Amazon Utilizes a Unique Method in Delivering Books to Consumers, This Network Is Called Whispernet - Research Paper Example

?Amazon Utilizes a Unique Method in Delivering Books to Consumers, This Network Is Called Whispernet Table of Contents Overview and Current Status ofthe Company 3 Thesis Statement 4 Company Characteristics 4 Organizational Structure 5 Sales 5 Business Process 6 Leadership 6 Technological Sophistication 6 Strategies Employed by Amazon 7 Differentiation Strategy 8 Marketing Strategy 9 The Strategy for First Mover Advantage 10 External Opportunities of Amazon 11 Analysis of Amazon’s Telecommunication (E-Commerce) 13 Telecommunication Equipment Employed by Amazon 14 Use of Telecommunication (e-commerce) for the Advantage of Business 15 Recommendations 16 Summary and Conclusion 17 Works Cited 18 Overview and Current Status of the Company Amazon is considered as one of the biggest internet retailers internationally. Based in Washington, United States, the business of Amazon is expanded in Canada, United Kingdom, Italy and Japan among other nations. “Amazon.com” website was first launched in the year 1995, and presently is known as one of the popular websites in e-commerce (Environmental Investigation Agency, “Amazon.com’s Unpalatable Profits”). E-commerce has profoundly altered the mode through which people used to traditionally buy goods and/or services as well as conduct business activities. The major markets of e-commerce can be identified as United States, United Kingdom and Japan in the current scenario. In the e-commerce segment, Amazon faces competition from several players. In North American region, the major players of e-commerce apart from Amazon are Apple, Wal-Mart and Sears, while in Latin America, BuscaPe.com, Groupon.com, Mercado Livre, and UOL play a dominating role among other e-retailers. In European region, the major players are eBay, DailyDeal.com, Weltbild.com and CooleDeals.com among other websites. Similarly, in Asian region the major e-commerce players are 360buy.com, Suning.com and Meituan.com among other websites. As these websites also operate in similar segment, they tend to act as major competitors for Amazon (yStats, “Global B2C E-Commerce Players Report 2011”). Irrespective of several competitors in the e-commerce sector, Amazon has shown significant growth in terms of its business and revenue. Thesis Statement The paper aims to develop an unambiguous understanding towards the impact of e-commerce over the business functions of Amazon. The paper describes how Amazon has utilized e-commerce in several aspects of business in order to gain higher revenue. The paper also describes the strategies used by Amazon analysing the telecommunication approaches used by the company. Company Characteristics Historically, Amazon has tangled itself strictly with e-commerce trends and was successful in developing its business functions from mere book selling to an e-retailing company. By recognising the growth trend of internet, Amazon had commenced offering ‘virtual bookstore’ facilities providing opportunities to buyers to view books along with reviews before purchasing. Amazon commenced its operations online in 1997 with a vision to retail books with low-cost compared to other traditional book retailers. In 1998, Amazon expounded the product line from books to other items to strengthen its position in e-commerce (Pearson Education, “Introduction to E-commerce”). The mission of Amazon is to emerge as a customer oriented company and attain the leadership position in the online retailing market. Amazon’s objective is to satisfy the requirement and desire of customers in e-commerce segment. It is the goal of the organisation to increase the efficiency and productivity of business and turn into a preferable website for online shopping of books along with other products. Organizational Structure Presently, Amazon follows the virtual organisational structure which is a modern form of business introduced in the 21st century. As a virtual organization, Amazon possesses a widespread geologically dispersed work culture, empowered by innovative telecommunication systems and Information and Communication Technology (ICT). Because of virtual organizational structure, Amazon has been able to attain higher efficiency, adaptableness, flexibility, agility and strategic attractiveness in the market which can be regarded as competitive advantages attained by the company (Sia, “Virtual Organizations: the Business Design for the Twenty-First Century”). Sales Due to e-commerce implementation, Amazon has experienced remarkable growth in its business operations. In the year 1997 the total revenue of Amazon was recorded to be almost US$150 million which has increased to US$3.9 billion by 2002 (Krishnamurthy, “A Comparative Analysis of eBay and Amazon”). Amazon was established by Jeff Bezos, who is presently the president of Amazon. Bezos have concentrated on online retail business by envisioning the massive growth of internet usage among people. Amazon has instigated its business operation as an online bookselling company, and has been able to gain efficiency in marketing other products as well such as music, videos, electronic items, applications and games among other products (Krishnamurthy, “A Comparative Analysis of eBay and Amazon”). In the year 2004, Amazon gained sales revenue amounting to US$6.92 billion, developing itself as one of the top 400 e-retailing companies globally. In 2009, Amazon had almost 