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 multinational e-commerce organization, with its head office in Seattle, Washington, USA. The company opened for business in July 1995, and runs in the un-conventional environment of the Internet, promoting itself as the world’s biggest bookstore (Laudon, & Laudon, 2007). In 2010, Amazon became America’s leading online retailer, with almost three times sales revenue of its closest competitor, Staples, Inc (Ferguson, 2017). Jeff Bezos the founder started Amazon.com, Inc. as Cadabra, Inc. and later changed it because it was observed that people often refer to it as “Cadaver” (Fleerackers, 2010). Amazon started as an online bookstore, but rapidly and strategically differentiated its e-commerce (now selling computer software, DVDs, CDs, video games, electronics, toys, clothes, furniture, food, music and video downloads, etc.), cloud computing, and video streaming. Amazon expanded by establishing separate websites all over the world for its products and services, and with the international shipping service available to certain countries for some of its products (Laudon, & Laudon, 2007). This gives the company both great advantages, such as visibility to potential customers and investors and great disadvantages - mainly large amounts of competition.
Amazon has responded to pressure from its competitive environment using its competitive forces and value chain models. One of the greatest value chains is Amazon’s wiliness to sacrifice her revenue for future growth unlike many companies of its size has. In addition, Amazon's ethical values is a distinction, especially the Bezos most popular mantra "Put the customer first. Invent. And be patient.", that drives the company (Bowman, 2017). Amazon has responded to pressure in the following ways;
· Free Shipping
In 2016, Amazon lifted its minimum order for free shipping for Non-Prime members from $35 to $49 (Bowman, 2017). The move was seen as a push by Amazon to encourage customers who hadn't already to sign up for Prime memberships, and to trim exploding shipping costs. However, the real intention was to weaken Wal-Mart Stores, Inc. expanding its online grocery pickup program and acquiring Jet.com for $3.3 billion when it promised to offer free 2-day shipping on orders of $35 or more in an attempt to challenge Amazon Prime (Bowman, 2017). Amazon’s move shows her responding to pressure from the competitors, guarding its advantage in e-commerce and its reputation for fast, free shipping.
Just to add, yesterday May 14, 2019, Amazon announced its new approach on evolving its Prime free two-day shipping program to be a free one-day shipping program. This is in order to expand the Delivery Service Partners program which it introduced in mid-2018. This was designed to give the company more control over the "last mile" of product shipments to consumers (Vena, 2019). According to the company, it would help entrepreneurs start, set up, and manage their own local delivery business. Amazon is starting by Paying Employees $10,000 to Quit and Start Delivery Businesses (Vena, 2019). Each business owner approved for the program would oversee between 20 and 40 Amazon-branded delivery vans (Vena, 2019).
· Daily Pricing Algorithm
Amazon has an imitable pricing algorithm, which adjusts prices over a million times each day – this is a critical way of how Amazon is always more engrossed on competitors than customers. Amazon usually prioritizes her own products over those sold by third-party vendors, even when Amazon's, is more expensive. It is also observed that Amazon manipulates price acuity by offering discounts on popular items, but rarely does such on uncommon items, creating the feeling that they offer the lowest price when that's not true (Bowman, 2017).
· Lower and Cheaper Price
Consumers also tend to compare prices among the retail leaders such that buyers are able to buy products with very big discounts compared to ones bought in real retail outlets. And Amazon uses its lower price advantage to reduce pressure from the competition, and can even buy off the competitor. For example, in 2010, Amazon’s key product, diaper sales were declining, going instead to upstart Quidsi, owners of Diapers.com. Amazon absorbed the pressure by trying to buy Quidsi, but when it refused, Amazon reduced its diaper prices as much as a third in an attempt to strongarm Quidsi, and later acquired the firm ((Bowman, 2017).
· High Level Customer Service
Amazon is also reducing pressure by keeping the customer first. It has created a simple search function to help the customer find his product, personalized customer services, loyalty program (Amazon Prime membership), efficient responsive customer help desk and a fast service/product delivery. With the conventional 2-day shipping retail delivery service introduced by Amazon, the company has deeply invested to integrate itself along the entire shipping process: from the manufacturer's factory to the customer's doorstep (Vena, 2019). To this effect, Amazon recently announced its one-day shipping program to reinforce the consumer's belief that Amazon is the only place to go and to dislodge pressure from competitors.
