Amazon Case Study
The Amazon organization is among the first online sites whose launching took place in the year 1995. It is the best online shopping site globally, hence regarded as a universal strategy for a successful online retailer. According to the primary market surveys done in March 1998, Amazon was among the top twenty online organizations. It is from the year 2000 that Amazon organization was considered the best online site for shopping. The organization’s popularity was as a result of the excellent client service that was as a result of the inventory management. After realizing the development of numerous e-tailing industries hence they had to consolidate the position in the best online shopping sites. Therefore they impacted multiple measures that helped in increasing the organization’s income. One of the measures that they moved is the addition of numerous goods to the site. In 1999, the organization made it a habit of adding a new promising product every six weeks. Later on, they enhanced the Customer Fulfillment Network by purchasing the goods from the distributors instead of stocking the products in the warehouse. In 2022, the Organization 22.3 million people on the site. In 2003, the organization became the best music, video, and book retailer online, offering more than 4.7 million CDs, computer games, videos, books, and other numerous products. Their aim was getting big at a fast pace which was evident through their driving force.
Jeff Bezos is the chief executive and founder of the Amazon Company. The company is located in Seattle. The internet has borne numerous changes in how business was perceived and the alternative strategy that clients can purchase. Currently, online clients are aware of the convenience of buying a book, and it is delivered to our houses. It is essential because a person does not have to deal with traffic and long queues in the name of purchasing a single book (Delfanti & Frey, 2021). The foundation of the company was because the internet offered colossal scope for trading online. Even though the Amazon organization was known for selling books, at the moment, it provides lots of products, and they are shipped to all parts of the world. These two factors are what sets them aside from the rest hence being the best online shopping site. Besides being an online retail site, the organization also focuses on cloud computing, live streaming, and artificial intelligence. Therefore, the case study will analyze Porter’s five forces, strategy mapping, critical success factors, future for the industry, and PESTLE.
Methods of Data Collection
In this case study, I have focused on acquiring knowledge for the tested subject from various articles, books, scientific papers, books, and the organization’s website. I had also planned a few interviews with some of the employees, but due to their busy schedules, primarily due to the pandemic, most people are purchasing their products online, the discussions did not happen. Also, I acquired information from their various social media platforms such as Instagram, Twitter, and different blogs and vlogs. Some of the information posted was relevant to my research since executive members such as Jeff Bezos quoted them.
Tools used to analyze the organization
Our case study about Tesla will use different tools to describe the organization’s strategies: Pestle analysis, Porter’s Five Forces, critical success analysis, strategy mapping, and competitive analysis.
Porter’s Five Forces
Amazon established porter’s Five Forces because it assists the company in understanding the weaknesses and strengths of the industry. Also, it helps in the determination of the market’s long-term profitability and competitors. Porter’s five forces are a threat of substitutes, new entrants, suppliers’ bargaining power, buyers’ bargaining power, and competitive rivalry. The latest entrant threats are low. It is easy for anyone to start an e-commerce website or an online shopping store online, but it is almost impossible for any company to take on a giant like Amazon (Escobar, 2019). It entails lots of investments in marketing, logistics, client service, warehousing, the establishment of a friendly-user website, and distribution. In terms of switching the costs, it is not easy because it will require another organization to spend billions of dollars before they compete with the amazon organization. Also, it is advantageous over other organizations because it is the leading internet retailer in the world. Moreover, the organization is loyal to the clients; hence, they constantly find new ways to satisfy their loyal clients.
The buyers’ bargaining power is high for the organization. It focuses on the clients’ satisfaction; hence their goal is to offer increased value to them. Therefore, the organization runs a client-centric method in the online business. It assures the clients that their goods are of high quality and they deliver them on time. The clients are price-sensitive; hence their bargaining power is high because of the high e-commerce competition. Therefore, the organization offers numerous high-quality products at an affordable price, failure to which the clients will choose their substitutes (Liberty et al., 2021). The clients’ bargain on are household goods, Amazon fire TV sticks, and online streaming services; these are but a few. However, the clients do not bargain on products that have less competition. The substitute threat is high. Amazon is constantly competing with the offline market as well as online retail. The huge challenge that the organization faces is the minimal switching sites because the clients change quickly from the company to several other retailers. It is more challenging because the organization does not offer unique services and products; instead, it provides the ones they get from retail stores. It is the reason why the organization focuses on the clients’ experience that helps in attaining online retail success in the industry.
