Abstract Science Construction’s business is in planning, developing and building road projects. The major of its clients are municipalities, city governments, and other public sector entities. While the bankruptcy rates for these clients is very low, when economic downturns happen, their ability to pay in a timely fashion also suffers. This leads to businesses such as Science Construction needing to take on additional debt and to find creative methods in order to stay afloat during times of recession. Methods such as selling accounts receivables at discounted rates and taking larger lines of credit through banks and other lending institutions are some of the ways organizations can remain viable when their cash inflows have turned into a trickle. Science Construction is asking the Turkish Courts to postpone their bankruptcy proceedings for a year while they attempt to restructure. Through this, suggestions such as forcing shareholders to pay their debt to the organization, gaining credi
Wikipedia posts the following information about competitive forces: “Porter's Five Forces Framework is a tool for analyzing the competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability” (Wikipedia, n.d.). Those five forces are the threat of new entrants, the threat of substitutes, bargaining power of customers, bargaining power of suppliers, and competitive rivalry (Wikipedia, n.d.). Porter also spoke to value chains. “A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. ... In Porter's value chains, Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service are categorized as primary activities” (Wikipedia, n.d.a). The following analysis looks at the competitive forces of Amazon (Pratap, 2019):
Supplier bargaining power is low. One because of Amazon’s size and branding and the suppliers are small and scattered. The suppliers can’t dictate their terms due to this mismatch.
Customer bargaining power is moderately high. Amazon spends a lot of attention on marketing, customer service and engagement, and retention. Customers also have alternative buying powers which include brick and mortar stores, as well as having access to information to make them well informed on costs and quality. All these give customers some power. The customers’ bargaining strength gets diluted when you consider Amazon’s branding, quality of products, customer service, R & D, marketing and global appeal.
The overall threat from the substitute brands is moderate. Because of Amazon’s brand image, large product range and global presence, they have been able to temper the threat from e-tail brands like Wal-Mart and eBay, as well as the retail brands Flipkart and Alibaba to a moderate standoff.
The threat from new entrants in the e-retail industry is moderately low. Technology makes it an easier investment for newcomers to the market. However, apart from the high level of loyalty that Amazon’s customers display, new entrants have an uphill battle with industry competition and the difficulty of a large investment, then growing it on a such an enormous planetary scale.
Competitive rivalry is growing with intensity. Brands like Walmart, eBay, Alibaba, and Flipkart are giving Amazon its competition. Added competition comes from Walmart and Costco who have thrown their hats in the ring with e-tail.
A value chain analysis of Amazon as provided by Pratap (2019) is quite thorough and offers a plethora of information about Amazon as it applies to value:
Inbound logistics - Amazon provides its suppliers with free and fast delivery options using Fulfilment by Amazon which is a program that allows suppliers to ship products to Amazon fulfillment centers to be readily accessible to customers
Operations - Divided into three segments, Amazon’s business operations span the globe. North America, International, and Web Services named segments to reveal Amazon’s business attention.
Marketing and Sales - Amazon’s budget has a large focus on marketing and sales. The 2017 year saw a 10 billion dollar budget.
Outbound logistics - Fulfilment centers (as discussed with inbound logistics) are a critical part of its distribution network and enable it to ship products bought online within a day to its consumers.
Service - An in-depth look of Amazon at Innovation Tactics.com (2018) reveals Amazon’s three value positions are all service based. So from the beginning, their proposition was to serve customers with low priced inventory, fast delivery speed, and the largest selection of products possible. Everything a customer could ask for not just a retailer, but an etailer. Amazon spends quite of bit of time, energy and money focused on service and the improvement of it.
Bowman (2017) documents that Amazon guards its competitive advantage in e-commerce and is known for fast, free shipping very closely. They respond to competitive pressures quickly and decisively. Amazon is not afraid to flex their financial strength when it comes to correcting sliding sales as they did when they bought a diaper company for $545 million dollars. Third, Amazon has a pricing algorithm and employs the practice of price manipulation to stay ahead in its competitive environment.
According to 123helpme (n.d.), Amazon provides value for customers in several ways. One is by offering customer satisfactory services by managing retail operations with efficient use of technology. Another by offering customers a broad array of products to select from through their website and ensuring timely delivery of products to exhibit a high level of commitment towards their business and customers. A third is by strategically placing warehouses in different countries in order to ensure fast, timely deliveries.
Chaffey (2018) recalls, in the beginning, Amazon offered the following as a business strategy. “Earth’s biggest selection and to be Earth’s most customer-centric company.” Today we see this goal continues, but “Amazon’s customers are worldwide now and have grown to include millions of Consumers, Sellers, Content Creators, Developers, and Enterprises. Each of these groups has different needs, and we always work to meet those needs, by innovating new solutions to make things easier, faster, better, and more cost-effective.” Amazon’s business strategy morphed to take into account the different customer bases it had acquired over time and provide them all with the same customer obsessed drive and determination. In fact, customer-centric Amazon set out to predict what customers want and give it to them before they even know they want it.
Conduct research and discuss the different markets that Amazon.com is expanding into (Books, Video, Music, General Merchandise, Cloud Computing, Devices). Discuss the competitive advantage that Amazon.com has in these diverse markets. Is the competitive advantage in each the same? Address why or why not.