· Buyer and Supplier Power
Amazon's suppliers range from a very wide range of manufacturers, merchants, and several alliances. So, it is difficult for any supplier to compete or dictate the price. Amazon chooses from a variety of suppliers at will to downsize any form of supplier related pressure (Vena, 2019). More so, Amazon’s consumers can be found in every corner of the population. Amazon has been able to keep its online shoppers’ sector due to the convenience (shop from home, any time), high levels of customer service, personalized services, unlimited virtual shelf space, low prices, internet access, low labor costs, high inventory turnover, delivery speed, and an easy to navigate Amazon.com. These have made it easier for consumers to log on and buy from Amazon than competitors.
At existence, Amazon’s vision was to provide customers with the most convenient way to purchase books at prices that couldn’t be matched by physical stores. While it strategically it expanded into new segments, this promise of convenience, low prices and availability to its customers remained. For more than a decade, Amazon has invested significantly ineffective customer service, loyalty-sales program (Amazon Prime and Subscribe & Save) to encourage bulk buying habits, which captures the value it creates for customers, personalized services and wide shopping categories for each customer, distribution networks, positioning itself as a logistics power by extending its logistics services to third-party sellers (Fox, n.d). Amazon.com has millions of customers who rely on its wide-ranging catalog and Amazon’s ability to deliver products at customers doorstep as quickly as an hour and a maximum of two-days depending on location. The larger Amazon gets, the more it can invest in lower prices, logistics, and expanding its catalog, which in turn creates a virtuous cycle leading towards greater sales per customer (Fox, n.d).
A business model is an explanation of the operation of the business which comprises all the elements of business, the task carried out in the business and includes the way the business generates revenues (Rayport, 2002). I believe a business strategy is an integral part of a company’s business model which it modifies when opportunities are handy. Amazon’s business strategy has changed severally since it began in 2005 – from selling books online to customers to diversification in other articles, with a variety of goods and the act of lowering prices. This well recognized because of the delivery of quality goods, services and information are provided to its customers in a timely manner. Amazon also evolved more dynamically recognizing the fact that consistency and continuous development of operational efficiency will create for her a sustainable competitive advantage in the online retail industry (Porter,2011). This strategy required that products and services provided needs third-party sources to maintain its sufficient supplies. By providing great customer support, free, reliable and secure shipping services, specialized algorithm, Amazon was able to improve operations efficiency. Still, to this very moment, Amazon is still doing well with the discount prices and ease of shopping they offer.
The obvious reason is that Amazon needed to compete better and remain the market leader. Often, for an online retail company to succeed in the market, it must learn to adjust to the current market and also be proactive to forecast future breakthroughs. By making changes to its business strategy Amazon was able to report profits in about 5- year period and still remains the market leader in terms of revenue and operations.
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.
Amazon uses the product marketing formula in the following ways;
• Product
Amazon offers a wide title of products through a continuous expansion process. Amazon products and services are not just online retail, but it maintains a competitive advantage Amazon uses its (Dudovskiy, 2018);
i. Amazon websites - that enable hundreds of millions of products to be sold by Amazon and by third parties across dozens of product categories.
ii. Electronic devices such as Kindle e-readers, Fire tablets, Fire TVs, and Echo.
iii. Amazon Web Services (AWS) - offering a wide range of global compute, storage, database, etc., to developers and businesses.
iv. Media content. An extensive range of products and services, including cloud-based services that can be used on content production.
• Place
Conventionally, Amazon doesn’t use the physical stores but it uses the online sales channel due to e-commerce nature of its business operations to reach its e-commerce customers. Examples of such platforms include Amazon.com, Audible.com, Amazon Books, etc. It also runs a physical bookstore named Amazon Books in Seattle (Dudovskiy, 2018).
• Price
Considering the nature of Amazon’s business, seeming highly seasonal Amazon ‘s pricing strategy can be generally described as cost leadership (regularly lowers prices until they weary competitors for all products), premium pricing (offering 70% royalty option for Publishers to make their books available in the Kindle Store) (Dudovskiy, 2018) and alternative pricing strategies in certain segments such as penetration pricing, price skimming, psychological pricing, product line pricing, promotional pricing, value-based pricing strategy and geographical pricing strategies (Ferguson, 2017).
• Promotions
Often, Amazon likes to encourage its customers to visit its websites and pay for its online services. The company uses the following promotional mix; advertising as basic (website owners/ online publishers earn revenues by displaying advertisements and corresponding links to products sold on the Amazon.com website), Sales promotions (uses discounts and special offers to generate more sales than competitors), Public relations (uses Amazon Smile, which gives a percentage of sales to charitable organizations to boosts its brand image), and Direct marketing (directly connects with businesses to offer their online services: digital content distribution and publishing) (Ferguson, 2017).
