Amazon
Background Note
Launched in 1995 as an online bookstore
quickly expanded to other consumer goods
continuously innovating its business model
Consistently evaluating and experimenting with its business model
started with "sell all, carry few" theory
then moved to sell all, carry more model
partnerships and affiliations with smaller websites and retailers
Started offering technology services
Acquiring online shoe retailer zappos and many other later
four core competitive advantages
Low price: they proactively cut prices and offered free shipping to attract customers
Wide Selection
Convenience:
o browser friendly website
o fast and reliable delivery
o timely customer service
o trusted transaction environment
Customer Service: Customer service, loyalty and customer retention were three
important aspects of Amazon's service culture
Growth now, profits later
Always focused on long term growth and investment instead of short term profit
investing its free cash flow back to its business
continuously expanding and diversifying into new arenas
continuously investing in new technology and customer service initiatives
reported a loss in 2014 for spending in new product development
in 2015, Amazon surpassed Wal-Mart in market value.
Resource and Process that support the strategy:
Technology:
Continuously adding and refining technology and changing the way customers shopped
Highlights of the technological advancements: drone based delivery service- Amazon
Prime air, Fire Tv, Fire Phone, Kindle, amazon storyteller, amazon studios, amazon cloud
drive, 3D print
in 2014, amazon spent $8.72 billion on research and development
leveraged its big data resource to upgrade customer recommendation system
Product development:
always customer centric and focused on the value delivered to the customer
"Working backward" philosophy while developing new products which is basically
thinking from the customer's perspective back to the product.
It had fours steps:
1. writing a press release which contains prospective product outline
2. a FAQ document raised by the customers and answered and resolved by the
product team
3. a well defined customer experience
4. and a user manual
o
Digitally Driven Supply chain
One of the most well-developed supply chains in the world
included warehouse and transportation management, inbound and outbound shipping,
demand forecasts and inventory planning
fast paced and tightly integrated, minimized the need for human intervention
SC team focused on customer experience and vendor experience
installed robots at warehouse
one of the most advanced fulfillment networks with large storage capacity
People
"two-pizza team" : small team of 5-7 people to promote autonomy and accountability.
also for fast and effective communication.
decentralized company where independent ideas dominated over group thinking
always hired smart and innovative people
Marketing
Always focused on online marketing channels
customers were directed to website primarily through sponsored search, portal
advertising, e-mail marketing campaigns etc
used free shipping offers such as amazon price as marketing tool
Partnerships
partnered or acquired a number of companies such as Drugstore, Living.com, Pets.com,
wineshopper.com, HomeGrocer.com etc
In most cases, amazon purchased an equity stake in these companies and also charged
them a fee for placement of their products on the amazon site.
faciliated formation of partnerships with smaller companies through its associates
programme.
offered its e-commerce platform to other retailers and sellers including technology
services, merchandising, customer service and order fulfullment
Challenges:
Amazon needed to be selective in the opportunities it pursued.
when amazon was trying to dominate online retail with aggressive strategies, its
competitors walmart, google shopping, alibaba were not behind
One of the biggest challenge was to keep the prices low while it grew
Amazon's shipping carriers (UPS, FedEx, US postal service) were considering increasing
their shipping rates
avoided tax for a long time, when they did not have a physical presence. with tax, they
can't keep up the low prices
Some of the investors were getting impatient for amazon's investment strategy
