Amazon.com inc: Retailing Giant to High-Tech Player?
Executive Summary This case study report provides a detailed analysis of the growth of the online retail firm, Amazon.com from a retailing giant to a major technology player for online business. The report investigates the product innovations, growth parterns, the strengths and weaknesses of the company by looking into the structure, strategic position and operating environment of the company. Introduction Technological advancement has seen the growth of online businesses through open innovation. Nowadays, online retailers such as eBay and Amazon.com have encouraged crowdsourcing and digital business operations with customers from all walks of lives getting their preferred services and products from anywhere at any time. Noteceably, Amazon.com has grown across the globe from a platform for individuals and retailers to sell their products. Imran (2014) states that the company has grown from a small web-based book seller to a successful company dealing in online business transactions. Clearly, with the customer prefences and trends changing each day, it is without a doubt that the firm has ensured that it is not left behind in terms of technology and consumer satisfaction. One question that concerns the firm’s development involves its growth to a major technology player while improving its profitability. Therefore, the objective of this case study is to provide an overview of the growth of Amazon.com from a retailing giant to a large technology player in online retail business. Further, this study discusses the strategic development of the company, innovation and the strategic position of the company besides assessing the impact of the firm on sales, market share and profitability. In addition to this objective, this study evaluates the strengths, weaknesses, and opportunities that have been observed as the company continues to grows towards a major player in technology. References
Based on an extensive literature review, this study analysed literature and views from various sources that addressed the growth of the firm. The findings indicate that the company has continued to grow significantly over the years through strategic steps such as partnerships, innovation, improving consumer relations and the use of a lean board of directors. An advantage of such is that the strategies have enabled the company to grow in profits and increased sales.
However, with more opportunities in site, this study recommends continued research on trends and prefences of the customers while encouraging innovation.
History and Current Information
Amazon.com inc is a fortune 500 e-commerce company based in Seattle, Washington and has the distinction of being one of the largest companies to sell goods over the internet (Amazon.com). The company was founded in 1994 by Jeff Bezos, a former Vice President of the Wall Street firm, D.E. Shaw. Schneider (2017) reports that after a period of about one year working with various software developers and experts, Jeff officially launched the company in 1995 with a successful operation that helped Bezos to be named the ‘Person of the Year’ by the ‘Time Magazine’ within 5 years. Initially, the company started as an online book store and quickly expanded its products by adding items such as movies, DVDs, games, clothing, toys, home furniture, kitchen ware and many other commodities (Amazon.com; Schneider, 2017). Moreover, considered a pioneer of online retailing, the company expanded through a series of acquisitions, alliances, partnerships and exclusive agreements (Amazon.com; Robinson, 2017; Schneider, 2017). Schneider (2017) and Robinson (2017) are of the same mind that on the basis of its financial objective of achieving long-term sustainability and profitability, the company has continued to focus on increasing its operations, revenue, and efficient management besides looking for ways to increase its capital and tightening its management costs. For instance, the firm works with third party partners such as Expedd and Virgin Wires among other multiple business enterprises. In fact, by 2008, the firm had become a global brand with websites in Canada, the United Kingdom, Japan, France, China, and with over 200 orders across the globe (Robinson, 2017). Currently, Amazon.com inc prides itself on various levels that include, corporate culture, employment benefits and compensation and customer satisfaction. As a matter of fact, the company is widely known for putting its customers first besides having ownership benefits for its team. Schneider (2017) asserts that with such a culture, Amazon.com currently employs about 290,000 workers who are expected to be resourceful and self sufficient. As an illustration, it is known for its technology innovations based on its engineering handlers who continuously work on the complex challenges in large scale computing. While concurring with Schneider (2017), Hoffman (2013) explains that with employees ranging from software development engineers, technology program managers, user interface experts and technology engineers, the employees work in teams throughout the firm to build an e-commerce platform for customers, sellers and merchants.
The Governance Structure
The founder, Jeff Bazoz, is the overall chairman and Chief Operating Officer (CEO) with an approximated ownership of 19.4% (Hoffman, 2013). Amazon.com has three board committees, two of which are standard committees: the Audit Committee and the Governance Committee. The third committee is the Leadership Development and Compensations Committee that is mandated to offer guidance in leadership development (Hoffman, 2013). In this case, the Leadership Development and Compensation Committee monitors and periodically evaluates the continuity of capable management that includes a successeion plan for the executive officers. An analysis of Hoffman’s report depicts that Amazon.com’s board is not populated by CEOs and retired CEOs. However, according to the author, the board comprises of several venture capitalists, a number of senior-level executives from different industries, one eminent scientist, and one representative from the non-profit sector. An assessment of the board’s description presented by Hoffman (2013) shows that Amazon.com not only works in partnership with several industries, but also tries to achieve its long-term financial objective by tightening the management costs. Furthermore, he insists that the company’s board members have worked together for a long time. This view implies that there is a deeper understanding between the members, which not only enables friendship between the individuals, but also increases the level of familiarity among the members. Concurrently, with the board members working together for a long time (Hoffman, 2013), it is obvious that the company has addressed the challenges that could rise from conflicts that might rise from individual objectivism.
