Company Overview
Amazon is based on innovations, web services, and highly optimized management. It started as a small online bookstore but became a large online retailer active in various countries. It experienced many successes and failures in the 2000s, experimenting with different strategies, and its stock prices oscillated a lot during these times.
In the 2010s, the company’s success became definitive: its revenues grew consistently, and its stock costs were stable above $150. Highly optimizing all work processes was crucial for the company’s success. It reduced operational costs to a minimum, as Amazon had to pay only small rent for offices, shops, and warehouses.
The company developed various strategies to optimize the trade process, acting as a large online supermarket and a marketplace where everyone can sell their goods. It also provides multiple online services for a subscription fee, such as video streaming platforms and cloud web services. Amazon’s highly optimized strategy enables it to maintain low prices and perfect customer support, and these qualities have become vital components of the company’s success.
Amazon’s Organization, Management, and Technology
Amazon’s organization and management approach is based on the maximum optimization of all processes and the best customer support possible. It launched many services along with the marketplace, from an online streaming platform to business web services, and this approach is the core feature of all of them. In addition, technology is one of the primary pillars on which Amazon stands, as it is highly innovative.
The company’s success is mainly grounded on its ability to implement cutting-edge technologies in its ventures. For example, it uses AI-based algorithms to suggest to its marketplace users the specific goods that are suitable for them. Other services, such as Amazon Prime, offer videos based on the customer’s previous choices, ensuring that the customers will be satisfied.
Porter’s 5-Force Model
Porter’s five-force model shows how five various market influences may endanger or stimulate a company’s development. These are competition and new entrants’ forces, the bargaining powers of suppliers and customers, and the threat of substitution.
The Industry Competition Force: Very Strong
Amazon is present in various markets, such as marketplaces, retail, web services, and cloud computing, but all these fields are highly competitive. In all fields, other strong and well-established companies are present: Walmart in the retail business, Microsoft in cloud computing, eBay and Alibaba on marketplaces, and Hulu and Netflix on streaming platforms. Those companies have a market share and capitalization comparable to Amazon’s.
The New Entrants Force: Weak
Amazon has a strong position in the market, and it is unlikely that there will be startups strong enough to compete with it successfully. Much more likely that Amazon will be able to acquire the new entrant, adding its innovations to the company. Therefore, the company has almost no risk of being endangered by new entrants.
The Bargaining Force of Suppliers: Moderate
Amazon requires various products, such as hardware for its servers and goods for its online shop. While the availability of good vendors is crucial for the company, it is not hard to find them and make a deal, and thus, the bargaining power of suppliers is only moderate.
The Bargaining Force of Customers: Strong
Amazon is based on services, and its revenues depend highly on whether customers are satisfied with them. If it had lost its customers, it would have lost all its revenues and leading market position, meaning the complete crush. Therefore, it is critical for Amazon to maintain its reputation and brand loyalty among customers and find new ones via various services, from marketplaces to cloud computing.
The Threat of Substitution: Moderate
While Amazon has a strong customer base and a well-known brand, as mentioned, there are many competitors in all market segments where it operates.Thus, for example, if Amazon has a more expensive subscription fee than competitors, such as Netflix in streaming or Microsoft in web services, customers will probably choose the competitor instead. The company should be aware that its services can be substituted by other market players and be sure that its offers are the best ones.
Decision Types and Business Intelligence
Amazon uses business intelligence (BI) to make various types of decisions: structured, semi-structured, and non-structured. Business intelligence includes practices such as data analysis using machine learning algorithms, the creation of analytical reports, and knowledge management. They help the company’s management make the best decisions, as both structured and unstructured decisions require figuring out the most efficient way to formulate and solve a particular problem in different conditions.
Structured Decisions
Structured decisions are clear, concise algorithms based on known and well-defined data, primarily quantitative. It is the situation when one needs to analyze data, act according to the algorithm, and repeat it when the problem emerges again. An example is Amazon’s analysis of customer habits and, based on them, the development of its marketing campaigns. Daily routines, such as checking which goods are in stock, in which amount, and where to order new ones, are other examples of structured decisions.
