Week 10: Case Study Group: FEP-KLTSA Business Challenge

Week 10

1. Introduction (What is the company?)

Amazon is the world’s largest online retailer and a prominent cloud service provider. Amazon originally started as an online bookselling company, Amazon has morphed into an internet-based business enterprise that largely focused on providing e-commerce, cloud computing, digital streaming and artificial intelligence services (Yasar & Wigmore, 2022).

Amazon is considered the oldest company. This is because, it was founded on July 5, 1994 by Jeff Bezos in his garage in Bellevue. Amazon officially opened business as an online bookseller on July 16, 1995. Originally Bezos had incorporated the company as Cadabra but later changed the name to Amazon. This is because, the name Amazon was exotic and different and as a reference to his plan for the company’s size to reflect that on Amazon River, one of the largest river in the world (Yasar & Wigmore, 2022). Thus, since its inception, the company’s motto has always been “Get Big Fast”.

In early 2000s, Bezos created a membership for Amazon called Amazon Prime. This membership-based service for Amazon customers offers free two-day shipping within the contiguous U.S., as well as streaming, shopping and reading benefits (Yasar & Wigmore, 2022). Furthermore, the comprehensive and evolving cloud computing platform was also born in early 2000s. The first Amazon Web Services offerings were launched in 2006 provide online services for websites and client-side applications. Within the same year, Amazon also launched a cloud computing and video-on-demand service known at the time as Unbox (Yasar & Wigmore, 2022).

Next, starting 2010s until now, Amazon debuted its first tablet computer called the Kindle Fire in 2011 and the Amazon Fire TV Stick which is part of Amazon’s extensive line of streaming media devices in 2014. In addition, Amazon also started an online Amazon Art marketplace for fine arts in 2013, which has featured original works by famous artists such as Claude Monet and Norman Rockwell. Amazon Alexa was rolled out to customers in 2015 and was followed by the Alexa-equipped Echo Dot in 2016 for in-home virtual assistant. Last but not least, Amazon acquired the organic grocery store Whole Foods in 2017 and launched Amazon Go, a chain of cashierless grocery stores in 2018. Meanwhile during COVID-19, the rise of in-home shopping is increasing and very demanding that made consumers rely on Amazon even more, and the trend is likely to keep growing (Yasar & Wigmore, 2022).

Last but not least, in terms of Amazon competition and market position, Amazon is a dominant player in the global e-commerce market. It has also secured a leading position in the cloud computing industry through AWS. However, it faces intense competition from other tech giants like Google, Microsoft, Alibaba, and Walmart in various segments of its business(Patrick Nowak, 2024). The mission statement of Amazon is “To be Earth’s most customer-centric company” while the vision of Amazon is “To be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online”.. This mission and vision set the company on a path to long-term growth and prosperity, providing strategic direction for attaining its goals (Daniel Pereira, 2024).

2. Current market position

Major Competitors

Amazon's key competitors vary depending on its business divisions. Walmart and Alibaba are major e-commerce rivals (Ecdb, 2024). In the cloud, AWS competes with Microsoft Azure and Google Cloud. In the digital streaming business, Netflix, Hulu, and Disney+ are major competitors.

Market Share Analysis

Amazon has a significant market share in e-commerce, especially in the United States, where it accounts for roughly half of all online purchases. AWS is also a market leader in cloud computing, with a sizable global share, despite increasing competition from Microsoft and Google. It has since become the largest cloud computing business in the world, with over 30 percent market share (Amazon Statistics (2024) - Business of Apps, 2024).

Competitive Advantages:

So, what gives Amazon its competitive advantage? Here are the main factors:

Enormous Logistics Network: Amazon's logistics network is a model of efficiency and size. With innovative warehouses, rapid delivery methods, and a global reach, we ensure that products reach clients quickly and reliably.

Diverse Product Portfolio: Amazon definitely sells almost anything, from gadgets to groceries, books to fashion. Our vast product line appeals to a wide range of customers, meeting nearly every need and demand.

