Swot Analysis of Amazon.com
Abstract
The internet and websites are now becoming methods of exchange between business and clients. It is easier to use and can have lesser problems. One website that gives benefit to people is the amazon.com. This website offers the people with so many things that are hard to find at prices that can be lowered. The website since it is found on the net can easily be found by people and they can deal with transactions there. This paper intends to give an introduction for the paper wherein a rationale for the paper will be given, through the introduction of the terms and reference can be made wherein key module concepts can be introduced,
Background of case organization and/or practical example and an outline of intended structure of the assignment can be given. This paper will also critically review the Amazon.com case study through application of relevant concepts and analytical techniques associated with the organization’s global business policies and strategies. Moreover, the paper will carefully analyze and evaluate Amazon.com’s strategic decision-making and problem-solving processes in the context of how organizations respond to changes in the business environment. The paper will also reflect on the future strategic direction of Amazon.com post 2004 by highlighting the strategic thinking behind adapting a long-term approach to developing an e-commerce business model that incorporated substantial global expansion. Through such information, conclusions and recommendations shall be made.
Introduction
In the short space of 25 years something which started as a US defense initiative has developed into the main communications mechanism for the academic and research community and most recently has expanded into a major business tool for the commercial sector. The Internet, as we have now come to call it, has evolved during this period from being a robust and an effective way of exchanging information in providing a delivery mechanism for massive amounts of multimedia information to a global audience. Virtually, all of the services and products related to the Internet were originally defined to satisfy demands emanating from the academic and research world. We are only just entering into the era where the main driving force for new developments is coming from the commercial sector. The original users of the Internet were drawn from a narrow segment of the populace. They have recently been joined by the new generation of users with a wider range of backgrounds than academia and research. The club-like nature of the Internet is fast disappearing as the ease and cost of access makes it accessible to a much greater audience (Stroud 1998).
The two Internet applications that are most likely, in the short term, to have an impact on the non-IT manager are e-mail and the World Wide Web (www). E-mail provides a very simple and effective way of sending both simple text messages and computer files to one or a number of recipients. The www enables individuals and organizations to provide a global audience with a gamut of multimedia information that can be accessed easily. The benefits of all of these Internet services are available at local telecommunications charge rates. The basic design criterion for the Internet- that it should provide a resilient network which is capable of operating without a central control and administration in the case of a nuclear attack, is now causing difficulties for those authorities seeking to administer its operations and in particular the content that it carries. The Internet's potential to change the way we conduct business is only just beginning to be understood. Already it is clear that managers must orientate their thinking to adapt to the opportunities and threats that are being created (Stroud 1998). The paper will be divided in a way that for every question its related answers will be given.
Background of Amazon.com
Amazon.com Inc. is an online retailer of books, music, videos, toys, electronics, and other products. In addition to selling products over the World Wide Web, Amazon.com administers online auctions for items ranging from postcards to personal property. The company also provides its customers with services, including an Internet-based address book and personal calendar, and a comparison-shopping tool. Amazon.com is based in Seattle, Washington. Amazon.com is recognized as a model in electronic commerce. The company pioneered many of the tools and procedures now commonplace in online retailing. These include order verification and customer service via electronic mail (e-mail), one-click shopping, and customer reviews. Amazon.com was also one of the first companies to sacrifice profitability, opting instead to devote its growing revenues to expanding the company’s offerings and presence on the Internet. This strategy was subsequently adapted by Internet start-ups, or dot.coms, in record numbers (Brynjolfsson & Urban 2001).
Company founder Jeff Bezos grew interested in online retailing in 1994 while working as a business analyst in New York City. After researching the success of different mail-order companies, Bezos decided that books were the perfect product to sell via the Internet. That year, he left New York to establish his new company in Seattle, chosen for its proximity to major book wholesalers and the booming high-tech industry. In July 1995, Amazon.com launched its Web site, an online catalog of books presented in a user-friendly, graphical format. During its first month in operation, without any media publicity, Amazon.com sold books to customers in every U.S. state and more than 40 other countries. Two months later, the company’s sales exceeded $20,000 a week. Amazon.com went public wherein it made its stock shares available for public purchase in 1997 (Brynjolfsson & Urban 2001).