• Profits
As already mentioned, Amazon spends a chunk of its annual revenue for future growth and opportunities for the company unlike its competitors. Previously, the company has invested in several projects but in 2019 it is willing to pay its employees $10,000 to join the delivery network.
Do you think Amazon can continue to be successful? Explain your answer.
I am certain that Amazon will continue to be successful. I have purchased several items with Amazon.com in the last five years including textbooks, shoes, bags, watches, etc. I do not hesitate to patronize Amazon because I am confident of their great deals. I will prefer them over Flipkart because of the easy-to-use interface. Amazon is always re-strategizing, improving and innovating with new technologies and products to improve operation efficiency, so I have no doubt that if they continue, they will remain but successful. By motivating employees to expand its logistics network, Amazon can ensure it has the capacity it requires to meet its ambitious one-day shipping goals which it announced a few days ago.
Conclusion
Amazon as the biggest e-commerce company in the world will always face increasing competition, which if not well managed can distort the company’s global growth potential or reduce its the market share. To avoid this, Amazon must ensure that its operation efficiency is optimized and that its marketing mix is relevant to recent market trends.
References
Bowman, J. (2017, March 1). 3 Times Amazon Responded Directly to Competitive Threats. Retrieved May 12, 2019, from https://www.fool.com/investing/2017/03/01/3-times-amazon-responded-directly-to-competitive-t.aspx
Dudovskiy, J. (2018, August 3). Amazon Marketing Mix (Amazon 7Ps of Marketing). Retrieved May 13, 2019, from https://research-methodology.net/amazon-marketing-mix-amazon-7ps-marketing/
Ferguson, E. (2017, February 17). Amazon.com Inc.’s Marketing Mix (4Ps) Analysis. Retrieved May 14, 2019, from http://panmore.com/amazon-com-inc-marketing-mix-4ps-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/
Fox, R. (n.d). Amazon Captures Value in a Low Margin Business. Retrieved May 14, 2019, from https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/amazon-captures-value-in-a-low-margin-business.html
Laudon, K. C., & Laudon, J. P. (2007). Amazon.com: An Internet Giant Fine-Tunes its Strategy. Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall. 107-108.
Porter, M. (2011). Strategy: Value Chain. Retrieved on December 20th from http://www.quickmba.com/strategy/value-chain/
Rayport, J.F. (2002). Cases in e-commerce. Retrieved May 13, 2019, from https://trove.nla.gov.au/version/41984263
Vena, D. (2019, May 14). Amazon Is Paying Employees $10,000 to Quit and Start Delivery Businesses. Retrieved May 15, 2019, from https://www.fool.com/investing/2019/05/14/amazon-paying-employees-to-quit-start-delivery.aspx
Amazon has responded to pressure from its competitive environment using its competitive forces and value chain models. One of the greatest value chains is Amazon’s wiliness to sacrifice her revenue for future growth unlike many companies of its size has. In addition, Amazon's ethical values is a distinction, especially the Bezos most popular mantra "Put the customer first. Invent. And be patient.", that drives the company (Bowman, 2017). Amazon has responded to pressure in the following ways;
· Free Shipping
In 2016, Amazon lifted its minimum order for free shipping for Non-Prime members from $35 to $49 (Bowman, 2017). The move was seen as a push by Amazon to encourage customers who hadn't already to sign up for Prime memberships, and to trim exploding shipping costs. However, the real intention was to weaken Wal-Mart Stores, Inc. expanding its online grocery pickup program and acquiring Jet.com for $3.3 billion when it promised to offer free 2-day shipping on orders of $35 or more in an attempt to challenge Amazon Prime (Bowman, 2017). Amazon’s move shows her responding to pressure from the competitors, guarding its advantage in e-commerce and its reputation for fast, free shipping.
Just to add, yesterday May 14, 2019, Amazon announced its new approach on evolving its Prime free two-day shipping program to be a free one-day shipping program. This is in order to expand the Delivery Service Partners program which it introduced in mid-2018. This was designed to give the company more control over the "last mile" of product shipments to consumers (Vena, 2019). According to the company, it would help entrepreneurs start, set up, and manage their own local delivery business. Amazon is starting by Paying Employees $10,000 to Quit and Start Delivery Businesses (Vena, 2019). Each business owner approved for the program would oversee between 20 and 40 Amazon-branded delivery vans (Vena, 2019).
