July 27, 2008

Amazon Case Study

Introduction


In the short space of 25 years something which started as a US defense initiative has developed into the main communications mechanism for the academic and research community and most recently has expanded into a major business tool for the commercial sector. The Internet has evolved during this period from being a robust and effective way of exchanging information to providing a delivery mechanism for massive amounts of multimedia information to a global audience (Stroud 1998). The two Internet applications that have created the most impact on people are e-mail and the World Wide Web (www). E-mail provides a very simple and effective way of sending both simple text messages and computer files to one or a number of recipients. The www enables individuals and organizations to provide a global audience with a full gamut of multimedia information that can be accessed easily (Stroud 1998).

The internet is a connection of network systems from all over the world. It started from a project of the US that intends to gain advantage over the Russian technology. This project created a program that aims to interconnect radar systems in the country. Those responsible in the program saw the potential of interconnecting systems as a unifying factor for human beings located in different places. After careful studies and advancements in technologies, the internets reach grew wider and wider. Its capacities and capabilities changed and its benefits to people grew more evident. The internet created online businesses like Amazon.com.


Background of Amazon.com

Amazon.com Inc. is an online retailer of books, music, videos, toys, electronics, and other products. In addition to selling products over the World Wide Web, Amazon.com administers online auctions for items ranging from postcards to personal property. The company also provides its customers with services, including an Internet-based address book and personal calendar, and a comparison-shopping tool. Amazon.com is based in Seattle, Washington. Amazon.com is recognized as a model in electronic commerce. The company pioneered many of the tools and procedures now commonplace in online retailing. These include order verification and customer service via electronic mail (e-mail), one-click shopping, and customer reviews (Brynjolfsson & Urban 2001).

Amazon.com was also one of the first companies to sacrifice profitability, opting instead to devote its growing revenues to expanding the company’s offerings and presence on the Internet. This strategy was subsequently adopted by Internet start-ups, or dot.coms, in record numbers (Brynjolfsson & Urban 2001). Amazon.com was founded by Jeff Bezos after researching about the success of mail order companies. Bezos believed that book selling can be profitable through its sale by the use of the internet. Amazon.com is one of the first electronic companies to sell products by the internet technology. The company had its first major problem on the collapse of its business but it has recovered since and it has remained profitable. The paper will focus on the case study on Amazon.com and it intends to answer some questions with the case.

Question 1: Amazon.com’s strategic intent

Strategic intent concerns the direction in which a business is headed in the long term. If identified simply and succinctly it can have a profound effect on the firm’s stakeholders, both internal and external. Employees know what they are trying to achieve and therefore how they should make their greatest efforts; customers know what the firm’s products and services embody; suppliers understand what the key elements are when dealing with the firm. The strategic intent process facilitates the attacking of horizontal market opportunities that might be missed in a business unit structure (Proctor 2000). Strategic intent needs to be defined with precision and it also needs to be supported by indications of how fast the firm proposes to travel and how far. Thus milestones along the route need to be spelled out and progress at each stage monitored and the people involved rewarded according to progress (Proctor 2000).

Strategic intent discusses the probable next strategic moves of the company and how the company will try to achieve its goals. The strategic intent of Amazon.com was to continue dominating the market through innovations that include: permitting the web developers to incorporate some features of Amazon.com into their website; increased alliances with multinational businesses that want to sell their products through the company’s website; and increase in international sales. Amazon.com wants to make sure that it continues to have good profit and income rates without sacrificing the quality of its services and the welfare of its personnel.

Question 2: Amazon.com’s stakeholders

Stakeholder management has become necessary and inevitable as many different groups demand to be recognized and satisfied (Golembiewski 2000). Stakeholders have much importance in the firm and are treated as an important part of the company. The stakeholders of the Amazon.com include private individuals, the government, the management, clients and creditors. Stakeholders are given the outmost authority in the business. Their powers in Amazon.com are overwhelming because they contributed a certain amount that contributes to the financial resources of the company. Stakeholder’s impact on the governance of the firm is it affects the way the company is managed. It makes sure that the company performs well according to the stake holder’s standards.

The stakeholders check on the company and its performance and they deliver comments or questions during meetings and other public occasions. To make sure that Amazon.com does what is expected of them, stakeholders have representatives in the company. The representatives of the stakeholder in the firm belong to the management group. They make sure that the concerns and problems of the stakeholders are brought to the company’s attention. They are the ones that foresee if the company abides with the changes the stakeholder wants. The stakeholder has a right be informed about the changes in the economy, each member has the responsibility among themselves to maintain the investment they made in the company.

Question 3: Amazon’s main resources and capabilities

Amazon.com’s main resources are the books and other products sold through their website. These products come from businesses they aligned with. A capability of Amazon.com is the extended promotional relationships with established internet players. The company has been working with internet players so that they can make use of each other’s resources to achieve their goals. Through the company’s association with such internet organizations their knowledge and experience in doing business in the internet continue to increase and thus they improve the services they give to the clients.

