MBA Strategy - Amazon Case

Amazon Case
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Amazon.com
Launched as an electronic seller of books in 1995, Amazon expanded its portfolio to other items and products. It aimed to be a one stop shopping experience for all. Humbly located initially in Jeff Bezo`s garage, Amazon is now a billion dollar company with a strong global presence. A medium term strategy is recommended given the circumstances that existed in the market and that is what this paper is about.
Jeff Bezos had a safe, prosperous career in the financial world and it was there that he began to understand the opportunities and potential the Internet had to offer. He discovered that internet usage was rising at 2300% a year in the 1990s. Bezos explored mail order businesses in order to comprehend what product could be sold efficiently over the market. He realized that the book sector did not have a regulated mail order system. So, he went to launch that out on the market. He attended a conference in Los Angeles to learn the dynamics of the market and then flew back to learn that his own company did not want to undertake such a venture. Therefore, with his wife, he drove to Seattle where he got the rights from Inagram, the main distributer. Offices were set up in small house and three hundred of his friends tested the beta. Once approved by all, he opened the doors to the internet online. Within the first month, sales had accumulated on a national level.
The business grew at a rapid rate and went on the stock exchange in 1997, after being launched only two years earlier. Amazon`s market share was bigger than its rivals. Bezo`s vision evolved from being the world`s biggest book seller to being the world`s biggest provider of every service imaginable. Keeping in sync with its highly customer focused and innovative strategy, he introduced pioneering features such as customer reviews, one click shopping and e mail order verification. Amazon diversified into toys, music, DVDs, CDs and electronics. In October 2002, a clothing segment was added with alliances with retailers such as the Gap and Nordstrom. In September 2003, it launched the A9 Search engine which concentrated on search for e commerce portals. It simultaneously introduced a sports store with three thousand brands under it. By the end of 2006, revenue had multiplied exponentially to $10.7 billion. (Jeffrey P. Bezos Biography, 2011)
Amazon has grown due to its ability to remain committed to its vision of being a customer centric company. By keeping the larger picture in mind, Amazon has taken steps to ensure its strategies are in line with its mission. Applying Porter`s five forces model, the first factor to examine is the bargaining power of consumers. It is relatively high as low prices and diverse variety keep reeling the consumer back in. The degree of competition is relatively high, especially, in Amazon`s e book commerce model due to low costs of establishment. Book stores usually have a greater customer base, stronger "brand recognition, brand awareness" and a more versatile collection of books. The online auction sector has created intense competition against eBay.com as well. However, it is vital to keep in mind that the threat of new entrants is moderately significant given the nature of the online realm. Anyone with the technical know-how and slight business acumen can incorporate an Internet based company that is similar to that of Amazon. Brick and mortar existing stores that sell music and books can easily set up online as they already have access to their existing inventory. The up side for Amazon is that it is expensive and challenging to create an innovative information system of a similar caliber. Not only that, Amazon`s brand recognition contributes to its stability and success in the market as well.
The bargaining power of suppliers is relatively low in the book sector. This is due to the fact that Amazon had broadened its supplier portfolio as it has opened five new automated distribution sectors in America to reduce dependency on its main one, Inagram. Suppliers of consumer electronics are reasonably better off as Amazon has been unable to lock in giants such as Sony and Panasonic. They protest against the pricing tactics that Amazon employs as it is below market price. The threat of substitution is moderate as physical bookstores have brand loyalty and customer buying behavior may prefer this model. However, those who value convenience and access will prefer Amazon`s one click shopping model. (Lasester, 2000)
One of the sources of Amazon`s strength is due to the powerful brand recognition it has created in the market. This was demonstrated by the fact that Kindle, the e book reader when launched by Amazon was out of stock within two days of its introduction to the market. (The History of Amazon`s Kindle So Far, 2011) The brand power of Amazon is so strong that despite Kindle not being the pioneer in its field, it was sold out within hours. It is definitely part of one Amazon`s versatile set of core competencies as the brand in itself has kept the company on the right path. The name "Amazon" is derived from the Amazon River, the world`s largest one. The analogy is to transform Amazon.com to being the "Earth`s biggest bookstore." As America`s largest retail online store, it is of no surprise that Amazon has an extremely diverse line of brands under its belt. It has remained true to its core competency which is to provide low cost, convenient and efficient service online. Amazon is credited with creating the first company to sell books online. Not only does it have first mover advantage, it has remained true to this core competency by being the first to develop many innovative, customer centric tech features such as one click shopping. It is also believed to have created the first Internet community. (Spainpower, 2004) Jeff Bezos stressed on the important of "convenience, selection and online customer experience" (Spainpower, 2004) as Amazon`s core competencies. Each of these augmented to the prosperity in each of Amazon`s product divisions.
There was constant such innovation in technology and marketing as it strived to improve the overall customer`s experience. This is an intricate dimension which loops in sundry variables such as usability, navigation, design, customer support, orders, payment methods etc. The "participatory network" (Spainpower, 2004) that Amazon has constructed over time has assisted in the achievement of excellence in customer experience. Customer reviews, editorials of books, product reviews, or be it music reviews, Amazon realized the potential of direct interaction with its customer and how it can benefit he marketing strategy of the company overall.
Weaknesses are a norm of any business and Amazon is no different. As it is a tech based set up, it is highly reliant on its servers, hardware and software. If it goes down, especially in a busy season, the entire network comes down. This makes the customer feels frustrated as he cannot access the portal. Another issue that Amazon faced was patent infringement issues. In 2006, IBM filed two lawsuits against the corporation which accused it of developing its e commerce abilities from technologies that were patented by IBM as far back as the 1980s. (Lewis, 2006). Cartier and Toys R Us also began litigation against Amazon and accused it of violating rights as demonstrated in the case.
The opportunities for Amazon are vast. As the number of worldwide internet users multiplies every day, Amazon can tap into such markets. This can further be explored by Amazon localizing its offerings to the cultures that it will be serving. It can lo...