own websites like A9 and CDNOW, Amazon.com also offers hosting and management services for other retailers such as Target, Sears Canada, Bebe Stores, Timex Corporation, and Marks & Spencer. The simplicity observed in Amazon.com’s customer checkout process extends to its partner relations and services, which are plentiful. “Marketing” noted in 2012 that Amazon.com provides a wide range of web services including ecommerce, database management, payment and billing solutions, web traffic management, and computing resources.
Finance – Amazon has made concerted efforts to maintain financial success through strategies such as profit increase, expense reduction, and product range expansion. At a broader level, Amazon takes into account factors including revenue, cost of sales, retained profits, and debt. Despite these considerations, Amazon’s investments have proven fruitful with growing net sales, decreasing cost of goods sold as a percentage of sales, and increasing net income. Additionally, Amazon persists in investing in initiatives that give them an enduring competitive edge (Whillden, 2012, para. 4).
Administration (Human Resources) – The human resource function at Amazon operates with the same goal of building something of lasting value, just like their customer-focused and growth-oriented approach (“HR,” 2012). Galbato, who had previously worked at General Electric for 18 years, joined Amazon in 2005 when it had only 8,000 employees (“HR,” 2012). Despite having some basic HR functions, they had to build processes and services from scratch that could be scaled to support their fast-growing organization (“HR,” 2012).
According to the article, HR at Amazon has been a great place for innovative individuals who prioritize starting with the customer and being highly engaged in their work. HR is now seen as a full business partner aligned with the primary businesses of the company. HR is viewed as a three-legged stool, with the first leg being the provision of client-based consultative services to support business units in achieving their objectives.
The second leg of the stool, according to Galbato, involves global Centers of Expertise (COE) that offer specialized knowledge in talent acquisition, organization development, and reward systems (“HR,” 2012). These COEs aim to create innovative programs and policies that can accommodate Amazon’s expansion (“HR,” 2012).
The third aspect is the centralization of administrative support centers and HR technology, which are responsible for handling functions that require efficiency and repetitive processes in order to achieve success (“HR,” 2012). Amazon sets a high standard in its hiring approach, taking a highly collaborative team process that demands a significant investment of time, energy, and passion (“HR,” 2012).
According to Galbato, Amazon expects its employees to be committed to the organization, showing pride in ownership through stock ownership and a mindset focused on growth and innovation (“HR,” 2012). Additionally, Amazon aims to retain its talent by offering opportunities for continuous learning and development (“HR,” 2012). Galbato states that they have highly intelligent individuals with a positive drive to enhance the customer experience, driven by the need to build and constantly improve (“HR,” 2012). Being a growing company that values innovation, speed, and customer focus, there is always a multitude of challenges (“HR,” 2012). Furthermore, people have the opportunity to grow on the job, by following long-term career paths, participating in formal leadership and technical skills training, and receiving informal mentoring (“HR,” 2012).
According to Galbato, a graduate of Cornell ILR School, Amazon’s collaboration with CAHRS demonstrates the company’s inclusive culture (“HR,” 2012). Galbato believes that Amazon sees CAHRS as a leading HR-focused organization and aims to gain more insights from this partnership (“HR,” 2012). It is worth mentioning that Amazon is recognized for its profitability (“SWOT,” 2012).
According to the source “SWOT,” Amazon’s profits in the three months ending June decreased by 32% to $52m (? 29.9m) compared to $76m in the same period of 2004. However, sales increased by 26% to $1.5bn. Previously, Amazon faced significant losses due to high initial setup costs. The recent decline in profits can be attributed to promotional offers that included reduced delivery costs for consumers.
Additionally, Amazon’s business strategy is supported by Customer Relationship Management (CRM) and Information Technology (IT). Through these methods, the company collects and analyzes data on customer buying behavior, allowing them to personalize specific item recommendations or bundles based on individual preferences and past purchases (“SWOT,” 2012).
Amazon, a renowned international brand with around 30 million customers (“SWOT,” 2012), is recognized as one of the pioneer dotcom companies. It was an early adopter of e-commerce technology and emerged as among the initial online retailers. While its primary focus was initially on books, Amazon now presents an extensive range of products, encompassing electronics, toys and games, as well as DIY items. Nonetheless, venturing into new categories might potentially undermine Amazon’s brand reputation (“SWOT,” 2012).
