Brief Introduction to the Business
Nowadays, Amazon is the largest and most popular online retailer. It is known for being the second-largest e-commerce company in the world being outperformed only by Google. During two decades on the market, the firm managed to reach the position of the retailer with the Earth’s Biggest Selection, thus growing extremely popular among customers and enjoying customer loyalty.
Amazon is an international corporation employing more than 150,000 people around the globe. Launched as an online bookstore in 1994, the company diversified its assortment so that now it offers a wide variety of products, including video games, software, furniture, electronics, apparel, jewellery, toys, and food. More than that, cloud services and infrastructure, as well as video gaming and music streaming, are provided to its customers.
The specificity of the company is the fact that it has several different websites launched and operating in different countries around the globe – the United States, China, Brazil, Netherlands, Australia, Germany, India, France, Ireland, the United Kingdom, and others. Also, the websites are translated into different languages, and new translations are constantly being added to minimize the language gap and increase customer satisfaction. Because of the novelties, as well as the wide assortment of proposed goods and services, the company is growing, increasing its revenues by almost 20 percent in 2014 compared to previous years, and the positive trend is constant (Research Methodology 2016).
What Is the Innovative Business Model Using IT?
Innovative business models are based on implementing the newest technologies to improve the economic outcomes of a particular company and increasing its productivity. It is essential to note that innovations might refer not only to the newest technologies but also the change of a business model to more progressive, contracting innovative partnerships, and creating innovative corporate cultures, including such aspects as marketing, business solutions, and projects (Afuah 2014; Johnson 2013). As for the innovative business model using IT, its foundation is the excessive introduction of information technologies to make business processes more efficient.
Speaking of Amazon, it is one of the most innovative companies. To begin with, it was launched as an online bookstore, which itself was innovative for that period. Throughout its development, the firm focused on implementing innovative business models. It centres on the introduction of information technologies such as using robots for improving business processes, designing innovative products, launching new IT-based services, and renewing its business model every time it becomes non-innovative (Research Methodology 2016). The foundation of the company’s business model is innovative marketing based on media products because of the ability to reach potentially higher numbers of customers in different corners of the globe. Also, it is the continuous introduction of online-based products as services, which correspond with the newest development in the technology sector (Johnson 2013).
What Are Innovative Business Processes Using IT?
The newest technologies can be used for making all business processes more efficient, thus increasing customer satisfaction and improving the overall performance of a company. For instance, using information technologies is beneficial for expanding to new markets, receiving orders from customers and processing them, replying to customer requests, making billing and shipping processing faster and more effective, etc. (Foss & Saebi 2015).
In the case of Amazon, innovating business processes are based on the incorporation of digital technologies in the company’s activities. For instance, automating the processes of making billings and receiving orders from customers is a common practice at Amazon. Moreover, the company uses digital marketing extensively. Also, Amazon invested in incorporating robots into carrying out common activities, such as organizing storages and retrieving products. In this way, the firm managed to minimize costs and guarantee attractive prices for offered goods and services (Research Methodology 2016).
More than that, it is essential to note that Amazon has a peculiar approach to understanding the innovation of business processes. First and foremost, the focus is made on becoming more progressive by taking small steps at a time instead of implementing tremendous changes requiring vast investments. It means that the sustainability of innovative development is the core value of the company. Moreover, the stress is laid on uniqueness and making business solutions country-specific (Carpenter 2015).
What Are the Innovative Products or Services Offered Using IT?
As mentioned above, companies may offer both innovative goods and services. It depends on their specialization. In the case of Amazon, the firm offers both goods and services. For instance, one of the most famous innovative products sold by Amazon is its Kindle designed and introduced to meet the requirements of the most demanding readers. Amazon’s cooperation with different publishers around the globe, helped it to introduce a series of Kindle Edition, thus making the reader experience even more consuming and unforgettable.
Still, the company’s primary focus is made on innovating provided services. Some of the most common innovative services are developing cloud infrastructure and offering streaming services. Moreover, there are some unique services such as print/disc on demand letting to avoid buying unnecessary paperback books, reviews and recommendations freely available to all users around the globe, wishlist, affiliate market to reach customers based on their previous purchases and recommendations and advertising products to potential clients, and Autorip as well as Amazon storyteller and Amazon Studios (applications).
