History of the company Amazon.com free essay sample

AmazonKindle, Amazon.com, Businessmodel, Customerservice, Electroniccommerce, JeffBezos, StrategicmanagementHistory of the company Amazon. com is an American multinational electronic commerce company with headquarters in Seattle, Washington, United States. It is the worlds largest online retailer. Amazon. com started as an online bookstore, but soon diversified, selling DVDs, CDs, MP3 downloads, software, video games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer electronics—notably the Amazon Kindle-book reader and the Kindle Fire tablet computer—and is a major provider of cloud computing services. Jeff Bezos started the company in his garage. He started out by selling just books, but now they sell just about anything. The Mission and Vision Statement of Amazon. com: Amazon. com has had a clear focus and a solitary mission since it began. Founder Jeff Bezos has publicly referred to the Amazon. com mission statement as the guiding force behind his leadership decisions many times in the companys 18-year history. We will write a custom essay sample on History of the company Amazon.com or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page It can be concluded that the success of Amazon. com as the top Internet retailing company in the world is due at least in part to their unwavering commitment to this mission and the daily execution of it. Our vision is to be earths most customer centric company; to build a place where people can come to find and discover anything they might want to buy online. † Says the founder of Amazon. com . The companies six core values are: customer obsession, ownership, bias for action, frugality, high hiring bar, and innovation. They seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators. Amazon. om has 3 customer service call centers in the United States and several others in several different countries to make sure they have phone support in all hours of the day and night. To reduce costs, they have what are called door desks. They are called that because that is what they are. Desks made out of do ors. The mission of Amazon. com is to secure the growth of the business in a sustainable manner, while at the same time constantly improving the company’s profitability. Amazon is always looking for simple solutions in order to provide lower prices to its customers. Amazon is always innovating to improve its users experience and make them feel at home. Let’s have a look on Amazon’s customer-centric innovations. Amazons Innovation Strategy Amazon was not the first online bookstore. But they were both the first to do a good job at selling their good services for a good profit. In retrospect, their successes seem amazing, but at the time, the goals were simple and the objective humble and clear: Be good, or at least better than the other guys. For they knew that alone was hard enough. One of the most unexamine facets of Amazons high-profile success is its unabashed embrace of transformational growth in its white space. Amazon survived the dot-com bust because it had a viable and innovative business model built around a market-changing customer value proposition and a radical profit formula, which upended the staid book industry. Then it quickly expanded beyond books to include all sorts of easily shippable consumer goods, growing from its core into near adjacencies. But Amazon didnt stop there. A few years later, the company seized its white space when it devised a new value proposition, offering a commission-based brokerage service to buyers and sellers of used books. Then it moved into its white space again by developing a model to serve an entirely different customer: third-party sellers. By opening up its storefront to other retailers that were essentially competitors, Amazon transformed its business from direct sales to a sales-and-service model, aggregating many sellers under one virtual roof and receiving commissions from the other companies sales. Then Amazon did it yet again, identifying a new area of potential growth by finding another new customer—the IT community. Serving this new customers needs required different processes, different resources, and a different profit formula—in short, another new business model. In 2002 Amazon launched a web services platform. Perhaps it was risky for a young company that had only reached profitability in that same year to invest its innovation resources in new business models rather than stick to its core, but within five years the site used by Amazons web-services platform had grown into the seventh-largest in the world. And Amazon kept going. In late 2007, it set up Lab126, whose first product, the Kindle e-book reader, came to market wrapped in a business model not only foreign to Amazons DNA but also potentially disruptive to the entire publishing industry. To launch this high-margin, product-based offering, Amazon had to become an original equipment manufacturer (OEM). It wrapped this technology in a seamlessly integrated iTunes-type digital media platform that combined both transaction- and subscription-based content delivery. It partnered with content producers in innovative ways and created an open back-end that allowed independent publishers to generate new content for the Kindle. In its first year, Amazon sold an estimated 500,000 Kindle. Amazon has greatly expanded the market for e-books and positioned itself for success not only in this market but in newspaper and periodical distribution as well. Amazon at its roots is built to transform. When it finds opportunities to serve new customers, or existing customers in new ways, it conceives and builds new business models to exploit them. Amazon has the unique ability to launch and run entirely new types of businesses while simultaneously extracting value from existing businesses. Amazons journey forward will likely be marked by a series of transformations, as it continues to pursue its vision unafraid of white space, business model innovation, or renewal. To be built to transform requires the courage to focus on delivering value for the customer first. Identifying value begins by thinking of an important un-served or underserved job that customers want done and then coming up with a well-defined value proposition to address that job, however foreign to your current offerings that may be. If you want to continuously revitalize the service that you offer to your customers, you cannot stop at what you are good at, says CEO Jeff Bezos. You have to ask what your customers need and want, and then, no matter how hard it is, you better get good at those things. With a well-defined customer value proposition serving a focused, well-articulated job, business leaders and project teams can work together to design the