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Amazon Case Study

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AMAZON CASE STUDY

Who are Amazon’s Competitors?

Since its inception in 1994, Amazon has experienced tremendous growth from a

company that offered discounted prices books, to an e-commerce company with global

presence. Also, the company has expanded its operations into different market segments,

thereby creating different competitors in the respective market segments.

In the media segment, there are two major competitors namely Ebay and Netflix. Ebay

offers a platform for distribution of digital content. Netflix, on the other hand, is an

established developer of digital content and movies and has recently engaged in market

integration which has seen the company distribute its digital content directly to the

consumers. In the electronic and general merchandise market segment, Alibaba is the major

competitor because it has established connections with suppliers and has distribution network

globally.

Why would Customers Shop at Amazon if they can Find Better Prices

Elsewhere?

First, customers have confidence in Amazon because the firm has endeavored to

nurture good working relationships with the customers. Also, the firm has a broad range of

products which are not offered by other companies. For example, the firm has overtime made

a departure from its traditional business model of selling books online and introduced

products such as videos, clothing, electronics, and digital content. Therefore, customers would

prefer to make purchases at Amazon because they are guaranteed of availability for the

preferred products.

Another reason why customers would prefer shopping at Amazon even at marginally

higher prices is that the firm has an extensive distribution network. In the past, the company

has been operating under partnerships with logistics companies for the distribution of its

products to the customers. However, the firm has recently bypassed the logistics

AMAZON CASE STUDY

intermediaries and adopted the model of delivering the products directly to the customers.

Therefore, customers enjoy active lead time so that they get their products on a good time.

Also, the website at Amazon allows customers to quickly search for products from different

departments and place their orders.

Why did Amazon create most of its technology from scratch?

Amazon decided to create its entire system from scratch because it wanted to

customize the system to respond to the needs of the customers. The development of the

system was designed to address three sets of needs including competitive pricing,

convenience in the selection of products, and ensure availability of the products throughout

the year. To this end, the current system in the company has distinct features such that when

as the customer places an order, the system connects to the distribution centers and the

product is delivered on a timely manner. Also, the system makes product recommendations to

customers based on previous purchases.

If Amazon buys products from other firms and simply ships them to customers,

why does it need so many of its distribution centers?

Amazon prefers to have own distribution centers so that it can effectively manage the

online presence of large retailers. The firm uses its distribution network to cultivate customer

loyalty, and facilitate the use of technology to analyze complex data and determine customer

preferences. Besides, the distribution centers allow the firm to remain faithful to its business

model of linking the order system with the distribution system and facilitate timely delivery of

products, devoid of the conveniences which may be caused independent logistics companies.

Will other retailers buy or lease the Web software and services from Amazon?

Can Amazon make enough money from selling these services?

Yes, other companies have bought the web software from Amazon in the past and will

continue to do in the future. In particular, retailers such as Target and Circuit City have

AMAZON CASE STUDY

established profitable relationships with Amazon. Regarding profitability, a record of the

financial statement indicates that the firm can make enough money from the sale of the web

software services. For example, 25% of Amazon’s sales in 2004 came from retail partners.

Also, the revenues generated from this business segment has been used to strengthen the

system and invested in research and development, thereby laying the ground for continued

success.

Write a Report to the management that describes the primary cause of the

problems, a detailed plan to solve them, and show how the plan solves the problems and

describe any benefits it will provide.

The problem at Amazon is that they have been losing market share to companies such

as Alibaba and eBay. Also, the aggressive growth has made the company lose grip on its

traditional market segments such as digital content. These challenges can be attributed to bad

working conditions within the company, which has eliminated the need for the employees to

increase their productivity. Besides, the vision has not been properly communicated to the

employees. The solution is to improve the working condition which is likely to generate

several benefits including improved productivity, improved internal environment and better

reputation from a customer perspective.

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