Jhonsa (2018) took time to list seven markets Amazon could capitalize and expand in for future revenue:
Groceries - Already having the competitive advantage of an in-place infrastructure to handle online business, Amazon bought Whole Foods to enter the grocery delivery business. Though not nearly at the point of satisfaction with revenue, Amazon should see an increase as it continues to build more Whole Foods stores and warehouses which will lower shipping costs and pickup/delivery times.
International Markets - Though India is the second most populated country, Amazon has barely seen movement until recently. Other potential markets to exploit are Latin America and Europe. With no obvious competitive advantages, Amazon will have to invest to get returns.
Large AWS Deals - The budding market for serverless cloud computing services is another big long-term opportunity for Amazon Web Services, AWS. Amazon enjoys an advantage being the early leader in the space via its AWS Lambda platform.
Pharmacy Services - Amazon announced it would by Pillpack which is the leading online pharmacy thereby making Amazon a licensed online provider of pharmacy services. Amazon Prime, the company's fulfillment infrastructure and Whole Foods stores could all be leveraged to provide a competitive advantage for Amazon making them a major provider of pharmacy services in the coming years.
New Ad Services - After discovering an accounting adjustment which leads to an increase in Amazon’s Ad revenue grew by a whopping 64%, ads are taken more seriously and are more of a priority. Amazon’s competitive edge of having an astronomical number of subscribers, 100 million as of 2017, makes advertising on their pages a no brainer.
New Bricks-and-Mortar Markets - It wouldn’t be surprising to see Amazon buy another storefront, but it wouldn’t be in retail since they are already taking a large share of the online market. Amazon has partnered with Kohl’s and Sears on a few occasions for customer convenience. A new purchase would probably integrate seamlessly with their AmazonGo platform.
Logistics Services - Amazon’s FBA had tremendous success coupled with giant warehouses and logistics investments. So much so, rumors came onboard about Amazon making serious moves on UPS and FedEx turf. This is one arena where Amazon does not have a competitive advantage and would take an all-out effort to make a move to capture some of that market.
Product Marketing is based upon the five P’s (Product, Place, Promotion, Price, and Profit). Discuss the Amazon.com approach to each and how this contributes to competitive advantage.
In an article posted at MBASkool (n.d.), an in-depth article details the Ps of product marketing using Amazon.
Product - In the overall scheme of things, the product is really Amazon itself. The website and its apps offer all types of goods for consumers. Having such a huge offer base contributes to its competitive edge.
Place - Amazon is present globally, all across the world. From their headquarters (with others being built) to FBA centers to warehouses, Amazon literally has a presence just about everywhere. This gives them a competitive edge for faster, timely deliveries.
Promotion - Amazon claims a competitive advantage with their aggressive marketing strategies. They saturate all markets -print ads, television, social media, and affiliate programs with their information and presence. The only thing that rivals their focus on marketing is their meticulous attention to sales promotion and avenues used to accomplish big things. Their competitive edge comes from the intensity and energy they put into promotion and sales.
Price - Amazon has a distinct competitive advantage with its competition based pricing strategy. Technology helps set prices. Efficient operations and web-based business models afford Amazon to offer the lowest prices possible. Frequent differential price adjustments, pricing also happens based on category and change daily and seasonally. They also offer value-added perks.
Profit - Amazon’s profit margins are astronomical. Having such a huge cushion gives them a competitive edge to do the things for their customers that most companies must consider a budget to do. Their profit margins are the reasons they such a grasp on the markets that they are placed in.
Do you think Amazon can continue to be successful? Explain your answer.
Yes. Amazon can continue to be successful. They are continually opening up new lines of revenue, for instance, someday they could be poised to interrupt the delivery service market cornered by UPS, USPS, and FedEx. This would save them money and add another cost-saving value to be passed on to their customers. Amazon also has markets of consumers in logistically challenging places that have yet to be exploited. Given the other expansion opportunities discussed earlier and those they will undoubtedly discover, Amazon remains on the fast track to even more financial and market security.
References
Bowman, Jeffrey. (March 2017). 3 Times Amazon Responded Directly to Competitive Threats. Retrieved from https://www.fool.com/investing/2017/03/01/3-times-amazon-responded-directly-to-competitive-t.aspx
Chaffey, Dave. (August 2018). Amazon.com case study - 2018 update. Retrieved from https://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/
Innovation Tactics. (August 2018). Amazon Business Model: Three Customer Value Propositions. Retrieved from https://www.innovationtactics.com/amazon-business-model-part-2/
Jhonsa, Eric. (August 2018). 7 Markets That Could Help Amazon Jusity a $1 Trillion Valuation. Retrieved from https://www.thestreet.com/opinion/markets-that-could-help-amazon-justify-one-trillion-valuation-14697306
MBASkool. (n.d.). Amazon Marketing Mix (4Ps) Strategy. Retrieved from
https://www.mbaskool.com/marketing-mix/services/17022-amazon.html
Pratap, Abhijeet. (January 2019). Strategic Analysis of Amazon. Retrieved from https://notesmatic.com/strategic-analysis-of-amazon/
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