The suppliers’ bargaining power is low to moderate. Suppliers offer the organization the goods that they require for the online business. The suppliers’ effect on the industry is essential; the clients will not be served because they lack them. The organization has numerous suppliers who must adhere to the regulations and rules of the company. The company has power over the suppliers because they are many, and their field lacks competition (Oliveira et al., 2021). According to porter’s five forces, the suppliers have low to moderate power in the industry. The competitive control over the sector is average to high. The competition in the e-commerce business is high. Since the emergence of technology, numerous organizations, even small ones, are selling their products online. However, Amazon’s primary competitors are Alibaba, Walmart, eBay, and Flipkart; these are few. All these organizations offer Amazon intense competition. Therefore the organization focuses on providing high-quality services and products to their clients at an affordable price to prevent them from selecting other retail stores. Since no other organization can invest a considerable amount like Amazon, it keeps on the leading position in the e-commerce industry.
The PESTLE Analysis
Most organizations in the world depend on the government for stability. Amazon is therefore not an exception. Due to its operating overseas, the organization must follow the legal and political regulations in every location. Consequently, it has to rely on the state for support to distribute, implement and profit. The organization not only depends on political stability but also e-commerce support because the cybersecurity bills influence them. Expanding and dispersing into the Asian continent is challenging even though Amazon is an influential and expansive organization. The Chinese organizations will there compete with Amazon hence making it almost impossible for Amazon to prosper. Also, taxes in certain nations is expensive, and they also tend to fluctuate; therefore, the organization needs to be updated.
The second aspect of the PESTLE analysis is economic factors. It entails the competitors and the competition. Positivity of the economy helps in the flourishing of business in that economy. On the good side, the retail industry is among the industry that tends to gain profits despite the economic beating. The disposable income is high currently; hence it permits individuals to more cash on entertainment and luxurious items, and they are accessible on Amazon (Smith & Linden, 2017). Also, it means that the organization will face much competition, especially from Walmart, because it is working hard on enhancing its online system. Some of Walmart’s actions are redoing the website and strengthening the sustainability and searchability that helps the users access them. Amazon is also fighting the battle by focusing on grocery development against Walmart. Also, it is creating more job opportunities in various nations after facing criticism from their clients.
The third aspect is the social factors. Most individuals claim that the Amazon organization is impacting the public’s health negatively. The obesity rate in children and adults is high. Even though the government is trying all measures possible to help maintain a healthy lifestyle, there are claims that the organization is doing the opposite. It is because it allows people to purchase products and get them at their doorsteps. Now that the organization is venturing into the grocery sector, people will not have to get out of the house to buy them. Despite getting opposition from the state, most individuals want that experience. It makes Amazon powerful because people can order various things and receive them at once, and also, the shipping is fast like never before. Therefore, online shopping is advantageous to old individuals that have difficulty walking. Also, most youths prefer ordering things online.
The fourth aspect is the technological factors. Since the Amazon organization is a technical company, these factors play a crucial role in their profits. Therefore, they rely on numerous specialized degrees to distribute their services and products to their clients. They keep experimenting with creative and new ways for the clients to get their packages. For instance, in 2017, the organization started by trying various initiatives like drone deliveries. The idea is still available; the only challenge is the implementation because they have to first get permission from the government and develop a means to reach the clients (Timpe & Kaplan, 2017). The organization is also looking for different shipping strategies through its technological and creative knowledge. Currently, the organization has doubled the number of employees in the United Kingdom Research and Development center. They aim to manage and discover new technological advancements to satisfy the clients’ needs and enhance logistics. Technology is also helpful in building meaningful relationships. Amazon tends to send emails to clients who forget their products. Also, by offering 24-hour live chat support, someone has a challenge with the package.
