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...
“Amazon.com", Inc. is a US-based multinational e-commerce company. Headquartered in Seattle, Washington, it is America’s largest online retailer, with nearly three times the Internet sales revenue of the runner-up, Staples, Inc., as of January 2010” (Fleerackers, T., 2010). To better understand the elements of Amazon’s success, we will study its competitive forces, value chain models, business strategy, as well as its market expansion and the marketing 5P’s.
Competitive forces
As explained by (Pratap, A., 2018), the five forces model was developed by Michael E Porter and can be used to analyze the level of competition and the forces that are affecting competition in the industry. According to Porter’s five forces model, five competitive forces determine industry profitability: bargaining power of suppliers, bargaining power of customers, the threats of substitutes, the threats of new entrants and rivalry among existing firms (Kroenke. D., 2007).
Porter’s five forces analysis of Amazon:
• Bargaining power of Amazon suppliers: Amazon always has the upper hand on its supply chain. Suppliers must follow the rules defined and comply with the code of conduct specified by Amazon Respecting Amazon’s supply chain standards are essential. Amazon has been able to create a positive working relationship with its suppliers so that they have a weak effect on their activities. Amazon can easily switch suppliers or find new suppliers. The bargaining power of Amazon’s suppliers is a strong one!
• Bargaining power of Amazon buyers: Each customer has enough information when searching for products online and can make choices based on available data as product description or customers’ reviews. The customer’s loyalty remains very important for the online retailer. The bargaining power of Amazon’s buyers is a strong one!
• The threat of substitute products: displaying various brands, designers and fashion names make it so easy for customers to play between products, review feedbacks and compare prices to decide on their purchase. The bargaining power of Amazon’s product is strong!
• The threat of new entrants: Amazon is not the only one in the game! We have e-bay, Alibaba and other competitors. The growth of digital technology has reduced barriers to entry. However, building a brand like Amazon is the real challenge. The bargaining power of Amazon’s new entrants is a weak force! It requires time, money and efforts to reach Amazon’s current operating level.
• Rivalry in the industry: As mentioned before, Amazon is not the only name in the market. Innovation and technology are rival to maintain a competitive advantage. Due to this, I would say that competition is a strong force!
Value chain models
“Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business” (Dudovskiy, J. 2018). Amazon’s value chain model is:
• Amazon Inbound logistics: “receiving, storing and disseminating inputs to the product” (Kroenke. D., 2007). Amazon is fully responsible for its logistics; customer service, products, prices, return and refund policies. They established an efficient, professional infrastructure for the business.
• Amazon Operations: transforming inputs into the final product (Kroenke. D., 2007). Amazon operations are organized into three segments: North America, international, Amazon Web Services (AWS).
• Amazon Outbound logistics: “collecting, storing and physically distributing the product to buyers” (Kroenke. D., 2007). Traditionally, Amazon relied on the services of day-to-day delivery companies such as UPS, FedEx, and TNT. However, the company plans to invest in its own air delivery business, announced Amazon Prime Air (drone delivery system) and Amazon Flex (intra-metropolitan delivery service based on gig-economy), and made extensive use of Treasure Trucks. (Dudovskiy, J. 2018).
• Amazon Marketing and Sales: “inducing buyers to purchase the product and providing a means for them to do so” (Kroenke. D., 2007). Amazon offers a wide variety of products, classified based on best sellers, price or quality. Overnight and next day delivery are available which makes it a premium service. Also, a firm return policy makes it even more convenient for customers.
• Amazon Services: “assisting a customer’s use of the product and thus maintaining and enhancing the product’s value” (Kroenke. D., 2007). Exceptional customer service is a significant feature for Amazon and one of the main reasons for being among the top in the market.
• Technology and Innovation: Amazon has invested in different areas of technology like advanced customer database and analytic tool for recommendation and personalization, scalable Amazon Web Services for Amazon.com’s technology infrastructure, fully optimized as well as automated warehouses and distribution centers along with robotics technology, advanced delivery with drones, voice shopping with Alexa AI and Echo devices, augmented reality to see how products fit and test how they look.
