Business Model of Amazon .

This paper proposes a new business model for Amazon taking into account security threats, order-fulfilment procedure, electronic marketing and legal issues. The proposed payment gateway and security threats management system, order fulfilment process, and e-marketing strategies are discussed. The social and legal issues faced by Amazon due to data thefts and recommendations to prevent hacking are also presented.

Running head: BUSINESS MODEL FOR AMAZON
Business Model of Amazon
Name of the Student
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Author note

BUSINESS MODEL FOR AMAZON
Executive Summary:
The business models of companies play very important roles in their business. However,
multinational companies are under tremendous pressure to adopt new business models to
meet threats like data thefts. The paper shows the steps which Amazon can incorporate in its
new business model.
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BUSINESS MODEL FOR AMAZON
Table of Contents
Executive Summary:........................................................................................................................1
Part 1. Introduction:........................................................................................................................2
Part 1.1. Context of discussion:.......................................................................................................2
Part 1.2. Aim of the report:.............................................................................................................2
Part 2. Discussion:............................................................................................................................3
Part 2.1. About Amazon:..................................................................................................................3
Part 2.5.1. Social issues:...............................................................................................................6
Part 2.5.2. Legal issues:................................................................................................................6
Part 3. Conclusion:...........................................................................................................................7
Part 4. Recommendations:..............................................................................................................7
Part 4.1. Customer education:.....................................................................................................7
Part 4.2. Third-party technological training:...............................................................................7
Part 4.3. Opening of more branches in new markets:................................................................7
Part 5. References:...........................................................................................................................9
Part 6. Appendices:........................................................................................................................12
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Part 1. Introduction:
Part 1.1. Context of discussion:
Amazon is undoubtedly the largest ecommerce company in the world operating in over
a hundred countries and selling a diverse range of products. The company sells goods at
affordable prices and has the ability to adjust its marketing strategy in accordance with the
market conditions in each of its host countries. The portals of Amazon are visible in the host
countries as per their specific needs like showing prices in the currencies of the respective host
countries rather than in USD. This portals of Amazon receive millions of orders and process
payments amounting to billions. The portals and the gateways of the American ecommerce
giant are not only sources of revenue for Amazon but also innumerable companies which
market their goods using the portals of the former. The companies which use Amazon portals
include small, medium and large multinational companies like Apple and P&G, the leaders in
their respective sectors (Amazon.com 2018). However, the portals of Amazon are always under
continuous threats from hackers and money laundering groups targeting the immense reserve
of customer data and revenue which circulate through Amazon portals (Abel 2018). These
illegal activities threaten the customer value creation process of Amazon besides causing
immense damage to the revenue generation and market goodwill of the company. The interim
report recommends outsourcing some of the operations of Amazon. However, it can be pointed
out that considering the immense business operations of Amazon and the impending data theft
as well as hacking threats, outsourcing would expose the company before the third party firms.
This would only add to the data and security risks to the company.
Part 1.2. Aim of the report:
The aim of the report would be proposing a new business model taking into account
four criteria namely, security threats, order-fulfilment procedure, electronic marketing or
emarketing and appropriate social as well as legal issues. The research would culminate into
making recommendations to the management of Amazon pertaining to the new business
model which the research would propose.
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Part 2. Discussion:
The proposed business model of Amazon would take into account four aspects in the
light of the context discussed above. The first aspect would be security threats, the second
aspects would be procedure which Amazon would take in the new business model, the third
would be emarketing of Amazon followed by the fourth concept which would deal with
legislations pertaining to all the three previous aspects. However, it would be prudent to delve
into the business operations of Amazon in order to provide the proposed business model a
stronger base.
