Amazons Difficulties about Human Resources and How They Solved It - Case Study Example

AMAZON’S DIFFICULTIES ABOUT HR AND HOW THEY SOLVED IT AND THE STRATEGIES ABOUT HR By Location Amazon’s difficulties about HR and how they solved it and the strategies about HR Introduction Managers face many problems when entering new marketing environments which they have little know-how or experience about their demand as well as other conditions. They are always uncertain of the effects of their firm’s competitive strategies on its value. One of such marketing environments where managers face challenges entering is e-commerce environment. There is a rapid increment of the number of firms operating in this marketing environment, and therefore, for a firm to enter it, its managers should have an understanding of the marketing strategies that can work well in this environment and that cannot. To highlight the impacts that e-commerce strategies have on the value of a firm, this paper analyses that the strategies that were used by Amazon.com, which is currently the leading online retailer. The paper focuses on six marketing strategies that are mainly used to enter online environment: (i) pricing, (ii) promotional activities, (iii) offline customer services and distribution expansion, (iv) expansion of product line, (v) foreign expansion, and (vi) service improvement. Amazon’s difficulties about HR Amazon.com started as an online book retailer in the year 1995 and in the year 1997 the company went public. After a few years, the company launched its first music store. Amazon is currently the leading internet retailer offering a variety of goods [and services to online shoppers. However, the firm’s HR faced various problems while entering this new marketing environment, forcing it to adopt sound marketing strategies that have contributed towards its growth and development. For instance, for Amazon to reach where it is today, its management had to implement competitive strategies to overcome the competition from its early rivals, which included BarnesandNoble.com, CDNOW, and N2K. Amazon operates as an online retailer. The online industry has a higher growth rate compared to other industries and has no concentration. The products that the company offered were not significantly differentiated from those of its competitors and this posed difficulties to its Human Resource. Another challenge is that the online switching costs are always low. In general, for a firm to enter e-commerce environment, it must be ready to face a number of difficulties since the overall competition in this industry is relatively very high compared to other industries. On top of that, customers in this industry have a relatively higher bargaining power. Therefore, the threat for new participants is very high, since establishing an online company is easy. Threat of substitutes is also very high since customers can shift to other brick and mortal firms over online firms. Suppliers bargaining can also be high, although this depends on the type of products that a company specializes in. Such challenges indicate that online retailers have low profitability. Amazon has been operating in a very competitive environment and it is due to stiff competition that led to the decline of the firm’s value in the year 2001. As mentioned earlier in this paper, Amazon.com became more familiar with the year 1997 and in 1999, its value was 61.70 times its first trading day’s value. However, by the end of 2001, the value of the company declined to 6.26 times. These are some of the difficulties that the firm’s Human Resource faced while entering the e-commerce marketing environment. However, the company has always remained the leading online retailer staying ahead of its rivals in terms of value and there is none of its competitors that has performed as well as Amazon.com. This is evident when one compares the company’s market value with the value of other firms on their IPO dates. None of its early competitors that has achieved its market value success. The key strengths that enabled Amazon’s HR achieve a competitive advantage include quality brands and quality customer service and relationship. Most customers perceive the Amazon.com to be reliable, an aspect that is very significant for online marketing and retailing. Although Amazon.com was founded specifically as a book retailer, the company later expanded its operations and started offering other products. The firm currently provides other online retailers with a free online space. This is a long-term viable strategy that will keep the company in the industry for a long time. The firm does not incur any costs because it does not manage its subscribers, it only rents online space. A large group of subscribers are attracted by this model because the firm allows them to reach out a large population of customers as well as taking advantage of the company’s name (Amazon.com). The strategies used by Amazon.com allow it to accrue revenues at higher margins compared to that of its competitors. However, for instance, the commerce network strategy is risky because the firm serves as a venture entrepreneur. The long term success of this strategy stems on the success of the partners who participate in the program. In addition, due to the difficulties the Amazon’s Human Resource faced, it decided to increase its distribution channels. The change allowed the company to improve and increase its customer services the main focus of Amazon. Increasing distribution channels enable the company to lower the cost of sold goods. The strategy allows the company to expand its customer based thus indicating that it can be viable for a long duration. Aspects of Human Resource involved in the change In the e-commerce marketing environment, the main strategy that brought about the change to Amazon.com was increasing the company’s sales volume. In the early days, companies believed that increasing their sales volumes was a very vital step. Therefore, most of the strategies used in marketing were mainly to increase the population of customers visiting their websites. Promotional advertising and alliances were among the main Human Resource devices that were used by companies for attraction of visitors. Promotional alliance is a combination of both promotion and advertisement contract with prolonged relationship. Internet provides several links to a company’s website, thus promoting the firm’s goods and services. A good example is the early alliance of Amazon.com with Yahoo.com which is the leading search engine company. Yahoo used to provide direct links to any Amazon.com related text book from almost all yahoo search results. Yahoo invited visitors to buy Amazon.com books related to the things there were searching for. The main aspect of Human Resource in order to ensure this strategy was successful was ensuring that all employees in the company were highly trained. This aspect positively affected the Amazon’s change. Highly trained employees were able to use the new forms of technologies, which were the key to successful change (Gennotte and Brett 2006, P. 667). Since technology is the backbone of all online operations, for an organisation such as Amazon.com, employing highly trained employees in the field of technology highly contributed towards the company’s growth. The highly trained employees contributed a lot in advancing the promotional advertising and alliances change strategy (Rajgopal, Mohan and Suresh 2003, p. 136). The main benefit of the involved activities is that they increase brand awareness thus attracting a large population of customers. Hiring trained employees also