Amazon’s Information System & Competitive Strategy

Introduction

With increasing competition and dwindling revenues, the need to remain competitive in the market has become a vital objective of every company (Al-Abed 2014). One approach through which businesses can gain a competitive advantage in adopting the use of an information system or information technology. The use of IT is influencing competition in three important methods. It alters the business configuration and, in so doing, modifies the directions of competition. It also generates a competitive advantage by offering organizations innovative means of outdoing their competitors. Thirdly, it spawns new companies. As such, the use of computers and the internet internationally has significantly increased. The article below analytically argues how organizations utilize the strategic use of information systems and information technology to attain a competitive advantage.

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One successful use of IS/IT for achieving competitive advantage

There are several ways through which companies can utilize information technology to outdo their competitors. By embracing IT, an organization can lower costs, differentiate its products and services, innovate, promote growth, and develop alliances. As such, the use of IT can substantially reduce the cost of business processes. For instance, advances in information technology enable companies to automate their production and access several production units remotely.

One company that has utilized the use of IS/IT to gain a competitive advantage is Amazon. Amazon.com was launched in the year 1995 (Barbos 2015). Its headquarters is situated in Seattle in the United States of America. In the beginning, the company sold books as its primary business. However, since then the company has extended into selling CDs, DVDs, computer software, electronics, and other household appliances.

Since its inception, Amazon has been utilizing IT to identify its strategic capabilities and to sustain its competitive advantage. It is alleged that before Amazon’s founder founded the company, he reads from a book that there was a need to fulfill the requirements of particular customers (Barbos 2015). Having been familiar with the internet, the founder managed to open the first online retail shop. The company has grown tremendously over the last decade. As such, it has managed to outdo physical bookstores regarding revenues. IT features have also enabled Amazon to offer unbeatable logistics hence boosting its competitive advantage. The company liaises virtually with numerous international distribution channels that provide efficient, quick, and safe delivery. The above third-party logistics corporations deliver the orders taken from Amazon’s website. Through this, they have fostered their consumer confidence and reduced the risks of their rivals to get hold of their suppliers.

Amazon has also utilized IT/IS to promote growth and develop alliances. Since its inception, the company has always been on the lookout for fresh markets that embrace information technology applications. With this strategy, the company has been able to collaborate with several emerging IT companies outside the publishing industry. For instance, the company has expanded its operations to retailing IT accessories like CDs, DVDs, and computer software. IT features have enabled Amazon to form virtual business alliances with other organizations in different countries (Barbos 2015). Amazon’s acquisition, alliances, strategic partners are considered to be the company’s strategic capabilities.

Through the acquisition, the company has managed to purchase Junglee and PlanetAll. By acquiring the above companies, the company has been able to enter the European market. Junglee enables the company to do an evaluation shopping on the internet. On the other hand, PlanetAll acts as a prompt website for the company reminding customers to purchase their gifts through its website. Similarly, by collaborating with drugstore.com, the company has been able to retail pharmaceuticals expanding its line of products.

By signing agreements with other online companies, the company has been able to direct hotlinks to its mother website. Over the past years, the company has signed several limited agreements with AOL.com, Netscape, Geocities, @Home Network, Alta Vista, a0nd with thousands of independent sites. Through all these agreements, each website is required to suggest some books for its customers and hotlinks to the company’s website. After that, if the client buys the book suggested to him or her Amazon.com is responsible for the logistics, order fulfillment, and compiles and communicates sales reports through emails.

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One unsuccessful use of IS/IT for gaining or enhancing competitive advantage

Despite the fact that companies utilize IS/IT to gain a competitive advantage, it should be noted that some companies have been unsuccessful. A time, the use of IT can go against the business’s goals and objectives. For instance, technology can attract numerous competitors that can outdo a pioneer company. As such, the use of IT can negatively affect the competitive advantage of the company in various ways. For existing companies, new IT features may increase competitors leading to lessening differences in products and services and intensified pressure to compete based on price.

One company that has been unsuccessful in the use of IS/IT for gaining a competitive advantage is Nokia. For a very long time, the company was a market trailblazer in the cell phone market. It was renowned internationally for its huge client base. It was so successful that it had created substantial entry hurdles for any new IT companies interested in the cell phone market. Its operating system, Symbian, was the pillar of its success. The OS was liked because it was user-friendly. The company’s products reigned from the intermediate and low-end market for years.

