Amazon Com An E Commerce Retailer Marketing Essay

virago Com An E Commerce Retailer Marketing EssayAggressive controversy, along with the external particularors of a paltry economy and viable repeal of the lucre sales tax exemption, has agonistic virago.com to reevaluate its current strategies and redevelop an utile differentiating strategy in fix up to make the come with a undifferentiated property maker in the short and long-term time frames, date salvage continuing to pursue corporeal objectives of flip unmatchables wiging at reason adequate to(p) be and staying beforehand of the comp some(prenominal)s competition.2. Summary statement of the recommended tooth root Develop and implement a competitive occupation-to- handicraft (B2B) exchange for suppliers, retailers, manufacturers and distributors.B. THE SITUATIONAmazon.com was founded by Jeff Bezos in 1994 and was , considered to be the premier(a) online retailer in the world (Collins, P., Mockler, R., Gartenfeld, M., p. 2, 2003) in 2003. The ships comp all originally exclusively started with selling books, but later expanded into several different outpution lines such as CDs, DVDs videos, electronics, toys, app arl, and home garden supplies. Amazon.com withal offered expediencys which include online auction offs, partnerships with retailers (i.e. The Gap Eddie Bauer,) Zshops (store hosting) and tissuesite caution. In 2003 the confederacy reported its start in operation(p) advantage of $64.1 million, which was an 115.55% improver from 2001s $412.2 million operate loss, for the fiscal year ending declination 31st, 2002. Amazon continued to meet its internal endings, of focusing on increase mart share, expanded proceeds offerings, and overall sales growth, the company was still facing pressureto produce consistent natural spring profits and to depict that its crinkle model worked financially over the long-term. (Collins, P., Mockler, R., Gartenfeld, M., p. 3, 2003) The pressure the company was facing, unite w ith a decreasing consumer confidence, an increased unemployment rate, and competitive threats from other online companies, like eBay and hick, who had started to expand into Amazon.coms current markets, left Bezos with the task of developing an effective differentiating inscribeprise strategy if Amazon.com was to survive and prosper against aggressive competition (Collins, P., Mockler, R., Gartenfeld, M., p. 2, 2003)II. compendA. ANALYSIS OF THE SITUATION1. ManagementIn Amazon.com first year as a company, they focused completely on increasing market share and super node service, but when the dotcom bubble burst happened and Amazon.coms stock prices fell Bezos and his management aggroup struck a good balance between their goal of increasing market share and their goal of producing a profit. This shows that the management team for Amazon.com is rather flexible whizz and is automatic to change strategies when the opportunities arise and the company is willing to modify its bus iness model if it feels that an opportunity to expand in a new area will be productive.2. OperationsAmazon.com has a corporate headquarters, which is set in Seattle, WA, and several distribution centers that are located in New Castle Delaware, Coffeyville Kansas, as well as in Campbellsville and Lexington Kentucky. Having these distribution centers allow for a better ability to regionally portion the United States, which allows for faster order fulfillment and naughtyer customer satisfaction. Since they beat online, they lose also expanded their weavesite operations into several different countries including Canada, France, Ger legion(predicate), lacquer and the United Kingdom.3. MarketingAmazon.com, in 2002, was getable in only 5 international geographic regions including Canada, France, Germany, Japan and the United Kingdom, as well as the United States. The company needed effective vogues to r each(prenominal) forbidden to its markets and in 1999 and 2000, Amazon.co m spent a good amount of money, like many online retailers of the time, on advertizing/marketing. They sacrificed short-term profits in order to derive a great chance of market share. At this time, online retailing was a fairly unfamiliar way of doing business, and the company felt that spending money on advertising/marketing its goods and services was the best way to avow them a competitive edge. In the 2002 holiday season alone, Amazon.com spent round $5 million on TV and radio ads, but out-of-pocket to increased pressure of producing an operating profit while still be able to offer low prices combined with free shipping, the company was forced to cut advertising/marketing expenses and decided to suspend all of its TV and radio advertisements. The company then invested in much to a greater extent(prenominal) forms of online advertising/marketing (i.e. search engine ads and email ads), as well as direct mail and newspaper advertisements. This allowed for successful cutback s in the budget.4. FinanceAmazon.coms first company goal was to gain market share, and the companys management team was willing to sacrifice potentiality profits in order to allow for potential growth. The company focused on this goal up until the dotcom burst and then switched gears and focused on controlling expenses in order to produce an operating profit according to full general accounting principles. If one exams Amazons financial sheets from 2000 to 2003, one dirty dog clearly see how hard it is to sustain operating favourableness and why the company is seeking to take a different run-in in several areas, including cutting costs. While Amazon had operating profits of $52 million in the third quarter of 2003-its first operating profit in a quarter that doesnt include the holiday season-it was a mute accomplishment. Once interest wagess of $30 million are subtracted, Amazon is left with just $22 million in operating profits. With come like this, it makes for a rather weak financial portfolio.5. Administration (Human Resources) A big part of Human Resources is customer service, which was a marvelous accent for the company, and because of that emphasis Amazon.com had outstanding customer service. This is one of the primary reasons the company constrain so successful. Their customer service allowed for the empowerment of the companys customers, and made maintaining a high level of customer service completely necessary, as well as pivotal to the companys survival. The company was able to accomplish such outstanding customer service in five ways 1. Their customer service communicate customers of predicted and actual shipping times, and gave the option of allowing customers to piece out jumbo orders. 2. It allowed customers to review products. 3. Emails were sent to customers offering suggestions on other products constituted on other(prenominal) orders. 