External and Internal Environment
One of the strengths that is noticeable is the fact that Amazon.com are the first mover in the industry and has established a significant market share by having many repeat customers (Parnel, 2013). Parnel (2013) explains that to achieve such a large share of the market, the CEO continued to use the current technology and by constantly evaluating the latest trends in the various industries. Parnel (2013)’s explanation suggests that Jeff seems to understand that by staying innovative and collaborating with other companies will ensure Amazon.com’s success. In addition, Parnel (2013) insists that the global expansion has helped with keeping the firm ahead of its competitors. While agreeing with Parnel (2013) on the global expansion of the company, Imran (2014) points out that Amazon.com also has a strong infrastructure with effective automated distribution centers. This observation by Imran (2014) confirms the fact that the company ensures that its customers are satisfied by designing user-friendly systems for online purchasing (Amazon.com; Schneider, 2017; Robinson, 2017).
However, whereas Amazon.com has much strength that benefits them, there are many weaknesses that they have as well. For example, Amazon.com offers free shipping on many of their products. Despite this strategy helping them to retain and attract many consumers, it should be noted that the current economy is dynamic, which could jeopardize their financial position and outcome (Hoffman, 2013; Robinson, 2017).
On the other hand, looking at its external environment, Amazon.com continues to have many opportunities to tap into while having many threats that they continuously encounter on a day-to-day basis (Crawford, 2015). Nonetheless, Crawford argues that for Amazon.com, and particularly the market, they are in still young, especially, in a world that continues to grow technologically and in terms of consumer preferences. The author contends that there is some segment or industry that Amazon is not in that they could jump into and be successful. Conversely, according to Robinson (2017) and Faye (2011), one place the company can look at to make more money is in their partnerships. Faye (2011) points out that despite having successful business strategies, the company has lost many partners over the years who include some large players. Robinson (2017) claims that while losing these partners, the company has not worked very hard in gaining more partners since. Clearly, from these view, it seems as though anything they deal with, when it comes to consumers, sellers, or developers is successful. Despite this challenge, one opportunity that they may be able to get into is the possibility of collaborating with a large manufacture of a good and be the only place online the consumer can buy the good (Parnel, 2013; Bellevue, 2014). It is evident by the percentages that Amazon.com still makes more money off their media. In addition to Parnel (2013)’s observation, Bellevue (2014) argues that another opportunity is the possibility of creating a website and branching into other countries and regions such as India, Mexico and South America.
Furthermore, concerning the external threats, Amazon.com has many competitors who try to steal as much of the market from them as they can (Robinson, 2017). For example, the competitors such as Overstock.com, Buy.com, Wal-Mart, and e-Bay are in a position to steal or take over some of Amazon.com’s market share (Robinson, 2017). Insofar, the largest external factor that seems out of the control of Amazon.com is the possibility of many people reverting to shopping at other firms like Brick-and-Mortar stores instead of online (Parnel, 2013). Clearly, being an online store only, Amazon.com might hinder their success if there is an incident that occurs across the web that makes their consumers feel threatened. Altoro (2015) explains that customers can feel threatened when they feel that their information is not safe while ordering products over the internet.
The success of Amazon.com as one of the largest online retailer can be explained by several strategic directions that include the customer, their corporate systems and the business operations (Imran, 2014). Altoro (2014), Parnel (2013) and Imran (2014) are in agreement that the company, through such strategies, could grow exponentially by taking advantage of the huge gap being experienced across the world through technological innovation and creativity.
Firstly, the corporate level strategy of Amazon.com is stated eloquently by their mission statement that states that they seek to be the Earth’s most customer-centric company. In their mission, the company addresses three major customers: the consumer, sellers as the other customers and developers (Imran, 2014). An evaluation of the mission statement indicates that Amazon.com can do anything or be everything that the consumers, sellers, and developers want or need. By encouraging the technology experts and engineers to improve their online platform, Amazon.com brings all the three customers underneath one umbrella (Imran, 2014; Parnel, 2013). Parnel (2013) is contented that such a corporate strategy seems to spit out the same result to all their customers, and that in the end, they all walk away from Amazon.com with the true e-commerce experience.
Secondly, looking at the business level strategy, Amazon.com has four categories by which they concentrate on within their business operations (Imran, 2014; Parnel, 2013). These categories include the firm’s e-commerce offerings by category, third party selling, infrastructure technology that involves the cloud computing technology, and their own consumer electronics business (Imran, 2014). Obviously, this view depicts a mirror image of their mission statement as stated earlier. According to Imran (2014), the CEO, Jeff Bezos, and his managers believe that Amazon.com is a technology company first and foremost, and its main mission is to use and develop its technological expertise to sell more goods and services in ways and procedures that satisfy customers, hence, the company keeps its profits growing.