However, Nokia made a mistake when it became narrow-minded and contented with its accomplishments and failed to envisage the rivalry, major inventions, and innovative advancements coming it’s the way. Nokia’s downfall began when Samsung started to manufacture phones focused on the low-end market. Similarly, its operating system failed to keep pace with Android OS. Through the above, the company’s operating system transformed from being a competitive benefit to being a drawback.

Success factors for the successful example

As indicated above several factors have enhanced Amazon’s success. The use of IT has enabled the company to differentiate its products and services. Amazon uses IT utilities to focus goods and services at the designated market segment. The company has come up with IT-related strategies that have been used to make structural modifications to corporate developments, which have radically lessen costs, increase quality, enhance competence, boost customer service, and contract time to market. IT has also enabled the company to come up with virtual establishments of business associates (Young, 2014). With the use of IT, Amazon has also created corporate information systems interconnected by computer networks, which uphold premeditated business relations with customers, merchants, and subcontractors.

Lessons learned (what went wrong for the unsuccessful example)

Several reasons made Nokia unsuccessful in the use of IS/IT for gaining competitive advantage is Nokia (Xu 2013). As indicated above, the company committed a major mistake when it became narrow-minded and contented with its accomplishments and failed to envisage the rivalry, major inventions, and innovative advancements coming its way. Nokia disregarded the market when customers started to prefer cell phones with sophisticated applications. Development of new application stores like Android enabled developers to come up with user-friendly and pioneering platforms. Through this, Nokia loses its competitive advantage in the market.

After encountering immense market rivalry from iOS and Android, the company continuously endeavored to advance its operating system. The trails were in vain because the company did not offer anything unique compared to iOS and Android applications.

The other biggest mistake made by the corporation was made when the company merged with Windows. During the merger, Nokia’s sales were already deteriorating. Therefore, trusting Windows to revive its ground in the competitive market was a mistake.

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Internal and external factors influencing the success or failure of organization’s attempts at gaining and enhancing competitive advantages

For the success of any business, the managers must develop structures and strategies required to sustain the competition in the industry (Whitmire 2014). A SWOT analysis has to be conducted to analyze the external and internal features that can affect the success or failure of the company’s ambition to gain or advance competitive advantage. The analysis will help in identify the intensity of competition and the profitability of the enterprise.

Helpful Harmful
Internal factors Strengths
Technology, diversity
Weakness
Personal management factors and organizational management factors
External factors Opportunities
Social and economic factors
Threats
Political, technological, environmental, and legal factors

Internal factors

Domestic issues affect the policymaking process, which in turn influences the roles of management preparation, consolidating, leading, and supervisory. One of the common factors is technology (Lin 2012). Development, organizing, directing, and supervisory are heavily influenced by technology. Technological developments present a healthy marketplace, an improved means of production, robust delivery channels. The Internet is the most vital technological improvement. It offers quick means of communication. As such, technology progresses aid in lowering the production costs and enhance invention through globalization. Equally, technology advances competence in resolution making.

Another internal factor that may affect the competitiveness of a company is diversity. Technological advancements have allowed individuals from different cultures, races, ethnicities, and backgrounds to work and communicate together. The above experiences have enhanced diversity in the workplaces. Diversity represents the manner through which individuals vary from one another. Customarily, individuals differ in sex, age, culture, race, religious conviction, and way of life (Xu 2013). Similarly, individuals differ in how they reason, study, process facts, react to power, or demonstrate respect. As such, diversity experiences have been exciting and frustrating to some. Having a workforce made up of individuals from different cultures, races, ethnicities, and backgrounds has an impact on a range of features in an organization.

Notably, organizational and managerial behaviors are significantly affected by the level of diversity in the organization. Upholding cooperation and economic relations in diverse organizations can be difficult (Xu 2013). Managers must come up with ways of encouraging employees to embrace their diversity. If employees take advantage of their differences, the individuals and the company will benefit. As such, diversity in the workplace enhances innovation and development of constructive organizational culture. When individuals participate in different discussions, they will come up with innovative and better alternative means of solving problems.

External factors

The external factors identified are political, economic, social, technological, environmental, and legal (Xu 2013). The above factors are crucial in the determining if the company will be successful or not in enhancing its competitive advantage. Currently, the enterprises in the USA enjoy numerous positive macro-environmental factors, which include proper US government policies, favorable legal policies, low-interest rates, and minimal inflation levels.