Part 2.1. About Amazon:
Amazon is the largest multinational information technology and communication
company based in the United States of America. The business of the company spreads across
diverse areas right from ecommerce, cloud computing to payment gateways. The company is
listed on the NYSE and NASDAQ, the two top stock exchanges in the world. This listing on top
stock exchanges attribute the company with an immense capital base (Nasdaq.com. 2018)
(Appendix 1). The financial performance of the company actually reveal business operational
strengths in both generating high net income and its increasing asset amounts
(Ir.aboutamazon.com. 2018) (Appendix 2). The twenty first page financial statements clearly
mentions the compliance with both US income taxes and host countries referred to as ‘foreign
jurisdictions’. Amazon has direct presence in twelve countries including its home country the
United States of America. The company is presented in other countries where it has no direct
operations through its third party distributors which sell Amazon products
(Services.amazon.com. 2018) (Appendix 3). The company has a global ecommerce selling
guidelines which give in-depth information to all the parties involved in selling and buying
products using Amazon portals. Thus, it can be mentioned that the business model of Amazon
should take into these aspects.
Part 2.2. Security threats and payment systems:
One of the most important aspect which the proposed business model should consider
would be immense security threats and payment systems of Amazon. Augustine and Asiedu
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(2017) that the financial resources inflow takes place in two forms, namely capital and revenue.
It can be pointed out that Amazon, being a listed company and having presence in twelve
countries in form of subsidiaries listed on leading stock exchanges. Thus, it can be pointed out
that immense amount of financial capital flows towards Amazon from all the two countries
including the US. As far as revenue generation, the Amazon portals serve more than a hundred
and eighty countries having loyal customers (Services.amazon.com. 2018). Thus, it can be
gauged from the discussion that trillions of dollars of revenue flows towards the company. It
can also be pointed out that the portals of Amazon acquire, manage and process colossal
sensitive customer data. The customer database and financial data base of the company is
under continuous threat from hackers and data theft groups. The international magazine, The
Forbes reports that database containing sensitive data of a whopping 120 million customers has
been leaked (Forbes.com. 2018). The Walls Street Journal reports third party sellers of Amazon
to steal confidential customer information as well as money (McMillan 2018). These two
secondary point out that essence of building secured data base and payment system to ensure
future security of the data and financial resources of Amazon. The report in the Wall Street
Journal is sufficient to discard the recommendation (as per the interim report) of outsourcing
business verticals would only invite more data theft threats and the third-party dealers are not
strong to counteract the hackers. Thus, the entire security system of the database and
payment gateways of Amazon should be under the supervision of Amazon.
Part 2.2.1. Proposed payment gateway and security threats management system:
The proposed payment gateway of Amazon should form a very important part of its
business model since would facilitate flow of cash into and away from the company (in form of
payments). The payment gateway of Amazon should be capable of processing both receipts in
form of capital as well as revenue. Whenever, the customers would payments to purchase
goods online, they would be required to input their identity details which should include
identification details mentioned in the document submitted with the bank in order to open
account (Aggarwal, Zamani and Christodorescu 2017). The concerned bank would be required
to verify the details of customers and send an auto-generated mail to Amazon. The ecommerce
will only allow the customer to make payment after receipt of the approval of the bank. If the
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bank declines to approve the payment, the customer would be blocked from making any
payment using the details for unlimited time subject to verification of Amazon. The similar
process would be used in the accepting investments and making payments in form of dividend
as well as premium (Reaves et al. 2016). The advantage of the multi-layered payment is that it
would prevent illegal groups from entering the payment gateway of Amazon.
Part 2.3. Order fulfilment process:
The order fulfilment process of Amazon should be equally strengthened to ensure
security of customers. The customers in order to place orders would have to input details like
complete address along the nearest police station. The company would send an auto generated
to the police station for verification. The customers would only be able to proceed further only
after the address is verified by the police station. It can be pointed out that this method would
be very helpful in tracking orders from customers in case they select ‘payment on delivery’
option. Thus, it can also be inferred from this description that order fulfilment process would
enable Amazon to reduce fake orders and stealing of customer data.
Part 2.4. E-marketing:
The twenty eight page of the financial statements of Amazon for the period ended
December 31, 2017 gives an in depth insight into the e-marketing strategies of the company.
The company markets its goods on its official websites targeting specific customer segments.
