Amazon.com is a transnational electronic commerce organization founded in 1994 by an American named Jeff Bezos. The company is the largest online retailer in America dealing with a wide range of consumer products such as books and other products (“Your Amazon.com,” 2010). Since the time it was established, Amazon.com has acquired five different businesses.
The company started by selling books and now deals with a range of other consumer products. These vary from a database technology to videos. It has also expanded to the European market where it has established separate websites. The success of this company can be attributed to its low competitive prices and the simplicity of making purchases from anywhere.
SWOT analysis is the internal review of an organization’s strengths, weaknesses, opportunities, and external environment threats, which influence its strategic decisions. Kotler (1988) has noted that a company should keep evaluating its strengths, weaknesses, risks, and opportunities if it has to survive in a competitive marketing environment.
Amazon Company is one of the profitable businesses dealing with online products (Longo, 2009). The company has adopted major initiatives towards meeting the varied needs of its consumers that gave yield to the increased profits.
The first issue facing the online store is that despite its increased profits, it usually experience periodic loses. These huge losses are due to a large amount of capital used in its establishment, poor implementation of some strategies, promotions of its products, and seasonality of its purchases.
In 2005, for example, the turnover for one hundred days to June dropped by thirty-two percent to $52m compared to $76m during the same period one year later. Therefore, the company should continue implementing strategies such as the practice of CRM as a technique for fulfilling its objectives (Byers, 2007, p.69).
It should also maintain the use of IT in assisting its business strategy as this will ensure that it cautiously documents all the relevant information related to customer buying behavior. This strategy is beneficial in providing people with particular items, or package of assorted items, based on preferences shown, through a collection of things bought or online products visited.
The strategy of providing free shipping to its consumers would undoubtedly decrease its returns. Although, it is a fair strategy since a person may consider purchasing similar products from a local shop at no added costs. Nevertheless, it is rumored that delivery costs could reach $500m, and such an amount is detrimental to the longevity of the online retailer.
Therefore, the management should reconsider this expensive strategy since transportation costs are increasing due to the high fuel price increments. Moreover, the periodic losses are also due to the seasonality of its purchases. The items that the company sells tend to be purchased on a seasonal basis; hence, this makes its revenues to fluctuate.
These items are most of the time purchased as gifts during holiday seasons. This makes most products to be sold at certain times of the year. To manage this issue efficiently, the management should consider trading in overseas markets in different cultures and such a situation will not be persistent. The growth of sales during the off-season can also be facilitated by introducing a membership facility to offer clients benefits during such times.
Secondly, Amazon is at the risk of deteriorating its established brand. Amazon is a significant global brand recognized for many reasons. The brand was one of the initial versions of dotcoms (Ehrlich, 1999). During the previous decade, it reached an estimated number of thirty million clients. Amazon took an early advantage of online technologies for establishing e-commerce.
This enabled it to be one of the earliest online retailers. However, as the company continues to add more products on its website, it risks deteriorating its brand. Microsoft, for example, is well known for computer software products. Imagine if Microsoft decided to diversify and start selling books. This will confuse its customers and put its brand at risk. Similarly, many of the new products, for instance, automotive products, might bewilder Amazon’s consumers.
Also, to avoid deteriorating its brand, Amazon can capitalize on several opportunities that can enable its continued growth within the marketplace. The company can build specialist connections with publishers to provide exclusive editions on its website as well as launch proprietary rights with authors. This would give a point of difference within the retail market and create aroused expansion through followers of particular artists. The company has the opportunity of adding more investment in fulfillment.
This would boost the level of actual client service and meet the needs and requirements of the purchasers since it depends on customer expectations to provide repeat purchases and prolonged existence. The company can sell its skills to various store groups. For instance, the British retailer Marks and Spencer, Target, and Toys-R-Us all agreed to corporate with the firm in online retailing.
The company can also exploit other opportunities that come from the entrance into new markets such as its new Luxembourg-based division seeks to provide retailers in Europe with tailored services. In 2004, the firm entered into China and bought the country’s largest internet store, Joyo.com. Joyo.com is dealing with similar items as Amazon. Exploiting foreign markets can expand their customer base.
For example, the move into the Chinese market by buying Joyo.com is commendable as this would increase its returns in the long run. However, the management should take drastic measures to ensure that Amazon does not lose its market leadership amidst these mergers. This is because the collaborations that it has formed with other firms may make weaken its brand in the market.
Finally, in this era of technological advancement, Amazon is faced with several threats to its existence. Every online business that has achieved its goals attracts rivalry from other players in the market. Since the firm deals with related items as high street retailers and other internet shops, differentiating the brand from its opponents can prove to be a significant problem. Therefore, with no particular differential to the increasing competition, potential consumers can shift their loyalties to other brands.
However, Amazon has its established brand and a variety of items to sell. Or else, price competition might harm the online retailer. As the company grows, the management should implement strategies for dealing with increased competition, especially from international opponents. This is because when the home-based competitors have failed to outdo it in the home ground; they may make their way and compete with it overseas.
In conclusion, Amazon.com plan of maintaining the competitive edge in the market is to employ every resource it has to make profits. To achieve this, it has spent fifteen years and about $2 billion developing its internet store, which is one of the largest and most consistent worldwide.
To maintain its market leadership, the company should implement counter-measures for dealing with the rise in property rentals, piracy, and unauthorized downloading of internet materials.
Reference List
Byers, A. (2007). Jeff Bezos: the founder of Amazon.com. New York: Rosen Publishing Group.
Ehrlich, C. (1999). Retail Success Factors. Web.
Kotler, P. (1988). Marketing Management (6th Edition ed.). Englewood Cliffs, N.J: Prentice Hall.
Longo, D. (2009). Pillars of Amazon’s Success. Nielson Business Media. Web.
“Your Amazon.com.” (2010). Shop all departments. Amazon.com. Web.