Explain Amazon case study
Coma’s strategy during the period 2007 to early 2010. Founded in 1995, Amazon makes twenty years later a turnover of $ 10 000 per second Ninth 150 million customers with nearly 200 million records, it is greater than $ 60 billion annual sales. The Amazon company is really different with other companies because it is the only one to make an incredible turnover but no real profits since the beginning.
Its strategy is to become the leader in books sector and in general on the e- commerce by proposing to the customer more choices than every other monitors. It took less than a year to Amazon to propose over one million different books. The entire company is organized around a big chess game. Every asset is a piece on the board thanks to the location of the different facilities in the world. The Amazon strategy is based on three major pillars: Selection Price Convenience.
Amazon is the largest e commerce company in the world thanks to the wild selection of products that customer can find.
Amazon has known a real expansion in the world Med e commerce. At the beginning in 1995 their strategy was to become the biggest bookshop in the world. Over the year the Amazon catalogue has been developed and now it proposes a lot more products like software, materials. In fact in 2004 materiel sells have created more turnover than books.
Amazon is the only company to sell products with negative margin profits. This strategy is divided in two ways : try to attract more customers than possible by lowering the price and proposing a free and quick delivery. He negative margin is also due to the continually investment made by the company to expand their brand and propose more products every day. Amazon tries all the time to please his customer. Indeed the vision of the company is based on ?«a pleased customer is a customer who is going to come back ?».
Many resources have been dedicated to understand the customer and his continual demand. The fact that the website is extremely easy to use allows the customer to have a great a sell experience and encourages him to purchase again.
Amazon is the only company to get + 220% turnover in three years between 2009 and 2013 but not being profitable. Nevertheless, Wall Street investors love Amazon stocks because Jeff Bozos, Amazon’s CEO, applies the current strategy to become the biggest, powerful ND more profitable e- commerce in the world in 20 years. 2) What do you consider to be Amazon’s strategic capabilities? Rhea company Amazon has various strategic capabilities and has place of leader today thanks to these capabilities.
Firstly, we can broach the incredible human resources faculty of Amazon.
Indeed, Amazon has strengthened its management since its creation. The company is hiring only senior experts to manage their various services: merchandising, logistic systems, supply chain, commercial,… Most of the time there succeed to poach these their managers from other huge companies like Apple, Delta Airlines and Microsoft. Amazon has today 20,700 employees and most of them are non-qualified but this is experts which are managing the logistic (an important point at Amazon).
One of the main capabilities of Amazon is to well manage their logistic thanks to platforms. Indeed, over the years, they increased the number of platforms Normalized always build in strategic locations.
Their logistic is totally under controlled and well mastered. In addition to that, they also wanted to diversify their services and they did it well. By this way they show their capacity to innovate and anticipate. Moreover, they always fit their products with customer’s expectations and they targeted the right people.
Three examples show this success: Kindle (permits to download books, magazines and newspapers and blobs), Amazon web services (cloud computing or public data sets), and digital contents (MPH music store, films and TV episodes and shows). Moreover, they also succeed to extend their products range in addition to books products: clothes, shoes, handbag, Jewelry and watches.
In addition to that, they succeed to attract the best brands of various sectors to brighten up their elections: Miss Sixty, Nautical, Crisis,…
Their precursor capacity (like feel the internet growth in the nineties) and their products extension confirms now their leadership position. To finish, Amazon has an important financial capacity and this permits them to realize good financial operations. Indeed, they did over the past year some acquisition (Fabric in 2008, Reflexive Entertainment in 2008 and Daybook).
These ‘arioso acquisition increased their influence in their market. The addition of all the competencies explain today the leadership growing constantly of Amazon worldwide. He balance of these competencies became essential for a company of this stature. ) Evaluate Amazon’s diversification strategy and should be it future strategy going forward? Amazon stands, first due to the nature of its sales which are of traditional consumer goods over the Internet and also by simplifying the buying process. Indeed, Amazon puts its technological expertise to the client keeps a fast and pleasant picture of purchase.
Therefore, all personal customer information are recorded. However, Amazon has to manage its brand to attract new consumers. This is why that it allocates a very large advertising budget to maximize its online communication.
It also contracts of about 40,000 partnerships exclusivity with several websites that will help to put an active link advertising on their site. More importantly, to better respond to a request, Amazon adopted a strategy of product diversification.
The product range is therefore widens the discs, videos, electronic products, toys and games and the future integration of magazine subscriptions and travel packages. Nile many shareholders don’t believed at this strategy of diversification, the Group’s versification strategy has proven and has managed to overcome the crisis of 2009. Ms is why, the company continues to increase sales and even it is recently been Unwelcome for its large number of turn over. The diversification strategy of the group is one of the greatest strength of the Amazon company, c is why it has to start soon also in food. When talking about diversification strategy lots of authors seem skeptic.
On the one hand, a bigger diversification can be a real asset but on the other hand it could puts the company in a bad position and become weaker than before. The efferent pros and cons are going to be discuss : Pros: A wider diversification can allow Amazon to be stronger than ever.
As Porter says, the bargaining power of the suppliers will be low; they will not have real possibility to fix their own price because Amazons is a huge costumer in BIB. Thanks to that, in ICC frame, Amazon could propose low price to final customers. As a consequence, the website will be more and more attractive in terms of prices and range of products (you can find everything, from book to Jeweler’s). 0 Amazon can become a reflex, overtime customers look for something, they know they can find on Amazon.
Moreover, as the site is well referenced on the internet, it is placed on top of the page of the research solutions in search engines (Google, Yahoo for example. Amazons will be everywhere and you cannot see it when you are looking for something. ::]Customers can become more and more loyal and then it could increase the sales. 150% of sales are made by loyal customers) 0 One product will attract others products, so more sells. Kindle attract online traffic and then people buy online book.
The internet is seen as the place where you can always find good deals.
If the company diversifies more then customers could have the feeling to save and come back more often on the website. 0 There are lots of huge sector where Amazon could set up its new business: food sector for example. (This sector weight 568 billions $ last year) 0 Amazon could never become old-fashioned because the company sells product that are on the current trend, they always propose new products. Diversification can allow Amazon to be up-to-date in each range of product. Cons Diversification can be risky: a too big range of products can lead to bad delay of livery.
Diversification means more cash flow in order to be able to invest (new staff, more stocks, warehouse construction.. ). Moreover Amazon already has currently long-term debt. 0 Legislation can become a problem. Since Amazon has a big power on suppliers, government wants to defend them and forbidden Amazon to have a too wide range of products at low prices.
In conclusion, more and more diversification can be a very good strategy but Amazon need to be focus on its policy. Diversification has allow to overpass one crisis, why not another one!