E-business, also referred to as online marketing, describes the transacting of business via platforms that are supported by the internet which doubles as the principal channel of communication and the channel through which money is exchanged (Turban et al. 2017). E-business can also be understood from the perspective of marketing and advertising where the Web and emails are used to influence direct sales through electronic commerce (Mohapatra 2013). Some of the recent trends in the context of e-business include social media which has emerged as a vital marketing tool for companies dealing in e-business (Tiago & Veríssimo 2014; Tuten & Solomon 2017). Moreover, in the modern world, social media also dictates the course of public relations (Whiting & Williams 2013). The different forms of social media play collaborative roles in helping companies to market their products. For instance, while blogs are essential in conveying detailed reports to users on the array of service packages and products on offer, Twitter accounts are instrumental for notifying followers of this new information. Social media strategy is efficient in the generation of sales.
The benefits of e-business outweigh its disadvantages, which explains the substantial successes of Jeff Bezo’s Amazon.com Inc (Ritala, Golnam & Wegmann 2014). The e-commerce company is a significant Fortune 500 company that enjoys the distinction of being one of the largest companies dealing in the sale of commodities over the internet (Floyd et al. 2014; Koo & Park 2017). The company was founded in 1994, and its mainstay at the time was in selling books before it gradually diversified to apparels, electronics, video games, music, and DVDs (Calabrese & Rollins 2017; Wang, Lin & Sung 2016). By 1999, the company had achieved great success in increasing the popularity of online shopping largely due to the ingenuity and relentless efforts of its CEO and founder Jeff Bezos. According to certain parameters including market capitalization and revenue, the cloud computing and electronic commerce company is the largest internet retailer globally. The tech giant is only outdone in the context of total sales by the Alibaba Group (Hänninen, Smedlund & Mitronen 2018). The company now also deals in jewelry, toys, furniture, and food (Amazon.com n.d.; Heng et al. 2018). Also, Amazon deals in the production of consumer electronics and cloud infrastructure services. AmazonBasics, the company’s in-house brand, is responsible for the selling of low-end products.
The extent of Amazon’s success is evident in the fact the company is the second leading employer in the US and ranks fourth in the global list of public companies ranked according to their valuation. The company thus closely follows Microsoft, Alphabet, and Apple in terms of value, thus validating e-business. The company’s service area is not limited to specific regions and includes a worldwide market. Also, its chief products include Amazon Video, Amazon Prime, Amazon Kindle, Amazon Echo and Comixology. The company’s subsidiaries include Body Labs, Audible Inc., Amazon Lab126, AbeBooks, Amazon Publishing, Amazon Books, Amazon studios, Amazon Robotics, Alexa Internet and Amazon Game Studios. Moreover, as of 2017, the company had about 560,000 personnel, total equity of about $ 27 billion, total assets worth an estimated $ 130 billion, net income of about $ 3 billion, operating income of about $ 4 billion and revenue worth $ 1.8 billion.
Key Internal Drivers of the E-Business Activities of the Organization
Some of the internal drivers of the company include its competent leadership, effective internal communication up and down the hierarchical structure, a preference for exclusively recruiting competitive staff, and its organizational structure.
The effective and visionary leadership of the company can be seen in a number of activities including the fact that it has separate retail websites for the different territorial markets it serves including Mexico, India, Japan, China, Australia, the United States, France, Canada, and Ireland. Recent national versions introduced by Amazon include customized versions of its website for Turkey and Poland in 2016 (Amazon.com n.d.). Therefore, the company has the capacity to respond to the cultural needs of the areas it serves including the different trends and tastes that are specific to those regions (Weinstein 2004). Also, another important driver for the company lies in the fact that the company uses a communication strategy that recognizes the need for local languages and thus the use of different versions of its website for the different regions that communicate using mother tongue. Also, the company has affective communication practices that ensure both vertical and horizontal communication is of high efficacy. Therefore, decisions made by the management, as well as knowledge and skills, are freely shared between employees.
Moreover, effective leadership has been an indispensable internal driver for the company considering that Amazon has achieved diversification at unprecedented levels. As a result of this initiative, Amazon has been able to adequately respond to strategies used by its rivals. For instance, the company improved its impact in the brick-and-mortar retailing market by acquiring Whole Foods Market in 2017 (Heng et al. 2018), a move that according to business analysts was understood to result from a desire to compete with users of traditional retail stores including Walmart (Amazon.com n.d.). As a result of its diversification, about 65% of American households are subscribers to Amazon Prime, one of the services offered by the company that has had a great impact on the market. Furthermore, the organizational values adopted by the company have over time given the company a significant competing edge over its rivals. The company’s corporate culture is also an essential driver for the e-business activities of the company.
