Marketing management on: Amazon.com

Amazon.com refers to one of the largest multinational company situated at Seattle. Amazon.com has been referred to as one of the largest retailer. This organization has structured different websites for different nations such as UK, Germany, USA, Japan, China, France, etc. The organization has shipping all across the world. This feature helps them in order to deliver the goods to various parts of the world.This online retailing site came into place in the year 1994 & was aired in the year 1995 by Jeff Bezos. This site was named as Amazon since, Amazon is the largest river situated in US. Amazon was originated as a book store & then widened its product line by adding DVD, MP3, electronic items, CD, apparel, furniture items, food, video games, software, toys, etc.

2.1 Market product:

The market product being served by Amazon.com has been divided into the following heads such as Core products, support products & others. They are discussed as under.

Þ    Core:

The core product which is being served by Amazon.com includes DVDs, video games, software’s, kitchen ware, apparel, lawn items, toys, watches, food items, baby products, cosmetics, musical products, health care item, branded clothes, sport goods, gourmet food, industrial supplies, etc.

The organization came into place when its web was launched in the year 1999. The auctions at Amazon was being taken into consideration with the help of the launch of the various zshops, fix price shops, etc. The auction of zshop has let its customers in order to sell its DVDs, any other product, etc. The main competitor to amazon.com is ebay.com.

In the year 2005, Amazon.com started selling the items by its own name. The label attached to Amazon.com was “Pinzon”. This particular label of Amazon would indicate that the following items such as utensils, apparel, goods, etc. In the year 2007, this trademark was being used by the organization for all the possible items which is being sold at that site. The new trademark was known as “PINZON”, & the space in this O states one o’ clock. The new trade mark consists of variety of jewelry, wallpapers, clothing, accessories, cleaning products, etc.

In the year 2007, the organization started a grocery service which offered variety of perishable products to its customers. The customers were delivered the products during dawn. Initially, this service was only for the residents i.e. localites staying in Washington. Once this service was noted to be a huge success, Amazon expanded its delivery service to various other places as well. Pick up services were also made available in the suburbs, etc.

Support:

Amazon Web Services (AWS) was first launched as a public beta of Amazon Elastic Compute Cloud running Microsoft Windows Server and Microsoft SQL Server.[73] This was later expanded to several operating systems including various flavors of Linux and OpenSolaris.

In March 2006, Amazon launched an online storage service called Amazon Simple Storage Service (Amazon S3). An unlimited number of data objects, from 1 byte to 5 terabytes in size, can be stored in S3 and distributed via HTTP or BitTorrent. The service charges monthly fees for data stored and transferred. In 2006, Amazon introduced Amazon Simple Queue Service (Amazon SQS), a distributed queue messaging service, and product wikis (later folded into Amapedia) and discussion forums for certain products using guidelines that follow standard message board conventions. Also in 2006, Amazon introduced Amazon Elastic Compute Cloud (Amazon EC2), a virtual site farm, allowing users to use the Amazon infrastructure to run applications ranging from running simulations to web hosting. In 2008, Amazon improved the service adding Elastic Block Store (EBS), offering persistent storage for Amazon EC2 instances and Elastic IP addresses, static IP addresses designed for dynamic cloud computing. Amazon introduced SimpleDB, a database system, allowing users of its other infrastructure to utilize a high reliability high performance database system. Amazon continues to refine and add services to AWS, adding such services as Scalable DNS service (Amazon Route 53), payment handling, and AWS specific APIs for their Mechanical Turk service.

Other:Launched in 2005, Amazon Shorts offers exclusive short stories and non-fiction pieces from best-selling authors for immediate download. By June 2007, the program had over 1,700 pieces and was adding about 50 new pieces per week. In November 2005, amazon.com began testing Amazon Mechanical Turk, an application programming interface (API) allowing programs to dispatch tasks to human processors.