4. Numerous ways to search for products were offered making for an swooning to use interface. 5. victimisation cutting edge technology, like 1 Click Ordering, making for an easy shopping experience. These reasons, along with things like Amazon.coms A to Z and Safe shop Guarantee (Collins, P., Mockler, R., Gartenfeld, M., p. 10, 2003), allowed them to differentiate themselves from their competition.6. SWOT Analysisa. StrengthsThe companys strengths include economies of scale, strategic alliances, huge customer base, internet storefront, variety of products and services, first mover advantage, customer loyalty, expert advantages, and distribution capabilities.b. WeaknessesThe companys weaknesses include difficulties of handling large numerate of customers, limited operating history, security awareness, and low margins in the sector.c. OpportunitiesThe companys opportunities include create alliances with other companies, concentrating on emerging segments, and concentrating on developing markets.d. ThreatsThe companys threats include the unknown future of online commerce , more(prenominal) offline companies becoming online companies (new competition) and heavy investments.7. Products or ServicesAmazon.com doesnt actually manufacture any of the products that it sells however, they do warehouse and ship books, videos, music/DVDs, electronics, home garden, apparel and toys. The company has several services that include online auctions, Zshops, and Website Management. Zshops offer petty(a)er business the opportunity to be able to sell on Amazon.coms interface. This increases the small businesss customer base as well as their product reach. This allows Amazon.com the ability of hosting and managing their websites. The companys website management service gives smaller businesses that dont have adequate websites to use Amazon.coms technology on their own web interfaces.B. PROBLEM DEFINITION1. State the problem symptoms The problem that Amazon.com is presenting is that the company, tremendous growth and increase in r even offues, must grow and expand the ir business in innovative ways in order to stay ahead of their competitors, while maintaining the level of excellent customer service they have become so well known for. Due to the increase of competitors, along with the possibilities of taxes levied against online transactions, if Amazon.com cannot bring out a feasible and low cost expansion solution, the company superpower have to cut products or services they offer in order to maintain profitability. If this takes place the company could find itself with less world-wide corporate positioning, a potentially tarnished reputation or they could even end up being the receiving end of a buyout from a competing company.2. Define what is intended to be accomplished by correcting the problem If Amazon.com successfully corrects their current problem, the company can continue to different themselves from their competition and determine onto the top spot of global online retailers. The company also will not have to make any reductions in their product or service offerings, allowing them to continue with their initial company mission of making book (as well as other products as this point) buying, into the fastest, easiest, and most enjoyable shopping experience possible. (Collins, P., Mockler, R., Gartenfeld, M., p. 4, 2003)3. Examine the causes of the problem thither are several possible causes to Amazon.coms dilemma. Aside from economic downfalls, increasing unemployment rates, issues of assorted cultures and languages, legal and regulatory differences, localization issues, and technology and infrastructure expansion concerns. The markets are flooded with millions of products and divers(a) options are available for customers to switch their loyalties. Hence the product life cycles are considerably shorter. Shorter product life cycles have denied companies the free burning and reliable growth, as well as financial eudaemonias, and posed a challenge of survival to many others in the same market as Amazon.com.II I. SYNTHESISA. ALTERNATIVE SOLUTIONS1. The first substitute solution is to, expand Amazon.coms business in online auctions. Because of the continued need for an intermediary in these types of transactions, Amazon.com would be able to market this supererogatory service to both its current customer base, finished the use of personalized emails, and to new customers, through with(predicate) a general advertising campaign, including television and print ads. The benefit of this alternative was that Amazon.com would be expanding on an existing service offering and would not incur any developmental or startup expenses. An additional benefit would be that by acutely promoting this service, Amazon.com would be able to attract new visitors to its web sites, and these customers might also purchase additional goods and services, such as new books and music that Amazon.com offered. This alternative was feasible because of the prior experience Amazon.com had developed in expanding and marke ting other product lines and services. By learning from past(a) mistakes and successes, Amazon.com would be able to mull over the correct marketing campaign to attract additional traffic to its web sites. The alternative could work because Amazon.com had become one of the premier online brands and had a large enough customer base to compete against eBay and other established online auction services such as Ubid.com and Yahoo Auctions. In addition to its nurture recognition, Amazon.com would look to use its large return of customer service programs, such as Amazon Payments and Safe Shopping Guarantee, to spoken language buyer and trafficker concerns about privacy, fraud, and security while also expanding the number of payment options available to both parties. The first drawback within this alternative was that Amazon.com would be competing against its own product offerings, as well as those of its retail partners. A flake drawback was the fact that it was going headtohead wit h one of the few other profitable online companies, eBay. eBay had built a considerably large base of loyal customers who would peradventure be reluctant to go to a competitor. A way well-nigh the first drawback was to either set up the auction services in a separate and distinct section on the web site, absent from the retail aspect, or set up a new web address for this service line. A way roughly the encourage drawback was for Amazon.com to market itself as a less expensive alternative to eBay, setting its determine structure at a level that was lower than eBays. (Collins, P., Mockler, R., Gartenfeld, M., p. 15, 2003)2. The second possible alternative solution is to, develop