More than that, Amazon managed to enter telephone and content programming markets. Still, except for the implementation of various IT-based services and designing numerous applications, Amazon is as well known for its breakthroughs in deliveries, as the company invested in deliveries by drones, which is as well a new service offered to customers. Finally, the firm innovates the buying process by developing and launching the so-called one-click checkout that reduces the number of clicks and operations necessary for buying a product or paying for a particular service (Carpenter 2015; Curtis 2013).
What Are Innovative Business Values?
Business values make up the foundation for achieving the core strategic objectives of a company and becoming successful. Regardless of the deployed business model, business values can be divided into dominant (constant) and rising (temporary). In this way, it is evident that continuous improvement of the company’s outcomes using innovation should become a dominant value while winning particular markets can be referred to as temporary values. Moreover, constant innovations are inseparable from the desire of constant personal development and growth, design and implementation of progressive goods and services, diversification of offered products and services, cooperation with the most innovative and developed companies, and enthusiasm to share knowledge with society and the world (Anca & Vasquez 2016).
As for Amazon, the company’s activities are based on a wide range of values. First and foremost, the firm focuses on the constant diversification of provided goods and services with the stress laid on continuous innovation. As mentioned before the idea is to maintain a constant pace of innovating business activities instead of implementing tremendous changes from time to time. The drive is to make even the simplest processes innovative to avoid errors and minimize costs. Moreover, senior management promotes the obsession with a customer – making customer service and support the initial objective with the focus on turning it into a fast, flawless, and efficient process. All in all, the motivation is to deliver results, thus increasing customer satisfaction (Satterfield 2014). In this way, it can be said that the primary business values of Amazon do correspond with the common values of innovative companies because of the focus on constant improvement and innovation.
What Are the Revenue Streams or Revenue Model?
A revenue stream is one of the components of a business model. In general, it is the source of earnings received by a particular company. The idea is to separate income and earnings because revenue streams refer to all financial resources received by the company before it allocates funds for paying taxes, salaries, and covering other related expenditures. There are different types of revenue streams, including revenues from Internet-connected income, advertising, free offerings, differing pricing strategies, and increased margins over conducted operations. At the same time, there are various revenue models such as subscription, merchant (e-tailer), manufacturer direct, cooperation, community, advertising, brokerage, infomediary, and affiliate. The models mentioned above are directly connected to different business models: access and content providers, retailers, portals, network providers, and application service providers (Assadi 2015).
Based on the activities and profile of Amazon, it can be said that the company’s business model is a combination of application service and access providers with retailers because of the specificities of offered goods and services. As for the revenue stream itself, revenues derive from incomes received from activities conducted online (Internet-connected income). Still, there are two geographical regions of all operations – North American region and international referring to the remaining parts of the world (Research Methodology 2016). Therefore, there are as well two revenue streams from a geographical perspective.
What Technologies Are Most Important for This Model?
Based on what was mentioned above, the business model and the type of revenue stream of Amazon are directly connected to operations conducted on the Internet. In this way, the foundation of the successful operation and future economic welfare of the firm depends upon efficient marketing strategies. Even though the company uses both online and print sources for achieving its marketing objectives – reaching a maximum number of customers and increasing customer base, – the role of print advertising is minimal, especially keeping in mind the extensive use of the newest technologies in everyday life. From this perspective, information technologies and innovations are the most critical for making this business model efficient and productive.
It means that Amazon should pay significant attention to allocating more funds and investing in the development of its digital network, thus expanding its activities to a new market and potentially increasing its client base. As noted by Assadi (2015), to become successful and exploit the chosen business model to its fullest, the company should focus on developing core competencies – a unique combination of innovative technologies and skills. In the case of Amazon, it means that the company should center on making used Web 2.0 technologies more creative and efficient as well as invest in training those working with them, thus improving the overall performance and boosting the productivity of the selected model.
Evolution: How this Model Has Emerged?
Changes in business models are directly connected to the changes and overall trends in the existing business environment. At the same time, similar developments are influenced by the changing needs of customers as well as the level of their common skills. In this way, companies are required to react to any demands from their existing as well as potential clients (Fassi & Shipley 2017). In this way, it is evident that the establishment of the innovative business model resulted from the extensive implementation of the newest technologies in everyday life and the commonality of the Internet. It means that if there is a trend toward online shopping in the national and international markets, the company should allocate funds for launching online shops and alter its business model respectively.
Speaking of Amazon, it has chosen an innovative business model initially, thus laying stress on innovation as the foundation of future development. Nevertheless, its business model still evolved. For instance, with the introduction of e-readers, respective innovative products were designed and implemented. At the same time, as the customers got interested in using cloud services, the company as well worked on developing the need segment and adapting its business model for complying with the new requirements. As for now, Amazon’s business model and core values do correspond with customers’ needs, as they focus on constant improvement, i.e. continuous development and further evolution.