In 1998, Amazon.com added music and videos to its online offerings. The same year, the company acquired British online bookseller Book pages and German online book retailer Telebook. The company also purchased the Internet Movie Database, one of the most comprehensive movie databases on the Internet, and added it to the company’s expanded list of online offerings. In 1999, the company expanded its product selection to include video games, software, home improvement products, and gifts. Also in 1999, Amazon.com acquired stakes in online drug and sundries retailer drugstore.com, pet supplier Pets.com, Internet grocery HomeGrocer.com, recreational and equipment provider Gear.com, and a number of other Web-based specialty retailers and service providers. Amazon.com launched its online auction service and teamed with esteemed auction house Sotheby’s to auction antiques, fine arts, and other premium collectibles (Brynjolfsson & Urban 2001).
First Question
To analyze the Amazon.com case study through application of relevant concepts and analytical techniques associated with the organization’s global business policies and strategies, SWOT analysis will be used. SWOT analysis gives the company information on the strength and weakness it has that matches it with the competitive environment it engages in. It also helps a company create strategic plans/moves that can counter any problem or threat from competitors and assists in maximizing the opportunities they have. SWOT analysis tends to help companies determine what aspects they excel in and what aspects they have problems in. It also helps companies determine its status against rivals.
Strengths
Strengths are the strong points of the business. To know the strengths of the things that should be known, one must look at the sources of the company’s revenue, the market share of the company in various product lines, the availability of strong brands of a company, the effectiveness of the advertisement of the brand or product, the availability of pool of skilled workers, the morale of the employees, the innovativeness of the company and the ability of the company to withstood international competition. The strength of the company is in its continuous and fast growth as the years pass. This gives them a distinct advantage towards their competitors. This also gives the company a distinct identity separate from its competitors. The continuous and fast growth of the company shows how well they are operating and how effective their strategy. Another strength of the company is the extended promotional relationships with established internet players. The company has been working with internet players so that they can make use of each other’s resources to achieve their goals. Through the company’s association with such internet organizations their knowledge and experience in doing business in the internet may increase, thus, they can improve the services they give to the clients.
Moreover, strength of the company is the powerful search facility wherein there is a personal notification service to email the clients, a recommendation section, an awards section containing award winning books, and an associate program with other sites. Through the stated facility, the company gives the client convenience and ease in finding the book they want. It also helps in giving the client some ideas on what to buy. Strength of the company is when having a vast and wide collection of books and products that it can give to the clients. Through this, the company can provide different choices for the clients. The client doesn’t have to go to other sites to find the products they need. This increase the profitability and status of the company. Lastly a strength of the company is the popularity it has. The company is one of the known websites that offer such services. When people look for books or other products, they remember the site as one of the most reliable and trusted.
Weaknesses
Weaknesses are the current problems of the company. To determine the weaknesses of the company, the things that should be given prior notice includes the products that are least profitable, areas of the company that is not able to recover cost, the weak brands, the ability of the company to raise money when it needs to, the ability of the company to stand price pressures against competitors, the ability of the company to create new ideas, the faith of employees in management and the ability to compete with other companies in the technology front. The weaknesses of Amazon.com includes: not having an attractable website. Having an attractable website makes client view the website and purchase the product they need. It increases the clients of the company and makes the client suggest it to people they know; It is not able to engage in other business endeavor other than the website. The company has not tried to engage in business ventures other than the website. The company might have other opportunities if they tried the other ventures; lastly, its inability to reach the sectors of society that does not have internet access. The company can further increase its profitability and revenue if it can reach sectors not having access to the internet or websites.
