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Amazon Shares Surge After Surprise Profit Case Study


Amazon.com represents service innovation. Service innovation helps corporates provide new or different kinds of services to consumers with the aid of new or improved technology. The innovation adopted by Amazon.com is closely bound by technological change. The company has concentrated on utilizing the Internet boom to capture a market that was still untapped.

Thus, the innovation brought forth by the company is radical innovation as they utilized a completely new technology and changed the whole structure of the business. The reason for the surging revenue of Amazon.com is its innovative business model. Amazon.com initially, earned its revenue from the commissions from its brokerage service to buyers and sellers.

Later they moved on to serve third-party sellers, who were essentially the company’s competitors, to sell through their website and earning commission in the process (Johnson par. 4). The third step taken by Amazon.com was to target the IT community through their web service platform. Later, they introduced the Kindle, a digital reading device, as a product and service offering (Johnson par. 5).

Thus, Amazon.com had not only constrained itself in utilizing a new technology but actively changed the business model to remain competitive. Aamzon.com moved from being an online retail company to one that helped third-party sellers in the B2B market, then introducing the Kindle platform for reading enthusiasts, setting up the web search platform, and then, most recently, the cloud platform for its customers.

The recent surge in its revenue in 2014-15 is attributable to its cloud computing division that has helped increase the company’s revenue by 80 percent. The progression of the innovations in their product and service offerings, business model, and technological platform has helped Amazon.com to remain competitive and stimulate the rise in its revenue.

Technology/market taxonomy provides a graphical analysis of the position of the product/service in a matrix measuring novelty of technology and novelty of market. The cloud-computing platform of Amazon.com is a highly novel technological product, introduced to the market very recently.

The cloud platform of Amazon allows customers to subscribe and use a domain and run any application on it as well as store data, paying for their usage. Therefore, the product is a novel technology as well as new to the market. Therefore, the technology offered is an innovation breakthrough and the market is still emerging, placing the product/service in the paradigm innovator category.

The case study demonstrates that the Amazon’s web services that comprises of the company’s cloud computing division, posted a rise in revenue by 81 percent. The cloud computing services have been offered in addition to the fast delivery service that increasing number of customers have signed up for. Cloud computing is a novel technology which is being experimented by many companies like Microsoft and Google.

Cloud computing provides its customers a pay-per-use and self-service model via the Internet. Thus, cloud computing helps create business value and increase technology enabled business innovation. The cloud platform offered by Amazon provides its customers with a unique platform where they can use any operating system of a computer that works virtually, and store their data in the virtual storage provided with by the company.

The customers have to subscribe to the cloud services provided by Amazon and continue using the product with little or no hassle. The only competition that Amazon faces in this service is from Google and Microsoft. Clearly, the service provided by Amazon with the aid of cloud platform is a novel technology, almost a breakthrough in the Internet and the market for the service is yet untapped, providing opportunity to the company to increase its revenue.

The cloud computing service of Amazon is divided into two categories – Elastic Cloud Computing (EC2) and Simple Storage Service (S3). EC2 provides infrastructure as a service to the customers. In other words, it helps customers rent a machine on the web in order to boost web-scale computing.

This allowed Amazon to capture small start-up on the Internet who faced problems from high traffic (Siegel and Gibbons 9). Amazon provides elastic IP addresses, thus, making inroads in the web hosting market. S3 provides its users with instant access to the data stored in the service interface from anywhere on the web. Thus, this provides users highly scalable, fast, inexpensive, data storage infrastructure.

The business model of Amazon was always to provide high value to tis customers through competitively priced products online. The Internet has been their stronghold since the inception of the company. The cloud platform provides a unique opportunity to make inroads into an emerging market with the aid of a nascent technology.

The company’s business model remains the same as before. The only change observable is in the product/service that Amazon provides. The company provides the infrastructure that helps other companies to process, access, use, and store data with minimum subscription. The target customers of Amazon for its EC2 and S3 services are mostly small start-ups who receive great value for the services they subscribe for and larger companies.

The technology S-curve is the life cycle curve for a technology. A new technology like the cloud platform of Amazon is marketed to its customers when it is still in the nascent stage of the growth curve. At this time, engineering development and increased adaptation will lead to a growth in the curve, indicating a positive and steep slope for the S-curve.

However, as the technology matures, engineers will face a block in their capacity to develop the technology, and therefore, stagnating its growth. This leads to the necessity of a new technology. Amazon’s cloud platform is presently in the rising portion of the S-curve indicating space for future growth.

Amazon faces competition from other technology companies like Microsoft and Google eager to capture the cloud computing market. They too would be innovating and improving their technology. Presently, all these companies are trying to improve on their product offerings.

However, none, so far, have successfully been able to capture the market completely. With continuous innovation, the cloud platform will reach a point of stability, which would be a comfort level for the companies as well as the customers. These points of stability that provides leadership to a company in the market is called punctuated equilibrium. Amazon’s cloud business has not yet been able to attain this stability.

Amazon has been trying to capture the largest share of the cloud computing market by targeting both small and big companies in order to become the market leader, ensuring that the customers invest heavily in their offering and have to use it, making their platform the dominant design.

Amazon has diversity of experience and exposure to prior related knowledge in providing great value to its customers. The cloud platform allows Amazon to increase its absorptive capacity and enhance their online retail business.

Works Cited

Johnson, Mark W. Amazon’s Smart Innovation Strategy. 12 April 2010. Web.

Siegel, Micah and Fred Gibbons 2008, . PDF file. Web.

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IvyPanda. (2019, July 5). Amazon Shares Surge After Surprise Profit. Retrieved from https://ivypanda.com/essays/amazon-shares-surge-after-surprise-profit/

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"Amazon Shares Surge After Surprise Profit." IvyPanda, 5 July 2019, ivypanda.com/essays/amazon-shares-surge-after-surprise-profit/.

1. IvyPanda. "Amazon Shares Surge After Surprise Profit." July 5, 2019. https://ivypanda.com/essays/amazon-shares-surge-after-surprise-profit/.


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IvyPanda. "Amazon Shares Surge After Surprise Profit." July 5, 2019. https://ivypanda.com/essays/amazon-shares-surge-after-surprise-profit/.

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IvyPanda. 2019. "Amazon Shares Surge After Surprise Profit." July 5, 2019. https://ivypanda.com/essays/amazon-shares-surge-after-surprise-profit/.

References

IvyPanda. (2019) 'Amazon Shares Surge After Surprise Profit'. 5 July.

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