Uncertainty always reigns in the minds of managers when it comes to deciding what impact is brought about by the competitive strategies utilized by the managers. This uncertainty is even more when firms operate in new environments such as the e-ecommerce platform.
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The fact that there are a growing number of firms joining the e-commerce environment is ground enough to establish strategies that would enable a firm compete effectively in the new environment. Understanding the strategies which would be usable in attaining value in e-commerce is a priority among e-businesses (Filson 2004).
Amazon.com being a leading online retailer for books is an e-business which has over the time positioned itself strategically to remain relevant and competitive in a dynamically evolving environment.
Amazon.com was founded by Jeff Bezos, who is also the current CEO of the company, in July 1995; however, the company started operating as a public firm in 1997. Amazon.com began as an online bookstore but then entered the music store field in June 1998. These services and goods, and others which Amazon.com has ventured in, are offered on retail basis hence making the firm an outstanding internet retailer (Filson 2004).
It is important to note some of the major competitors of Amazon.com include Barnes & Noble and eBay among others. Compared to its competitors i.e. including even the early competitors, Amazon.com’s market value has remained larger thus making the company always stand out in performance.
While the main competitors experienced fall in their market value after their peak in the late 1990s, Amazon.com’s value has been clearly outstanding (Filson 2004).
Amazon.com realized that the theory of increasing sales as a general strategy for the competitiveness of a business was not enough in the e-tailing environment. In realization that exploring other product lines may increase a firm’s competitive position, Amazon.com has pursued other lines of business including “1-Click ordering and zShops”.
These shopping devices eased shopping by offering shoppers more information since categorization of products has been made possible. In addition, 1-Click payment feature for instance offers recommendations on books or music which may be related to the customer’s search. This has eventually led to an increase in value.
Since the above strategies are not price-based, Amazon’s competitors have found it challenging to imitate (Datamonitor 2011). This is because technology used to develop such features is usually patented, thus barring competitors from imitating the technology. As for zShops and auctions, Amazon strategically benefitted in that others were offered an opportunity to utilize Amazon’s technologies.
Shopping at Amazon.com has been made easier by use of these shopping devices as well as utilizing actions. Amazon.com also realizes that expanding product lines does not necessarily translate into increased market value. Instead, the firm identifies that specific line of products achieve this.
These include “small, high value/weight objects such as books, electronics, health and beauty products, music, toys and games, and videos” (Filson 2004, p.152). By going into these lines of business, Amazon.com has remained at the top of its competitors as far as market value is considered.
Other than its official www.amazon.com website, Amazon also increases its global presence by offering its products on other websites available internationally. For instance, in its formative years, Amazon.com formed promotional alliances with prominent portals such as Yahoo and Netscape among others.
Promotional services as well as advertising through popular portals set Amazon.com apart competitively against its competitors, making Amazon.com defeat its rivals during its early years.
Despite the fact that promotional services through major portals have lost value given Amazon.com’s stage of growth, it is no doubt that it was a vital tool in taking the firm where it is now in the e-marketing environment (O’Brien & Shambora 2009).
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Rivette and Kline (2000) emphasize that the emergence of intellectual property is a business competiveness tool in today’s business world. Other than boosting the overall competitiveness of an organization, Rivette and Kline (2000) say that patents have, of late, become avenues for enhancing financial markets and putting up a proprietary advantage.
This is through the fact that patents help protect the uniqueness of a business system and reduce corporate risk. Novel ideas and technologies must be protected if modern businesses, especially ICT-based businesses, must capitalize on them to gain both strategically and competitively.
The patenting of Amazon’s 1-Click system, which is a system that is used in order processing, was a competitive weapon established by the company back in 1999. This would later give Amazon leverage in a suit where Barnes & Noble had infringed on the 1-Click system rights. Amazon won the case.
Amazon is renowned for its constant stretching of its muscle into business lines which are completely new, thereby ending up disrupting the industries it joins. It can be termed as a firm which is adventurous even when they face failure. From an online bookstore to a music store, Amazon diversified into treadmills, cloud computing and toilet seats, just to name a few areas where it has ventured.
Amazon has recently taken the challenge to Apple by coming up with Kindle, which is somewhat a competitor of the iPad. This is just an indication of how far Amazon is willing to adventure to ensure its sustainability given the current dynamism in the market (O’Brien & Shambora 2009).
In addition, Kindle’s e-reader tool is already enabling widening of the e-books space, thus making Amazon a dominant firm in the e-book market since its launch in 2007. It is recorded that book sales as enabled by Kindle exceeded the sale of hardcover books on www.amazon.com by July 2010. There have been more Kindle book purchases from Amazon website now than any of the two print books offered by Amazon.
Amazon has therefore gained both competitive advantage and revenue generation through this revolutionary gadget (Datamonitor 2011). The virtue of Amazon being a leader in online retail business has already positioned it to reach a wide customer base. This is something that is envied by its rivals.
How Amazon.com’s has Created Superior Customer Value
Amazon is a business of its kind and has of late attracted attention due to its trail of impressive growth. It has kept on embracing transformational growth sending its tentacles into different interests while still trying to retain an aspect of core business.
Amazon started as an online book business and this was already very innovative as it was built around a changing customer value proposition bringing another view of the book industry (Burgelman & Meza 2001). It then went beyond books to all kinds of consumer goods that could be easily shipped. Its view of core business at this time started changing from that of a product to a business design.