Great Brand Awareness: Amazon's brand is one of the best known in the world. This strong brand presence not only attracts new clients but also keeps existing ones, strengthening trust and dependability in our services.

AWS Scalability: AWS has unparalleled scalability, enabling organizations to easily extend their cloud services as they grow. This adaptability is a major selling feature for businesses searching for cloud solutions that can keep up with their changing requirements.

AWS Reliability: Reliability is critical in cloud computing, and AWS delivers. Our infrastructure is designed to provide optimum uptime with minimal disruptions, providing businesses confidence that their activities will run smoothly.

In conclusion, Amazon has the competitors on the ropes on numerous fronts, exploiting its strengths to stay ahead of the pack.

3. Business Model and Strategy

There are several business model and strategy suggested to Amazon to improve its current business(Pizio, 2024).

Revenue Streams

Amazon's primary revenue streams include online retail sales, third-party seller services, AWS, subscription services (such as Amazon Prime), and advertising services. AWS has become a critical component of Amazon's revenue and profit, contributing significantly to its overall financial performance.

Business Model

Amazon operates a hybrid business model that combines elements of e-commerce, subscription services, and cloud computing. It leverages its vast logistics and delivery network to offer fast and reliable shipping. AWS provides scalable and cost-effective cloud solutions to businesses of all sizes.

Key Strategies for Growth

Amazon's growth strategies include expanding its product offerings, entering new markets, investing in technology and infrastructure, and enhancing its customer experience. The company continues to innovate with services like Amazon Fresh, Amazon Go stores, and its investment in artificial intelligence and machine learning.

Strategic Partnerships and Alliances

Amazon has formed strategic partnerships and alliances to strengthen its market position. These include collaborations with retailers to expand its physical presence, partnerships with logistics companies to enhance delivery capabilities, and alliances with technology firms to bolster AWS.

4. Challenges Faced

One of the primary operational challenges is maintaining its vast and complex logistics network. The company's reliance on a global supply chain makes it vulnerable to disruptions caused by natural disasters, pandemics, or geopolitical tensions. Additionally, the need to ensure rapid delivery times while managing rising labor costs and guaranteeing the safety and well-being of its workforce in fulfillment centers presents significant hurdles(Kevin,2024).

Regulatory and legal challenges also pose substantial risks to Amazon. Operating in multiple jurisdictions means the company must navigate a diverse array of regulations and legal requirements. Antitrust investigations in the United States and the European Union, scrutiny over data privacy practices, and compliance with local labor laws often necessitate changes in business practices, which can impact profitability and operational efficiency(Hopstack,2022).

In the competitive arena, Amazon faces intense rivalry from other e-commerce giants like Alibaba and Walmart, as well as from niche players and direct-to-consumer brands leveraging social media and digital platforms(Kantrowitz, A. ,2023). The need to constantly innovate and differentiate its offerings to retain market share is a continuous challenge. Additionally, traditional brick-and-mortar retailers adopting omnichannel strategies further intensify the competitive landscape.

Technological challenges are another significant aspect for Amazon. Staying at the forefront of technological innovation is crucial, and the company invests heavily in artificial intelligence, machine learning, and cloud computing through AWS (Amazon Web Services)(Hopstack,2022). However, rapid technological advancements require continuous upgrades and integration, which can be resource-intensive. Cybersecurity threats also pose significant risks, necessitating robust security measures to protect sensitive customer and corporate data.

On the customer front, Amazon’s customer-centric approach drives its success but also presents challenges. Meeting the ever-evolving expectations of consumers for faster delivery, wider product selection, and superior customer service requires constant innovation and investment(Kantrowitz, A. ,2023). Additionally, addressing concerns over counterfeit products and ensuring product quality and authenticity are critical to maintaining customer trust and loyalty.