appropriate profit formulas, key resources, and key processes the company needs to thrive. Business Strategy of Amazon. com The strategic intent of Amazon is to become the number one choice of the online shopping for their shopping needs. Their website has been made to provide more convenience for customers who wish to buy certain items right away rather than wait for the delivery. Amazon can now direct their customers to local stores that presently have the product in inventory. Consumers need not call all the local stores and tolerate taped messages and long waits to find a product. Even such Internet pure-play firm as Amazon, through its partnership with Borders, for which it provides website operations, can direct customers to the nearest Borders store offering the desired product. Customers need only provide a zip code. Integration of physical stores and online operations can also lead to greater efficiencies. The strategy of the company uses the Internet and took advantage of its capability to reach more clients. Furthermore, Amazon strategic intent is to provide more options for their clients by partnering with other international and local suppliers. The company also diversified their offerings to different products, services, categories and other physical assets. The company’s strategic intent is to sustain their competitive advantage by compelling what the needs and demands of their target market and expanding their business portfolio in the global market. The company’s strategic intent is to do their business in a slow but sure manner by becoming innovative in what they are offering for the customers. Another strategic intent of Amazon is its goal to be recognised and respected as a global bookstore and online shopping brand and to dominate the global market through their high quality product and service offerings. The advertising and marketing strategy of Amazon have been focusing on how the products would gain interest from their target market and how they can be able to generate sales with their products. This is Amazon’s stronghold where it continues to yield strong sales revenue by leveraging off its excellent online shop in different locations, such as in UK and other country, strong brand name and excellent reputation among customers. Amazon has also been continuing to create affiliate websites to expand their business market among various consumers. About the business approach and strategies of Amazon it can be said that the company has been able to continue to grow and expand their business in the online market. Amazon has been able to use various strategies which enable them to sustain their competitive position in the global market. Amazon strategy includes differentiation approach and innovative approach. In doing so, the company has been able to have a sustainable focus on their core business values ensuring that their goals, objectives and mission are achieved. In addition, the company has been able to sustain good relationship with its target market and all other stakeholders and the company -focus itself on atisfying the costumers by providing them quality products and services in the online. The ability of the management to manage their financial resources and limit their expenses to sustain their needs for expansion has also been considered as one of the capabilities that sustain their competitive advantage. The strategies used by the Amazon include Intensive strategy, which aims to competently position and promote their products and services in the online market. The industry has also utilized the Integration strategy and forward integration in order to promote and closely manipulate where all the Amazon products and services are being sold. To improve financial performance, the company sees to it that they utilize all their resources in a manner that will be beneficial to enhance the performance of the company. The ability of the company to expand their business is through their flexibility and innovation which enable Amazon to counter the risks of erosion and losing of their competitive advantage. In order to cope with the various influences and effects of market environment changes, and to sustain their competitive advantage, the management of Amazon has been able to improve and expand its organization so as to conduct business operations and activities on a global scale which include the expansion of Amazon through the online presence of the brand in different parts of the world and by making specific websites as well as considering merging and acquisitions. The e-commerce business model has been widely used by Amazon. om since the year 2001, but the application of this model has started to spread up to this time. Instead of selling the products directly, Amazon. com nowadays is doing the process of selling their monthly or yearly access to products and services. As a result, the company is able to convert a one-time sale of a product into a recurring sale of a service. Amazon. com benefits from this strategy because of the fact that they are guaranteed of a constant revenue stream. The Company regards its patents, copyrights, service marks, trademarks, trade dress, trade secrets, proprietary technology and similar intellectual property as critical to its success, and relies on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with its employees, customers, partners and others to protect its proprietary rights. For the most part, Amazon has earned a reputation for strong service by letting customers get what they want without ever talking to an employee. Sales clerks are nonexistent. Orders ship with a few mouse clicks. Packages arrive on doorsteps quickly. It all happens with monotonous regularity even as the number of customers has doubled in the past five years to 88 million. Outsourcing StrategyAmazon. com has purchased majority of its products from two major wholesalers, Ingram Inc. , and BT, which enabled Amazon. com to have less, inventories and reduce internal overhead such as operating expenses. Strategic PartnershipAmazon. com has established long-term relationships with Internet companies to become a premier merchant on the Internet: America Online, Yahoo! Excite, Netscape, Geo Cities, AltaVista, @Home, and Prodigy. Compelling ValueThrough the innovative use of Internet technology, Amazon. com was dramatically able to lower the price and provide enhanced selection, high-quality content, a high level of Consumer service, and personalized service. Active AdvertisingAmazon. com has spent a large portion of its expenses to strengthen the brand name. For th e years ended 1995, 1996, 1997, the company incurred advertising expense of $30,000, $3. 4 million, $21. 