In 2007 Amazon launched Amapedia, a now-defunct wiki for user-generated content to replace ProductWiki, the video on demand service Amazon Unbox, and Amazon MP3, which sells downloadable MP3s.[86] Amazon’s terms of use agreements restrict use of the MP3s, but Amazon does not use DRM to enforce those terms.[87] Amazon MP3 sells music from the Big 4 record labels EMI, Universal, Warner Bros. Records, and Sony BMG, as well as independents. Prior to the launch of this service, Amazon made an investment in Amie Street, a music store with a variable pricing model based on demand.[88] Also in 2007 Amazon launched Amazon Vine, which allows reviewers free access to pre-release products from vendors in return for posting a review, as well as payment service specifically targeted at developers, Amazon FPS.[citation needed] In November 2007, Amazon launched Amazon Kindle, an e-book reader which downloads content over “Whispernet”, via the Sprint Nextel EV-DO wireless network. The screen uses E Ink technology to reduce battery consumption to provide a more legible display. As of March, 2011, the stated library numbers over 850,000 titles. In December 2007, In August 2007, Amazon launched an invitation-only beta-test for online grocery delivery. It has since rolled out in several Seattle, Washington suburbs.In September 2011, Amazon announced its entry into tablet market by introducing Kindle Fire. Kindle Fire is a tablet computer based on customized version of Android operating system. The aggressively cheap pricing of Fire ($199 USD) was largely perceived to be a strategy backed by Amazon’s revenue from its content sales, stimulated by sales of Fire.

In January 2008 Amazon began rolling out their MP3 service to subsidiary websites worldwide.[89] In December, 2008, Amazon MP3 was made available in the UK. In September, IMDB and amazon.com launched a Music metadata browsing site with wiki-like user contribution.[90] In November, Amazon partnered with Fisher-Price, Mattel, Microsoft and Transcend to offer products with minimal packaging to reduce environmental impact and frustration with opening “clamshell” type packaging.[68] Amazon Connect enables authors to post remarks on their book pages to customers. Amazon Webstore allows businesses to create custom e-commerce websites using Amazon technology. Sellers pay a commission of 7 percent, including credit-card processing fees and fraud protection, and a subscription fee which ranges between free to $24.99/month depending on different bundle options for an unlimited number of webstores and listings.

In July 2010 Amazon announced that e-book sales for its Kindle reader outnumbered sales of hardcover books for the first time ever during the second quarter of 2010. Amazon claims that, during that period, 143 e-books were sold for every 100 hardcover books, including hardcovers for which there is no digital edition; and during late June and early July sales rose to 180 digital books for every 100 hardcovers.[91]

In 2011, Amazon announced that it was releasing a Mac download store in order to offer dozens of games and hundreds of pieces of software for Apple computers.

2.2 Market Profile:

Demand:

Competition:

Amazon.com’s competitor’s have changed as the company continues to evolve. When Amazon.com only sold books it’s competitors were other bookstores such as Barnes and Noble. Small independent bookstores took a turn for the worst as large chain bookstores began to open. These bookstores were able to offer a large square footage and hundreds of thousands of titles in stock. The bookstores also included coffee shops which changed book buying from a retail activity to a social outing. When Amazon.com first launched in 1995 it changed the idea of book buying, allowing the buyer to look through millions of titles from the comfort of their own computers. Independent bookstores were able to offer the customer the option of ordering the book online and then pick it up from their local bookstore getting them a small commission of the sale. This method of selling books has not threatened sales on Amazon.com.

In a matter of three years Amazon.com expanded it’s number of products by adding music, DVD/videos, toys and electronics, and software and video games. By selling such things as CD’s online it quickly shut down the Internet leader Cdnow Inc. With a name like Amazon that people trusted they were able to take out the competition online in every category from sporting goods to video games.

Amazon entered a new world online offering anything and everything to the consumer. Not many online companies can offer what Amazon offers. One online company that also sells a vast majority of products is Ebay.com. Ebay works much differently than Amazon in that it allows the general public to post and sell their items online. Buyers then come to the site and purchase the product giving Ebay a certain percentage of the sale. Although Amazon is in a league of it’s own the competition still exists. Last year, due to heightened competition Amazon reported a steep drop in the quarterly profit and therefore began to offer free shipping and lower prices. Amazon.com is truly in a league of its own.

2.3 Strategic Analysis:

The strategic analysis of Amazon.com could be done by looking into its mission, objectives, and work culture being practiced at the same. In order to have an in depth knowledge of its strategic position, internal & external analysis should be done. SWOT analysis would help in order to have a detailed knowledge regarding its internal environment & PESTEL, Porter’s Five Forces Model would help in order to have a detailed external analysis of the same.