Business strategy
“Amazon.com” started as an online bookstore, but soon diversified, selling DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. Amazon has established separate websites all over the world, and it also provides international shipping to certain countries for some of its products “(Fleerackers, T., 2010). The business strategy of Amazon consists focusing on investing in technologies, enhancing its logistic applications, improving its web services by fulfillment capacity, M&A strategy, AWS segment, R&D activities in logistics, and experimenting with Fintech (Grey. B., 2018).
Indeed, Amazon invests in different technology for better services:
Amazon Robotic,
Amazon Drones
Amazon Alexa
Amazon Go
Amazon Cloud Technology
Amazon Prime Video
Amazon Prime Music
Amazon grocery delivery service
Amazon Fulfillment Centers
Amazon Logistics App
(Grey. B., 2018).
Amazon aggressively pursues its merger and acquisition strategy, having completed more than 30 deals in the last five years. Amazon has made numerous acquisitions to strengthen its core e-commerce business. The company has also invested in technology companies (Grey. B., 2018). The two are connected at Amazon: its business innovations are all driven by huge investments in information systems (Laudon & Laudon., 2007). Amazon has invested in different markets and developed a competitive advantage (Laudon & Laudon., 2007).
More so, the company would have a considerable market share because of its large consumer base as they would turn to operate in other international geographical areas like Europe, Africa and Asia. However, the competitive advantages are not the same in the various markets because some companies are already leading the market with products. For example, Netflix is leading when it comes to media (films, videos). As such, Amazon would need to plan and strategize well. It is targeting those areas not yet visible to other competitors.
Marketing Mix
The Marketing Mix, or “5 Ps” as it’s more commonly known, is one of the oldest yet robust marketing concepts. It suggests that there are five elements of a business: Product, Price, Place, Promotion, and Profit
Product: Amazon provides a variety of a diverse product selection moving from literature, music, movies to online groceries, cloud computing, and film/TV production with convenient and easy to handle package. Unlimited choices at our fingertips! These give them a competitive edge (Fleerackers, T., 2010).
Price: Amazon offers affordable prices through its overall pricing strategy (cost leadership approach, penetration pricing, price skimming, psychological pricing, product line pricing, and geographical pricing strategies), coupled with many promotional discounts (www.mindtools.com).
Place: Amazon operates online which makes it very convenient for shoppers all over the world buy a variety of items within a space of no time. They equally ensure that deliveries are done in a fast manner and offer free delivery for purchases with specific amounts. These strategies make them competitive (Fleerackers, T., 2010).
Promotion: Amazon uses various marketing media like print and media advertising, sales promotion, public relations, and direct marketing while displaying a consistent message about its products, thus making their brands recognizable.
Profit: Amazon is aggressively expanding and diversifying its products while ensuring that they are affordable and meet the needs of its customers. According to the report by (Laudon & Laudon., 2007), Amazon is already struggling with decline profitability. The company will need to do more by using analytics to identify the key cost drivers and apply innovatively IS to drive down cost and increase profitability.
Conclusion
Amazon is unquestionably the e-commerce leader and has invested heavily in its infrastructure, services and products. Amazon has already established its strong position in the current market. Therefore, I think they can continue to be successful for the time being.
References
Cohan, P. (2018). 5 Ways That Amazon Keeps Its Lead In The $180B Cloud. Retrieved December 19, 2018, from https://www.forbes.com/sites/petercohan/2018/08/01/5-ways-that-amazon-keeps-its-lead-in-the-180b-cloud/#7c7297959e24
Department of Industry. (2018). The 5 Ps of marketing. Retrieved December 16, 2018, from https://www.business.gov.au/marketing/advertising/the-5-ps-of-marketing
Dudovskiy, J. (2018). Amazon Value Chain Analysis. Retrieved December 16, 2018, from https://research-methodology.net/amazon-value-chain-analysis/
Fleerackers, T. (2010). Case: Amazon.com. Retrieved May 23, 2016, from https://flatworldbusiness.wordpress.com/flat-education/intensify/creating-a-flat-business/case-amazon-com/
Grey B. (2018). Amazon Business Strategy: Insights of its Core Operations and Investments. Retrieved December 16, 2018, from https://www.greyb.com/amazon-business-strategy
Kline, D. B. (2015). Amazon’s Sustainable Competitive Advantage. Retrieved December 19, 2018, from https://www.fool.com/investing/general/2015/05/18/amazons-sustainable-competitive-advantage.aspx
Kroenke, D. (2007). Organizational Strategy, Information Systems, and Competitive Advantage. Experiencing MIS. Upper Saddle River, NJ: Prentice Hall.