49 million customers who actively used the e-commerce facilities (CBS Interactive, “Amazon: E-Commerce Success Story”). Business Process The business process of Amazon focuses on cross selling and high margin sale which can instantly augment its short-run income and profit. Besides, Amazon also focuses on reducing the rate of sales and operational expenditures. The mission of the company is to develop a place where customers can search for their desired commodities and accordingly purchase them through online cost advantages. The value proposition of Amazon is to provide the customers with a variety of choices in a single combined package (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Leadership Amazon has strong leadership in the internet based book retail market. In the year 1997, Amazon had captured almost 75% of internet book sales. Amazon has also been able to attain a leadership position in other e-retail segments by marketing other consumer products (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Technological Sophistication Amazon’s technology strategies consist of modern tools which are developed by ‘oracle database server’. Additionally, Amazon uses “Enterprise Resource Planning” system in order to improve its business performance. The company has developed its own tailored e-commerce system such as attractive website, efficient order management system, XML oriented marketing and advanced product search application program. Contextually, Amazon has efficient ‘Customer Relationship Management’ (CRM) package comprising ‘one-to-one’ personalization and cooperative filtering. The ‘order management system’ of Amazon is also effective which performs in synchronization with ‘Supply Chain Planning Optimization’ (SCPO) system and ‘Decision Support System’. These technology aspects help to provide instantaneous custom-made purchasing experience and hence increase the level of customer satisfaction (Digital 4Sight Corp, “Customer Fulfillment in the Digital Economy Amazon.com”). Strategies Employed by Amazon Amazon can be identified to heavily invest on ICT by providing strong emphasis on software attributes rather than hardware advancements in order to empower customization. The central value proposition of Amazon is to provide greater accessibility of products while purchasing along with the benefit of a wide range of product categories to the customers. As Amazon intends to operate as a customer oriented company, its strategies focuses more on features such as browsing capabilities, searching functionalities and other personalized services. The key for accomplishing competitive advantages in the e-commerce sector is to develop a unique strategic positioning. In Porter’s Generic Strategies, Amazon follows the differentiation strategies of business (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Differentiation Strategy Being a part of its differentiation strategy, Amazon has developed automatic completion centres; ‘customer service centres’ and storerooms facilities, allowing quick reaction to the demand of customers and time efficient delivery system. Apart from that, Amazon has also formed contract with outsourcing associates such as Federal Express in order to manage transportation and distribution activities more efficiently. Due to its improved infrastructure in e-commerce, Amazon has been able to cope up with high number of customer orders, preserving its persuasive image in the e-retail market. Amazon has efficient ordering system which has provided the company with quick ordering service facilities and a secure transaction structure. The time efficient ordering system helps the company to acquire the information of customers which can be used for future buying. Amazon also provides its customers with the opportunity to view the contents of book and also search contents inside a book maintaining a similarity with the traditional mode and thus render higher satisfaction to its customers (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Amazon has further simplified the procedure of business transactions by better management of payments and deposits which assist the company to increase the amount of sales. Contextually, Amazon also follows the growth strategy by diversifying the business into other segments. For instance, in the year 2004, Amazon was identified to enter the retail jewellery market (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Amazon is considered as the innovator of “customer fulfilment network” strategy in e-commerce which offers real dynamic trade and customized marketing experience to its target customers. The dynamic and smart personalization guarantees appropriate balance between the demands of customers with the satisfying ability possessed by Amazon. Amazon also uses virtual incorporation in its business process which certifies synchronicity by providing intelligent and lucrative order fulfilment (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). Marketing Strategy The marketing strategies of Amazon are intended to fortify and widen its brand reputation and raise the number of customer visits at the company website. The marketing strategies of Amazon are also focused on inspiring customers to purchase numerous items and to encourage repeat purchases. Amazon has improved the purchasing experience of customers by developing customised web-pages, simplifying services, widening the scope for product selection, facilitating on-time delivery at an affordable