Opportunities
Opportunities are those events or situations that may arise in the future. To determine the opportunities of the company, the things that should be known includes competitive position of the company, new technologies that the company can innovate for low costs, the capacity and opportunity to extend brands, the capacity to implement incentive plans to boost employee’s effectiveness, the ability of the company to move up the value chain, the ability of employees to be multi-skilled to reduce levels of redundancy, opportunities to cooperate with companies that are not competitors for both companies to be beneficial. Amazon.com’s opportunity is its website. The website of the company can still be improved and given a new look and be made more attractive and informative. The website of the company can be made more up to date and convenient to use for the client.
Another opportunity for the company is its wide range of products. They can use such products to satisfy the needs of the clients and offer these clients everything that they needed. This can also be used to increase the status of the company against its competitors. Lastly an opportunity for the company is the internet constantly being improved to suit the lifestyle of the people. Through the constant innovations made regarding the internet, the company can increase the clients they have at the same time their profits will also increase.
Threats
Threats are problems that may arise and should be avoided. To determine the threats of the company, the things that should be known includes the capacity of employees to be adequately trained, the capacity of the company to withstand sudden changes in the environment, the ability of the brands to withstand price competition, the financial being on the verge of liquidity, if the company considered a good employer, and the ability of the company to cope up with technological changes. A threat to the company is its competitors. The competitors they have might find a way to equal or exceed the performance of the company in the future. This could cause them problems or major hindrances to achieve their goals. Another threat to the company includes the laws in the country they are operating in. Laws are vital part of a country. These laws are the ones that initiate order and discipline in the country. There may be laws that can cause some delay in selling the products. These laws can hamper business transactions to be completed.
These laws are enacted to protect the welfare of local sellers in a specific country. Since there are different laws in different countries, it can also cause problems for the company. Laws in Taiwan are different from the laws in Switzerland; therefore the laws in one country may cause problems for the company while in another country it may not be a problem. Lastly, a threat to the company is the tariffs and taxes that the company has in different countries, each countries has its own rate of taxes and tariff. Taxes and tariffs are collected by the countries government as additional funds for their projects in that country. The taxes and tariffs collected by a country depend on what the law of the country states. The taxes and tariffs collected by a country is a threat because this causes expenditures to a company. Since its rate varies, the company must be wary of the cost of the taxes and tariffs and be able to decide if having a business in that particular country is reasonable and feasible for them.
Second Question
Strategic management is becoming recognized as the administration of operations dominated by purpose and by consideration of future opportunity, with explicit attention given to the need to clarify or change strategy as results suggest and to enter the future on a predetermined course (Gilbert Jr. 1992).The chief executive of a company has his or her highest function in the management with a continuous process of strategic decision in which a succession of corporate objectives of ever-increasing appropriateness provides the means of economic contribution, the necessary commensurate return, and the opportunity for men and women of the organization to live and develop through productive and rewarding careers. Strategic decision making may be viewed as a series of means-ends decisions beginning with the determination of long-term global objectives and the development of shorter term, more local actions to obtain these objectives They locate this concern with purpose in the context of an amalgamation of external relationships (Gilbert Jr. 1992). The company ensures that every decision it made will be for the best of the company. It makes sure that every action done will be good for the long term of the company. There was a year when the company experienced so many problems and difficulties, through making the right decisions and engaging in problem solving the company was able to overcome such adversity.
Problem solving starts off from an initial given situation or statement of a problem. Based on the problem, as prior knowledge, you have to work towards a solution. When you reach it, you are in the goal state of the problem. On the way from the initial state to the goal state you pass through, a number of intermediate problem states. In some cases you don't know what the answer is in advance and you have to find it. How you find the answer might not be particularly relevant. In other problems it is precisely how you get the answer which is important. The point of doing exercise problems in textbooks is to learn how to solve problems of a particular type. If the answer was all you were interested in, you could look that up at the back of the book (Robertson 2001). Finally, you can have problems where you have only a vague idea what the answer is and an even vaguer idea of how to get there. Writing a 4000-word experimental report as an assignment is an example. The only thing you can be really sure of is whether you have written 4000 words or not. Another example might be finding a compromise solution in an industrial dispute-you are very unlikely to know in advance what the compromise position is going to be, or how you are going to find it (Robertson 2001). In problem solving, the most important thing considered is the projected results. Amazon.com makes sure that in problem solving their main goal is to bring a better future for the company. They make sure that they solve the problem and not worsen it.