Mission:

The mission statement of Amazon.com states that – “Our mission is to portray you as one of the leading customer centric organization. The main aim is to become a common place where people would collect & discover each and everything online.”

Objective:

The main objective of this organization would be to provide each & every individual with all type of commodities under one website. The products mentioned above states the different types of commodities which are being offered by the same to its customers.

This type of a concept is a novel idea & has been serving the customers with the best of its ability. The main objective of this organization to reach as many customers as possible. Amazon.com has been referred to as one of the organizations which is purely based upon the needs of its customers.

Culture of the company:

As mentioned above that, Amazon has been referred to as one of the largest multinationals which posses Strong Work culture. This means that, the people working in the organization would respond towards the organizational values.

Various surveys indicates that, Amazon.com posses strong cultures which would portray clear values & benefit the organization in the years to come. Some of the various characteristics which portray those Amazon.com posses’ productive cultures could be defined as under:

Þ    The employees are aligned towards the accomplishment of the various goals, objectives, mission & vision statements

Þ    The level of motivation of the employee is quiet high.

Þ    Cohesiveness amongst the various departments of the organization would help in inculcating team work.

Þ    To have consistency as well as increase the level of coordination which would help in order to minimize the gap in the organization.

Þ    To have effective as well as efficient measures which would help in order to shape the behavior of the employees?

Þ    Proper investment shall be done to learn, train the employees.

Þ    Equal treatment to all the employees working in the organization.

Þ    Increase the level of motivation, enthusiasm of the employees working in the organization.

Þ    Equal opportunity shall be given to the employees who would help in order to see the full potential.

Þ    To practice strong communication skills within the organization in order to minimize the gaps.

Þ    To have strong sense of direction

2.4 Market Environment:

The market environment for any organization could be divided into two main parts i.e. Internal & External Environment. The internal environment could be studied with the help of SWOT analysis & the external environment could be studied with the help of PESTEL analysis.

Internal Environment (SWOT):

Þ    Amazon has been referred to as one of the leading multinational companies dealing in online buying & selling of goods.

Þ    Amazon has been referred to as one of the leading global brands.

Þ    The two main sources which would help the organization in order to drive its strategy would be – CRM & IT.

Þ    Has diversified portfolio which includes CDs, DVDs, software’s, apparel, kitchen ware, beauty products, health care, books, etc.

Þ    Proper feedback helps this organization to be successful in the past years.

Þ    Availability of certain cheap products such as AMAZON MP3 helps the organization to have diversified products.

Þ    This is the only online retailer which posses unwanted items as well thereby fulfilling the wants of its customers.

Þ    Customer loyalty & better quality of products help the organization to be on the hit list.

Þ    With an online purchase of more than $25, the delivery of the goods is free.

Þ    The organization provides one of the speediest deliveries of its goods (GAD).Weakness

Þ    One of the major risk factors attached with this organization refers to the brand image associated with the products being offered by the same.

Þ    Technology refers to one of the main tool which should be kept in mind while dealing with the online retailers.

Þ    Proper systems should be maintained which would help in order to attain the satisfaction of its customers.

Þ    The delivery service should be kept in mind which would help in order to deliver the goods or commodities to the prescribed customer on time.

Opportunities

Þ    Fair relationship should be maintained with the publishers which would help in order to grow in the years to come.

Þ    The organization should partner itself with the various other online firms.

Þ    The firm would be able to build relationship with the various sectors which would help in order to include the various antique books, CDs, DVDs, software’s, etc.

Þ    The organization should be able to maintain high levels of expectations which would help in order to have loyalty amongst the customers.Threats

Þ    The competitors would grow easily as the technology is growing day by day.

Þ    The online business attracts more number of people towards itself. Such type of businesses is quite complex to maintain as the products offered by each & every company is near about same.

Þ    One of the major threats which could be faced by Amazon would be in regards to the goods offered.

Þ    The cost of transportation is also on rise as the prices of the same have being increasing at a constant rate.

Þ    Due to the rise in the prices, the customers would have to bear all the costs.

Þ    The other major threat which might halt the growth of Amazon. While expanding its operations in the various countries, it should take into consideration the target audience.

Þ    The rivals might decrease the prices & hold it till it is able to attract more number of customers. Hence, Amazon should keep in mind all the strategies which would help them in order to attract more customers.