price. Amazon uses numerous internet and traditional advertisement strategies in order to increase its brand awareness such as e-mail advertisement, direct marketing, television advertisement, and other offline marketing operations. Only limited numbers of companies use ‘one-to-one marketing’ such as Amazon, in order to reach to the potential customers though e-commerce. For instance, Amazon attempts to spend almost 24% of profit on advertisements so that it can attain a larger customer base (Casey and Carroll, “The Impact of E-Commerce Industry Turmoil on Amazon.Com: A Strategic Perspective”). Unions and Partnerships Strategy Amazon has also been engaged in numerous contractual agreements for differentiating itself from its competitors. To attain more profit, Amazon has made deals with retail chains such as Circuit City and Toys ‘R Us. The deals allow the retail chains to promote their products on the website of Amazon, fill order using Amazon’s system and help Amazon to enjoy certain percentage of their sales. Thus, the strategy proves to be effective in generating a win-win situation for both parties. Amazon has been significantly benefitted due to unions and partnership with other companies with the intention of attaining the higher revenue as well as a substantial increase in its brand reputation (Casey and Carroll, “The Impact of E-Commerce Industry Turmoil on Amazon.Com: A Strategic Perspective”). The Strategy for First Mover Advantage Amazon can be perceived to attain the benefits of becoming the first mover in the field of e-commerce in its strategic performances. Notably, it is the first organization which provided customers the facilities of online book purchases. The first mover advantage helped the company to achieve remarkable brand acknowledgement. However, the actual benefits arrive from Amazon’s constant innovation in the e-commerce field. In the year 2000, Amazon had developed an ‘Associates Program’ on the book services which was principally focused on the creation of automatic recommendations on the basis of buying trend of customers. Amazon had also developed ‘one-click ordering’ system which has been widely considered as unique in the field of e-commerce. As a leader in using exclusive technology throughout the business, Amazon has developed its web services towards better customer interaction, better transaction processing and improved customer services (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). External Opportunities of Amazon Nowadays, Amazon is considered as an online book selling organization, competitively progressing towards a leadership position in online e-retail segment where customers can access a wide range of products. In this regards, the market opportunity for Amazon appears high with a large variety of product categories such as books, music, toys and other household products (Larson, “Amazon.com Turning the Corner toward Profitability”). The emerging notion of m-commerce is carrying new experience for e-commerce and demonstrating that how easily customers can use different networks for purchasing and comparing different products or services. The astounding success of social networking (such as Facebook and MySpace) also demonstrates that people are becoming more comfortable with online activities. With the advancement of technology, the e-commerce practices are quite likely to enhance the experience of customers and bring new opportunities for Amazon (Preibusch and Fleckenstein, “Strategies to Achieve Market Leadership: The Example of Amazon”). E-commerce acts as a much greener substitute for traditional retailing necessitating low floor area and logistics as a part of the technologically supported business activities. It is expected that the emerging markets (e.g. United States & United Kingdom) of e-commerce will further expand in the future era. Besides, the penetration of e-commerce is also increasing in various developing markets (such as India & Brazil) (yStats, “Global B2C E-Commerce Players Report 2011”). This apparently indicates a larger growth prospect for the company in its global sphere. The customers of United Kingdom have been observed to incur huge spending on e-commerce activities. In the year 2010, the total spending by UK online customers was calculated as almost €1300 per capita (Interactive Media in Retail Group, “B2C Global e-Commerce Overview 2011”). Surveys depicted that the trend of buying books and apparel products online will gradually increase in near future. According to Nielsen survey in 2009, it was been found that 46% of international internet shoppers had purchased books through online (Nielsen, “Global Trends in Online Shopping”). Hence, these figures denote the increasing opportunity for Amazon in e-commerce. The major drivers for growth in e-commerce are higher internet penetration rate and demographics. It is apparent that online purchasers have high income level compared to traditional retail customers. Generally, people prefer purchasing goods such as books, DVDs, and software packages which is observed to be directly proportional with income, i.e. when income increases the demand of these goods increases. Therefore, the income level of people can certainly have a direct impact on the business of Amazon. According to a survey conducted on 2008 on customers of United States, it was been observed that the low income households (i.e. income level of below US$25,000 per annum) are less probable to purchase through internet and