The US policies favor the growth of the company. For instance, the availability of incentives and reduced taxation ensures the company faces low operation cost. The rights of ownership and other legal framework ensure that businesses are protected from entrance of competitors into the industry (Xu 2013). The presence of a stable government motivates and attracts both local and international investors. In the event of wars and other political conflicts, the company may incur a loss of money, personnel, and assets. As such, political uncertainties and risks do not provide a favorable environment for any business.

In the US, the companied have to monitor the changing social trends and patterns that may lead to reduced profitability (Xu 2013). As such, the primary social factors are family set ups, social classes, and lifestyles. The above factors offer a healthy environment for the growth of IT companies. The economic factors in the United States favor the growth and profitability of the company positively. Most of the US citizens have buying power because of the existence of well-paying jobs.

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Are internal factors more important than external factors? Or the other way around?

In management, internal aspects are more important that external features. They are vital because the company has more influence over them compared to external factors. In this regard, the company should concentrate more attention on these factors if they want to gain competitive advantage. If they focus on external factors other than the internal features, companies will achieve little success because they have little control over these functions.

How can competitive advantages gained via IS/IT be sustained?

Sustaining of competitive advantages is a challenge for most companies because of the increased consciousness of customers towards value. Therefore, companies should note that value in today’s context does mean not only money but also the perceived benefits of the product offered. Customers are increasingly demanding products with benefits at a lower cost.

Competitive advantage can be sustained cost-leadership and continuously providing differentiated products and services. Companies with higher cost and no differential advantage in the eyes of the consumers are in effect commodity suppliers with little hopes of long-term success unless they find ways to improve their situations. In reality, it will not be sufficient for companies to compete based on being the lowest cost retailer. If it does so, the consumers will perceive their products as commodities with no value. However, if they implement a strategy based on differentiation, they will justify their reasons to compete on grounds other than price. Despite the fact that value for money will always be an issue, they should focus on increasing their customers’ perception of the values they are receiving and hence their willingness to pay a higher price.

Similarly, to sustain competitive advantage companies should embrace innovation. Through continuous innovation, a company can outperform its direct and indirect competitors. With technological advancements, businesses should always be ready to adopt innovations in their service to ensure that they remain relevant in the company field. In the same way, they should always be prepared to keep pace with the changes in the market opportunities. By being innovative, the companies should always be on the lookout for emerging market segments. They should consider strengthening their business in developing countries.

Lastly, competitive advantage can be sustained if companies embrace merging and acquisition of new firms (Lin 2012). Given that new innovative online companies are formed daily, the IT companies should look forward to collaborating with these enterprises. The companies would not only increase their line of business but will also bring along new technologies needed for survival in the future. Therefore, IT companies should adopt and implement the above strategic directions in the corporate and business-levels over the next coming years.

Conclusion

In conclusion, it should be noted that one approach through which business can gain a competitive advantage is adopting the use of information system or information technology. Notably, the use of IT is influencing competition in numerous critical methods. It alters the business configuration and, in so doing, modifies the directions of competition. It also generates competitive advantage by offering organizations innovative means of outdoing their competitors. There are several ways through which companies can utilize information technology to outdo their competitors. By embracing IT, an organization can lower costs, differentiate its products and services, innovate, promote growth, and develop alliances. As such, the use of IT can substantially reduce the cost of business processes. In spite of the fact that companies utilize IS/IT to gain competitive advantage, it should be noted that some companies have been unsuccessful. A time, the use of IT can go against the enterprise’s goals and objectives. For instance, the technology can attract numerous competitors that can outdo the pioneer company.

References

Al-Abed, M 2014, ‘Technology Transfer Performance and Competitive Advantage: Evidence from Yemen’, Asian Social Science, vol. 10, no. 3, pp. 24-25.

Barbos, A 2015, ‘Information Acquisition and Innovation under Competitive Pressure’, Journal of Economics & Management Strategy, vol. 24, no. 2, pp. 325-347.

Lin, C 2012, ‘Service innovation, and competitive advantage with the perspective of system dynamics – using China Mobile as an example’, International Journal of Services Technology and Management, vol. 18, no. 3, pp. 245-246.

Whitmire, B 2014, Increase your Competitive Advantage using Technology. Web.

Xu, J 2013, Managing information systems ten essential topics, Atlantis Press, Amsterdam.

Young, J 2014, Patent Application Titled Remote Managing System and Method. Web.

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