and implement a businesstobusiness (B2B) exchange for suppliers, manufacturers, distributors, and retailers to use. Because the largest percentage of ecommerce sales resulted from transactions conducted on 13213 exchanges, this opened up a large potential market for Amazon.com to expand into. The benefit of this alternative was that Amazon.com could easily market this service to its large number of affiliates and partners that it conducted business with. Having its partners suppliers and distributors participate in this online exchange would allow their affiliates to achieve greater operational efficiencies in their supply chain. These efficiencies would translate into lower prices for Amazon.com. A second additional benefit for Amazon.com would be the steady cash flow it would intoxicate through the charging of hosting fees and commissions on completed transactions. This alternative was feasible because Amazon.com would use its past experiences and patented technology to develop a secure, easytouse plan that its customers would be comfortable with. It was also feasible because of the large number of midsize to small companies that did not have the necessary capital to develop or run their own exchanges but wished to participate in these auctions in order to increase their own sa les and market coverage. This alternative could win against the competition because these additional offerings would be available to all companiesnot just companies from one specialised patience, which most existing B2B exchanges did (for example, Covisint in the automotive industry). And because Amazon.com would only be acting as an intermediary with these exchanges, costs would be kept to a minimum because Amazon.com would only be the host of the exchange and would not have to hold any inventory. The drawback to this was that Amazon.com would be entering a business that would require more intense customer service than its other lines of business. This was due to the high buck bill amounts of the transactions, as well as the issue of product specifications. An additional drawback would be the issue of payment processing and concerns with the shipping and receiving of goods. A way just about the first drawback was to assign specific customer service personnel to each exchange category. By having an assigned customer service representative give care all aspects of the exchange transaction, Amazon.coms employees would be able to build an excellent kind with the involved parties, which would help to address any issues that might occur. The way around the second drawback could be broken down into two categories. First, Amazon.com would use its escrow payment service to hold all movies until the goods were bewilderd and all parties were satisfied. To help address shipping concerns, Amazon.com, because of its human relationship with shipping companies, could negotiate discounted deals with them for their exchange partners to use. (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003)B. RECOMMENDATIONS AND CONCLUSION concord to the evidence in this case study, the recommended solution is to seek growth through implementation of a business-to-business (B2B) exchange for suppliers, manufacturers, distributors, and retailers to use. Business-to-business (B2 B) exchange is increasing rather rapidly and it will offer the chance to enter a new market. This solution can provide a number of benefits, including the fact that growing net income technology allows for a level of collaboration between affiliated partners in the supply chain, which would have been difficult and/or rather expensive in the past for anyone but the biggest producers or retailers.Implementation of a business-to-business exchange would benefit Amazon.com by allowing the company to, easily market this service to its large number of affiliates and partners that it conducted business with. Having its partners suppliers and distributors participate in this online exchange would allow their affiliates to achieve greater operational efficiencies in their supply chain. These efficiencies would translate into lower prices for Amazon.com. A second additional benefit for Amazon.com would be the steady cash flow it would receive through the charging of hosting fees and commissi ons on completed transactions. (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003) It could also allow for additional functions that could be performed which have been previously unaddressed Providing a starting point where buyers and sellers enter the market either through a web browser/interface, or supply chain optimization solution. Gathering buyers and sellers of a specific industry in one centralized marketplace. Facilitating and enabling transactions by building trust in the online market through credit verifications, reputation ratings and various decision making support tools. Post-transaction customer service support such as warranty and maintenance, asset management, etc. which would promote recurring participation.However, even though Amazon.com would be entering a business that would require more intense customer service than its other lines of business. This was due to the high dollar amounts of the transactions, as well as the issue of product specificati ons. An additional drawback would be the issue of payment processing and concerns with the shipping and receiving of goods. (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003) There is an easy way around this problem, which is to, assign specific customer service personnel to each exchange category. By having an assigned customer service representative grasp all aspects of the exchange transaction, Amazon.coms employees would be able to build an excellent relationship with the involved parties, which would help to addressany issues that might occur. (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003)In conclusion, implementing a business-to-business strategy would allow Amazon.com to remain competitive even in a, poor economic environment, and the possible repeal of the sales tax exemption afforded ecommerce transactions (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003.) The benefits and advantages of this solution outweigh the disadvantages as, this alternative wo uld win against the competition because these additional offerings would be available to all companiesnot just companies from one specific industry, which most existing B2B exchanges did (for example, Covisint in the automotive industry). And because Amazon.com would only be acting as an intermediary with these exchanges, costs would be kept to a minimum because Amazon.com would only be the host of the exchange and would not have to hold any inventory. (Collins, P., Mockler, R., Gartenfeld, M., p. 16, 2003)