Introduction
Amazon.com, Inc. is a company that offers variety of services to consumers all over the world. The Company has since developed in such a way that it offers its services to consumers through the retail websites that the Company owns. Amazon produces programs to the seller customers that enable them to easily use the Company’s Website and their own Websites to sell the products they produce.
Through its Web services, Amazon caters for the need of the developer customers. This is by providing them with the recommended technology infrastructure that enables them to operate any type of business (Amazon.com, 2009).
Amazon operates in two known segments which are North America and International. Within these segments it offers co-branded credit card agreements, marketing and promotional services that enable the Company to generate revenue. The Company has acquired the rights to own various companies through purchasing.
For instance in the year 2008 it purchased Shelfari which is a social network for those who like books, It also acquired AbeBooks in the same year. Towards the end of 2009 the Company obtained the ownership of Zappos .com. Inc. (Amazon.com, 2009).
Portfolio of new business services
The building of a portfolio of services is often considered as the first logical step in the process of implementing a new business. The ideal framework for building a service portfolio must be set and followed to the latter (Aaker, 1998). Jeffrey Bezo of Amazon Company is very much concerned with the growth of the company.
This has made him to be more concerned on how to work closely with the relevant groups within the company including the business process owners, system architects and developers to bring success to the company (Hynes and Pradhan, 2008).
Identifying Services
In discovering the appropriate service there are techniques that are employed by business companies. In order to realize complete satisfaction of its customers, Amazon employed the process of “working backwards” which entailed identifying customer needs and working backward until they reach the minimum technology required to satisfy the identified customer need. This resulted into the company commanding a good base of loyal customers (Stanford University, 2008).
Amazon has found it necessary to invest in the research and development; this has seen the Company take advantage of the propriety technology it owns. The Company has used this technology to improve on the process efficiency and offer support to Web infrastructure services.
They’ve also gone as far as patenting “I-Click” that has enabled easy dealing with return businesses without repeating the entry of information within the system. There is also the development of the intelligence-based pricing system which works artificially (Stanford University, 2008). The invention of the SmugMug offers cheap storage service, offering cheap space on the disk drives for the benefit of businesses or programmers willing to store data.
Amazon Company has embarked on programs that will enable it to run the technical and logistical parts of retail businesses. In order to render this, the company has embarked on the technique whereby its renting out most of the things it uses to run its own businesses.
Amazon is also focusing to offer free-shipping that will be marketed in place of TV adverts and also buying more servers to run the new machines. There is also the idea of using the automated technique to run the business processes, this will involve the art of taking orders while at the same time processing the payment of the orders (Stanford University, 2008; Hof, 2006, p5).
Classification of Services
The classification of services is based on their usefulness and importance. The classification always allows for easy management and supervision of the requirements for different groups of services (Hynes and Pradhan, 2008). The company has so far embarked on buying the technologies and their contents.
They also consider hiring of specialists i.e. engineers and programmers to enable easy implementation of the services. The company has simple storage service i.e. disk drives, where it charges businesses for storage of data and programs. Amazon also has the idea of offering the outside software services and enabling Web site developers to gain access to the Company’s selected data (Hof, 2005, p4).
Determining service Granularity
Appropriate granularity ensures that the service rendered is easily put in use and managed appropriately (Hynes and Pradhan, 2008). The services provided by Amazon tend to satisfy customers to their expectations. This is because more flexibility to the client use will be applicable. However it has been discovered that the preferred service is the one that focuses in maximizing the value of the business, hence Amazon rents out its computing power at hourly rate to cater for this.
The storage service is being used by potential customers, i.e. Microsoft Corp. is using it to speed up software downloads, and the service is also very vital to Linden lab since it assists them in handling quick software downloads. In order to handle customers in all corners of the world, Amazon has provided customized handling, packing and customer service to people. This is in order to cater for the upscale retailers and manufacturers, this is been done by opening the small and midsize businesses (Hof, 2006, p5).
Service Implementation
For a service to be acquired and implemented, its placement and purpose must be well determined (Hynes and Pradhan, 2008). The company has got storage facilities, disk drives, where they charge customers for using them. They also charge storage in their warehouses. Amazon has set up a semi-automated global market place that serves the online piece work, which includes transcribing snippets of podcasts.
Logic and risk of new direction
Amazon faces some risks in its bid to lead the next wave of the Internet; it faces stiff competition from Google and Microsoft which is also fighting to be the Net’s king pins (Hof, 2006, p3). The other risk is that the Web developers continue to build new services on top of the Amazon technology, hence gaining advantage over Amazon’s core retail businesses.
The majority of the retail sales in the US and other parts of the world are still based in brick and mortar stores which pose a greater risk to Amazon’s competition in the market. The focus that Amazon Company has towards the purchases done online, offers the company a great opportunity to strategize in establishing itself on long-term sustainable growth (Amazon.com, 2009).
The cloud computing market has grown tremendously permitting a stiff competition in the already populated market. The entry of Amazon in the cloud computing market faces stiff competition from the already established industries like Microsoft, Google and IBM. Due to this Amazon has ideally placed its focus on customer satisfaction as well as innovation. They focused on the value that they could add to customers besides just incorporating any new technology.
The company has emerged as easily accessible offering variety selection of products at a lower price to customers (Stanford University, 2008, p3).However, the cloud computing has been classified by some analysts as a disruptive technology and this poses some risk to Amazon. The eBay company is one of the largest competitors to Amazon in the e-commerce sector; they compete against each other in the area of online auctions.
The retail businesses that Amazon runs, offered a round 16 million items that attracted over 615 million customers in the year 2007. In the online retail market, the company accounts for 6% of the $ 136 billion that is, within the U.S market. By the year 2008 Amazon’s branch in Seattle had employed over 17,000 all over the world. It had also established warehouses and software design centers in eight countries around the world (Stanford University, 2008).
