Summary statement of the problem: Amazon. com Company is a business that was started by a man by the name of Jeff Bezos. The goal of the business was to provide the people with a way to purchase books and other items over the internet. Amazon has experienced a lot of success but, they come have come across some potential issues. One of the issues the company faces the high cost of staying competitive against other companies in the same industry. Another issue that is visible is the high cost of maintaining the products they sell.
Summary statement of the recommended solution: The issues that the Amazon Company faces are very real threat to the future success of the company. These problems need to be addressed as soon as possible. The high cost of staying competitive against other companies can possibly be offset by offering products that other companies don’t supply. This will help with ease some of the cost. The high cost of maintaining the products they sell can be offset by getting other companies to sell their products through Amazon. This will allow the company to regain their money as well as make money.
The Situation Jeff Bezos founded Amazon. com in 1994. Originally the business was based out of his garage in his Bellevue, Washington home (“History,” 2011). A businessman by the name of Nick Hanauer believed in Bezos’ idea and decided to invest $40,000 in the venture (“History,” 2011). When Amazon first decided to go online, its layout was not as flashy as it is today (“History,” 2011). In fact, the site looked very plain and nattractive to most visitors, causing the business to start out on shaky ground (“History,” 2011).
A man by the name of Tom Alburg decided to invest $100,000 in Amazon in 1995, which helped the company fund a better looking website and hosting capabilities (“History,” 2011). When people began purchasing books from Amazon, Bezos was in awe that he had customers from all over the country, not just Washington State, purchasing books (“History,” 2011). The company was rapidly growing and becoming a well-known name but, they have experience some issues along the way.
The expectations and growth of Amazon have increased over the years. Bezos decided that he had to create more than just a bookstore if he wanted people to come back as customers (“History,” 2011). He added the option of buyers to write their own book reviews, which is a huge credit to Amazon. com’s success (“History,” 2011). People began to look at Amazon as more of an online community and not just a place to purchase things (“History,” 2011). By 1997, Amazon. com had generated $15. 7 million in revenue (“History,” 2011).
Once the company went public the same year, they decided to add CDs and movies to the website (“History,” 2011). In 1998, Amazon added some new items to the roster: software, electronics, video games, toys, and home improvement items (“History,” 2011). Once the company began showing signs of success, people became skeptic and claimed that Amazon was getting too large in too short an amount of time (“History,” 2011). This is where some issues for Amazon began. One of the main issues was the cost of competing with other companies in the same industry.
Therefore, by offering a place where people can buy multiple products in the same place kept the company ahead of others in the same industry. This is one of the items that help them stay successful. Amazon was also dealing with another issue which was maintaining the products they sell. They offset this issue by gathering other businesses to sell their products through Amazon. The idea worked (“History,” 2011). Companies such as Target, Toys R Us, Old Navy, and many others have agreed to sell their items through Amazon (“History,” 2011).
Although Amazon is not directly responsible for inventory through these companies, they do get part of the sales, creating a profit for all involved (“History,” 2011). Since the inception of the idea, Amazon is now back on its feet and remains one of the most popular online vendors in the world today (“History,” 2011).
Management – Amazon has many corporate controls in place to ensure the integrity of the organization (“Company,” 2011). First, they have a code of business conduct and ethics that lays out the ethical rules that must be complied with (“Company,” 2011). They have a system of internal auditing and controls in place to make sure that the company is not altering financial statements or committing any illegal activity in the financial reporting process (“Company,” 2011).
Amazon has an audit committee that is responsible for these types of activities as well as reviewing complaints from within the organization (“Company,” 2011). Organization members are encouraged to anonymously submit instances in which employees are engaging in questionable accounting or auditing matters (“Company,” 2011). The audit committee also helps the board of directors in verifying the accuracy of all financial statements and its compliance with all legal requirements (“Company,” 2011).
Operations – In terms of the structure of the company, Amazon is likely using a multidivisional structure (“Company,” 2011). Amazon is made up of multiple different divisions each with a vice president that reports directly to the CEO (“Company,” 2011). Some of the divisions within Amazon, each with an officer overseeing them, are business development, seller services, Amazon web services, worldwide digital media, world wide operations, international retail, and North American retail (“Company,” 2011).
Each of these officers are responsible for overseeing a specific division of the company and reporting back to the CEO (“Company,” 2011). Despite its massive growth, Amazon. com remains unremittingly focused on the consumer (“Marketing,” 2012). Out of 452 company goals in 2009, 360 directly affected customer experience (“Marketing,” 2012).