Semi-Structured Decisions
Semi-structured decisions are a mix of structured and non-structured ones. They are based on both qualitative and quantitative data and are usually used to pose short-term goals or solve an actual problem. One example is the design or rebranding of a corporate website, such as when it is necessary to change how Amazon’s marketplace service looks. The development of monthly and yearly plans, such as financial or marketing plans, is another example, as these plans should be based both on quantitative indicators and qualitative predictions. Internal decisions about the corporate budget and its allocation to different developer teams constitute the third example, as these decisions rely on estimated aims and business strategies.
Non-Structured Decisions
Non-structured decision-making means a decision that is based on unstructured and not clearly defined data. Examples of them, especially applicable to Amazon, are innovations and insights, such as creating a new product and entering a new market. They cannot be produced by simple quantitative data analysis but require a deep understanding of various connections between data.
The establishment of new Amazon services, such as Amazon Prime and Amazon Web Services, a streaming platform and cloud computing services, is a successful example of such decisions. Figuring out long-term business goals and aims also requires unstructured decisions, as the company’s management should take into account various types of data, such as competitors’ activity and business landscape changes. Lastly, approving the financial plan of the whole company is a non-structured decision, too, as it requires a deep understanding of how many costs will be necessary for the company in the future year.
Rules Extracted/Classified to Predict Whether Class is “N” or “P”
The classification rules obtained from the table below (Table 1) are as follows:
- If there is going to be rain and strong winds, then P (Yes).
- If there is going to be cloudy, then P (Yes).
- If it is going to be sunny and the humidity is high, then and only then N (No).
- If there is going to be rain and the wind is weak, then and only then, P (Yes).
- If there will be a lot of humidity and cloud cover, then N (No).
Table 1: A weather conditions classified based on the N/P parameter
The Value Web
The value web is a concept of interconnection between various aspects of the company’s activity: services, customers, vendors, marketing, and employees. Amazon established its name as a robust marketplace, facilitating national and international trade, where thousands of people can buy and sell various goods. It provides different conditions for customers: they can buy goods they need, sell their own goods in partnership with Amazon, or use its web services for their businesses on a subscription basis. Therefore, the company builds the value web using its various services and fulfilling the diverse needs of its customers.
The Value Chain
The value chain concept is the chain of operations aimed at the company’s value creation, starting from the inbound operations to operations, logistics, marketing, and customer services.
- Inbound operations are those necessary for Amazon to maintain its activity: it includes ordering the hardware necessary for its services and goods, which will be sold in its online supermarket.
- Operations of Amazon include the maintenance of its servers and software engineering, including web design and machine learning algorithm development.
- Outbound logistics includes the conditions of Amazon’s services and the delivery of goods ordered by customers on its marketplaces and shops.
- Marketing and sales include promotions for goods and subscription offers for various clients.
- Customer service includes the feedback system and the online chat where customers can contact the support manager and obtain all necessary information connected with the company. It is the most important element of Amazon’s value chain.
Amazon and Cloud Options
As Amazon uses web services as its leading resource, cloud options would benefit all of Amazon’s information systems. They enable the company to make its services, such as marketplaces and streaming platforms, more robust and efficient. Cloud services create a backup copy of all good information uploaded by customers to Amazon marketplaces. In addition, they improve the quality of Amazon’s web services in general. Cloud-based streaming platforms are more reliable, and cloud computing greatly benefits business services like deployment and management.
An X of My Choice: Amazon’s Optimization
Amazon’s success is mainly based on the minimization of expenses and high workflow optimization on all levels. Its services are web-based and require minimum space and costs to maintain them. Its success depends only on the customer’s demand and satisfaction, which are very high due to excellent support service and prices. In addition, its internal working processes are highly optimized, meaning that the company’s teams know what they should do and are well-motivated. These factors created a unique, efficient, optimized Amazon ecosystem with billions of dollars in revenues.