School Papers

1) products should have a wide range as

1) Amazon’s
strategy is based on cost leadership and differentiation. Cost leadership is a
very important part of Amazon’s strategy. The company targets becoming
customer-centric and offering its customers the products which they want, also
these products should have a wide range as well. In addition to that the
company continuously invests in technology, which helps to improve efficiency,
lower the operating costs and enables to continue offering low prices to
customers. Amazon also points out differentiation. It provides a large variety
of products from its selection of retail products to Amazon Software, Kindle
and Cloud services. It provides a wide variety of services to different types
of consumers. There are 3 of them: 1) Consumer customers (through its website
Amazon offers a wide range of products, low prices to the customers); 2) Seller
customers (seller who either sell their products via Amazon website, either
they sell via their own website and use Amazon delivery services); 3) Developer
customers (customers that use Amazon Web Services, which give these people
access to Amazon IT infrastructure and enable them to create any type of
business they like). Amazon provides low prices and wide selection of products,
which then forms the resources for innovation. In addition the company tries to
understand its customers better offering feedback forms and also collecting
data about customers’ preferences among the products. The expansion process,
such as launching Kindle or Amazon Web Services and other digital content
platforms, is very difficult for the competitors (like eBay) to follow up. In
order to make all the deliveries on time, Amazon opened fulfilment centers in
different places of North America (Arizona, Delaware and etc.), Europe
(Glenrothes, Hesse and etc.) and Asia (Chiba, Guangzhou and etc.). To
summarise, cost leadership strategy enables amazon to gain competitive
advantage along with the gaining more market share. However, large investment
in R can also cause some risks.

2) Strategic capabilities have a significant impact on an
organisation’s long-term survival or competitive advantages in the market
(Johnson et al., 2014). Strategic capabilities can be
composed of resources (what the company has) and competences (what the company
does). Resources are divided into 2 groups: tangible and intangible. Tangible
resources for Amazon are: IT infrastructures, customer databases, warehouses
and management team. Amazon has warehouses around the US and Europe with
several warehouses in Asia. IT infrastructure is also a big resource of Amazon,
since it is the not only the resource, but also the the source of Amazon
revenue. The last but not least are customer databases and management team.
These two resources are also important for Amazon, as for a customer-centred
company customers are the main resource and source to make profit and
management team in this occasion must perform at its best in order to serve
this customers in the best way. Intangible part of resources consists of
Amazon’s financial instruments, such as profit

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Competencies are the skills and abilities which help the
resources to be deployed and used effectively. This can be seen through
organisation’s activities and processes. Amazon, as a powerful brand, gets its
core competency through brand and also through providing services to customers
and building relationships with the retailers and suppliers. In addition,
“Amazon also built relationships with Simon&Schuster Inc., and Christian Publishers,
making even more titles available and further ‘fuelling’ interest in this
revolutionary product.”(Case study, p.577). This part is very difficult for the
competitors to imitate. Although the whole design of Amazon (website, logo) can
be imitated, the innovation part of the issue is close to be untouchable due to
high investment in this part of business. Another reason why Amazon is far
ahead is its diversification, which sometimes is far away from the core
business, which are books for Amazon.

Finally, when it comes to employment, Amazon uses a
strategic approach- headquarters are located in Seattle, where lots of IT
talent is situated and also helped Amazon in strengthening the management team
in the very beginning. A good example can also be hiring Richard Dalzzelt,
former Wal-Mart Vice President, in order to get more knowledge in
“merchandising, supply chain, commercial decision support and data mining
systems” (Case study, p. 576)

 

3) Amazon is considered as a much diversified company where sometimes
it is much unrelated to the core business, which for Amazon are books. It can
also be mentioned that diversification is a part of Amazon’s growth strategy.
The first move towards the diversification was made, when Amazon launched the
first version of Amazon Kindle in the last quarter of 2007 followed by the
second version in 2009. The market of electronic books is very close to
Amazon’s core business. Only after that the company launched AWS, which allows
IT vendors and small companies use their services in cloud computing. This was
the first move towards unrelated businesses done by Amazon.  Later on Amazon launched its Motorcycle Store
“as a single shopping destination for motorcycle and parts, accessories and
protective gear” (Case Study, p. 579). From 2007 till 2009 making acquisitions
and forming alliances was a mail sources of diversification and expansion for
Amazon, for example company acquired Fabric.com, Reflexive Entertainment and
AbeBooks. Such strategy enables Amazon not only to grow, but also to enlarge
their customer base and also enter the new market. However, the main
disadvantage is that acquisition requires large investments and enlarges the
risks, if, for instance, this acquisition is unsuccessful.

4) Amazon still remains a “customer centred” company and, in my
opinion, Jeff Bezos does not have to change anything in this point. Nowadays
Amazon is targeting digitalisation and invests more and more in this field, for
example the launch of Amazon Go, Alexa and the Prime feature itself. In these
circumstances, we can clearly see that Amazon targets not only digitalisation
and innovation, but the company also turns to, so to say, connected
technologies-connected cars and connected houses. In this case Alexa is a very
good example how Amazon adapts this product to a market: Alexa is being
installed into Ford cars and also it helps people to control their smart
houses, which are getting more popular. The process of innovation won’t stop at
Amazon, as well as adapting new technologies to their customers. This will
definitely lead to a more deep competition with Apple and Google, which are
considered to be two technological giants. In these circumstances Amazon will
face the dilemma: 1) invest more in order to compete more comfortably, or 2) continue
investing on the same level and do not get into the competition. To my mind,
investing more and start deeper competition with Google and Apple is a
reasonable strategy for Amazon in the nearest future. Investing in a lot of
startups (what Amazon is doing nowadays as well) will benefit in the future and
also today, because in this situation the competitors won’t be able to get one
particular technology easier.

