Analysis of Amazon in the UK - Term Paper Example

E-Commerce and E-Business Fundamentals Executive summary Current paper provides analysis of Amazon.com - worldwide leader of online business in the retail industry. The analysis aims at presenting majors technological enhancements as well as business strategy in order to consult on best practice to VG Jones - books, videos, DVDs and CDs retailer in the UK. To produce recommendations for the company and to improve its online presence, the report will first discuss the Amazon's website context of use, emphasizing characteristics upon which particular emphasis should be placed within VG Jones. A critical appraisal of the key characteristics of the competitor's web site is based upon the results of my analysis and is justified by the use of appropriate guidelines and other suitable techniques. The second part of the paper identifies and critically appraises the business models used by Amazon, its sources of competitive advantage and the technology used to facilitate this. 1. Analysis of Amazon.com Context of use Amazon.Com is a leading online retailer company, offering many different items such as books, music, DVDs, videos, toys, electronics, software, video games and home improvement products. They have an estimated 22.5 million customers in 150 different countries. Amazon was founded in July 1995 by Jeff Bezos in the state of Washington. With Amazon.com, customers can search at home a database of millions books, CD's, DVDs, videos, software, video games, lawn products and even a pan for your kitchen. If you find the item you want, just add it to the shopping cart and then is needed to fill out an online form to specify the type of payment, shipment characteristics and even if it's a gift, the type and color of wrapping paper. Also today it is possible to access used and collectible items through their Shops and Amazon Commerce Network or going to Amazon Auctions or sothebys.amazon.com (Press release Amazon.com and Borders Group Announce Strategic Alliance, 2006). Amazon.com is rated as a company in the Internet software and services industry into the technology sector. The most important competitors for Amazon.com are E-Bay (on-line auctions and retail sales), Barnes and Noble (books sales and other products) and CDnow (on-line music retailer). They are also a Bricks and Mortar store, which E-Bay is not. Since 1998, Amazon.com has started expanding their operations. This allowed Amazon.com to purchase several small and medium Internet companies in order to help build a larger customer base. In the US market the most important part of growth has been the introducing new products and services besides the normal books, videos, and music. This goes right along with the company goal of being the place where customers can search and buy anything they may want on the Internet. Amazon.com has reached that goal and is visited and used by many. Page layout and navigation The structure of Amazon.com is most certainly representative of a great marketing effort on the part of the company. Amazon.com has a myriad of different marketing concepts which aid to the increased consumption and popularity of this great organization. With thirty-six product categories offered on the website, Amazon.com is bound to appeal to the consumer with its premiere marketing efforts and techniques Amazon.com's easy to navigate webpage and simplistic accessibility are both contributing factors to making it an outstanding website for internet novices and experts alike. From the moment you arrive at Amazon.com you are greeted with a laundry list of the top sales and deals on various products which are currently being offered. A couple clicks of the mouse and you are on your way to saving money with bargains that only this particular website has to offer. Amazon.com's ability to convey their numerous products through their website with discounts exclusive to Amazon.com is undoubtedly a great marketing effort. Amazon.com realizes consumers will be more apt to purchase items if they are discounted and money can be saved. Further savings can be accumulated with the purchase of Amazon.com Visa card which grants the individual $30 back after your first purchase as well as up to 3% rewards. This offer is a great marketing benefit for both Visa and Amazon.com. Further enforcing the aforementioned marketing concept of sales and discounted pricing, Amazon.com has separate deals of the day section where consumers can check out the products that are on sale for that day only. The advantage of this marketing effort is twofold. First, it encourages consumers to check back periodically with the website resulting in an increased percent chance which the consumer will make a purchase. And secondly, because the deal is only offered for that day in particular, it disallows the consumer to think it over and talk himself out of it. Time is of the essence and the consumer will be more inclined to make the purchase because the deal won't be available the next day. This is a smart maneuver on the part of Amazon.com and a brilliant marketing effort. Amazon.com implemented a drop down tabbed search which makes narrowing down the product of your desire that much easier. With categories ranging from home and garden, toys and kids, clothing and accessories, and consumer electronics just to name a few, Amazon.com allows the consumer to find more of what they are looking for in less of the time. Listed underneath each category are sub categories allowing the consumer pin point the exact product they wish to purchase. Amazon.com also has a search function at the top of the page to guarantee precise results after conducting a search. This type of expedited shopping allows the consumer to buy more in less of the time is a great marketing on the part of Amazon.com Also on the top of the website, Amazon.com has a link directing the consumer to be able to purchase gift certificates for special occasions such as birthdays and holidays. This is a great marketing effort because by purchasing a gift card it enables consumers to spread the word of Amazon.com to the recipient of the card. Word of mouth can be a powerful thing and through gift certificate offerings, Amazon.com