perceive lower degree of trust on e-commerce setting. The reason is that low income people are concerned more on monetary safety, where e-commerce is related with purchasing through credit cards which always bear certain risks (Horrigan, “Online Shopping”). The gender also has a significant impact on the trend of internet purchasing. It can be observed that men prefer online shopping more when compared to women. The reason is that men find internet purchasing as more convenient. It is in this regards, that female customers have often depicted higher level of internet fearfulness than male and thus are more doubtful about internet shopping (Zhou, Dai and Zhang, “Online Shopping Acceptance Model — a Critical Survey of Consumer Factors in Online Shopping”). Thus, the gender demographics can be considered as another aspect which can impact on the business of Amazon. Analysis of Amazon’s Telecommunication (E-Commerce) E-commerce primarily denotes electronic ‘exchange of information’ and transaction between different parties. Through e-commerce, Amazon has been able to optimize the market performance and develop into a completely new IT based organization that focuses on web design and numerous applications. E-commerce has helped Amazon to boost its overall operational procedure such as time-efficient ordering procedure, faster delivery process, order check-in facilities, and so on. E-commerce also provides better limpidity such as seasonal offers, discounts, price comparisons which helps to encourage the purchasing willingness of people. In e-commerce system, an order is received and transmitted through computer then processed via internet which makes the transaction faster and cheaper. As a result, through e-commerce platform, Amazon also attains low cost advantage (Koenig, Wigand and Beck, “Globalization and E-Commerce: Growth and Impacts in Germany”). Telecommunication Equipment Employed by Amazon In B2C, the e-commerce functions concentrates more on customers rather the businesses (New Age Publishers, “Electronic Commerce — Technology and Prospects”). For instance, Amazon has attempted to implement telecommunication equipment named ‘Whispernet’ in order to enhance the purchasing experience of customers. ‘Whispernet’ is a wireless telecommunication system which permits customers to download books and other elements without using external internet sources. This telecommunication system helps Amazon to provide complete solution to the basic requirements of people with respect to books such as reading, searching or purchasing. This system has resulted in immense success as customers do not require searching different internet sources. The ‘Whispernet’ system of Amazon allows customers quick download of books along with the facilities for free distribution of private documents and also helps to forward the purchased audio-book wirelessly (Wisconsin Valley Library Service, “Amazon Kindle”). Presently e-commerce has achieved immense public attention. Products such as books, music files, and computers among other e-commerce commodities are purchased frequently by numerous customers. Thus, it is no surprise that Amazon has gained immense achievement though its e-commerce strategies in the modern day context. E-commerce contributes to major variations in the supply chain and delivery procedure of Amazon. The major impact of e-commerce can be witnessed on the organisational supply chain in terms of the elimination of middleman through disintermediation. E-commerce is certainly not only a subject of cybernetic information movement, but is also interrelated with the flow of goods. E-commerce significantly improved the freight transport which is critical for attaining customer satisfaction. Besides, e-commerce also provides environmental advantages to Amazon (Hesse, “Shipping News: The Implications of Electronic Commerce for Logistics and Freight Transport”). In e-commerce, trust is a major aspect which determines the success of businesses. Therefore, determining the degree of trust among customers is considered to be a prime concern for Amazon. Amazon has been able to entice more customers not only because of its impressive brand reputation, but also because of the degree of trust it has gained as a reliable trader (Gefen, “E-commerce: The Role of Familiarity and Trust”). Use of Telecommunication (e-commerce) for the Advantage of Business Amazon is currently recognised as a famous e-commerce player in the world market. Retailers as well as sellers use the platform of Amazon in order to sell goods. Amazon also rendered the facility of bidding and auctioning to its customers where, sellers can bid on numerous products through the website at their desired rates, and similarly sell their materials to the highest auction-goers. Amazon has also applied sales channel named ‘Amazon Advantage’ where individuals can sell books, music, and movies among other products straightforwardly from its warehouse. Furthermore, e-commerce helps the company to manage the entire transaction from beginning to end. The other e-commerce facilities provided by Amazon are ‘Amazon Services’. Through this platform, Amazon, attempts to deliver complete e-commerce packages to various organizational partners in order to establish or refurbish the business (Pearson Education, “Introduction to E-commerce”). Recommendations Although Amazon is considered to be one of the leaders in e-commerce, the company had to face huge losses in its recent operations. For instance, in