Amazon. com’s self-proclaimed mission statement is: “We seek to be Earth’s most customer-centric company for three primary customer sets: consumer customers, seller customers and developer customers” (“Marketing,” 2012). In a special for the Miami Herald, journalist Jack Hardy declares: “Customer obsession; innovation; bias for action; ownership; high hiring bar and frugality (“Marketing,” 2012). These six core values focus Amazon. com’s operational strategies” (“Marketing,” 2012). It is committed to long-term growth based on consumer satisfaction (“Marketing,” 2012).
Marketing – Amazon. om bases its marketing stratagem on six pillars: it freely proffers products and services, it uses a customer-friendly interface, it scales easily from small to large, it exploits its affiliate’s products and resources, it uses existing communication systems, and it utilizes universal behaviors and mentalities (“Marketing,” 2012). Much of its marketing is subliminal or indirect – it does not run $1 million dollar ads during Super Bowls nor post flyers in mall marketplaces Amazon. com relies on wily online ploys, strong partner relations and a constant declaration of quality to market itself to the masses (“Marketing,” 2012).
Independent Pay Per Click (PPC) advertising has been the black sheep of Amazon. com’s marketing campaign (“Marketing,” 2012). In today’s stop-and-go internet traffic, an engaging, simple and easy-to-use website is a necessity. Amazon. com expends millions of dollars and hundreds of man-hours to identify problems, develop solutions, and further enhance the customer’s online experience (“Marketing,” 2012). Amazon. com’s strategy is simple: since customers shop online, online is where they will be found (“Marketing,” 2012). Easy ordering is Amazon. com’s Holy Grail.
It eagerly develops technology to allow customers to better navigate and explore their online retail mall (“Marketing,” 2012). Amazon. com has shook hands and signed contracts with quite a few partners (“Marketing,” 2012). Not only does it operate many of its own websites, including A9 and CDNOW, but it hosts and manages retail web sites for an array of other retailers, including Target, Sears Canada, Bebe Stores, Timex Corporation and Marks & Spencer (“Marketing,” 2012). The simplicity that pervades Amazon. com’s customer checkout extends to its partner relations and services, of which there is no shortage (“Marketing,” 2012). Amazon. com hosts no less than twelve types of web services, including ecommerce, database, payment and billing, web traffic, and computing (“Marketing,” 2012).
Finance – There is no easy way for Amazon to maintain financial success. Amazon has worked extremely hard to keep profits rising and expenses low. The company has broaden the number products they sell to meet these financial goals. Amazon reviews at the macro-level which includes revenue to cost of sales overtime, revenue and retained profits, and gearing, debt and capital structure; Amazon’s investments are paying off (Whillden, 2012, para. 4). Their net sales continue to grow, their cost of goods decreases as a % of sales and their net income continues to increase (Whillden, 2012, para. 4). And, they continue to invest in initiatives that provide them a longer-term competitive advantage (Whillden, 2012, para. 4).
Administration (Human Resources) – The human resource function at Amazon operates with that same customer-obsessed, growth-oriented desire to build something of lasting value (“HR,” 2012). After having worked for General Electric for 18 years, Galbato came to Amazon in 2005, when the company had only 8,000 employees (“HR,” 2012). We had the basic HR functions, but in many ways we were starting from scratch, building processes and services that were scalable,” he says (“HR,” 2012). “Like any young organization, Amazon was growing faster than some of the HR infrastructure to support it (“HR,” 2012).
But, just as with the company as a whole, HR at Amazon has been a great place for people who want to innovate, start with the customer and work backwards, and be highly engaged in their work while watching the business grow” (“HR,” 2012). Now, HR at Amazon is considered a full business partner aligned with the primary businesses of the corporation (“HR,” 2012). I think of HR as a three-legged stool,” Galbato says (“HR,” 2012). “First, in support of our business units, HR provides client-based consultative services to help businesses achieve their operating objectives” (“HR,” 2012).
The second leg of the stool, says Galbato, is global Centers of Expertise (COE) which provide specialized knowledge in areas of talent acquisition, organization development, and reward systems (“HR,” 2012). These COEs focus on developing innovative programs and policies that scale with Amazon’s growth (“HR,” 2012).
The third leg is centralized administrative support centers and HR technology, which handle functions where efficiency and repeated processes are critical to success (“HR,” 2012). Amazon sets the bar high in its approach to hiring, which it does through a highly collaborative team process involving a significant investment of time, energy, and passion (“HR,” 2012).
In turn, Galbato says, Amazon expects its employees to be invested in the organization, with the pride of ownership that comes not only from having stock in the company but also from a mindset that takes pride in growth and nnovation (“HR,” 2012). And Amazon seeks to retain its talent by providing opportunities for continual learning and expansion (“HR,” 2012). “We have lots of smart people with lots of positive energy, driven by the need to build and continually improve the customer experience,” he says (“HR,” 2012). “There is no lack of challenge in a growing company that values innovation, speed, and customer focus (“HR,” 2012). People grow on the job, through long-term career paths, through formalized leadership and technical skills training, and through informal mentoring” (“HR,” 2012).