Later the business ventured into commission-based brokerage to traders of used books and then to third party sellers. It was therefore no longer a sale only but a sales-and-service model. In 2002, the company then ventured into web services, a field in IT and very different from its shipping and trade facilitation business.
Over 200,000 outside web developers were giving free help. 2007 saw Amazon set up lab 126 that launched its first product, the Kindle e-book reader threatening to disrupt the publishing industry. This saw 500,000 e-books for kids sold in the first year. E-books on Amazon are now a booming business and have greatly expanded.
Today, Amazon offers world’s biggest selection and is seeking to be the most customer centric company. They offer millions of unique, new, used, and refurbished items in several categories like jewelry and watches, health, food, sports, books, electronics, toys and many other categories.
Amazon has shown ability to find new opportunities to serve a different type of clientele or serve the same clientele in a new way and still retain value in the old business.
Amazon.com: a case in point
Amazon.com used internet as its only method of selling goods to its customers. It has some competitors like Barnes & Noble and also Borders. There are also others like eBay and Google. The competitive advantage that Amazon.com has over Barnes and Noble is that its costs are significantly lower as the competitors use brick and mortar as their distribution channel (Brandenburger & Nalebuff 1996).
Amazon.com has no storefronts and the main distribution warehouse can be located anywhere even away from densely populated areas where other conventional businesses would like to have their stores located. This allows Amazon to pay cheaper in terms of rent as it locates its warehouse in low rent areas.
Due to the various ways in which Amazon is able to avoid costs, it is able to deliver items at prices lower than market prices and still generate profit.
Other competing online booksellers are unable to deliver services as those of Amazon due to its recent boom, and its cost efficient way to shop for goods (Leschly & Sahlman 2008). Despite the attempts to use internet to sell their books, the competitors have not been able to overcome the overwhelming reputation of Amazon.
However, there are other new entrants who are gaining popularity and who are now real threats to Amazon’s business. Google is one such business whose entry into the market attracted overwhelming interest from customers. The market is therefore showing stiffer competition since Google is a well known and well connected competitor.
The current trend of Amazon makes it difficult to classify its business model. Instead it seems to be combining different models and no single one is sufficient to entirely sustain competitive advantage. It could also be said that it has created a new business model.
This new business model uses the synergy of various benefits to create value for the customers. Some of these benefits are: shopping convenience, speed, discounted pricing, ease of purchase, wide selection, reliability of order fulfillment and lots of information that enable decision making (Campbell & Collins 2010).
Sustainability of Amazon’s Strategies
In its operational strategy, Amazon has managed to enhance its competitive strategy through cost leadership, customer differentiation, and focus strategies. Rather than talk of core business, Amazon would rather talk of core capabilities and world class core assets. It is seen to make calculated moves in transforming capacities into profit centers.
Elastic compute cloud
As one of its recent models Amazon ventured into leasing computing horsepower over the web which is a very welcome solution for those in businesses that will require buying of servers. It is an equivalent of leasing a server at a cost of $876 per year or at a cost of ten cents each hour (Leschly & Sahlman 2008). These kinds of diverse investments are part of what made eyebrow rise on Wall Street.
They wondered why, despite Amazon spending billions of dollars developing its business model, it could venture into such businesses that are far not related to the core business.
It shows Amazon does understand that the solution to sustained success is business model innovation. While many see Amazon as over committing its capacity into new ventures, others see that any of these ventures could grow into blockbuster businesses like the e-Books sector.
The logic behind expansion of product range
Amazon’s case can in one way be seen as that of William’s Inc. William’s Inc. is a steel pipe manufacturer that ventured into manufacture of pipes that transport internet. In the view of the company the concept in the business is the same and in little wonder, both areas are vastly profitable. Amazon’s venture into a variety of products is firstly to exploit its distribution systems maximally (Campbell & Collins 2010).
Most of the products that Amazon sells will use the same concept in distribution as that used in the book business. Just as many companies would enjoy the benefits of economies of scale, so is the case of Amazon. The question may arise if some products like the Electronic Compute Cloud are still in this category.
Companies sometimes want to harness their core capacities and capabilities in a way that not only sees the use of the resources but also in ways that are profitable and innovative. Product and customer differentiation are strength to the company.
It is one thing to build a successful business at a particular time and another to build a business that is successful in all times (Boyd 2002). It therefore calls for business managers to keep evaluating if they are remaining relevant in times of change or if they will be phased out by newer competitive businesses.
It calls for continuous business process reinvention and other strategies that will keep the business relevant to its customers at all times. Amazon is not only an example of a business exploiting innovative business models but one that has no limits in the way they create profit centers.
It is an example of a business reinventing its processes to suit changing circumstances of environment, client needs, and economy. It can be seen as logical to have one profit center still so efficient when the others are hit by inevitable circumstances.
Amazon constantly changing business models can be seen as an ingenious strategy to remain relevant to customers (Byers 2006). At such times when even customer preferences change so fast, Amazon is still able to prove itself efficient and a good preference to customers.
Businesses should therefore make calculated moves without fear to venture into some innovative products as this will help bring them to a new level of competitiveness.
Amazon can be said to be enjoying the benefits of value creation through shopping convenience, speed, and ease of purchase among other benefits. Its business model is a unique one that has seen some other businesses try to mimic and is a potential blockbuster business maker.
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Campbell, M., & Collins, A., 2010. In search of innovation, in: The CPA Journal, 71(4), 26-35
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