Amazon

(Part 2)

 

2.4 N- Non-Substitutability

 

Amazons focus on being ‘Customer Centric Company’ was due to its non-
substitutable product and services. Acquisitions, partnerships and technological
advancements provided, made them capable of developing Amazon web services
(AWS). It was a non-substitutable service. Its skilled employees, managers &
executive’s capability of achieving organizational goals through innovative strategies
gave Amazon a potential advantage over others.

Thus, VRIN Analysis provides an insight of the core capabilities of Amazon and
supports its growth strategy of leveraging it assets for long-term success.

 

3. Framework 2: The Value Chain (Appendix 3)

 

The value chain framework is also suitable to explain the Amazon case. Based on
Appendix 3, some activities within Amazon are analyzed as following.
Amazon inbound logistics maintains quality checks to ensure proper quality for the
customers and stock inventory for quick delivery.

In operations, Amazon has diversity of products, more than thousands of employees
work on order placement, packing and answering customer questions. On the website
customers are able to sell their used goods.

The outbound logistics such as warehouses are placed in different areas to
increase storage facilities and get closer to customers. Fulfillment centers are near
airports minimizing transport costs for customers.

As a marketing and sales activities, Amazon provides a large range of products for
customers that can be easily found on the website. The one-click order is convenient
for consumers to buy their products. Promotions and discounts are also ways of
marketing that helped Amazon in its strategy. Moreover, establishing strategic
alliances with other online retailers like drugstore.com allowed the company to
expand. The new currency converter system and ‘Bill Me Later’ created a wider way
for consumers to purchase from the website.

Services activities include free shipping, and on time delivery. In addition,
excellent customer service such as quick reply to emails, FAQ and feedbacks makes
the shopper more comfortable to shop online.

Amazon is heavily spending its revenue on new technology. The company
focuses on increasing present value of cash flows for the future. As for technological
developments, Amazon focuses on research and development. For instance, the use of
Elastic Compute Cloud (EC2), Simple Storage Service (S3) and online-based
technology to sell retail products and cloud software to retailers (e.g., the
Kindle). As for procurement, there are many alliances with suppliers and relationships
with different e-commerce stores. Finally, Amazon focuses on human resource
management because they have a lot of High quality staff.

The value chain model displays high quality organization and high competitive
power of Amazon. Therefore, Amazon has enough power to make diversification of
their business and can be success in the long run.

 

4. Framework 3: Mapping Activity Systems (MAS)

 

Amazon’s success is underpinned by several factors that show distinct and strong
strategic capabilities to earn customers and market share. It was firstly well known for
its online books, then diversifying into various segments, which sharply increased its
assets with 24,241 dollars in five years and developed its business. According to
Mapping Activity Systems, all higher order theme and supporting activities build
Amazon’s strong brand image. (See Appendix 4)

 

4.1 Customer-focus Service

 

The basic principle of Amazon, as Jeff said, customer service is “the cornerstone of
Amazon.com” (Vasusha M., Doris J. 2013. Amazon provides discounts, personalized
deals and daily promotions along with relatively low price. Additionally, they
innovated one-click-ordering system to make it convenient for customers.
Furthermore, for customers benefit, Amazon offers free shipping as it had
strategically placed global warehouses to ensure constant availability of items, which
enabled them to provide lower-cost globalized delivery and on-time free delivery
services once customers spend over 25 dollars. This process encourages customers to
buy more than they initially wants.

 

4.2 Innovation

 

Along with one-click-ordering system, skillful and experienced staff, Jeff
believed that decentralized management could empower amazon to be the market
leader. Amazon also created products by itself, the most successful – Kindle. To be
different from other players like Barnes & Noble, Amazon made its tagline as “Books,
Music and More” to impress the customers.

 

4.3 Excellent partnerships

 

In spite of Amazon’s great foundation like global warehouses, it also has effective
software such as Amazon Web Service and Amazon Commerce Network. Besides,
they also offer “Shop the Web” program to direct customers to other online retailers,
which do not have conflicting interests by charging few commission. Moreover,
people can publish their own books onto Amazon databases in wholesale model,
which brings publisher more benefits and relatively convenience. In this situation,
Amazon got 65% in e-book market share. Hence, Amazon earns great business in
partnerships.

 

4.4 Diversity of products

 

Amazon known as the first online book site, then became a successful player in e-
commerce. ‘zShop’ attracts many people to run their own business that they are even
allowed to sell used products through amazon, which helped them in diversifying
their products. Amazon made strategic acquisitions to expand its business. As they
had strong cash flow they did not maintain inventory & allowed its vendors to deal
with the orders placed to them. Besides, AmazonFresh was the new way to expand its
grocery business, which delivered farm fresh products to increase its category.

 

4.5 Brand Image

 

The above capabilities have made Amazon building a strong Brand image, which
has benefitted the company in increasing its market share, customers and finance.
Brand image is difficult to build. Amazon has achieved it through its proper
supporting activities that made it excellent in its field.
Thus, MAS Framework analysis also supports amazon in diversification of its
business and be successful in the long run.

 

5. Framework 4: SWOT Analysis

 

The SWOT analysis can be used to analyze Amazon’s internal strengths and
weaknesses. Amazon, as a largest online retailer, disrupting brick and mortar stores
and dismantling market leaders has many unique advantages (Appendix 4).
Amazon has some innovations and patents such as 1-click ordering system that is
extremely convenient for customer to purchase. The innovations make Amazon build
greater reputation than other competitors. In addition, Amazon focuses on customers,
on-time deliveries and customer services following their motto – ‘listen, invent and
personalize’ (Vadusha M., Doris J., 2013). These add value to customer service.
On the contrary, there are also some weaknesses in Amazon. One of them is that
Amazon expanded too fast and into too many fields. This excessive expansion led to
some failures due to low margins and huge order quantities E.g. In 1999 Amazon lost
$323 million $1.4 billion in 2001 (Vadusha M., Doris J., 2013). Thus, Amazon took
immediate actions to limit the losses by making strategic partnerships & alliances
with vendors and players, diversifying their range thus converting their weakness into
strength.

As for the external aspects, Amazon should take advantage of opportunities and
avoid threats. Also, to adapt and fit the market volatility, Amazon invested in
acquisitions and focused long term profits instead short term.

 

Conclusion

 

To conclude, the different frameworks confirm that amazon is a strong brand and
is making use of its core capabilities to build competitive advantage over its rivals.
Diversification in different products and excellent customer service allow amazon to
expand globally and attract customers from all round the world. Being customer
centric company, Amazon is investing a lot in product development and technology to
innovate. Although the free cash flow is decreasing that disables the allocation of
dynamic capabilities to face external changes. Due to its wide customer base amazon
can success in the long term through diversification

Thus, Amazon’s growth strategy allows the company to leverage its core
capabilities across different businesses and therefore assures success in long term
despite short term decrease in profitability due to growth related investments.

 

 

 

Amazon