A capability of the company is the powerful search facility wherein there is a personal notification service to email of clients, a recommendation section, an awards section containing award winning books, and an associate program with other sites. Through the said facility the company gives the client convenience and ease in finding the book they want. It also helps in giving the client some ideas on what to buy. A capability of the company is it having a vast and wide collection of books and products that it gives to the clients. Through this the company provides different choices for the clients. The client doesn’t have to go to other sites to find the products they need. This increase the profitability and status of the company. A capability of the company is the popularity it has. The company is one of the known websites that offer such services. When people look for books or other products they remember the site as one of the most reliable and trusted.

Question 4: Resource and capability that gives competitive advantage

It is the unique architecture of each operations strategy that provides an essential strategic contribution to achieve sustainable competitive advantage. From this people can speculate that organizations will have not one, but many operations strategies. Each may have common components, but each has a unique and individual emphasis that is dictated by a number of factors such as trading partners, supply system configuration and demand behaviors. The building blocks of an operations strategy can be viewed as forming a composition matrix that fuses them together as a reaction to the demand and supply system circumstances (Lowson 2002). The unique architecture that is formed is in some degree individual to each strategy, business and sector and provides strategic impact and competitive advantage due to its emphasis upon particular performance factors (Lowson 2002).

The development over time of the concept of sustainable competitive advantage is one of the main reasons why the concept of strategic management has evolved into its recent state. Too often scholars of strategic management believe that competitive advantage can be gained merely by analyzing value creation and advice firms to maximize the value created for the customers. Although both competitiveness and shareholder value are typically measured in economic terms, there has been considerable argument regarding whether either should be the key to managing a firm. Typically, management is said to have to do with the fact that shareholders focus on short-term profits, while competitive advantage and strategic management should focus on long-term profitability of the firm (Drejer 2002). The more competitive firm has one or more core competencies that it can use to create value for its customers and/or achieve lower internal costs, thereby creating overall competitive advantage relative to its competitors. This measure of competitiveness is not an operational measure and should not be taken as such. However, it does focus attention on two different issues that must be seen in connection in strategic management: the position enjoyed by the firm and the internal competencies of the firm, which together form the basis for judging the competitive advantage of the firm (Drejer 2002).

Competitive advantage can be acquired by a company through proper implementation of strategy and a god relationship with the internal and external environment. A resource and capability of Amazon.com that gives sustainable competitive advantage is the vast and wide collection of books and products that it offers to the clients. Such resource and capability is the main reason why clients visit their site and it makes them unique in the industry. Their collection is so diverse that clients will not have a difficult time finding for a certain product, this gives Amazon.com a sustainable competitive advantage. Another capability of Amazon.com that gives sustainable advantage is the powerful search facility wherein there is a personal notification service to email of clients, a recommendation section, an awards section containing award winning books, and an associate program with other sites. This capability differentiates Amazon.com from their competitors.

Question 5: Amazon.com’s future strategy

Amazon.com’s future is a bright one but to make sure nothing disastrous happens the company needs to make use of strategic moves. The strategic move will help in furthering the growth of the company and it will make sure that future problems can be easily solve. A strategic move by the company will be improving the website it has. This should be a strategic move by the company because they need to keep up with changes in society. Redesigning the website to a better look can boost the company’s sale. Making it more user friendly and attractable to consumers can invite more clients to view the website and see the products the company offers.

A strategic move by the company will be creating more mergers with non competitors. This should be a strategic move by the company because through it the company can make use of the capacity of non competitors for its benefits. Through the said move both companies will acquire benefits and both can promote the products they have through each other’s promotion techniques. Lastly a strategic move by Amazon.com is improving the capabilities of their employees and strengthening the services rendered by the employees. This might be a strategic move by the company because improvement of the employees means better service; better service means more clients, and more clients’ means reaching their goal and objectives. The company should strengthen the internet knowledge of the employees so that any new technological problems can be solved immediately.

References

Brynjolfsson, E & Urban, GL (eds.) 2001, Strategies for E-
business success, Jossey-Bass, San Francisco.

Cummings, S & Wilson, D 2003, Images of strategy, Blackwell
Publishing.

Drejer, A 2002, Strategic management and core competencies:
theory and application, Quorum Books, Westport, CT.

Ferguson, PR & Ferguson, GJ 2000, Organizations – A
strategic perspective, Macmillan Press Ltd.

Golembiewski, RT (ed.) 2000, Handbook of organizational
consultation, Marcel Dekker, New York.

Lowson, RH 2002, Strategic operations management: the new
competitive advantage, Routledge, New York.

Proctor, T 2000, Strategic marketing: An introduction,
Routledge, London.

Stroud, D 1998, Internet strategies: a corporate guide to
exploiting the internet, Macmillan, Basingstoke, England.

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