Amazon has made variety of services and products apart from its main business that it offers to its customers. These include; Amazon Associates which is an affiliate marketing program, Amazon Auctions, Amazon Marketplace which allows vendors to sell new and used goods, Pinzon a private label that deals with textiles and household goods, digital content offerings and Web store, and most recently the Social Networks (Stanford University, 2008).
Amazon plans to incorporate a corporate culture that is friendly and comprises of people from different backgrounds. These people who will be employees for the company must share in the vision of the company by desiring to move profitably. The company plans to offer more products at competitive prices with diverse distribution network to cover big market segment as opposed to internet retail websites which cater for smaller market segment (Stanford University, 2008, p7).
Technology and logistics to start-ups –How attractive?
Like in the case of Amazon, the e-retailer services present them with the opportunity to apply the effectiveness of the Net; this is through the provision of both tangible and corporeal assets. These assets include the products and the people. This technology enables easy product distribution and automatically enables the transacting of orders together with their payment (Hof, 2006, p4).
The Mechanical Turk has made it easy to gather people for tiny tasks, hence it has attracted so many customers from different companies and this provides an attractive market for Amazon. It has been used by companies to analyze great amount of search keywords that they use to attract potential shoppers to specific Web sites (Hof, 2006, p5)
If the technology offered can consistently meet the quality, cost and delivery expectations of customers it is considered to have the ability to contribute to the revenue growth. In the recent past the business environment has dramatically changed to the extent that these conditions are no longer considered sufficient for success. The internal and the external constraints are accounted for before the technology is sent into the market place (Cravens & Piercy, 2000; Miller, 2009).
Innovation process- describes and evaluate
The key factors that Amazon considers for improvement of the Company are lowering of the prices, offering convenience to customers, expansion of the services selected as well as improving their availability (Dwyer & Tanner, 2001). These factors have made the core foundation that has made the company to realize fabulous growth. This has seen the company to realize a growth of $ 14B in the retail machine.
The direct link to customers that Amazon enjoys through the online model, has enabled the Company to maintain and contain its inventory in the few available warehouses that are strategically located. This has enabled the company to offer variety of goods without relying on any one product line. This has eliminated the inventory risk that is always experienced with the brick and mortar retailers (Miller, 2009).
Amazon is using the storage service to speed up software downloads. The innovation process used by Amazon has provided an advantage to the retail operations. This is because it has enabled Amazon to use only 10% of its capacity at one operation giving room for occasional spikes. The innovation process has also seen the distribution centers operating more efficiently and at the same time providing the customers with variety of products (Hof, 2006, p4-6).
The invention of the automated business process has enabled efficiency and ultimately prevented the issue of overstaffing (Hof, 2006, p4). The modernization of the Amazon’s massive data collection centers and their software has made it easier for the incorporation of new Web site features. The employees, working in small groups, have hence found it easier to incorporate new ideas such as customer discussion boards, software to play music and videos on the various sites.
The innovation of the Scan buy service by Amazon has made it easy for customers to make comparisons of prices through their cell phones. This enables the consumers to check whether the Company offers better prices than retail stores. The invention of the Mechanical Turk on the other hand has enabled consumers to easily sort out photos through the Web site at an affordable cost (Hof, 2006, p4; Amazon.com, 2009).
Financial evaluation
Amazon recorded an over- reliance on electronic sales, continued promotions and shipping discounts. This resulted into the decrease in the realized profits during the year 2006. The total revenue for 2006 was $ 10,711 slightly higher than 2005 which was $ 8,490. The new markets that the company invested into were characterized by thin-margin businesses.
Also Amazon’s willingness to offer discounted shipping for customers has to some extent affected its sustainable growth in profits. The operating profit has been low for quite some years including 2006. The promotions were the major boosters to sales during that year (Keith Regan, 2007).
The company recorded sales growth from the previous year; the growth has been evident between the years 1998 and 2007. The sales have grown from $ 609 million to almost $ 15 billion. The profit margins have however recorded a five year average of 3.5% which is consistently lower than the sector average of 7.3% (Stanford University, 2008). The Online retail revenues grew substantially to $ 130.3 billion in 2006 as compared to $ 104.4 billion in the previous year (Jupiter Internet Shopping Model, 2008).
Cash Flow Statement
Conclusion
The utilization of the internet by Amazon has produced tremendous results in the global business platform. The company has focused on the profitable business ventures which have enabled it to expand gradually beyond the normal business platform.
Formally it was known as the internet superstore selling variety of products from books to electronics, groceries, jewellery and auto parts. This has since been expanded and encompasses the e-commerce and internet technology, fulfillment and logistics, search technology, internet advertising and internet startup incubator of sorts.
References
Aaker, D. (1998). Strategic market Management. 5th edition. New York: Amazon.com. (2009). Amazon the Global Superstore. Web.
Cravens, D. and Piercy, N. (2000). Strategic Marketing. McGraw-Hill-Irwin (9th Ed). Boston.
Dwyer, F. and Tanner, J. (2001). Business marketing: connecting strategy, Relationship and learning. 2nd edition. New York: McGraw-Hill.
Hof, D. R. (2006). Jeff Bezo’s Risky Bet. Business Week, November 13, 2006.
Hynes, D. and Pradhan, S. (2008). Building a Portfolio of services. Web.
Jupiter Internet Shopping Model. (2008). US online Retail Sales Revenues 1999-2006. Web.
Keith, R. (2007). E-Commerce Times. Web.
Miller, R. (2009). Outage for Amazon Web services. Web.
Stanford University, (2008). Amazon Enters The Cloud Computing Business. Web.