· Daily Pricing Algorithm
Amazon has an imitable pricing algorithm, which adjusts prices over a million times each day – this is a critical way of how Amazon is always more engrossed on competitors than customers. Amazon usually prioritizes her own products over those sold by third-party vendors, even when Amazon's, is more expensive. It is also observed that Amazon manipulates price acuity by offering discounts on popular items, but rarely does such on uncommon items, creating the feeling that they offer the lowest price when that's not true (Bowman, 2017).
· Lower and Cheaper Price
Consumers also tend to compare prices among the retail leaders such that buyers are able to buy products with very big discounts compared to ones bought in real retail outlets. And Amazon uses its lower price advantage to reduce pressure from the competition, and can even buy off the competitor. For example, in 2010, Amazon’s key product, diaper sales were declining, going instead to upstart Quidsi, owners of Diapers.com. Amazon absorbed the pressure by trying to buy Quidsi, but when it refused, Amazon reduced its diaper prices as much as a third in an attempt to strongarm Quidsi, and later acquired the firm ((Bowman, 2017).
· High Level Customer Service
Amazon is also reducing pressure by keeping the customer first. It has created a simple search function to help the customer find his product, personalized customer services, loyalty program (Amazon Prime membership), efficient responsive customer help desk and a fast service/product delivery. With the conventional 2-day shipping retail delivery service introduced by Amazon, the company has deeply invested to integrate itself along the entire shipping process: from the manufacturer's factory to the customer's doorstep (Vena, 2019). To this effect, Amazon recently announced its one-day shipping program to reinforce the consumer's belief that Amazon is the only place to go and to dislodge pressure from competitors.
· Buyer and Supplier Power
Amazon's suppliers range from a very wide range of manufacturers, merchants, and several alliances. So, it is difficult for any supplier to compete or dictate the price. Amazon chooses from a variety of suppliers at will to downsize any form of supplier related pressure (Vena, 2019). More so, Amazon’s consumers can be found in every corner of the population. Amazon has been able to keep its online shoppers’ sector due to the convenience (shop from home, any time), high levels of customer service, personalized services, unlimited virtual shelf space, low prices, internet access, low labor costs, high inventory turnover, delivery speed, and an easy to navigate Amazon.com. These have made it easier for consumers to log on and buy from Amazon than competitors.
At existence, Amazon’s vision was to provide customers with the most convenient way to purchase books at prices that couldn’t be matched by physical stores. While it strategically it expanded into new segments, this promise of convenience, low prices and availability to its customers remained. For more than a decade, Amazon has invested significantly ineffective customer service, loyalty-sales program (Amazon Prime and Subscribe & Save) to encourage bulk buying habits, which captures the value it creates for customers, personalized services and wide shopping categories for each customer, distribution networks, positioning itself as a logistics power by extending its logistics services to third-party sellers (Fox, n.d). Amazon.com has millions of customers who rely on its wide-ranging catalog and Amazon’s ability to deliver products at customers doorstep as quickly as an hour and a maximum of two-days depending on location. The larger Amazon gets, the more it can invest in lower prices, logistics, and expanding its catalog, which in turn creates a virtuous cycle leading towards greater sales per customer (Fox, n.d).
A business model is an explanation of the operation of the business which comprises all the elements of business, the task carried out in the business and includes the way the business generates revenues (Rayport, 2002). I believe a business strategy is an integral part of a company’s business model which it modifies when opportunities are handy. Amazon’s business strategy has changed severally since it began in 2005 – from selling books online to customers to diversification in other articles, with a variety of goods and the act of lowering prices. This well recognized because of the delivery of quality goods, services and information are provided to its customers in a timely manner. Amazon also evolved more dynamically recognizing the fact that consistency and continuous development of operational efficiency will create for her a sustainable competitive advantage in the online retail industry (Porter,2011). This strategy required that products and services provided needs third-party sources to maintain its sufficient supplies. By providing great customer support, free, reliable and secure shipping services, specialized algorithm, Amazon was able to improve operations efficiency. Still, to this very moment, Amazon is still doing well with the discount prices and ease of shopping they offer.
The obvious reason is that Amazon needed to compete better and remain the market leader. Often, for an online retail company to succeed in the market, it must learn to adjust to the current market and also be proactive to forecast future breakthroughs. By making changes to its business strategy Amazon was able to report profits in about 5- year period and still remains the market leader in terms of revenue and operations.
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.