Leadership: Background of the People Behind It
Effective leadership is the foundation of the productive business model. It is especially critical in the case of an innovative business model that is directly connected to the necessity of constant development and improvement. In this way, leaders should be the set of strong personal features to motivate others to develop as well as drive the positive change.
Speaking of Amazon, leadership operates in correspondence with the company’s core business values. It means that the major value is the motivation of people to constantly self-improve to be able to use the newest technologies and comply with the requirements of the time. Also, leaders focus on making people behind them interested in seeking ways to innovate offered products and services as well as develop ideas for simplifying them. More than that, they lay the stress on the exceptionality of provided services and reaching high standards of operation. Finally, leaders are those who motivate their teams to improve performance and become more productive by estimating their key performance indicators and teaching them to become better (Amazon 2017). All in all, leaders at Amazon are those who are not afraid of becoming a role model for others.
Who Are the Stakeholders?
In general, stakeholders refer to those individuals and groups that contribute to the company’s growth and successful operation because they are both directly and indirectly connected to business activities. The specificity of these actors is their interest in the company’s development and economic success. In this way, stakeholders and firms are interconnected, as the stakeholders contribute to the company’s evolution, while the company provides needed value to its stakeholders (Ferguson 2017).
In the case of Amazon, it is essential to keep in mind that it is an international organization. More than that, it employs more than 150,000 people around the globe and is influential both within and outside of the North American region. It means that the company has many different stakeholders. To begin with, the most significant stakeholder group is Amazon’s customers. It derives from the company’s values and corporate responsibilities. In this way, customers are interested in receiving goods and services of exceptional quality, while the firm is interested in the financial reward for constantly improving its performance. The second group of the stakeholder is employees.
The interconnection between them is evident: those hired are interested in financial stability, being at the same time important to the company because of the contribution to its growth and sustainability. More than that, communities are as well perceived as stakeholders because of Amazon’s social responsibility policies for communities – development through education and sharing knowledge in return for loyalty and support (Ferguson 2017). At the same time, it is essential to mention that the government is as well one of the stakeholders. While it is interested in receiving taxes from Amazon, the company hopes for legal support and a favorable business environment. Finally, there are creditors and suppliers as major stakeholders, as they are as well interested in Amazon’s success (O’Brien 2016).
How Do They Do Competitive Advantage? (Porter’s Five Forces Model)
Competitive advantage can be analyzed by deploying Porter’s Five Forces Model:
- The threat of new entrants – high: even though entry barriers are substantial, new entrants still can enter the market because of the specificities of the business – Internet-based activities. It means that Amazon should focus on the further innovation of its products and services to guarantee customer loyalty and its popularity;
- Bargaining power of buyers – high: regardless of the differences in the bargaining power of buyers among varying categories of products and services, in general, it is high because of the direct dependence of Amazon on its customers;
- Bargaining power of suppliers – low: because of cooperating with a wide range of suppliers, their bargaining power is low. It means that the company like Amazon could easily find new suppliers in case of conflicts or misunderstandings with the existing ones;
- The threat of substitute products and services – high: regardless of the recognized brand name and popularity of services, customers are interested in price. It means that because Amazon is a retailer of common goods and services, the risks of being replaced by rivals are high if they offer lower prices or better quality;
- Rivalry among existing firms – high: this risk is connected to easily substituted goods and services and supplemented with the specificities of business operations. In this way, any online retailer is a potential threat.
Conclusion (from the Middle East and Arab World Point of View, Especially UAE)
Based on the facts provided above, it is no doubt that Amazon is an innovative company. Nevertheless, as it was as well mentioned, there are two geographical regions of operation – North America and the rest of the world. Here, the challenge is in the level of implementing the innovations as well as cooperating with particular regions. Speaking of region-specific innovations, there is still much work to do for Amazon in the Middle East. For instance, there is no official website for the United Arab Emirates.
The same is true about the official translation of the website into Arabic. This challenge does not minimize the language gap and does not increase the customer base. More than that, not all goods can be delivered from Amazon to the UAE that as well leads to the lower popularity of the company in this region. Nevertheless, Kindles, as well as cloud services, are available. It means that Amazon has launched its activities in the region and might become more popular and influential in the case of adapting its business model to the Middle East needs.
Reference List
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