Laudon, K. C., & Laudon, J. P. (2007). Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall.
Oakley, T. (2016). Amazon: Marketing Mix (4 Ps). Retrieved December 16, 2018, from https://themarketingagenda.com/2016/11/12/amazon-marketing-mix-4-ps/
Petro, G. (2017, August 2). Amazon’s Acquisition Of Whole Foods Is About Two Things: Data And Product. Retrieved 26 June 2018, from https://www.forbes.com/sites/gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/
Pratap, A. (2018). Five Forces Analysis of Amazon Inc. Retrieved December 16, 2018, from https://www.cheshnotes.com/five-forces-analysis-of-amazon-inc/
Sawers, P. (2015). Netflix vs. Amazon Video: How they differ and who has the upper hand. Retrieved December 19, 2018, from https://venturebeat.com/2015/09/05/netflix-vs-amazon-video-how-they-differ-and-who-has-the-upper-hand/
The 5 Ps of marketing (2018). Australian Government Business. Retrieved from: https://www.business.gov.au/marketing/advertising/the-5-ps-of-marketing
The Marketing Mix and the 4Ps of Marketing: Understanding How to Position Your Market Offering. Retrieved from https://www.mindtools.com/pages/article/newSTR_94.htm
Visual Paradigm. (n.d.). Value Chain Analysis Example: Amazon Value Chain Analysis. Retrieved December 18, 2018, from https://online.visual-paradigm.com/es/diagram-examples/value-chain-analysis/amazon-value-chain-analysis/
Competitive forces
As explained by (Pratap, A., 2018), the five forces model was developed by Michael E Porter and can be used to analyze the level of competition and the forces that are affecting competition in the industry. According to Porter’s five forces model, five competitive forces determine industry profitability: bargaining power of suppliers, bargaining power of customers, the threats of substitutes, the threats of new entrants and rivalry among existing firms (Kroenke. D., 2007).
Porter’s five forces analysis of Amazon:
• Bargaining power of Amazon suppliers: Amazon always has the upper hand on its supply chain. Suppliers must follow the rules defined and comply with the code of conduct specified by Amazon Respecting Amazon’s supply chain standards are essential. Amazon has been able to create a positive working relationship with its suppliers so that they have a weak effect on their activities. Amazon can easily switch suppliers or find new suppliers. The bargaining power of Amazon’s suppliers is a strong one!
• Bargaining power of Amazon buyers: Each customer has enough information when searching for products online and can make choices based on available data as product description or customers’ reviews. The customer’s loyalty remains very important for the online retailer. The bargaining power of Amazon’s buyers is a strong one!
• The threat of substitute products: displaying various brands, designers and fashion names make it so easy for customers to play between products, review feedbacks and compare prices to decide on their purchase. The bargaining power of Amazon’s product is strong!
• The threat of new entrants: Amazon is not the only one in the game! We have e-bay, Alibaba and other competitors. The growth of digital technology has reduced barriers to entry. However, building a brand like Amazon is the real challenge. The bargaining power of Amazon’s new entrants is a weak force! It requires time, money and efforts to reach Amazon’s current operating level.
• Rivalry in the industry: As mentioned before, Amazon is not the only name in the market. Innovation and technology are rival to maintain a competitive advantage. Due to this, I would say that competition is a strong force!