In conclusion, Amazon's ability to navigate these multifaceted challenges will determine its sustained success in the global marketplace. The company's proactive strategies, coupled with its commitment to innovation and customer satisfaction, will be pivotal in overcoming these hurdles and continuing its trajectory of growth and influence.

5. Opportunities

There are several opportunities as mentioned by Guillén, 2024.

Market Expansion Opportunities

Amazon has significant opportunities for market expansion, particularly in emerging markets. The company's global reach and logistical capabilities position it well to capitalize on growth in regions like Asia, South America, and Africa.

Technological Advancements

Advancements in technology, such as artificial intelligence, machine learning, and automation, present opportunities for Amazon to improve its operations, enhance customer experience, and develop new products and services.

Emerging Markets

Emerging markets offer vast potential for growth. Amazon's entry into these markets can drive significant revenue growth, particularly as internet penetration and e-commerce adoption rates increase.

Product/Service Diversification

Amazon continues to diversify its product and service offerings. Areas like healthcare, financial services, and autonomous vehicles present new opportunities for growth and innovation.

Strategic Partnerships

Strategic partnerships and alliances can help Amazon expand its market presence and enhance its capabilities. Collaborations with other companies can drive innovation and open up new revenue streams.

6. Conclusion

In conclusion, Amazon is one of the biggest organizations in e-commerce and cloud computing with a wide range of products and service. Its competitive advantages, including a vast logistics network and a customer-centric approach, have driven its success.

Due to the advancement of its emerging markets, technological enhancements, and the diversity of products, it opens up opportunities and promising future in terms of outlook; though the company must face current challenges regarding competition, regulation, and operational complexities.

To maintain such growth, Amazon should continue to invest in technology and infrastructure, focus on enhancing the customer experience, and explore new markets and product opportunities. Strategic partnerships and innovation will be key drivers of its future success.

References

1. Amazon Statistics (2024) - Business of Apps. (2024, May 24). Business of Apps. https://www.businessofapps.com/data/amazon-statistics/

2. Ecdb. (2024, June 20). Top Amazon competitors: Marketplaces, market revenue & GMV. ECDB. https://ecommercedb.com/insights/top-amazon-competitors-thriving-ecommerce-marketplaces/4596

3. Guillén, Sergio. “Amazon’s International Expansion Strategy: What We Can Learn.” Accelingo, 13 Feb. 2024, www.accelingo.com/amazons-international-expansion-strategy/.

4. Hopstack. (2022, February 10). Amazon FBA in 2023: Biggest Challenges and How to Overcome Them. Www.hopstack.io. https://www.hopstack.io/blog/challenges-faced-by-amazon-fba-sellers

5. Kevin.(2024,April 12)6 Challenges Faced by Amazon Sellers in 2024 and How to Solve Them. (2024, April 12). https://www.zonbase.com/blog/6-challenges-faced-by-amazon-sellers-in-2024-and-how-to-solve-them/

6. Kantrowitz, A. (2023, June 20). Challenges Mount for Amazon CEO Andy Jassy. CMSWire.com. https://www.cmswire.com/ecommerce/two-years-in-amazon-ceo-andy-jassy-faces-challenges-at-every-turn/

7. Patrick Nowak. (2024, June 20). Top Amazon competitors: Marketplaces, market revenue & GMV.ECDB. https://ecommercedb.com/insights/top-amazon-competitors-thriving-ecommerce-marketplaces/4596

8. Pereira, D. (2024, May 30). Amazon Mission and Vision Statement. Business Model Analyst. https://businessmodelanalyst.com/amazon-mission-and-vision-statement/

9. Pizio, Anthony Di. “People Think Amazon Is an E-Commerce Company, but 74% of Its Profit Comes from This Instead.” The Motley Fool, 10 Jan. 2024, www.fool.com/investing/2024/01/10/amazon-e-commerce-company-74-profit-this-instead/.

10. Yasar, K., & Wigmore, I.(2022, June 8). Amazon. WhatIs. https://www.techtarget.com/whatis/definition/Amazon