1 million, respectively. Porters Five Forces Threat of new entrant: Low However, threat of new entrant remained low in areas where it is very costly to set up similar information system because of the underline technology that is fortified by innovation making it rather unique. This is particularly true by looking at Amazon. coms One-click shopping technology where Amazon. com has patented it to deter their competitors from copying the technology. Amazon. com has also brand recognition in selling books online thus this would make it rather difficult for other competitors, namely Barnes and Noble, to enter to the online business. This is true because Amazon. om has successfully create an awareness among the public where buying books online would be linked to Amazon. com. Bargaining power of buyer: High Bargaining power of buyer remained high because there are a wide variety of choices to purchase any given books from various sources. Intense competition from various sections of Amazon. coms business has prompted them to price their product competitively. These products encompass books, music, electronics and much more. Bargaining power of supplier: Low However, bargaining power of supplier in Amazon. coms online book sector is relatively low. Their power is low because Amazon. om has opened five new automated distribution centers in the US to lessen dependence on their main distributor. In this case, Amazon. com has become lesser dependence from Ingram that is their main distributor in the US. Threat of product substitute: High Threat of product substitute is very high in Amazon. com online business. Physical bookstores have an established brand name in their brick-and-mortar business and customers might not be comfortable buying books online. A more competitive competitor that might be able to offer better services and prices that would be able to substitute Amazon. coms products. However in this case, Amazon. oms One-click shopping might provide some form of switching cost to the customer. Industry rivalry: High As the result of h uge and wide presence of competitors, namely physical bookstores and other online bookstores, Amazon. com faces high industry rivalry in their online book business. Established bookstore have cause intense rivalry in this industry because they have the advantage of a larger and well established customer base, greater brand recognition and brand awareness and wider selection of books. The entry of established bookstore into the online arena has further increase industry rivalry in this sector. Amazon. com also faces intense rivalry from their online music sector. RD and Technology in Amazon Amazon. com’s commitment to research development activities has always been one of its top strategies to remain competitive in the market. The Companys objective is to become the best place to buy, find and discover any product or service available online. Amazon. com will continue to enhance and broaden its brand, customer base and electronic commerce expertise with the goal of creating customers preferred online shopping destination, in the United States and around the world. It can be said that Amazon’s resources and capabilities can be divided in the management of the company specifically their leader which is Bezos, the ability of the management to effectively use strategic supply chain management and aligning it with their business process and information technology, their competitive advantage in the online market, and the financial resources that it gains through its successful approaches. The management of Amazon has also been able to focus on their research and development department and to initiate innovative strategies designed to provide a competitive advantage and edge in the marketplace. As business gravitates towards a global scale, entrepreneurs find themselves faced with the challenge of producing new and better products at reduced cost and market price. Daft (2003) pointed out that in managing a global environment, managers of Amazon must be characterised by the ability to bring about change through innovation and creativity. Further according to Daft, a revolutionised manager sees change, rather than stability, as the nature of things (2003). Innovation as a ground for doing business in the 21st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors. Through the marketing of differentiated products originating from their research and development activities, Amazon. com is able to create its own firm-specific advantages. The continuous pursuit of research and development processes enables the company to sell a steady stream of originally differentiated products which makes it difficult for competitors to find substitutes. Because of this differentiated approach, Amazon. com is able to market their products worldwide, which enables them in turn to maximize the returns on research and development expenditures. The Company has implemented numerous site management, search, customer interaction, recommendation, transaction-processing and fulfillment services and systems using a combination of its own proprietary technologies and commercially available, licensed technologies. The Companys current strategy is to focus its development efforts on creating and enhancing the specialized, proprietary software that is unique to its business and to license or acquire commercially developed technology for other applications where available and appropriate. The Company uses a set of applications for accepting and validating customer orders, placing and tracking orders with suppliers, managing and assigning inventory to customer orders and ensuring proper shipment of products to customers based on various ordering criteria. The Companys transaction- processing systems handle millions of items, a number of different availability statuses, gift-wrapping requests and multiple shipment methods and allow the customer to choose whether to receive single or several shipments based on availability. These applications also manage the process of accepting, authorizing and charging customer credit cards. Amazon. com Web sites also incorporate a variety of search and database tools. Systems administrators and network managers monitor and operate the Companys Web sites, network operations and transaction processing systems. The continued uninterrupted operation of the Companys Web sites and transaction-processing systems is essential to its business and it is the job of the site operations staff to ensure their reliability. The Company uses the services of five Internet service providers to obtain connectivity to the Internet, both domestically and internationally, over multiple dedicated lines. Click Technology. Amazon. com provides customers with a streamlined ordering process using 1-Click technology. If a customer has previously activated 1-Click functionality, a customer can place an order by clicking one