Amazon uses the product marketing formula in the following ways;
• Product
Amazon offers a wide title of products through a continuous expansion process. Amazon products and services are not just online retail, but it maintains a competitive advantage Amazon uses its (Dudovskiy, 2018);
i. Amazon websites - that enable hundreds of millions of products to be sold by Amazon and by third parties across dozens of product categories.
ii. Electronic devices such as Kindle e-readers, Fire tablets, Fire TVs, and Echo.
iii. Amazon Web Services (AWS) - offering a wide range of global compute, storage, database, etc., to developers and businesses.
iv. Media content. An extensive range of products and services, including cloud-based services that can be used on content production.
• Place
Conventionally, Amazon doesn’t use the physical stores but it uses the online sales channel due to e-commerce nature of its business operations to reach its e-commerce customers. Examples of such platforms include Amazon.com, Audible.com, Amazon Books, etc. It also runs a physical bookstore named Amazon Books in Seattle (Dudovskiy, 2018).
• Price
Considering the nature of Amazon’s business, seeming highly seasonal Amazon ‘s pricing strategy can be generally described as cost leadership (regularly lowers prices until they weary competitors for all products), premium pricing (offering 70% royalty option for Publishers to make their books available in the Kindle Store) (Dudovskiy, 2018) and alternative pricing strategies in certain segments such as penetration pricing, price skimming, psychological pricing, product line pricing, promotional pricing, value-based pricing strategy and geographical pricing strategies (Ferguson, 2017).
• Promotions
Often, Amazon likes to encourage its customers to visit its websites and pay for its online services. The company uses the following promotional mix; advertising as basic (website owners/ online publishers earn revenues by displaying advertisements and corresponding links to products sold on the Amazon.com website), Sales promotions (uses discounts and special offers to generate more sales than competitors), Public relations (uses Amazon Smile, which gives a percentage of sales to charitable organizations to boosts its brand image), and Direct marketing (directly connects with businesses to offer their online services: digital content distribution and publishing) (Ferguson, 2017).
• Profits
As already mentioned, Amazon spends a chunk of its annual revenue for future growth and opportunities for the company unlike its competitors. Previously, the company has invested in several projects but in 2019 it is willing to pay its employees $10,000 to join the delivery network.
Do you think Amazon can continue to be successful? Explain your answer.
I am certain that Amazon will continue to be successful. I have purchased several items with Amazon.com in the last five years including textbooks, shoes, bags, watches, etc. I do not hesitate to patronize Amazon because I am confident of their great deals. I will prefer them over Flipkart because of the easy-to-use interface. Amazon is always re-strategizing, improving and innovating with new technologies and products to improve operation efficiency, so I have no doubt that if they continue, they will remain but successful. By motivating employees to expand its logistics network, Amazon can ensure it has the capacity it requires to meet its ambitious one-day shipping goals which it announced a few days ago.
Conclusion
Amazon as the biggest e-commerce company in the world will always face increasing competition, which if not well managed can distort the company’s global growth potential or reduce its the market share. To avoid this, Amazon must ensure that its operation efficiency is optimized and that its marketing mix is relevant to recent market trends.
References
Bowman, J. (2017, March 1). 3 Times Amazon Responded Directly to Competitive Threats. Retrieved May 12, 2019, from https://www.fool.com/investing/2017/03/01/3-times-amazon-responded-directly-to-competitive-t.aspx
Dudovskiy, J. (2018, August 3). Amazon Marketing Mix (Amazon 7Ps of Marketing). Retrieved May 13, 2019, from https://research-methodology.net/amazon-marketing-mix-amazon-7ps-marketing/
Ferguson, E. (2017, February 17). Amazon.com Inc.’s Marketing Mix (4Ps) Analysis. Retrieved May 14, 2019, from http://panmore.com/amazon-com-inc-marketing-mix-4ps-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/
Fox, R. (n.d). Amazon Captures Value in a Low Margin Business. Retrieved May 14, 2019, from https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/amazon-captures-value-in-a-low-margin-business.html
Laudon, K. C., & Laudon, J. P. (2007). Amazon.com: An Internet Giant Fine-Tunes its Strategy. Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall. 107-108.
Porter, M. (2011). Strategy: Value Chain. Retrieved on December 20th from http://www.quickmba.com/strategy/value-chain/
Rayport, J.F. (2002). Cases in e-commerce. Retrieved May 13, 2019, from https://trove.nla.gov.au/version/41984263
Vena, D. (2019, May 14). Amazon Is Paying Employees $10,000 to Quit and Start Delivery Businesses. Retrieved May 15, 2019, from https://www.fool.com/investing/2019/05/14/amazon-paying-employees-to-quit-start-delivery.aspx
Comments