the year 1996, Amazon had to face a loss of around US$6.24 million. In 2001, the amount of loss suffered by the organisation was amounted to almost US$1.4 billion. Again, in 2002, Amazon had a deficit of more than US$ 3 billion (Pearson Education, “Introduction to E-commerce”). Even if, Amazon had successfully turned the loss into profit, the company is facing immense competition in the e-commerce segment. Hence, it has gradually become difficult for the company to create critical mass of purchasers and sellers in order to survive in the long run (Pearson Education, “Introduction to E-commerce”). Thus, in order to sustain its profitability in the long run, Amazon needs to strike a balance between its short run profit and business growth. Retaining the loyal customers is another significant challenge faced by Amazon in e-commerce. As there are numerous competitors of Amazon in the e-retail market, the organisation should develop effective strategies to retain the customers. It is recommended that Amazon should continuously add innovative features in its websites in order to enhance customers’ purchasing experiences. Amazon can also develop customer purchasing portal for registered and loyal customers which can entice customers to stick with the brand. Amazon further needs to retain the best sellers in the website, so that the number of customers can continuously increase. Introduction of new product lines can also help Amazon to raise its customer base, but at the same time, Amazon must realize and take the advantage of high ‘economies of scale’ to avoid further market losses and gain profitability in future. Summary and Conclusion E-commerce is the most significant occurrence in international business context and an exciting new retail channel which has greatly transformed the traditional business operations. E-commerce invigorates the commercial activities concentrating on improving the experiences of the customers. With reference to the above discussion, it can be affirmed that Amazon has gained higher market share in internet book retailing sector by using e-commerce applications. It is the objective of Amazon to operate as a customer oriented company where individuals can access any product and accordingly purchase them. Telecommunication technologies such as wireless system and other e-commerce applications have further helped the organisation to obtain strategic benefits such as cost advantages and time-efficient business processes. Therefore, e-commerce can be witnessed to help Amazon significantly in expanding the business beyond global reach. By using e-commerce, Amazon has significantly improved its supply chain performance and efficiency in business transactions. As Amazon has expanded its business into other segments also, it can further use its industry leadership strengths in terms of e-commerce and brand name in order to attract customers as well as inventors in its future conducts. From an overall point of view, it becomes apparent that there lay huge potentials for Amazon in the e-commerce segment where the company can use its competitive advantages for strengthening its market position in online book retailing and other consumable products. Works Cited CBS Interactive. Amazon: E-Commerce Success Story, 11 Feb. 2009. Web. 07 Jun. 2012. Casey, Russell and William Carroll. “The Impact of E-Commerce Industry Turmoil on Amazon.Com: A Strategic Perspective.” The Internet Business Review 6 (2004): 1-30. Digital 4Sight Corp. Customer Fulfillment in the Digital Economy Amazon.com, 2000. Web. 07 Jun. 2012. Environmental Investigation Agency. Amazon.com’s Unpalatable Profits, Feb. 2012. Web. 07 Jun. 2012. Gefen, David. “E-commerce: The Role of Familiarity and Trust.” The International Journal of Management Science, 28 (2000): 725-737. Horrigan, John. Online Shopping, Pew Internet & American Life Project, Feb. 2008. Web. 07 Jun. 2012. Hesse, Markus. “Shipping News: The Implications of Electronic Commerce for Logistics and Freight Transport.” Resources, Conservation and Recycling 36 (2002): 211-240. Interactive Media in Retail Group. B2C Global e-Commerce Overview 2011. Apr. 2011. Web. 07 Jun. 2012. Krishnamurthy, Sandeep. A Comparative Analysis of eBay and Amazon. University of Washington 2004. Web. 07 Jun. 2012. Koenig, Wolfgang, Rolf T. Wigand and Volkswirt Roman Beck. Globalization and E-Commerce: Growth and Impacts in Germany. University of California, Aug. 2002. Web. 07 Jun. 2012. Larson, Paul. Amazon.com Turning the Corner toward Profitability. Stock Report, 14 Feb. 2000. Web. 07 Jun. 2012. Preibusch, Soren and Matthias Fleckenstein. Strategies to Achieve Market Leadership: The Example of Amazon. Technische Universitat Berlin, 17 May 2005. Web. 07 Jun. 2012. New Age Publishers. Electronic Commerce — Technology and Prospects, No Date. Web. 07 Jun. 2012. Nielsen. Global Trends in Online Shopping, Jun. 2010. Web. 07 Jun. 2012. Pearson Education. Introduction to E-commerce. No Date. Web. 07 Jun. 2012. Sia, Choon-Ling. Virtual Organizations: the Business Design for the Twenty-First Century. City University of Hong Kong, No Date. Web. 07 Jun. 2012. Wisconsin Valley Library Service. Amazon Kindle, 2008. Web. 07 Jun. 2012. yStats. Global B2C E-Commerce Players Report 2011, 19 Dec. 2011. Web. 07 Jun. 2012. Zhou, Lina, Liwei Dai and Dongsong Zhang “Online Shopping Acceptance Model — A Critical Survey Of Consumer Factors In Online Shopping.” Journal of Electronic Commerce Research 8.1 (2007): 41-62. Read More