For Galbato, a 1984 graduate of Cornell’s ILR School (Industrial and Labor Relations), Amazon’s affiliation with CAHRS is just one more example of the company’s expansive culture (“HR,” 2012). “CAHRS is a premier organization for premier companies that focus on HR’s strategic value,” Galbato says, adding that Amazon hopes to learn even more through its CAHRS association (“HR,” 2012). 6. SWOT a. Strengths – Amazon is a profitable organization (“SWOT,” 2012).
In 2005 profits for the three months to June dipped 32% to $52m (? 29. 9m) from $76m in the same period in 2004 (“SWOT,” 2012). Sales jumped 26% to $1. 5bn (“SWOT,” 2012). Until recent years Amazon was experiencing large losses, due to its huge initial set up costs (“SWOT,” 2012). The recent dip is due to promotions that have offered reduced delivery costs to consumers (“SWOT,” 2012). Customer Relationship Management (CRM) and Information Technology (IT) support Amazon’s business strategy (“SWOT,” 2012). The company carefully records data on customer buyer behavior (“SWOT,” 2012). This enables them to offer to an individual specific item, or bundles of items, based upon preferences demonstrated through purchases or items visited (“SWOT,” 2012).
Amazon is a huge global brand (“SWOT,” 2012). It is recognizable for two main reasons (“SWOT,” 2012). It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people (“SWOT,” 2012). It was an early exploiter of online technologies for e-commerce, which made it one of the first online retailers (“SWOT,” 2012). It has built on nits early successes with books, and now has product categories that include electronics, toys and games, DIY and more (“SWOT,” 2012). b. Weaknesses – As Amazon adds new categories to its business, it risks damaging its brand (“SWOT,” 2012).
Amazon is the number one retailer for books (“SWOT,” 2012). Toy-R-Us is the number one retailers for toys and games (“SWOT,” 2012). Imagine if Toys-R-Us began to sell books (“SWOT,” 2012). This would confuse its consumers and endanger its brands (“SWOT,” 2012). In the same way, many of the new categories, for example automotive, may prove to be too confusing for customers (“SWOT,” 2012). The company may at some point need to reconsider its strategy of offering free shipping to customers (“SWOT,” 2012). It is a fair strategy since one could visit a more local retailer, and pay no costs (“SWOT,” 2012).
However, it is rumored that shipping costs could be up to $500m, and such a high figure would undoubtedly erode profits (“SWOT,” 2012). c. Opportunities – The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups (“SWOT,” 2012). For example, British retailer Marks and Spencer announced a joint venture with Amazon to sell its products and service online (“SWOT,” 2012). Other recent collaborations have been with Target, Toys-R-Us and the NBA (“SWOT,” 2012).
Amazon’s new Luxembourg-based division aims to provide tailored services to retailers as a technology service provider in Europe (“SWOT,” 2012). There are also opportunities for Amazon to build collaborations with the public sector (“SWOT,” 2012). For example the company announced a deal with the British Library, London, in 2004 (“SWOT,” 2012). The benefit is that customers can search for rare or antique books (“SWOT,” 2012). The library’s catalogue of published works is now on the Amazon website, meaning it has details of more than 2. 5m books on the site (“SWOT,” 2012).
In 2004 Amazon moved into the Chinese market, by buying china’s biggest online retailer, Joyo. com (“SWOT,” 2012). The deal was reported to be worth around $75m (? 40m) (“SWOT,” 2012). Joyo. com has many similarities to its new owner, in that it retails books, movies, toys, and music at discounted prices (“SWOT,” 2012). d. Threats – All successful Internet businesses attract competition (“SWOT,” 2012). Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult o differentiate the brand from its competitors (“SWOT,” 2012).
Amazon does have its brand (“SWOT,” 2012). It also has a huge range of products (“SWOT,” 2012). Otherwise, price competition could damage the business (“SWOT,” 2012). International competitors may also intrude upon Amazon as it expands (“SWOT,” 2012). Those domestic (US-based) rivals unable to compete with Amazon in the US, may entrench overseas and compete with them on foreign fronts (“SWOT,” 2012). Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets (“SWOT,” 2012).
The products that Amazon sells tend to be bought as gifts, especially at Christmas (“SWOT,” 2012). This means that there is an element of seasonality to the business (“SWOT,” 2012). However, by trading in overseas markets in different cultures such seasonality may not be enduring (“SWOT,” 2012).