Value chain models
“Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business” (Dudovskiy, J. 2018). Amazon’s value chain model is:
• Amazon Inbound logistics: “receiving, storing and disseminating inputs to the product” (Kroenke. D., 2007). Amazon is fully responsible for its logistics; customer service, products, prices, return and refund policies. They established an efficient, professional infrastructure for the business.
• Amazon Operations: transforming inputs into the final product (Kroenke. D., 2007). Amazon operations are organized into three segments: North America, international, Amazon Web Services (AWS).
• Amazon Outbound logistics: “collecting, storing and physically distributing the product to buyers” (Kroenke. D., 2007). Traditionally, Amazon relied on the services of day-to-day delivery companies such as UPS, FedEx, and TNT. However, the company plans to invest in its own air delivery business, announced Amazon Prime Air (drone delivery system) and Amazon Flex (intra-metropolitan delivery service based on gig-economy), and made extensive use of Treasure Trucks. (Dudovskiy, J. 2018).
• Amazon Marketing and Sales: “inducing buyers to purchase the product and providing a means for them to do so” (Kroenke. D., 2007). Amazon offers a wide variety of products, classified based on best sellers, price or quality. Overnight and next day delivery are available which makes it a premium service. Also, a firm return policy makes it even more convenient for customers.
• Amazon Services: “assisting a customer’s use of the product and thus maintaining and enhancing the product’s value” (Kroenke. D., 2007). Exceptional customer service is a significant feature for Amazon and one of the main reasons for being among the top in the market.
• Technology and Innovation: Amazon has invested in different areas of technology like advanced customer database and analytic tool for recommendation and personalization, scalable Amazon Web Services for Amazon.com’s technology infrastructure, fully optimized as well as automated warehouses and distribution centers along with robotics technology, advanced delivery with drones, voice shopping with Alexa AI and Echo devices, augmented reality to see how products fit and test how they look.
Business strategy
“Amazon.com” started as an online bookstore, but soon diversified, selling DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. Amazon has established separate websites all over the world, and it also provides international shipping to certain countries for some of its products “(Fleerackers, T., 2010). The business strategy of Amazon consists focusing on investing in technologies, enhancing its logistic applications, improving its web services by fulfillment capacity, M&A strategy, AWS segment, R&D activities in logistics, and experimenting with Fintech (Grey. B., 2018).
Indeed, Amazon invests in different technology for better services:
Amazon Robotic,
Amazon Drones
Amazon Alexa
Amazon Go
Amazon Cloud Technology
Amazon Prime Video
Amazon Prime Music
Amazon grocery delivery service
Amazon Fulfillment Centers
Amazon Logistics App
(Grey. B., 2018).
Amazon aggressively pursues its merger and acquisition strategy, having completed more than 30 deals in the last five years. Amazon has made numerous acquisitions to strengthen its core e-commerce business. The company has also invested in technology companies (Grey. B., 2018). The two are connected at Amazon: its business innovations are all driven by huge investments in information systems (Laudon & Laudon., 2007). Amazon has invested in different markets and developed a competitive advantage (Laudon & Laudon., 2007).
More so, the company would have a considerable market share because of its large consumer base as they would turn to operate in other international geographical areas like Europe, Africa and Asia. However, the competitive advantages are not the same in the various markets because some companies are already leading the market with products. For example, Netflix is leading when it comes to media (films, videos). As such, Amazon would need to plan and strategize well. It is targeting those areas not yet visible to other competitors.
Marketing Mix
The Marketing Mix, or “5 Ps” as it’s more commonly known, is one of the oldest yet robust marketing concepts. It suggests that there are five elements of a business: Product, Price, Place, Promotion, and Profit
Product: Amazon provides a variety of a diverse product selection moving from literature, music, movies to online groceries, cloud computing, and film/TV production with convenient and easy to handle package. Unlimited choices at our fingertips! These give them a competitive edge (Fleerackers, T., 2010).
