Amazon Business Model Essay

Overview amazon.com was founded in 1994, it started by selling books online. As it grew, the alliance started whirl various products and services. Some goods include DVDs, videos, electronics, camera and photography, clothing app atomic number 18ls, shoes, and so forth. Other retailers yield merged with amazon.com to house diverse quality of items found on contrastive degrees of usage, such as b ar-assed, refurbished, and intentiond items. The ships political partys headquarter is in Seattle, Washington. It has six global websites that serves clients that are based in the linked States, the unify Kingdom, Germany, France, Canada, and Japan. Their website features e-mail enjoin verification, customer review on products, and one-click shopping. mountainAccording to Jeff Bezos, the founder of virago.com, they assumeiness to build one of the most customer-centric partnership in the world. A place where people seat find everything they want to defile online (virago.com t he Hidden Empire, 2011). Mission Work Hard, Have Fun, and Make History.The companys core value is based upon customer obsession. With the help of construct and technology, they want to take lead in customer care (Fast contemptible Consumer Goods, 2009). personal credit line ModelA melodic line model is a abstract framework which expresses the underlying economic logic and system. It proves how a vexation can appropriate costs, make money, and deliver value to customers. As a result, this subdivision volition introduce this companys model, and how over the course of several(prenominal) years, it has managed to adapt their model to keep itself ahead (Business Model Definition, N.D).Business schemeBusiness FoundationThe foundation of Amazon.com was built on the ability to transform. It has proven that when opportunities arise to serve naked as a jaybird or existing customers, it manages to adapt new business models to exploit it. The company is equal to(p) to launch and run new businesses while extracting value on existing ones. Accordingly, they ordain satisfy their customers need no matter what, even if it is extraneous to their material model. You can non stop at what you are good at. Jeff Bezos says, You boast to ask what your customers need and want, and then, no matter how hard it is, you better get good at those things. (Jeff Bezos Biography, 2001).The leader of Amazon was always interested in building an online retailer. The business model was not uniquely customized to the peculiarity of the Internet, nor was it predominantly innovative as it was based upon an online catalog operation. He saw himself improving on the handed-down brick-and-mortar memory boards saying, Look at e-retailing. The key trade that we make is that we trade real the triplet estates for technology. Real estate is the key cost of physical retailers. Thats why theres the old saw location, location, location. Real estate gets more expensive every year, and technolog y gets cheaper every year. And it gets cheaper fast. (Online Extra Q&A, 2001). However, it was an uninitiate observation when the company assumed that it could fatten without making physical investments. presently, Amazon has invested a large amount of funds into warehouses.Third Party Sellers later gaining a large amount of clear from their book industry, they began to expand into considerably shippable consumer goods. This lead them into two new directions the initiative initiative was to host pocket-size business as part of the Z-Shop project. The second was partnering with several e-retailers that sold goods that Amazon.com did not. These projects allowed merchants to argument up to 3,000 items at cost of 9.99 USD a month (Amazon.com Opens zShops, 1999). pull down though this creates emulation between Amazon.com and the terzetto party sellers, it gains a percentage of distributively sale as bearing from these merchants. The company obtains information on consumers p urchasing habits, and create one destination where purchasers enjoy a consistent experience (Chaffey, D., 2012).Competitive environsAs stated previously, Amazon.com is an e- trade, and in order to analyze the competitive surroundings both SWOT (Strengths, Weaknesses, Opportunities, and Threats) and Porters Five Forces depart be discussed. SWOT AnalysisStrengthsAs of January 2010, Amazon.com has iii times the Internet sales revenue of the runner up, Staples. By offering a large amount of varied categories through its website and otherwise internationalistic ones (Amazon.co.uk, Amazon.co.fr, and so on), it has managed to grow to a customer based company with over 30 million people. In addition, the online retail format enables the company to tighten up costs of managing inventory (Amazon.com online bookstore, 2008). Due to Amazon.com building their business model slightly their customers ever-changing tastes and preferences, they were able to avoid the dot-com get into a pe riod between 2000-2002, where many dot-com companies went bankrupt (Dot-com bust, 2012).Amazon.com has successfully managed to make its customers to feel that anything they could possibly want could be found on their website. Additionally, its products are marketed at a competitive harm. Another important promoter is their speedy delivery with their usage of UPS and FedEx (United States) and Royal Mail (United Kingdom). The company in any case caters for people that prefer online shopping with extra services such as Amazon Prime a service with a yearly payment, customers are eligible for free next day delivery. Even though Amazon.com is cognize to be an online seller of most things, it still excels in its original market of book selling. Evidence of such is that students are more likely to use the marketplace to purchase or sell utilize university books at a fair value.WeaknessesFrom a financial standpoint, Amazon.coms goal of being a customer-centric company that wants to ga in a market share rather than profit whitethorn not be good-hearted to investors. Also by relying on third party sellers to provide products to customers, there is the risk that the seller whitethorn fail to commit to their sale. Customers bequeath most likely blame Amazon therefore, damaging Amazon.coms reputation more than the third party. Another separate is that prices may differ due to geographical location and economy, for example a FILCO Keyboard is 100USD in the in the States whereas, in the United Kingdom, it is 100GBP. (Amazon.com online bookstore, 2008).OpportunitiesThere is an hazard to expand to other emerging countries such as China, India, and the Middle East. Not scarce does Amazon have opportunities to expand its base to other geographical locations round the world, it equally has the chance to provide many local shops to sell its products foreign through their website. There exit be an incentive for retailers to post products on Amazons website to increas e their sales around the globe, as a result, the company leave behind generate more revenue through third party sales. In addition, it is also possible to open retail stores or provide its own goods such as the stimulate Fire to well-known and established retailers. These suppliers could then be paid a small commission fee to have them display their goods in a proper showcase. This will allow customers to physically interact with the companys gadgets similar to an orchard apple tree store. They could also provide tech support to any problems that may arise.ThreatsCurrently Amazon.com faces the threat of 15 court cases in regards to patent infringement. Moreover, international issues with their foreign websites may reach, such as export and import restrictions, taxes, tariffs, trade barriers, different payment cycles, and political instability. To illustrate, American electronics use different voltages compared to Europeans, which may grammatical case issues to buyers that are u naware therefore, Amazon must take extra aid to ensure that customers are fully aware of what they are purchasing. It may also struggle to provide proper customer support to people that have purchased goods abroad.Porters Five ForcesThreat of New EntrantsIt is unlikely that competitors will be able to compete with Amazon.coms information system. The technology that has been used in their website is unique, such as the One-click shopping. It has been patented to deter their competitors from copying it. Competitors will find it difficult to compete with Amazons brand recognition, because they are well-known for selling books online and are fairly established in that market (Analysing Amazon.com, 2006).Bargaining Power of BuyerDue to a wide sort of choice, the bargaining power is heights as customers may choose to buy from other sites rather than Amazon. Although, Amazon.com has been known to price their products lower to compete with other services such as iTunes.Threat of Product SubstituteIt may be considered high, because people might prefer to physically visit a store rather than buy it online.Bargaining Power of SupplierAmazon.com is not allowed to directly purchase electronic products directly from main distributers such as Sony, because of its low cost strategy. On the other hand, in their book sector, the company has opened five automated distribution centers located within the United States. This lessens dependence on their main distributer, Ingram (Analysing Amazon.com, 2006).Industry RivalryAmazon.com has little competition versus websites that sell everything however, they will have to compete with websites with certain niche for products. For example, competing with Newegg.com with computing device parts, iTunes with music, Netflix with movies, Barnes and Nobles for books, and Best-Buy for electronics.Potential Growth through Agility and AdaptationTo be regarded as an agile company it must have four characteristics it must be flexible, adaptable , coordinated, and balanced. The business must have the capability to adjust and adapt in effective ways to environment and market changes. There are three types of agility, one that involves the customers, another with partners, and finally with operations (Marakas, 2011).Consumer Focused outlineAs previously mentioned, Amazon.com is obsessed with its customer base, the companys aim is at gaining market share rather than profit. Accordingly, pricing is said to be the prime tool while considering customers bargaining power therefore, adjusting the price of identical goods to correspond to the purchasers willingness to pay is a necessity. Amazon.com does not operate in any physical stores all of its sales occur through its website. The company captures their customers recommendations and comments for site