Amazon is the leading seller of books, while Toys-R-Us dominates the toy and games market. However, if Toys-R-Us decides to sell books, it could confuse its customers and damage its brand. The same applies to expanding into new categories like automotive, which may also result in customer confusion. Additionally, the company may need to reconsider its strategy of offering free shipping to customers. While this might seem beneficial, customers could easily choose a local retailer that does not charge for shipping.
It is rumored that shipping costs may reach as high as $500m, which would undoubtedly impact profits negatively (“SWOT,” 2012). However, the company is capitalizing on its reputation as an online retail pioneer by offering its expertise to major store groups (“SWOT,” 2012). For instance, British retailer Marks and Spencer announced a partnership with Amazon to sell their products and services online (“SWOT,” 2012). Other recent collaborations include Target, Toys-R-Us, and the NBA (“SWOT,” 2012).
Amazon’s new division based in Luxembourg is focused on offering customized services to retailers as a technology service provider in Europe (“SWOT,” 2012). Additionally, there are opportunities for Amazon to collaborate with the public sector (“SWOT,” 2012). To illustrate, the company established a partnership with the British Library in London back in 2004 (“SWOT,” 2012). This collaboration allows customers to search for rare or antique books (“SWOT,” 2012). Furthermore, the Amazon website now includes the library’s catalog of published works, providing information on over 2.5 million books available on the site (“SWOT,” 2012).
In 2004, Amazon acquired Joyo.com, China’s largest online retailer, for approximately $75m (?40m). Joyo.com shares similarities with Amazon in terms of selling discounted books, movies, toys, and music. However, one potential threat is the increasing competition that successful internet businesses face. As Amazon offers similar products to high street retailers and other online businesses, it may become challenging to distinguish the brand from its rivals.
According to “SWOT” (2012), Amazon has a distinct brand and offers a wide variety of products. However, price competition may pose a threat to the business. Additionally, as Amazon expands internationally, it may face competition from foreign competitors. Domestic rivals who cannot compete with Amazon in the US may establish themselves overseas and compete with Amazon in foreign markets. The possibility of joint ventures, strategic alliances, and mergers could result in Amazon losing its top position in certain markets.
According to the “SWOT” report from 2012, Amazon’s products are often purchased as gifts, particularly during the Christmas season. Therefore, there is a level of seasonality associated with the business. However, trading in foreign markets with diverse cultures might lessen the impact of seasonality.
Products or Services – Amazon.com aims to be the most customer-centric company on Earth, providing a wide range of products and services for online purchase (“Overview,” 2012). With a commitment to offering customers low prices, a vast selection, and convenience, Amazon.com remains a leading global e-commerce platform (“Overview,” 2012). In addition to operating retail websites, we also offer platforms for third-party sellers to showcase and sell their products (“Overview,” 2012). Furthermore, we provide marketing and promotional services as well as web services for developers (“Overview,” 2012). Starting in 2000, Amazon.com expanded by offering its top-notch e-commerce platform to other retailers and individual sellers (“Overview,” 2012).
According to an overview from 2012, the Amazon.com e-commerce platform is utilized by over two million small businesses, retail brands, and individual sellers to expand their sales and attract new customers. Various components of the platform, including Selling on Amazon, Fulfillment by Amazon, Amazon Webstore, Checkout by Amazon, Product Ads and Advantage, enable sellers of all sizes to offer their products to Amazon.com customers.
Launched in 2006, Amazon Web Services (AWS) started offering key infrastructure services as web services, which are now commonly referred to as cloud computing (“Overview,” 2012). The main advantage of cloud computing and AWS is the capability to transform fixed costs for capital infrastructure into flexible expenses (“Overview,” 2012). Currently, Amazon Web Services supplies a cloud-based infrastructure platform that is highly dependable, scalable, and cost-effective, serving businesses of various sizes in 190 countries worldwide (“Overview,” 2012).
Amazon Web Services (AWS) provides a wide range of services, with more than 28 options to choose from. These include popular offerings like Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), and Amazon Relational Database Service (Amazon RDS) (“Overview,” 2012).