Another internal driver includes the fact that the company has an efficient recruiting policy that prioritizes the hiring of competent staff. By 2017, the company had developed a strong team of about 270,000 employees, a number that includes a team of engineers who are capable of handling complex challenges in large-scale computing (Rashidirad, Soltani & Salimian 2014). Technical staff including test engineers, technical program managers, software engineers and user interface experts have been organized in small groups throughout the company which makes the functioning of the company more efficient. Also, Amazon has managed to develop an e-commerce platform that external developers, merchants, sellers, and customers can use to make business transactions. Amazon also has a strong IT department that supervises and services the massive system that Amazon relies on to make online purchases possible. Moreover, the continuously innovative nature of the IT personnel and the focus of the company’ management on the creation and sustaining of infrastructure and databases that can manage an enormous amount of transactions has been crucial for Amazon.
Furthermore, the tech giant has relied on continuous learning and innovation as an important internal driver for operational success. One example of the use of innovation to reinforce Amazon’s stronghold on the e-business world is Echo (Amazon.com n.d.). The voice command device created by Amazon has the capacity to perform a wide array of tasks including checking the weather, researching one’s favorite sports team and playing songs. This innovation made significant profits for Amazon considering that the company sold in excess of 20 million units in 2017. Echo was a good example of the positive impacts of innovations for e-commerce companies. Also, Amazon has for years dedicated itself to providing exceptional customer service. Considering that e-business involves multiple significant challenges including finding the right products to sell, attracting the perfect customer and the need to generate targeted traffic, an above average customer policy is mandatory for success in online business (Chaffey 2015). Also, the line of business dealt in by Amazon involves multiple customer complaints considering that people purchase products they cannot test or try on and thus whatever is shipped to them may not be satisfactory.
Also, the company’s organizational culture which includes a customer-centric approach has been instrumental for Amazon’s success (Hänninen, Smedlund & Mitronen 2018). The company’s’ customer-centered approach includes the belief that customers, and the way the company interacts with them, are the two central factors for the company. This has helped the company overcome routine challenges including delayed deliveries and damage of goods that are in transit to the intended recipients, especially in the context of delicate items (Aral, Dellarocas & Godes 2013). Also, many electronics usually have performance issues that may make customers unhappy or tamper with good customer relations. Amid the risks involved in selling products to recipients who are too far away to view the products, Amazon has won the trust of many clients and thus gained many loyal customers because of its prioritization of customer satisfaction. The company has done so well in this front to the extent of winning many awards in the context of good customer service. The principal reason as to why Amazon has been able to earn such a favorable reputation is because of its commitment to prevent and quickly address challenges that customers face.
Furthermore, the use of social media platforms to create more efficient communication with clients has been an important internal driver for the company. They have mastered the art of using social media to engage with clients and thus through customer feedback including their thoughts and experiences, improve their quality of customer care. This is in line with the use of social media channels such as Twitter and Facebook to engage with clients and respond to their complaints or requests for assistance (Vinerean et al. 2013). The exploitation of social media by Amazon has not only helped the company have a good customer service reputation but has also helped the company market itself widely to potential clients. One way social media helps companies market themselves is by facilitating the addressing of customer concerns timely. This helps build a solid foundation of passionate and loyal clients who are willing to play the crucial role of advocating for the brand. Social media users often update each other on their experiences with business brands and is an important source of reviews that could potentially ruin or build a brand (Blank 2015).
Furthermore, the use of efficient execution has been an important internal driver for the company’s growth curve and has resulted in significant dividends for the company. Amazon, after carefully selecting services and products that their clients need and want, make concerted efforts directed toward leveraging distribution centers all over the world to allow them to swiftly ship their products. This factor helps Amazon to speedily deliver products to their clients. Also, the company has effective vendor relationships that enable it to offer clients attractive discounts which are crucial in winning customers in the competitive modern retailer market (Lin & Lekhawipat 2014). The speed of delivery is a vital factor considering that many of Amazon’s customers reside outside the United States and would opt for alternative retailers if they thought the time and distance between them and their desired products were unbearable. Amazon has been quick to sense the need to invest more on improving their delivery time and are in the process of introducing brick-and-motor stores that will be equipped with drones that could handle same-day deliveries.
External drivers (Porter’s five forces)
Competition from Rivals (High)
Retail companies are primarily aggressive and tend to create a high level of competition against each other. For instance, Amazon is compelled to compete in the same service area with strong online retailers like Walmart (Shi 2016). This rival has the advantage of owning numerous physical stores and having a strong internet infrastructure as well. Also, there is a high presence of substitutes in the market in the name of brick-and-mortar stores including those of Walmart. Moreover, switching costs to other retailers are significantly low thus driving up the influence of rivalry in the market.
Bargaining Power of Consumers (High)
Amazon’s customers are capable of accessing large volumes of information that are of high quality in the context of commodities dealt in by the company (Nagra & Gopal 2013). This external driver increases the capacity of consumers to exploit alternative options regarding the services enjoyed by Amazon. Also, the significant presence of substitutes in terms of Walmart stores that are conveniently placed all over the US makes it easy for consumers to opt against the online sales by Amazon.