visitors to read, and this is similar to that of a salesperson in a store offering advice on which product to buy. Their website is consistently modify to be personalized and sat isfying for customers. It tracks users traffic, the number and duration of visits, what products have been looked at, and so on.Amazon.com then uses all this information to create patterns. It then uses this data promotions and rating of goods. Unique and personalized features such as online customer reviews, personalized recommendations, and One-Click ordering, customers rightfully feel as if their needs are being catered to. Amazons website is so technologically advanced, that each customers preceding page would be different from another (Hill, M., N.D). Furthermore, Amazon.com offer its users almost everything due to the huge amount of resources available, such as Amazon.com Auctions, Marketplace (selling of used items), and Z-Shops (third-party sellers).Growth StrategyIn late 2007, Amazon created a subsidiary company called Lab126. Their first product was the Amazon heat E-Book Reader. Its business model was so foreign, that it had break off the entire industry. In order to be able to launch this product, Amazon became an original equipment manufacturer (OEM). It has linked the fire into a digital media broadcast that used both transaction and subscription based content delivery. Content producers have also partnered up with Amazon to create new content for the Kindle. Even after changing their business model several times, their ability to emend operational efficiencies such as shopping convenience, discount pricing, ease of purchasing, dependability of order fulfillment, and to purchase a large quantity of products from suppliers allowing them to benefit from discounts and offer a wide selection of goods to their customers is the key to sustainable competitive emolument (Kotelnikov, V., N.D).Innovation StrategyAmazon has redesigned Android 3.0, as a result, The Kindle Fire has a clean, user-friendly home screen without random widgets scatter within the interface. The company has spent several years building up their services such as their cl oud music player, video service, Kindle e-books, Android App Store therefore, the tablet has a vast amount of content. As a result, consumers will know exactly what to look for in the device, and they will know where to get its content. The price point of 199 USD compared to 269USD for the Xoom, 379USD for the Galaxy Tab, and 499USD for the iPad (A Tablet Buyers Guide, 2012) is a price consumers are willing to purchase and weigh off the opportunity cost. It will not affect a large portion of their disposable income therefore, they are more likely to purchase it for their kids.It is much more appealing to purchase an item that is practical at a price of 199USD in comparison to other practical goods at 350USD price range. The objective of the Kindle Fire is mainly about media consumption. Amazon has supplied this device at a low price point, in return, customers are being hooked into Amazons digital distribution ecosystem. The main purpose of this is to buyers to purchase high margi n items such as the Kindle Apps and E-Books. The Kindle Fire will become a platform for selling digital content, and its distributer will most likely subsidize some hardware to be able to sell more content in the long run. This is a similar approach to what they have done with the E-Reader Kindles.AdaptationAmazon.com has managed to adapt its markets to current events by creating promotional sales that are equivalent to specific dates of the year for example, disgraceful Friday, Christmas, and Veterans Day. They have daily, weekly, and monthly deals constantly running throughout the year. The companys website places recent products that are popular on their front page, in order to have people notice it. Furthermore, Amazon.com combats competition by allowing sellers to open their stores for a small fee of 9.99 USD a month, and taking a small percent free from suppliers sales.ConclusionThe sample first introduced Amazons business model. This model involved business strategy, founda tion, and third party sellers. It then analyses Amazons competitive environment through SWOT and Porters Five Forces. To conclude, the company has apparent potential growth from agility and adaptation. Amazon.com has created one of the most unique e-commerce online store by having a variety of products as well as a huge customer base that, to this day, is steadily rising. Amazon.com is a behemoth e-commerce retailer, exactly time will tell what wonders and innovations this company will bring in the future.BibliographyA Tablet Buyers Guide. 2012. ONLINE ready(prenominal) at http//community.digitalmediaacademy.org/15165-ipad-2-vs-kindle-fire-xoom-others-a-tablet-buyers-guide. Accessed 20 November 2012. Amazon.com Opens zShops Direct merchandising News. 1999. ONLINE for sale at http//www.dmnews.com/Amazon.comcom-opens-zshops/article/62986/. Accessed 14 November 2012. Amazon.com the Hidden Empire. 2011. ONLINE operable at http//www.slideshare.net/faberNovel/amazoncom-the-hidden-em pire. Accessed 14 November 2012. Amazon.com online bookstore. 2008. ONLINE Available at http//www.ukessays.com/essays/education/amazon.php. Accessed 15 November 2012. 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