helped the company implement strategies that increased its sales volumes as well as achieving a competitive advantage (CA). Such strategies that are discussed in the case study include, (i) pricing, (ii) promotional activities, (iii) offline customer services and distribution expansion, (iv) expansion of product line, (v) foreign expansion, and (vi) service improvement. Hiring trained employees was essential for Amazon’s change and success. Trained employees were crucial towards the company’s change because they were able to effectively use the new technology, ensured the firm’s competitive edge in the e-commerce market, improved profitability and productivity, and created career development opportunities as well as personal growth (Hand 2001, P. 296). This aspect of HR also improved the firm’s competitive strategies. Most of the competitive strategies that are designed to increase the number of customers draw a portion of the customers from competitors. Amazon.com implemented quality, competitive strategies, drawing a large portion of customers from its customers and currently it is among the leading online retailers that have a large number of online visitors (Ocasio 2007, p. 188). Another main problem that firms face when trying to join the e-commerce marketing environment is being unaware of how customers value certain goods and services that they introduce. This is one of the basic problems that negatively affected Amazon.com although it later identified a sound strategy to overcome this challenge (Hand 2001, p. 67). As a result, many mistakes are likely to occur and the firm’s HR observed many initiatives that could lower the value of the company. In addition, some of the initiatives have no or little impact on the value of a company. Hiring trained employees enabled the firm to determine whether it should focus advancing its current products or expanding into other unrelated activities (Bettman, James and WhanPark, 2010, p. 245). It was also the role of HR to determine whether the firm was to partner with other companies or operate on its own. For instance, Amazon.com decided to partner with Yahoo.com, a strategy that increased its brand and service awareness, thus attracting and grabbing a significant portion of customers from its competitors (Brown & Morgan 2006, p. 78). Amazon.com achieved its success by focusing on service improvement and product line expansion programs that involve alliances and acquisitions separately. Another aspect of HR that enable Amazon.com go through its change successfully was quality evaluation of employees’ performance. The change that Amazon.com went through was mainly set to increase its sales volume. Evaluation of employees’ performance enabled the company to successfully implement the change strategies that are mentioned in the case study. These strategies include (i) pricing, (ii) promotional activities, (iii) offline customer services and distribution expansion, (iv) expansion of product line, (v) foreign expansion, and (vi) service improvement. Evaluation of employees’ performance is very essential towards an organisation’s growth and development. The main purpose of employee evaluation is measuring job performance. Conduction of employee evaluation at Amazon.com provided the management with quantitative measurements that are essential increment of the company’s sales volume and attraction of new customers. It also provided the management with metrics that regard employees’ performance quality (Henderson and Will 2007, p. 67). This also enables the company to whether a certain employee has skills that appropriately matches his or her responsibilities. Ensuring high skilled employees through performance evaluation enabled the company to expand its product line thus improving the firm’s value. The results of the case study indicate that Amazon’s HR adopted quality employment strategies to ensure that the company had qualified employees who could understand and implement the above mentioned strategies successfully (Zaheer and Akhar 2001, p. 859). For instance, the competent employees brought new forms of technologies such as zShops and click ordering allowing other merchants adopt Amazon’s capabilities. These services generated and improved the value of the company through exploitation of its expertise for variety of products. Stock prices for online companies like Amazon fluctuates broadly for no reason. However, the results of the case study show that in an online market setting, the market makes response to information (Rajgopal, Mohan and Suresh 2003. p. 135). Since the reaction in the market provides firms’ managers with plenty of significant information, firms entering new e-commerce marketing environment should announce their strategies for competition, go public, and isolate the reaction of market to each one. Apart from evaluating employee performance, Amazon’s HR has enough information to value the company, which its competitors do not have. The HR managers of Amazon also made use of information gathered from market’s reaction to assist them formulate the firm’s future strategies. According to the entire discussion in this paper, managers pass through a learning process when entering new marketing environments. They gain a lot experience, make several mistakes, and get used to changes in the new marketing environment. The case study explored what can work and what cannot work in the new marketing environment, e-commerce environment. The lessons in the case study can be used in other new environments when managers are not aware of the impacts that some strategies can cause to their firm’s value. This paper can conclude that, firms should avoid investing more in foreign expansion, offline expansion, and price competition. Positive value only comes from service improvements and product line expansion.In addition, there are some aspects on HR that highly contributes towards change in an organisation’s value Conclusion In conclusion, all market playing fields come with new types of barriers. Implementation of the proper tools can help a company’s overcome these barriers. Entering e-commerce marketing environment is among the playing fields where new ventures face numerous problems. Appropriate e-commerce platforms and basic techniques can help new ventures in this environment overcome the barriers. Managers face many problems when entering new marketing environments which they have little know-how or experience about their demand as well as other conditions. This is evident in the case study whereby the results show that there are some strategies that can do well in entering online industry while other can worsen the situation forcing an organisation to terminate its new venture. There is an increasing number of firms operating in this marketing environment, and therefore, for a firm to enter it, its managers should have an understanding of the marketing strategies that can work well in this environment and that cannot. HR of firms entering this marketing field should ensure that they rely on the most appropriate strategies that will enable their firms compete with other online retailers. Bibliography Bettman, James R,andCWhanPark 2010, Effectsofpriorknowledgeonexperienceand phase ofthechoiceprocessonconsumers’decisionprocesses:Aprotocolanalysis,Journal of ConsumerResearch7 (December):234–48. Brown, J, & Morgan, J 2006, Reputation in online markets: Some negative feedback. Unpublished paper), University of California, Berkeley. Gennotte, G,andBrett T 2006, Thestrategictimingofcorporatedisclosures,Review of FinancialStudies9, no.2(Summer):665–90. 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