The fifth one is the environmental factors. The Amazon organization is resisting pressure from the stakeholders and investors in disclosing essential data regarding the ecological impact. Recently the organization is claiming to release the information at the end of the year. The other issue is minimizing institutional emissions (Casagrande et al., 2021). Therefore it is challenging to estimate the e-commerce business emission. Ordering products online needs less energy as compared to driving to stores and picking up groceries. By 2030, the organization is aiming to have half of the shipment emission. The final aspect is legal factors. Amazon’s business needs to comply with various regulations and laws. Several legal factors influence amazon, like discrimination laws, data protection laws, anti-trust laws, and client protection laws. The counterfeit goods laws and regulations are essential for the clients. It is an opportunity for the organization to enhance the efforts to reduce the counterfeit on the sales. The various acts that are a threat to the Amazon organization are Consumer Privacy.
The competitive analysis is an essential tool because it analyses the competitive market hence offering the organization strategies that help achieve the competitive advantage. It helps in understanding the competition of the services and products in the market. Amazon has numerous competitors who are keeping them on the age of the game. The biggest retail store competitors are Alibaba, Walmart, Costco, Target, and Best Buy. It also competes with Apple, Netflix, and Google when it comes to subscription services. For instance, Alibaba, a Chinese dragon online retail store, is advantageous over Amazon in that it acts as the middle man between the sellers and buyers. At the same time, Amazon deals directly with the buyers. However, Amazon stays on top of the game due to its market share. In 2018, Amazon worldwide sales got to $233 billion, which impressed and shocked the retail industry.
The organization has a competitive advantage: it offers free convenience and shipping and offers various products at affordable prices. Also, the technology of Amazon is up notch hence being a disadvantage to the competitors. To help in fighting the competitors, the organization keeps expanding from one stage to another. Despite their efforts, various retailers, especially Walmart, keep fighting Amazon (Delfanti & Frey, 2021). According to a survey, more than 20% of the shoppers use in-store services like financial, photo processing, and pharmacy. These services assist in boosting in-store traffic as well as driving revenue.
The other strategy that retailers like Best By and Walmart exploit the collect and click system where the clients order the products online but come to the stores to pick. It, therefore, offers the customers the instant gratification and convenience that they crave. This way, it is impossible for the thieves to steal the product once dropped at the doorstep. Amazon offers clients the pick-up lockers like Home Depot, but it still tends to be challenging for the e-commerce giant. Amazon finds it challenging to match the collection and click strategies scale that the vast mortar-and-brick retailers use.
The objective and goals of any business are to meet the client’s needs; therefore, the organization must develop various strategies to produce products that are idle to the clients. Strategy mapping, therefore, analyses the method to establish a quick opportunity to create opportunities in the market. The objective or goal of Amazon is to keep being the best online retail store by satisfying the client with the best services and products at an affordable price. They also intend to provide more products and use technology to make the selling of products cheap and easy.
Critical Success Tool
The Amazon Organization is the globe’s largest online retail store, with over $280 billion in 2019. Jeff Bezos, the executive officer and founder of the organization, claims that its success results from three client value propositions. These propositions are extensive selection, quick delivery, and affordable prices. Also, the fact that the organization has 40% of the United States of America’s e-commerce sales remains unstoppable. The other factor is that the organization learns from its competitors but implement better and practical strategies to maintain its number one position in the online retail stores (Escobar, 2019).
Various factors have played a critical role in the organization’s success. The first one is innovation. The victory results from the innovative practices and technologies that they keep implementing continuously, for instance, Echo, a device that people use to give commands like playing specific songs and checking the weather. It was among the most innovative technologies in the year 2017, which the organization managed to make over $22 million from their sale. The second factor is the client service. Since it offers services and products to clients globally, Amazon has developed numerous practical tools that help track the packages. In case of a return, it is also handled effectively and quickly. As a result of the employees’ dedication, the organization has won numerous awards due to its excellent customer service. Social media has also played an essential role in interacting with the client.