Price: Amazon offers affordable prices through its overall pricing strategy (cost leadership approach, penetration pricing, price skimming, psychological pricing, product line pricing, and geographical pricing strategies), coupled with many promotional discounts (www.mindtools.com).
Place: Amazon operates online which makes it very convenient for shoppers all over the world buy a variety of items within a space of no time. They equally ensure that deliveries are done in a fast manner and offer free delivery for purchases with specific amounts. These strategies make them competitive (Fleerackers, T., 2010).
Promotion: Amazon uses various marketing media like print and media advertising, sales promotion, public relations, and direct marketing while displaying a consistent message about its products, thus making their brands recognizable.
Profit: Amazon is aggressively expanding and diversifying its products while ensuring that they are affordable and meet the needs of its customers. According to the report by (Laudon & Laudon., 2007), Amazon is already struggling with decline profitability. The company will need to do more by using analytics to identify the key cost drivers and apply innovatively IS to drive down cost and increase profitability.
Conclusion
Amazon is unquestionably the e-commerce leader and has invested heavily in its infrastructure, services and products. Amazon has already established its strong position in the current market. Therefore, I think they can continue to be successful for the time being.
References
Cohan, P. (2018). 5 Ways That Amazon Keeps Its Lead In The $180B Cloud. Retrieved December 19, 2018, from https://www.forbes.com/sites/petercohan/2018/08/01/5-ways-that-amazon-keeps-its-lead-in-the-180b-cloud/#7c7297959e24
Department of Industry. (2018). The 5 Ps of marketing. Retrieved December 16, 2018, from https://www.business.gov.au/marketing/advertising/the-5-ps-of-marketing
Dudovskiy, J. (2018). Amazon Value Chain Analysis. Retrieved December 16, 2018, from https://research-methodology.net/amazon-value-chain-analysis/
Fleerackers, T. (2010). Case: Amazon.com. Retrieved May 23, 2016, from https://flatworldbusiness.wordpress.com/flat-education/intensify/creating-a-flat-business/case-amazon-com/
Grey B. (2018). Amazon Business Strategy: Insights of its Core Operations and Investments. Retrieved December 16, 2018, from https://www.greyb.com/amazon-business-strategy
Kline, D. B. (2015). Amazon’s Sustainable Competitive Advantage. Retrieved December 19, 2018, from https://www.fool.com/investing/general/2015/05/18/amazons-sustainable-competitive-advantage.aspx
Kroenke, D. (2007). Organizational Strategy, Information Systems, and Competitive Advantage. Experiencing MIS. Upper Saddle River, NJ: Prentice Hall.
Laudon, K. C., & Laudon, J. P. (2007). Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall.
Oakley, T. (2016). Amazon: Marketing Mix (4 Ps). Retrieved December 16, 2018, from https://themarketingagenda.com/2016/11/12/amazon-marketing-mix-4-ps/
Petro, G. (2017, August 2). Amazon’s Acquisition Of Whole Foods Is About Two Things: Data And Product. Retrieved 26 June 2018, from https://www.forbes.com/sites/gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/
Pratap, A. (2018). Five Forces Analysis of Amazon Inc. Retrieved December 16, 2018, from https://www.cheshnotes.com/five-forces-analysis-of-amazon-inc/
Sawers, P. (2015). Netflix vs. Amazon Video: How they differ and who has the upper hand. Retrieved December 19, 2018, from https://venturebeat.com/2015/09/05/netflix-vs-amazon-video-how-they-differ-and-who-has-the-upper-hand/
The 5 Ps of marketing (2018). Australian Government Business. Retrieved from: https://www.business.gov.au/marketing/advertising/the-5-ps-of-marketing
The Marketing Mix and the 4Ps of Marketing: Understanding How to Position Your Market Offering. Retrieved from https://www.mindtools.com/pages/article/newSTR_94.htm
Visual Paradigm. (n.d.). Value Chain Analysis Example: Amazon Value Chain Analysis. Retrieved December 18, 2018, from https://online.visual-paradigm.com/es/diagram-examples/value-chain-analysis/amazon-value-chain-analysis/
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