button without having to fill out an order form. The customers shipping and billing information is automatically referenced on the Companys secure server. Secure Credit Card Payment. Amazon. com utilizes secure server software for secure commerce transactions. It encrypts all of the customers personal information, including credit card number, name and address, so that it cannot be read as the information travels over the Internet. Customers can select from a variety of delivery options, including overnight and various international shipping options, as well as giftwrapping services. The Company uses e-mail to notify customers of order status under various conditions and provides links to shipping carriers so that the customers can track their shipments. The Company seeks to provide rapid and reliable fulfillment of customer orders and to continue to improve its speed of availability and fulfillment. Return Policy. Within 30 days following the customers receipt of their order, Amazon. com will provide a full refund for any book in its original condition, any Amazon. om recommended book in any condition, any unopened music CD, DVD, VHS tape or software, and any other merchandise item in new condition, with its original packaging and accessories. Web site responsiveness, functionality and features, acquire and license leading technologies, enhance Amazon’s existing services, develop new services and technology and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. Due to the fact that technol ogy remained one of the core aspects in Amazon. coms business, Amazon. com should keep track of the fast changing technological environment. Example, advancement in any areas of IT systems should be adopted, if appropriate, and in turn guarantee timely response and quality of service to the customer that ensure total customer satisfaction in return. It would be preferable to stay ahead of competitors by embracing new technology to gain competitive advantage. Example of some of the technology that is unique in Amazon. com is their One-click shopping, email alerts, and much more. Amazon. com has also taken to the extent of patent their One-click shopping so that their competitors would be unable to copy this technology. Core Distinctive Competencies Unique to Amazon is its patent-protected software technology. This resource would surpass industry standards with benefit of securing the right to exclusively use and sell the developed innovation. Other close-rival firms may have strategic and innovative-like leaders with experience and knowledge of the industry but the value-adding capability that it can offer to customers would be amputated, if not, eradicated for use due to legal constraints. In a similar manner, large firms wanting to enter the industry would have large capital base and shareholder or public financing capable of pirating Amazon key employees or buying close competitors. However, without buying the whole company such seemingly unethical would not injure the competitive advantage of Amazon much because patents do not accrue to individual employees rather the company. As a result, stagnation or over-complexity of technology would be the long-term position of imitating rivals. The most prominent core competency of the firm would be its strategic plot of expansion though customer innovation. It has the costly-to-imitate financial and technological resource, valuable firm infrastructure, rare strategic leader and top management composition and non-substitutable software technology. These resource and capability combinations that possess the four criteria suggest that sustained competitive advantage is present to the firm’s patented innovation. Amazon. com has several core values which play a crucial part in the success of the company. One of them is excellent customer service based on extraordinary technology. The company provides various services such as book reviews from other customers and from staff. In addition, many featured books contained descriptions, snippets of reviews and interview posted by authors. Convenience and price is the second core value of the company. It sells books through Internet and has its own distribution system. Similarly, Amazon does not have to spend too much money on real state and other operation because it is pursuing Internet-based business. Thus, it can reduce its inventory expenses. On one hand, the company has several key resources and capabilities to meet the challenges presented by opportunities and threats. These resources and capabilities have thus far allowed the company to be the world leader in the special retail industry. Jeffrey P. Bezos, founder and chairman of Amazon since 1994, is the driving force behind the company. He is a valuable resource that gives the company the competitive advantage with above-average return. Amazon. com has also a very strong brand name presence in the online-retail market, which is primarily due to their successful exploitation of their ‘first-mover’ advantage. It would be able to leverage this brand name as it realizes its plans for expansion in the future. In addition, the technological infrastructure of the company also gives its competitive advantage against the other rivals. It can pen a new store which has different products very easily because its core shopping technologies are easily re-usable. On one hand, its website is elegantly designed, easy to navigate and quick to load. It also has numerous proprietary inventions like the click shopping, personalized recommendations and user rating which make shopping more pleasurable. The four strategies such as outsourcing strategies, strategic partnership, compelling value, and active advertising implemented by the company have contributed to its success in sales growth and cost efficiency. Information technology enables forms to pay more attention to what makes consumers different from one another. Focusing on such variation serves as the basis for positioning a brand as being highly intimate with consumers. Amazon uses customers’ purchase histories to make suggestions about additional books that they might enjoy. The system is based on detecting patterns in the purchase histories of other customers who have bought some of the same books as the target customer. Such automatic response systems are simply usage-based segmentation systems that capitalize on the firm’s database to create more customized communications than traditional mass media. Even though one can search online and find the identical book at a lower price than at Amazon. com, Amazon is the clear leader in selling books online. This is a combination of greater awareness of Amazon and unique value. Amazon built a customer-focused principle. It targets customers on a one-to-one basis through Internet-based services.