Bargaining Power of Amazon’s Suppliers (Moderate)
The fact that there exists a limited number of suppliers in the market significantly improves the influence of suppliers on the company. On the other hand, as a result of moderate forward integration, suppliers only have a moderate level of control over the company.
The Threat of Substitutes (High)
Customers can easily switch from one online retailer to the other because of the low costs involved (Clemes, Gan & Zhang 2014). Moreover, there is a substantial presence of substitutes in the market and a low cost of them that increase the impact of the substitutes on Amazon (Hänninen, Smedlund & Mitronen 2018).
The Threat of New Entrants into the Market (Low)
As a result of low switching costs, Amazon’s consumers are being empowered to switch to other players in the industry which attracts new entrants into the market. However, brand development is an expensive affair which decreases the influence of new entrants into the market (Janita & Chong 2013). Moreover, established companies like Walmart and Amazon enjoy large economies of scale which make it difficult for new entrants to operate at their level of profitability.
Strengths and Weaknesses
Some of the strengths enjoyed by the company include the fact that Amazon is at a global level, the most prominent online retailer. The company draws its immense impact on the market mainly because of its business strategy that focuses on three key elements: focus, differentiation, and leadership. This particular strategy is particularly productive considering that it has influenced shareholders in deriving value from the organization and has helped the company make massive profits. Moreover, the company principally draws its competitive advantages from its ability to leverage Information Technology and its application of e-Commerce as a platform to get ahead of its rivals (Daly & Nataraajan 2015). Furthermore, the tech-giant enjoys easy recognition (Wang, Lin & Sung 2016), which has assisted it in venturing into newer markets which would otherwise be inaccessible to other rival organizations. Moreover, with the utilization of superior distribution and logistics systems, the organization has gained the capacity to attain improved customer satisfaction thus resulting in the company drawing competitive edge over its rivals.
On the other hand, the weaknesses affecting the company include its extensive diversification which has increased the number of services and products it delivers to the market but has decreased its performance in key areas. This means that in certain service areas, the company has prioritized quantity over quality and has thus reduced its influence and capacity in these areas. Also, an aggressive and quick diversification approach means that while the company has invested in additional product lines, previously existing service areas have with time received less and less attention. Thus, these areas have been suffering from increased competition from rival companies that may have specialized in these product lines. Therefore, diverting from its key competencies that helped build the company up including the retailing of online books has exposed the company to the risk of losing its strategic advantages.
Also, as the company ventures into offering free shipment to its clients, it faces the risk of losing its margins and thus may lack the capacity to optimize on costs as a result of this policy. Furthermore, considering that the online retailer lacks in physical stores and focuses primarily on internet infrastructure and banking and credit card services to operate its business, this particular factor is an impediment to its growth and plans of expanding into less tech-savvy territories (Malhotra 2014). Moreover, one of the most significant challenges that the company is currently facing includes the fact that Amazon has been operating on almost zero-margin trading models that have negatively impacted the company’s profits.
Opportunities and Threats
Amazon has adequate resources to finance the expansion of its global marketshare and the opening of additional sites in newer territories. This would give the company substantial gains over its rivals in the online retailing business. Moreover, the company has the opportunity to improve the variety of products it offers to the market by stocking an increased quantity of products than it currently does thus reinforcing its hold on the market and generating better profits. Also, another area of opportunity for Amazon includes the fact that it has the capacity to invest resources in the selling of commodities under its own brand instead of forwarding of commodities for third parties. This means that Amazon should dedicate itself to increasing the number of commodities under its own brand instead of the mere stocking and selling of commodities by its the companies it partners with.
Moreover, the introduction of its online remuneration system gives the company the opportunity to improve its performance and profits because it will have solved some primary concerns regarding online shopping which include concerns to do with privacy and security (Niranjanamurthy et al. 2013). Using its payment channel will help the company earn improved profits because of fewer costs to do with external payment channels.
Some of the threats faced by the company include the fact it experiences substantial rivalry from local online retailers who are more agile in comparison to its behemoth type of strategy which exposes the company to the risk of losing its grip on the local markets while pursuing global expansion. As a result of its intensive pricing policies, Amazon has lost a lot of money to lawsuits that are based on the fact that the company’s emphasis on price reductions have been perceived as a threat to many existing businesses (Dahl 2014). Moreover, one of the substantial dangers facing the company is the hacking and identity theft menace that exposes consumer data and decreases consumer confidence in online purchases.
Therefore, it is evident that Amazon has a strong hold on the online retailing market but needs to make important adjustments to improve its relevance and make sustainable profits. Overall, Amazon is a good example of the impact of e-business on the world and its viability.
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