captures this marketing technique and increases it's ever so popular list of consumers. Customer favorites are another category on Amazon.com. Customer favorites allow the consumer to view the personal preferences of the majority of other consumers. This feature can aid in the purchase of the products listed because it peaks the consumers interest. The consumer figures that the products listed in this category are other customer's favorites for a reason, and will directly influence an increase in the purchases of those products. Additionally, Amazon.com has a top seller's category. A top seller's category allows the consumer to view the products that are most popular amongst other consumers. This feeds into the theory of everybody wants what other people have and will persuade the consumer to make a purchase from this category because they won't want to feel left out. After you have located your particular product and selected it for purchase, Amazon.com takes you to a screen where you can view related products to the one you have selected. This list is compiled of the products that likeminded consumers also purchased in addition to the one which you have chosen. A list such as this can bring consumers with the same tastes and preferences together to make shopping what you look for that much simpler. Technology growth through business growth Growth is core to Amazon.com's business strategy, and that has had a significant impact on the way they use technology: growth through more categories, a larger selection, more services, more buying customers, more sellers, more merchants, and more developers, increasing the different access methods, and expanding delivery mechanisms. The impact has been on many areas: larger data sets, faster update rates, more requests, more services, tighter SLAs (service-level agreements), more failures, more latency challenges, more service interdependencies, more developers, more documentation, more programs, more servers, more networks, more data centers. A large part of Amazon.com's technology evolution has been driven to enable this continuing growth, to be ultra-scalable while maintaining availability and performance. The biggest success has been that Amazon.com has become a platform that other businesses can benefit from. Making Amazon.com a general platform for e-commerce operation has been made possible through their advanced technology investments and it has become a major success. Making Amazon.com available through a Web services interface to any developer in the world free of charge has also been a major success because it has driven so much innovation that they couldn't have thought of themselves. One of the biggest challenges is developing at large scale, i.e. making sure that developers are productive in this large distributed SOA, making sure that all the pieces work together as intended, now and in the future, testing in an environment like Amazon.com. These are very hard questions, and Amazon.com has no simple answers. Testing in a very large-scale distributed setting is a major challenge. Current Systems Analysis Amazon.com has selected HP to provide the highly available Web infrastructure required to power one of the world's busiest e-commerce sites. HP servers help Amazon.com build the most reliable and secure shopping experience online. The servers deliver high availability, scalability and mainframe-class performance needed to support its e-commerce business. HP's Internet computing platforms are designed guarantee the availability and performance of the entire hardware and software environment from end-to-end and across all points of the transaction stream. Strict service orientation is an excellent technique to achieve isolation; you can come to a level of ownership and control that was not seen before. By prohibiting direct database access by clients, Amazon.com can make scaling and reliability improvements to their service state without involving clients. Each service has a team associated with it, and that team is completely responsible for the service- from scoping out the functionality, to architecting it, to building it, and operating it. Many services are directly customer-facing in Amazon.com retail applications. Take a simple service such as sales rank; there is an attribute on most product pages that indicates what the sales popularity of that product is in its category. The Listmania service produces specialized that that on almost every page is adapted to the specific product on that page and the history of the customer. This is a case where there is an important direct interaction between the developers of the service and the retail customer. Amazon.com is a very advanced e-commerce platform on which anyone can become a retail partner and instantly benefit from all the platform functionality that has made Amazon.com so successful. The Amazon.com technology and data is available through the AWS (Amazon Web Services) e-commerce services. This is a free Web-services interface for developers, which they can use to build (and charge for) their own applications on top of Amazon.com. There are about 150,000 of these developers and Amazon.com considers them important customers (Brynjolfsson, Smith, 2005). Information Security Analysis There are almost as many definitions of privacy and information security as there are users on the Internet, security refers to the controls (including authentication, authorization, confidentiality, integrity and availability) applied to electronic data, and privacy refers to the controls (including confidentiality, integrity and authorization) applied to personal data associated with an individual data subject. Amazon.com work to protect the security of customers information during transmission by using Secure Sockets Layer (SSL) software, which encrypts information customers input. Also Amazon.com reveals only the last five digits of customers credit card number to the appropriate credit card company during order processing (Homburg, Workman, Jensen, 2000). Amazon.com site includes third-party advertising and links to other websites. Amazon.com does not provide any personal identifiable customer information to these advertisers or third party websites. These