Amazon has country specific official websites to market its products in the twelve host
countries in which it has direct presence. The company promotes its products in countries in
which it has no direct presence using third party websites. Amazon promotes its brand name
and products by sponsoring events in both its home as well as host countries. The company in
additional to its official websites and websites of its third party sponsors also makes use of
social media websites like Youtube and Instagram to market its products. Ali et al. (2017) points
out in this respect that the e-marketing portals of ecommerce companies are often subject to
security threats and intrusion from illegal entities. This statement can be verified by the fact
that third party distributors of Amazon have already suffered attacks from hackers and were
not able to prevent the attack (Abel 2018). This actually points out the lack of technological
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power of third party of Amazon to check data theft risks. Thus, the entire e-marketing function
should be under the control of Amazon.
Part 2.5. The relevant social and legal issues:
The above discussion clearly point out that the security thefts which the gateway of
Amazon faces strong social and legal issues. The following are the social and legal issues which
Amazon faces due the data thefts and information thefts:
Part 2.5.1. Social issues:
The first social issue which Amazon faces due to data theft is lack of customer trust on
ecommerce marketing. Vladlena et al.(2015) mention that data thefts in the ecommerce portals
of Amazon lead to loss of customer trusts and repel them from making online purchases.
Considering the fact that ecommerce sale of goods have become significant sources of revenue
of several multinational companies, it can be pointed out that repulsion of customers from
ecommerce purchases hits the revenue generation this companies very badly.
The second issue which can be called as the outcome of the first issue is reduction in the
number of goods available to customers which ultimately effects their lives. Prisha et al. (2017)
point out that consumers are able to get access to products which are not available in the local
market. Moreover, consumers are able to purchase goods from ecommerce websites at
affordable prices. Ogbanufe and Kim (2018) point out that in absence of ecommerce websites,
the consumers are bound to buy locally available products at higher prices. This ultimately,
erodes their saving and increase their expenditure, thereby hampering their standard of living.
Part 2.5.2. Legal issues:
The consumers who suffer losses due to data thefts and cash thefts often file cases
against the ecommerce companies. Von Glahn and Taulbee (2017) point out that second legal
issues, the complex legal procedures of dealing with data thefts. Amazon clearly mention in ist
official documents that it abides by legislations in different nations while functioning in the
global market (Ir.aboutamazon.com 2018). However, it can be pointed out that the legal
procedures of dealing with data theft and online cash thefts vary between countries. The illegal
groups have their network spread across countries and use these procedural differences to
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escape trials. Thus, it can be pointed out that data theft gives rise to serious issues pertaining to
law and society.
Part 3. Conclusion:
It can be concluded from the above discussion that the proposed business model of
Amazon should take into account the issue of security of customer data and financial resources.
The company should make its portals more secure and reduce hackers to the extent possible. It
is not feasible to reduce data theft due to the technologically advanced groups which are
involved in hacking.
Part 4. Recommendations:
The following are the recommendations which can be made to the management of
Amazon regarding prevention of hacking:
Part 4.1. Customer education:
Amazon should educate customers by holding demonstrations regarding measures to be
taken while purchasing goods online. The customers should be educated on the necessity of
having strong passwords and not sharing passwords with anyone under any situation. The
customers should also be advised to change their debit cards’ and credit cards’ PIN numbers if
they suspect any sort of fraud in their accounts or any third party observation while using the
cards.
Part 4.2. Third-party technological training:
Amazon should train the third party agents which sell Amazon products to strengthen
their technology. The personnel of the selling partners should be provided with technological
knowhow and if required financial help to acquire software to prevent hacking.
Part 4.3. Opening of more branches in new markets:
Amazon must open branches in countries where it has no direct presence to control
hacking. The map in third figure shows that compared to its global operations, Amazon is only
present in just twelve countries which is insufficient to control its global operations. Thus, the
ecommerce giant must open more branches to gain stronger control over its markets.
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Part 5. References:
Abel, R. 2018. Scmagazine.com. [online] Scmagazine.com. Available at:
https://www.scmagazine.com/home/security-news/cybercrime/amazon-breach-shows-need-
for-stronger-third-party-cybersecurity/ [Accessed 5 Dec. 2018].
Aggarwal, A., Zamani, M. and Christodorescu, M., 2017. REMOTEGATE: Incentive-Compatible
Remote Configuration of Security Gateways. arXiv preprint arXiv:1709.04569.