An analysis of the strategies explained in this case, it can be argued that Amazon.com realizes that they need to pursue several other avenues in an effort to remain competitive in the market. Parnel (2013) and Imran (2014) argue that the company has worked hard to create innovative technologies to allow them to provide a differentiated e-commerce customer experience, something that is evident from the type of employees they have in the company. As stated earlier, by using such expertise in technology and software development, they have been leaders in making that technology available to others (Schneider, 2017; Robinson, 2017). This strength is evident because it is possible to ascertain that technologies like the use of cloud computing is one technological advancement that has helped Amazon.com to be once again, the leader in online retailing (Imran, 2014; Crawford, 2015; Parnel, 2017). It is clear from this view that Amazon.com is constantly looking at ways to improve their product of being a third party vendor to a plethora of companies. For instance, they remain innovative by looking at different ways consumers, developers, and sellers want their products handled in the business environment. Increasingly, Amazon.com has purchased many small companies in different industries to help with the e-commerce experience they offer.
Concomitantly, one unique thing about Amazon that is driven specifically by the founder, Jeff Bezos, is that he empowers all employees to recruit and train new employees so they quickly get up to speed in their new jobs (Schneider, 2017; Parnel, 2013). More so, according to Parnel (2013), Jeff motivates and encourages the employees to do this giving all his employees a share of stock in the company. In particular, the employees of Amazon.com own over ten % of the company. At the same time, Imran (2014) points out that Bezos also implemented a policy of decentralizing significant decision-making authority to the employees and encouraged them to find ways of meeting customers’ needs quickly.
Whereas this study demonstrates the merits of technological innovation through the implementation of strategies aimed at achieving sustainability and profitability, Amazon.com can take advantage of the available opportunities. Clearly, with the current dynamic business environment, Amazon.com needs to continue to improve on the existing strategies that enable innovation, especially, in areas such as cloud computing and online security. An obvious advantage of this recommendation is that the company can not only be in a perfect position to retain the existing customers, but also attract new customers, hence, increase their sales and improve on profitability. Moreover, in order to increase their revenue, this study suggests that through the business strategies such as partnerships, the firm needs consider working with large scale retailers and manufacturers. At the same time, the company, through continous research, could understand the different trends and preferences of different consumers and expand into newer markets, thereby, increasing its income from the improved sales. The move towards this direction could be improved by improving its network, which will ensure that all the customers are satisfied in not only the availability of specific products, but also on-time delivery of these products and services. Further, it is evident that rivals and other competitors could steal or substitute the products and services offered by the company. However, an improved security system within the firm’s website could not only address this limitation, but also address the issues related to customers feeling insecure about the kind of information they give when ordering online.
Conclusion and Summary
On the basis of this case study, it is evident that Amazon.com has grown from just an online book store to a huge online retail company dealing with varied goods and services. With a strong leadership scale that is based on diversity in the management team, the firm has grown at a steady pace over the last two decades. This development identified during this study indicates that the company is at the best position to compete with other brick and motar companies that offer similar products. This study found that the company has tried to leverage its economies of scale by increasing its product and market share through strategic procedures that include acquisitions, partnerships, innovation and creativity, the use of technology among others. These procedures have improved the company’s capital while reducing many costs. On the other hand, such strategic directions have enabled the company to increase its sales while also improving its position as one of the most profitable online retail organization across the world. It is obvious that by adopting a lean management system, the company has addressed some of the issues related to unnecessary management costs. Also, Amazon.com prides itself of having skilled workers and experts that enables the company’s competitive edge over its competitors and continued development of its technology. One example is the use of cloud computing in its operations. However, Amazon faces many challenges that range from online insecurity threats for both the customers and the business operations, competition from rivals among others. Additionally, the company’s delivery platform faces threats related to costs that could develop from the slow economy. In particular, the same day delivery system is a weakness that could result to huge losses in the case of an unexpected financial crisis. Therefore, this study recommends continued research on the use of technology in addressing the issue while encouraging creativity and innovation in different areas of operations.
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This case study report provides a detailed analysis of the growth of the online retail firm, Amazon.com from a retailing giant to a major technology player for online business. The report investigates the product innovations, growth parterns, the strengths and weaknesses of the company by looking into the structure, strategic position and operating environment of the company.
Technological advancement has seen the growth of online businesses through open innovation. Nowadays, online retailers such as eBay and Amazon.com have encouraged crowdsourcing and digital business operations with customers from all walks of lives getting their preferred services and products from anywhere at any time. Noteceably, Amazon.com has grown across the globe from a platform for individuals and retailers to sell their products. Imran (2014) states that the company has grown from a small web-based book seller to a successful company dealing in online business transactions. Clearly, with the customer prefences and trends changing each day, it is without a doubt that the firm has ensured that it is not left behind in terms of technology and consumer satisfaction. One question that concerns the firm’s development involves its growth to a major technology player while improving its profitability. Therefore, the objective of this case study is to provide an overview of the growth of Amazon.com from a retailing giant to a large technology player in online retail business. Further, this study discusses the strategic development of the company, innovation and the strategic position of the company besides assessing the impact of the firm on sales, market share and profitability. In addition to this objective, this study evaluates the strengths, weaknesses, and opportunities that have been observed as the company continues to grows towards a major player in technology.