Third Question
To meet the future threats the company might face and grab the opportunity it has. The company must use strategic moves. One strategic move is to continuously improve the products they offer. This might be a strategic move of the company because the company wants to be the best in its industry and by doing it they can achieve this goal. To make sure that competition will not gain advantage over them, the company will continuously improve the products they are offering so that more consumers will be encouraged to buy from them. The complaints of the client about certain products should be compiled and bonded together. Each complains should be read and noted. Complains that are similar should be grouped together. The proper action regarding complains should put into action unto the product so that the best product may come out.
Another strategic move of the company is to improve their website. This might be a strategic move by the company because they need to keep up with changes in society. They also need to make sure that the method they use to sell and promote products will be the one known by the customer. Redesigning the website to a better look can boost the company’s sale. Making it user friendly and attractable to consumers can invite more clients to view the website and see the products the company offers.
A strategic move of the company is to create more mergers with non competitors. This might be a strategic move for the company because it might boost the company’s status and the company can make use of the capacity of non competitors for its benefits. Through the stated move both companies will acquire benefits and both can promote the products they have through each others advertisement media. Lastly, a strategic move by Amazon.com is improving the capabilities of their employees and strengthening the services rendered by the employees. This might be a strategic move by the company because improvement of the employees means better service; better service means more clients, and more clients’ means reaching their goal and objectives. The company should give their employees additional knowledge through allowing them to attend seminars and the like. Through this the company can improve their status in the industry.
Conclusion
The SWOT analysis of the company showed how successful the company is. The SWOT analysis of the company helped in showing how effective the company’s strategy is. It showed the areas that the company is doing well. The SWOT analysis also showed some weak spots of the company and why it is considered as a weak part. Moreover, the SWOT analysis showed what things the company has that they may use to continue the success they has. Finally, the SWOT analysis showed what problems the company might face in the future and why are they such a problem. In the second question the focus was on how the company implemented the strategic decision making. Making a good decision is vital for the company. Any wrong decisions made can give the company problems in the future. In the third question the focus is on the future activities of the company. The future activities and action that are perceived to be done by the company gives a better position against competitors and a brighter future. If the perceived actions are done well, the company can increase the status it has and be the best in the industry.
Recommendation
Amazon.com is currently one of the best in its industry. The company can maintain such status by improving the website it has. By making the website more user-friendly and attractive, more clients will be encouraged to use the site and avail their products. The website is the main way for the company to transact business with clients. That is why they must make sure that the website gives the client ease and not problems. The company can also engage in other business endeavors to widen the scope and territorial boundaries of clients. The company can invest in other methods of transacting business like putting up stores and other personal selling methods to reach clients that are not able to make use of the internet or they do not capable of using the internet. This will help the company gain competitive advantage against rivals.
References
Bennett, R 1999, International business, 2nd edn, Financial Times Pitman Publishing.
Brynjolfsson, E & Urban, GL (eds.) 2001, Strategies for E-
business success, Jossey-Bass, San Francisco.
Cummings, S & Wilson, D 2003, Images of strategy, Blackwell
Publishing.
Ferguson, PR & Ferguson, GJ 2000, Organizations – A strategic perspective, Macmillan Press Ltd.
Gilbert Jr., DR 1992, The twilight of corporate strategy: a
comparative ethical critique, Oxford University Press, New York.
Lasserre P 2003, Global strategic management, Palgrave McMillan.
Robertson, SI 2001, Problem solving, Psychology Press,
Philadelphia.
Stroud, D 1998, Internet strategies: a corporate guide to exploiting the internet, Macmillan, Basingstoke, England.
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excellent post with great resourses!
Posted by: randy orton | August 05, 2011 at 04:16 PM