Ali, M.A., Arief, B., Emms, M. and van Moorsel, A., 2017. Does the online card payment
landscape unwittingly facilitate fraud?. IEEE Security & Privacy, 15(2), pp.78-86.
Amazon.com. 2018. Amazon.com. [online] Available at: https://www.amazon.com/b?
ie=UTF8&node=16354394011 [Accessed 5 Dec. 2018].
Augustine, O. and Asiedu, E., 2017. Monetary Versus Fiscal Policy Effects on SMEs Growth in
Africa: Evidence from Ghana. International Research Journal of Finance and Economics, (164).
Forbes.com. 2018. Forbes.com. [online] Available at:
https://www.forbes.com/sites/thomasbrewster/2017/12/19/120m-american-households-
exposed-in-massive-consumerview-database-leak/#13870d6e7961 [Accessed 5 Dec. 2018].
Ir.aboutamazon.com. 2018. Ir.aboutamazon.com. [online] Available at:
https://ir.aboutamazon.com/static-files/917130c5-e6bf-4790-a7bc-cc43ac7fb30a [Accessed 5
Dec. 2018].
McMillan, L. 2018. WSJ.com. [online] WSJ.com. Available at:
https://www.wsj.com/articles/amazon-coms-third-party-sellers-hit-by-hackers-1491816600
[Accessed 5 Dec. 2018].
Nasdaq.com. 2018. Nasdaq.com. [online] Available at:
https://www.nasdaq.com/symbol/amzn/stock-chart?
intraday=off&timeframe=5y&splits=off&earnings=off&movingaverage=None&lowerstudy=volu
me&comparison=off&index=&drilldown=off [Accessed 5 Dec. 2018].
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Ogbanufe, O. and Kim, D.J., 2018. Comparing fingerprint-based biometrics authentication
versus traditional authentication methods for e-payment. Decision Support Systems, 106, pp.1-
14.
Prisha, P., Neo, H.F., Ong, T.S. and Teo, C.C., 2017. E-Commerce Security and Identity Integrity:
The Future of Virtual Shopping. Advanced Science Letters, 23(8), pp.7849-7852.
Reaves, B., Scaife, N., Tian, D., Blue, L., Traynor, P. and Butler, K.R., 2016, May. Sending out an
SMS: Characterizing the Security of the SMS Ecosystem with Public Gateways. In Security and
Privacy (SP), 2016 IEEE Symposium on (pp. 339-356). IEEE.
Services.amazon.com. 2018. Services.amazon.com. [online] Available at:
https://services.amazon.com/global-selling/overview.html [Accessed 5 Dec. 2018].
Vladlena, B., Saridakis, G., Tennakoon, H. and Ezingeard, J.N., 2015. The role of security notices
and online consumer behaviour: An empirical study of social networking users. International
Journal of Human-Computer Studies, 80, pp.36-44.
Von Glahn, G. and Taulbee, J.L., 2017. Law among nations: an introduction to public
international law. Routledge.
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Part 6. Appendices:
Appendix 1: Stock chart of Amazon on NASDAQ:
Figure 1. 5 years stock chart of Amazon
(Source: Nasdaq.com. 2018)
Appendix 2: Financial data of Amazon for the year ending December 31, 2017
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Figure 2. Extract of the financial statements of Amazon showing profit and assets
(Source: Ir.aboutamazon.com. 2018)
Appendix 3: Direct markets of Amazon
Figure 3. Map showing main offices of Amazon and respective official websites
(Source: Services.amazon.com. 2018)
Appendix 4. Proposed payment gateway system of Amazon:
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14
Amazon
Customers places orders and makes payments on the
gateway by putting details including at least one
number given by a government body(including any one
document furnished while opening bank account)
Amazons sends customers details
and payments details to banks for
approval
Amazon sends OTP to
customers
Bank approves by
sending auto generated
mail to Amazon
Bank declines Customer/investors blocked
and processing stopped on
the mentioned ids
Payment processed
Investors (including corporate investors)
invests in Amazon sharesDividends and
premium on shares