third-party websites and advertisers, or Internet advertising companies working on their behalf, sometimes use technology to send the advertisements that appear on Amazon.com website directly to customer's browser. They automatically receive customer's IP address when this happens. They may also use cookies, JavaScript, and other technologies to measure the effectiveness of their ads and to personalize advertising content. Amazon.com does not have access to or control over cookies or other features that they may use. Using 1-Click ordering is secure, even on Amazon.com's standard server, as the only information sent pertains to the items customer wants to order. Since Amazon.com already has customers' account information on file, no sensitive information is transferred. Amazon.com knows that customers care how information about them is used and shared, and appreciates their trust that Amazon.com will do carefully and sensibly (Homburg, Workman, Jensen, 2000). 2. Amazon Business Strategies From "Earth's biggest bookstore" to "everything to everybody" to "Wall Mart of the Internet" to "World's most customer-centric company", Amazon has been tagged with these kind of labels by its customers and followers. The reason for these many labels is because of the Amazon changing business model. Starting from Single-product, customer centric and an intermediary with little inventory in 1995-1997 to Multi-product, profit-making, Client-centered, investor, Services provider in 2000. Amazon has been changing its business model according to market conditions. One indication of a smart company is to continuously change its business model; it is an indication of smart company and ultimately the smart management team. It is also an indication that the company is learning and adopting itself to the external and internal environment (Cravens, Merrilees, Walker, 2000). Since its beginning, Amazon has adopted various e-Business model to increase its customer base and recently set its focus on making profit. Given below are the strategies adopted by Amazon. Expertise and scaling Amazon has a track recording of first gaining expertise in the market and then scaling into other areas. For ex. Amazon started with a web-based bookstore model and after gaining expertise in various operations expanded to other segments and geographies. Another example is, after capturing the US market; it expanded its business to Europe- U.K, France and Germany and then to Japan. One advantage of this approach is that the incremental costs to expand the business, whether to multiple product line or geographically are small. This strategy of perfecting before scaling helps in long-term survival and growth of the company (Merrilees, 2002). Customer Focus Since it's beginning, Amazon has always kept focus on the needs of its customer and never lost sight of it. This gives Amazon a strong foothold of the internet retail business. Playing on this customer strength, Amazon has struck deals with industry leaders retailers Toysrus.com, Borders, Drugstore.com, and Target to help them draw customers to their Web sites, thereby giving birth to its services segment. Amazon is playing on its strength here and in the process creating a place for itself as a provider of e-tail services (Press release Amazon.com and Toysrus.com Announce Strategic Alliance, 2007). Cooperative model Under this model, the partners do not compete with each other and try to lessen each other risks. This cooperation represents a symbiotic relationship, where the two partners do what they do best while depending on each other to eliminate respective weaknesses (Dann, Dann, 2001). On August 10 2000, Amazon and Toyrus announced a strategic alliance. According to the press release by Amazon. The two companies have entered into a strategic alliance under which each company will assume responsibility for specific aspects of the toy and video games and baby products stores. Toysrus.com, in collaboration with its majority shareholder, Toys "R" Us, Inc., (NYSE: TOY), will identify, buy and manage inventory; Amazon.com will handle site development, order fulfillment, and customer service, housing both Toysrus.com's and its own inventory in Amazon.com's U.S. distribution centers. This alliance helped Amazon in eliminating its inventory risk, as it does not have to purchase or store any toys until the customer have ordered and paid for the goods. Competitive Model Under this model the two parties act as provider and customer. Both the parties compete with each other but one party tries to lessen other risks and in return gets the share of others business (Cravens, Merrilees, Walker, 2000). On Apr 11, 2001 Amazon and Border announced strategic alliance. According to the press release by Amazon on Apr 11, 2001, Amazon.com will be the seller of record, providing inventory, fulfillment, site content and customer service for the co-branded site. The new site will continue to offer content unique to Borders.com, including store location information and in-store event calendars. In this case Amazon will continue to sell books on its own, but will also provide services to Border. In return Amazon will get a share of every sale by Border. Conclusion As we have seen that Amazon has employed various model to reap the benefits of its strengths of wider customer base. Amazon.com's B2B strategy has three variations: be a cooperative online channel (ToysRus); be a co-opetitive online channel (Borders); be a click and brick channel (Circuit City). While similar from the outside, each model is actually quite different from the inside in terms of the technology, fulfillment processes and customer experience. It is simply amazing that Amazon's technology platform can support all three models concurrently. One of the most important things Amazon will have to look for is that it should not loose the sight of its customer and tries to widen it market presence by entering into strategic alliances with market leaders. Amazon management has learnt from its past mistakes and has tried to rectify them. That's why it is still one of the most favorable sites for online shopping. References: 1. Amazon.com Apr 11 2006. 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