Amazon Company Review and Project Course Plan

(Team-B: Course Project)

SBE430ON : E-Commerce for Small Business SPRA11 Sec A Project Manager: Kakorya (Denise Davis) Assistant Project Manager: Tiffany Velasquez

Abel Cabello Dorothy Redhead Janelle Williams Taneka Irvin

03/13/2011

Number of Pages Submitted: 7 Amazon, company review 03/13/2011 Team-B

When was the last time you purchased something on-line? Did your purchase come from e-bay, textbook.com, half.com, or Amazon? With the increasing popularity of the Internet and

World Wide Web both companies and young entrepreneurs, alike, have begun to step into the world of E-Commerce and E- Businesses. What better way to increase revenue by reaching consumers all over the world with desired products and services!

Today, Amazon.com is one of the largest e-commerce enterprises. The company offers everything from books, electronics, sportswear, tennis rackets, food, children toys, and gold- silver-and diamond jewelry. It was one of-the-first major companies to sell goods over the internet. Located in Seattle, Washington Amazon.com is a Fortune 500 enterprise. The company was launched in 1995, by Jeff Bezos (Schneider, (ND)).

The company’s perception is to be the world’s prime establishment for the entire needs of every online shopper/customer. The services provided by Amazon.com are through an assortment of third party businesses, such as, Target, Toys R Us, and Expedia. By choosing to utilize a third party Amazon.com has an advantage over its competitors. The advantage is that there is no need for minimal products to be ordered since there isn’t a warehouse. Amazon.com purchase’s the items directly from the company and the third-party vendor ship’s the customer’s purchase(s) directly to them, therefore, creating the opportunity for volume purchases and more revenue for Amazon. “Sometimes criticized for its focus on market share over profits,

Amazon.com put investor fears to rest when it secured its first net profit during the fourth quarter of 2001. Selling products over the Internet offered a variety of choices and opportunities. One of

of 7 Amazon, company review 03/13/2011 Team-B the pioneers of e-commerce was Jeff Bezos, founder of Amazon.com,” How stuff works (Layton

1998-2011).

During the 1999-2000 eras, consumer satisfaction with ecommerce was limited. Due to

this online shoppers went online, purchased what they wanted, and never returned because their

expectations were not met. The actual number of people shopping actively online in the United

States of America (USA) declined at the end of 2000 and continued to fall through the first half

to three-quarters of 2001. In 2002, there was a pickup in growth, and each quarter saw

improvement from the previous one. These companies were developing a completely new

business model, and they had to learn how to improve online service. In the USA, about 65

million households are online today. Between 25 million and 30 million households are buying

online. This suggests there will be about a 20 percent to 25 percent growth in e-commerce,

driven by non-online shoppers becoming online shoppers, as well, as those who already buy

online and continue to expand their online purchasing quantity. Over the next 5 to 10 years,

some experts expect that online sales could reach at least 10 percent of the total e-commerce

revenue. (Gilpin, 2003).

Amazon.com sales have continued to gradually increase. The secret to both their success

and profitability has been customer retention, customer loyalty, and repeat customer purchases.

Nearly 70% of Amazon's sales are from repeat customers (Bezos, 1999).

Jeff Bezos and Amazon.com did not witness pure success immediately; it was a few

years before the e-commerce giant began proving to be the online sensation that was predicted.

In 1995, Amazon was just another business willing to try the online market and identified its

opportunity to sell books online. However, Amazon.com was not placed in the same category

as other businesses trialing online servicing. What distinguished Amazon.com from these other

of 7 Amazon, company review 03/13/2011 Team-B

online businesses and what now allows Amazon.com to claim that it changed the world,

includes its business model and the ways in which it turned the rules of finance upside down

(Gasson, 2004).

Amazon.com has also contributed to its’ company’s success by utilizing three strategies.

The three business strategies which have enhanced its competitive advantage including: cost-

leadership, customer differentiation, and focus strategies. The company uses the cost-leadership

strategy by differentiating itself primarily on the basis of price. Due to this strategy,

Amazon.com always makes sure that it offers the same quality products as other companies for

a considerably lesser price. Second, the employment of a customer differentia approach

provides current and potential customers with differentiation though design, quality, or

convenience. Amazon.com consumers can recognize and differentiate its product from

competitors. Last, but not least, the enterprise uses a focus strategy. This strategy takes one of

the two earlier strategies and applies it to a niche within the market. Amazon.com focuses on

outstanding customer service as a niche, rather than a whole market, because each niche has its

own demand and requirement. (Saunders, 2001).

Now, let’s take a minute to discuss the company’s use of web-applications. The success

of Amazon.com interface is based on two strong models which include the conceptual model

and the structural model. The conceptual concept is based on the concept of a reference

catalogue. Amazon.com uses magazine style-catalogues on its website and it appropriates them

to Amazon.com. This than allows Amazon.com to arrange its product categories, in addition,

this model implies the presence of several methods for locating specific products, such as, a

table of contents and multiple indexes. The conceptual model of a reference catalogue not only

gives users a clear understanding of what the site offers and how it is organized, but permit’s a

solid foundation for further interface growth and development.

The structural model can be described as having an a-hub like appearance. The center of

the hub contains the product details and category index pages and the spokes link to functional

areas, such as checkout and account management. Amazon also uses the structural model as a

guide for its checkout process and another hub for its account management area. So, due to this

model, Amazon.com has the capability to establish an effective One-Click Ordering system and

consumers can purchase the products without going through the check-out process (Baxle y,

2004).

The following chart is an S.W.O.T analysis of Amazon. The analysis divides the

company into four recognizable areas. And the analysis identifies the company’s major

strengths, weaknesses, opportunities, and any threats which may provide or hinder future

development and company growth (deGerencia.co mW ri ting, 2010) .

SWOT Analysis STRENGTHS WEAKNESSES

 Recognition of brand (internationally and domestically).  The business model have the ability to rise sales (in $ and units) without the need for large increases in direct expenses.  Strategy based on low prices.  The company has an assortment of both  Complexity of business products which are sold and geographic markets being served (provides stability).  And Amazon continuous to reinvent itself and improve its value (customer/ company) proposition.

OPPORTUNITIES THREATS

 The increase of pre-sale products/purchases (advance purchasing) would allow customer to pay products before they are available and  Growing competition from months before they have to pay the provider. competitors,  Markets underdeveloped, with the rapid  Risk Inventory, increase of internet usage and broadband in  And the pressure to performance. other countries Amazon can increase its’ number of potential online customers.

Amazon.com is an example of what an e commerce business should embody. They not only look out for the best interest of their customers with security featured protection but, they also allow individuals and businesses alike to earn profits through the use of their web site. This is what creates revenue for Amazon. Continued success, attracting loyal consumers and associates, and becoming the world’s largest e commerce business is Amazon’s mission.

References

Baxle y, B. (2004). Making the web work .

Bezos, J. (2008, Septe mber 8). Showed the world how to deliver anal-

retentive customer service on an e- commerce web site . deGerencia.co mW ri ting, . (2010, Jul y 24). Swot analysis amazon.com

company. Retrieved from http://www.forex tradi.com/forex/swot- analysis-amazon- com-company/

Gasson , C. (2004, August 31). Missing the Story New Statesmen . Retrieved from http:/search. epnet.co m Julia Layton(2011). How stuff works retrieved March 8, 2011 from

www.howstuffworks.com/amazon

Saunders, R. (2001). Business in amazon.com

Schneider, L. (n.d.). Amazon.com company research . Retrieved from

http://j obsearch tech.abou t.com/o d/co mp an yp ro fil es/a/A ma zon.ht m