In addition, it is becoming more and more important to be a
diversified company-companies, after the success in their core businesses try
to expand and compete in the other markets, for example Google entered the
market with its One Touch Plus smartphone; Apple is thinking about car industry
and also has an example of entering the mobile market with iPhone. Since Amazon
has good technological base and has experience in producing electronic
products, such as Kindle, the company has good chances to also enter the market
of mobile phone and start competing with Apple on their territory. Besides the investing
strategy I think Amazon should continue investing more in promotion, as the
company does right now-the overall advertising and marketing costs are
increasing from year to year. And in the case of Amazon entering the new
markets, such as mobile market (which I have already mentioned above), the
marketing strategy Amazon uses in other fields of business alongside with the
experience can be very beneficial to them.

All in all, in the future I see Amazon as one of the most
powerful, technological and diversified companies alongside with other
giants-Google, Apple, Microsoft. The strategy of Amazon should still be based
on high investments in new startups and marketing, in order to enlarge the
customer base and adopt new technologies for the startups. The second point is
based on the diversity of the company-Amazon should diversify more, enter the
markets, where other technological giants prevail-electronic market. I think
that Amazon has already enough experience and technology to produce something
really unique and which will be loved by their enormous customer base.

 

International Business Game

First of all, I would like to begin with the definition of a
business model where network effects can be used. Such business model is called
a platform. A platform is a business model which enable the exchange of value
between the consumers and producers. Platforms are also considered to be a
two-sided networks, where both parties have cost and revenue or value side.
There are different types of platform, which are used nowadays:

1)     
Services Marketplace (booking.com);

2)     
Social Networking platforms (Facebook, Twitter);

3)     
Content platforms (YouTube, Twitch, Twitter, iTunes);

4)     
Product marketplace (eBay, Amazon)-type of a platform
where customers and producers of goods meet;

5)     
Payment Platform (PayPal, WebMoney) – platforms where
the transactions are performed online;

6)     
Development platforms (Android, Windows, Linux)-platforms
which are dedicated to developers and users;

Platforms are very different from the other type of business
models, as they enable large number of producers to make and exchange value
with the same large amount of consumers. For example, Apple, as a software
company, makes one value (MacOS, for instance) and then sells this value to
many consumers, whereas Amazon has created a technical infrastructure, where
unlimited number of producers and consumers create and exchange value.

Network effects are the ways in which consumers of a platform
influence the value of a platform itself, so to say the more people are there
in a platform-the more valuable it is. There are three types of Network
Effects:

1)     
Direct Effects-are the effects where the value of a
platform or any service increases as the number of consumers increases. For
example, telephone-it becomes more valuable and useful as more people use it
and on the other hand, the more people use phones, the more useful it is to
have a phone yourself in order to contact people with phones.

 

2)     
Indirect Effects-are the effects where the value is
created in exchange between two or more groups of users. In other words, this
effect describes the relationship between customers and producers/developers
who use a given platform together. The increase of consumers in a platform
makes a platform more valuable for producers, which leads to an increase of
high quality producers. This generates even more value for customers, which has
the influence and frequency on the platform’s usage. For example, there many
developers who produce good apps for Apple iOS. Since these apps are good more
people will be using this platform and buy new iPhones. Since the number of
iPhone users increase, the number of developer grow as well, as more people
learn how to develop an app for iPhone due to the increase of the market. Such
interdependent circle is called “positive feedback loop” which is considered to
be the main source of success for platforms.

 However, as the
network/platform expands it is common that the average quality starts to drop,
so it becomes very important for a platform to maintain high quality. For
example, social networking platforms, such as Facebook and Twitter, ban and
delete spam accounts, they also ask their users to verify themselves. This
enables these networks to grow further.

It is often better to understand the global consumer network as a
collection of small local networks that operate independently from each other.
In Facebook and Snapchat, for instance, people have contacts in their small
peer groups. Even though they are a part of a whole consumer base of these two
social network, they are more directly impacted by their involvement in their
small peer groups. Such local network effect is a very powerful force in
keeping user engagement, as it put an emphasis on each user’s individuality.

As for Amazon, the network effects play a big role in their
success. To start with, Amazon is considered to be a two-sided product
marketplace, where consumers and producers create and exchange value. The
company sits between end consumers and producers or merchants. The company’s
value-add in this situation is more or less keeping order-all pages look the
same. Amazon keeps merchants on a short lease and requires them to operate in
strict metrics. Amazon plays a crucial role in this market, which is why it is
very difficult to enter this market. In traditional retail business it is very
difficult to adopt direct network effects as they are very limited. Amazon was
able to adopt ratings and reviews in a digestible format-products with low
ratings(less than 3-4 stars) are not presented for a long time, the products
that can attract consumers have at least 40 reviews. Such ratings and reviews
along with tracking people led to predictive analysis. This has changed a lot
in direct effects world, as they have nowadays more broad presence alongside
with indirect effects.

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