The third factor is execution. During the implementation of the clients’ wants and needs, Amazon tends to get everything right. They choose the services and products that the clients need and want and leverage distribution centers in the world hence permitting them to be shipped with immediate effect. Also, the organization has unique relationships with the vendors that enable them to offer the clients discounts (Liberty et al., 2020). The other factor is diversification. The organization started as an online bookstore but currently, it provides everything. Even things like soup that you should not expect the company gives it. For instance, if an individual goes to their website and searches for the word soup, they will find 3000 listings. Also, searching nuts, there are about 37,000 results. Currently, the organization has even ventured into music products, beauty, and health, clothing, and grocery, and automotive. Through diversification, the organization is continuously driving relevance and reach. Through its expansion into new product categories and markets, an organization can attract new opportunities that help in the company’s growth. The other factor is the user’s experience. An established user experience allows the clients to determine the things they need and proceed to the conversion funnel. It is a result of this that the organization employs a UX team comprising professionals from interaction design and user research to the development of the website. Therefore the experts, together with the product managers and engineers, establish a seamless experience hence driving the client conversions.
Effectiveness of the Strategies undertaken by Amazon
The strategies that the organization has been implementation have been effective in positioning the company. The amount of information that Amazon has in regards to their clients is mind-blowing. It uses the information to enhance the product offering and operations and sell data to the advertisers by the Amazon DSP strategy. Also, the organization offers prime membership to the clients (Oliveira et al., 2021). It is essential because most clients love and know Amazon; hence, it is a sign of loyalty once they are considered the prime members of the company. According to recent research done by Consumer Intelligence Research Partners, it claims that more than 100 million individuals in the United States of America own an Amazon Prime Account. The CIRP estimated that 60% of the prime members offer a payment of $119 annually. According to CIRP, the premium members spend double compared to the non-prime members when purchasing the various services and products.
Amazon has a powerful effect on the new markets. It is because it has been able to leverage the recognition of the brand in the world. Through this, they tend to be a threat to the e-commerce industry. For instance, currently, the organization has a 47% market share in the United Kingdom and 31% in Germany (Smith & Linden, 2017). Moreover, the organization has a logistics scheme that is powerful as compared to the other worldwide retailers. It is through this way that the organization can deliver its objectives and goals. It, therefore, invests lots and lots of money and time in the logistical systems hence helping in their growth and success. Despite Amazon’s size, it is still effective when it comes to making various decisions. The organization entails numerous built-in schemes that keep the team; hence making decisions becomes fast and flexible.
The Future of Amazon
For Amazon to keep being the best online retail store, it has to keep advancing by implementing other strategies because, failing to do that, its competitors will overtake them. The first thing that Amazon is planning to achieve is opening more than 3000 cashiers fewer stores. Currently, the organization has three stores in Seattle, and they are planning to expand in New York, Chicago, and San Francisco. In this case, the client will enter the store and pick what they have ordered from the app, and the cameras are available whose purpose is tracking if they will steal. Also, the organization is planning to start using drones in delivering the products, and they are still finding a way of implementing the strategy and how they will convince the government (Timpe & Kaplan, 2017).
Moreover, Amazon has started a hair salon. The organization has announced the opening of the salon, which is in Spitalfields, London. This salon will be a technological one that permits the clients to view how various hairstyles will look on their heads before the commencement of the hair-making process. Also, the technology will enable the customers to know the multiple tasks of the hair and facial products. Amazon’s founder and Chief Executive Officer, Jeff Bezos, wants to retire from the organization he formed. Therefore, he is leaving the leadership on Andy Jessy’s hands, who is currently the leader of cloud computing in the company.
Amazon is the leading online retail store, is with no doubt that it has taken lots of work to attain that level and position. The company has created vast market competition in the e-commerce industry. The innovations and excellent customer service of the organization have helped in keeping the organization in position one. Also, technology has played a significant role because it is an online organization hence helping it maintain the market share. Therefore, the organization should be consistent in innovation, no matter how difficult it is. Many companies are unable to manage the changes and challenges that take place in technology and industries. Therefore, innovation and creativity are essential in solving the challenges and implementing the necessary changes. Implementation of new technologies should be a priority in the organization because e-commerce is a competitive field. The organization aims to keep being the best online retail store.
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