The problem highlighted in the given case is that the Amazon Company needs to expand and grow their business positively while keeping expenses low, without compromising their established reputation. Amazon.com has a highly ambitious growth initiative. Their marketing strategy is based on six principles: offering products and services for free, using a user-friendly interface, easily scaling from small to large, taking advantage of its affiliates’ products and resources, utilizing existing communication systems, and leveraging universal behaviors and mentalities (Marketing, 2012).
If The Amazon Company fails to achieve and maintain these goals, they will not be able to meet the Amazon growth initiative. If the goals cannot be accomplished, the company might have to compromise or reduce their targets in order to achieve them. Correcting the problem will allow The Amazon Company to continue growing and conducting their business as usual. The financial and expense challenges were expected to be handled internally. However, by expanding their already successful business and exploring new opportunities, The Amazon Company is committed to ensuring their ongoing success.
There are multiple reasons why this is a significant problem for The Amazon Company. Firstly, the cost is increasing in all aspects of the business, including the high expenses of competition within the industry. This is a pressing matter that requires immediate attention. Finding innovative methods to compete in the industry is a crucial aspect of solving this issue. Additionally, Amazon faces financial troubles in maintaining their products, which although profitable, has become quite costly. Overcoming this expense is a major challenge that needs to be addressed promptly.
SYNTHESIS
Alternative Solutions
One key challenge is to expand the business rapidly while minimizing expenses, especially in order to compete with other companies in the industry. To achieve this goal, it is suggested to offer unique products that are not available from competitors. It is crucial to constantly innovate and identify products that other websites do not offer. By staying at the forefront of this aspect, they can consistently achieve renewed success.
Amazon was encountering a separate issue in terms of enduring expenses for their sold items. The expenses for maintaining their self-produced goods were consistently escalating. A viable solution to minimize these costs is to collaborate with external businesses to vend their products on Amazon’s platform. This strategy proves fruitful as it establishes robust collaborations with other companies, while simultaneously appealing to consumers.
Recommendations and Conclusions
The most effective approach to address Amazon’s expense issue in its business expansion involves two steps. Firstly, it is crucial to diversify the range of products offered to consumers. This solution helps to keep expenses low by positioning Amazon as a comprehensive company. To implement this, a well-developed plan must be established, considering various factors and conducting thorough studies. It is possible that adjustments may be necessary once the process begins. Developing a plan is essential as it provides guidance and enables monitoring of tasks and achievements. Additionally, recruiting more companies to sell their products on Amazon is another important solution.
By charging fees to these companies and offering their products at lower prices, Amazon can generate revenue and attract more customers. This strategy will enhance Amazon’s popularity with consumers and establish a positive reputation for delivering dependable products. As long as Amazon adheres to the aforementioned solutions, it will maintain its success. One factor that sets Amazon apart from its competitors is its ability to stay at the forefront of technological advancements. This capability enables Amazon to provide unique services that other companies cannot offer.
Amazon’s ability to customize their services to meet the needs and preferences of customers is a key factor in their ongoing success. In conclusion, Amazon’s future prospects remain promising.
References
- Amazon’s Marketing Strategy. (2012, October 28). Retrieved from http://www. marketingplan. net/amazon-com-marketing-strategies/
- Amazon Overview. (2012). Retrieved from http://phx. corporate-ir. net/phoenix. zhtml? c=176060&p=irol-Mediakit
- Amazon SWOT. (2012). Retrieved from http://www. marketingteacher. com/swot/amazon-swot. html#
- Corporate Controls and Structure of Amazon. (2011). Retrieved from http://derek-mangagement. logspot. com/2010/04/corporate-controls-and-structure-of. html
- HR Profile for Amazon. com. (2012). Retrieved from http://www. ilr. cornell. edu/cahrs/hrspectrum/hr-profile-amazon. html
- The History of Amazon. Com. (2011). Retrieved from http://www. essortment. com/history-amazoncom-21180. html
- Wheelen, T. L. , & Hunger J. D. (2008) Strategic Management and Business Policy. Upper Saddle River, NJ: Pearson-Prentice Hall.
- Whillden, D. (2012, June 26). Amazon’s Internal Analysis. Retrieved from http://www. strategy-keys. com/example-of-a-strategic-plan-model-amazon-internal-analysis. html