Products or Services – Amazon. com strives to be Earth’s most customer-centric company where people can find and discover virtually anything they want to buy online (“Overview,” 2012). By giving customers more of what they want – low prices, vast selection, and convenience – Amazon. om continues to grow and evolve as a world-class e-commerce platform (“Overview,” 2012). Amazon. com operates retail websites and offers platforms that enable third parties to sell products on our websites (“Overview,” 2012). We also provide platforms for third-party retailers, marketing and promotional services, and web services for developers (“Overview,” 2012). In 2000, Amazon. com began to offer its best-of-breed e-commerce platform to other retailers and to individual sellers (“Overview,” 2012).
Today, more than two million small businesses, world-class retail brands and individual sellers increase their sales and reach new customers by leveraging the power of the Amazon. com e-commerce platform (“Overview,” 2012). Through programs such as Selling on Amazon, Fulfillment by Amazon, Amazon Webstore, Checkout by Amazon, Product Ads and Advantage, sellers of all shapes and sizes offer their selection to Amazon. com customers by using various components of the e-commerce platform (“Overview,” 2012).
Launched in 2006, Amazon Web Services (AWS) began exposing key infrastructure services to businesses in the form of web services — now widely known as cloud computing (“Overview,” 2012). The ultimate benefit of cloud computing, and AWS, is the ability to leverage a new business model and turn capital infrastructure expenses into variable costs (“Overview,” 2012). Today, Amazon Web Services provides a highly reliable, scalable, low-cost infrastructure platform in the cloud that powers hundreds of thousands of enterprise, government and startup customers businesses in 190 countries around the world (“Overview,” 2012).
AWS offers over 28 different services, including Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3) and Amazon Relational Database Service (Amazon RDS) (“Overview,” 2012).
The problem that was apparent in the case presented was that the Amazon Company needs to grow their company in a positive manner and they must keep their expenses down in doing so without forfeiting the reputation that they have built over their years in business. The Amazon Company has a growth initiative that is very aggressive. Amazon. om bases its marketing stratagem on six pillars: it freely proffers products and services, it uses a customer-friendly interface, it scales easily from small to large, it exploits its affiliate’s products and resources, it uses existing communication systems, it utilizes universal behaviors and mentalities (“Marketing,” 2012).
If The Amazon Company is not able to reach these goals and maintain them then the Amazon growth initiative will not be able to be met. If the goals cannot be met then the Amazon Company may have to cut corners or to lessen their goals so that they can be met. . If the problem is corrected then The Amazon Company will continue to grow and handle their business the way they are accustomed too. The financial and expense issues were to be incurred internally. But continuing to grow what was already a strong business for them and being open to new opportunity areas, The Amazon Company will be working on ensuring their continued success.
There are several reasons that this is a real and important problem that The Amazon Company is facing. First off the price is rising in every aspect of a business. The high cost of competing against other businesses in the same industry is a real concern. This is a problem that needs to be looked over as soon as possible. Trying to use innovative ways to compete in the industry are apart on the problem. Another finance issue that Amazon was experiencing was the cost of maintaining their products. The products do generate profit but, maintaining them has become quite costly. This expense is a big problem to overcome. It also needs to be addressed soon.
The main problem that needs to be addressed is how to grow the business at a very aggressive rate while keeping the expenses down. The costs associated with competing against other companies in the same industry have to be kept to a minimum. One alternative way that this can be accomplished is by offering other products that these companies don’t provide. They need to be innovative and continue to research which products other sites do not offer. Their ability to be on the cutting edge of this aspect continues to bring then renewed success.
Another main problem that Amazon was facing was the cost of maintaining the products they sell. The cost to maintain their in-house products was continuing to increase. One alternative way to keep this to a minimum is to enlist other companies to sell their products through Amazon. This idea is successful because it creates a strong partnership with other companies and the appeal of it to consumers.
Recommendations and Conclusions
The best solution for the expense issue that Amazon is facing in the expansion of its business is a two part fix. First off diversify the products offered to the consumer. This is the best solution because it’s keeping expenses down by marketing itself as an all-purpose company. A plan will need to be implemented in order for this to take place. There are several things that will need to be looked at and studied to ensure that you are successful. They may even need to be changed once the process actually starts. Having a plan is essential and a good way to keep you on track and help you to monitor all the things that you need to get done and accomplish. Another essential solution is to continue recruiting companies to sell their products online through Amazon.
This will help Amazon gain money by the fee these companies pay and make the company more popular with the consumer. The website will continue to offer products from these companies at lower prices and build a positive reputation with customers for providing reliable products. Overall, Amazon will continue to be successful as long as they follow the solutions described above. Amazon has an advantage over other companies because they continue to stay on the cutting edge of technology. This is what allows them to produce services to the consumer that other companies don’t have to offer.
Their continuation to customize their services to what the customer wants is another source of their success. In short, Amazon continues to have a positive looking future.
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- 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