2.5 External Environment (PESTEL):

The external environment of Amazon.com could be seen with the help of PESTEL analysis. The five major aspects which should be kept in mind while studying the external environment would be Political, Economic, Social, Technological & Legal factors.

Þ    Political: The first aspect which should be kept in mind while studying the external environment of Amazon.com would to have an in depth knowledge regarding the political factors of the same. While establishing the website in various countries, the international policies should be kept in mind. This would help the company to grow in the years to come.  To quote an example, google.com was not allowed to be aired in China just because of the reason that, the Chinese government did not approve the content which was being aired by google.com. Various regulations should be kept in mind while establishing Amazon.com at various countries. Different safety measures should be taken into consideration which might help in safeguarding the essentials of its customers such as account number, credit card number, address & telephone number.

Þ    Economical: The second which should be kept in mind while studying one’s external environment would be the economical factors. This means that, the constant fluctuations in the currency would also have an impact on the overall effectiveness of the organization. It is seen that, the currencies of some of the countries devaluate as compared to the value of dollar. It is seen that, people are comfortable to buy from normal neighborhood stores rather than going the online way. Customers prefer to buy instantly rather than waiting for the ordered product for many weeks.

Þ    Social: The third aspect which should be kept in mind refers to the social aspect. Various religious & ethical norms should be taken into consideration while airing the website on the web portals of the various countries.

Þ    Technological: Amazon.com has been known for its highly developed technology. In order to attain success in the years to come, up gradations in the technology should be practiced by the same. With new advancements in the same, would help the organization to face all the challenge in the years to come. With new technology, various innovations would help the company to grow at a high pace.

2.6 Industrial Environment (Porter’s Model):

Porter’s five forces model would help in order to have a detail study of the industrial environment at Amazon.com. This strategic management tool has been regarded as one of the measure which would help in order to understand the market position of the organization. Porter’s model for Amazon.com could be described as under:

Þ    Supplier Power: Supplier Power at Amazon.com has been referred to as one of the major advantages which have been shared by the same. The major for the same is that, the products & service which is being offered are quiet wide ranging from CDs, DVDs, software’s, apparels, kitchen ware, beauty products, etc. For large organizations, Amazon.com stocks products for approximately 35 days. Ready to deliver the goods has been the key reason for its growth in the past many years. In case of small & medium sized organizations, Amazon.com stocks maximum of five products so as to minimse its cost of storage. Amazon has been rendered as one of the most trustworthy as well as most prestigious online retailer which delivers its products on time at a reasonable rate.

Þ    Buyer Power: The buying power at Amazon.com has been regarded as one of the major factors to be kept in mind. Low prices on the products & services have helped the company in order to have a competitive edge over its competitors. Low prices have also helped the company to minimize the switching cost of its target audience. Due to the cheap prices, the consumers have been converted into regular clients.

Þ    Competitive Rivalry: Amazon.com has been termed as one of the initial sites with such a novel concept. Amazon.com has been innovating its products & as well as service so as to attract more number of customers towards them. Technological advancements have led to curb the competitive rivalry amongst the other major players in the online retailers.

Þ    Threat of Substitution: Amazon.com has been referred to as one of the most innovative sites which have been using the best of the technology. Hence, it could be seen that, there would not be any threat for substitution for the same.

Þ    Threat of New Entry: The last aspect which should be kept in mind while studying the five porter’s model refers to the threat of new entry. One of the major threats to the Amazon.com would refer to the newly aired websites such as face book, tweeter, orkut, etc. These websites have dragged high levels of target audience towards itself & could also lead to one of the major threats to the same.

2.7 Strategic Position of the company:

Resources:

Product Life Cycle:

2.8 Value Chain Analysis:The value chain analysis undertaken examines the operational effectiveness of activities that enable Amazon.com to perform better than its competitors; i.e. the distinctive value chain activities that are difficult to imitate. Using the framework proposed by Amit and Zott (2001) this analysis focuses on ‘value creation’ and ‘transaction cost economies’; where Amazon.com configures its value chain activities to create unique value for customers, reduce its costs of carrying out these activities and reduce the cost of its customers’ transactions. The figure below indicates examples of how Amazon.com has created value and reduced costs in its value chain activities.

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