E-commerce Strategy of Amazon: A Comprehensive Analysis

This article discusses the e-commerce strategy of Amazon, including its approach, value proposition, revenue generation model, target audiences, business models, and e-commerce based strategies. It also includes an environmental analysis of Amazon's e-commerce business, including a SWOT analysis and Porter's five forces analysis.

BUS303: E-commerce in the Global
Business Environment
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Table of contents
Contents
Introduction:..................................................................................................................................3
Identification of business with its E-commerce component:.....................................................3
Critical aspects of E-commerce strategy:....................................................................................5
The context of business operations:...........................................................................................10
Environmental analysis of e-commerce business:....................................................................11
SWOT Analysis:.......................................................................................................................11
Issues of e-commerce based business:........................................................................................14
Recommendations:......................................................................................................................15
Conclusion:...................................................................................................................................15
References:...................................................................................................................................15
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Introduction:
In this assignment, the e-commerce based business platform is discussed in relation with great e-
commerce retailer Amazon. It has opened the new revolutionary door in this retail sector where
people can fulfill all of their demands at their doorsteps. Nowadays, Amazon becomes the titan
in the E-commerce based business industry with its enormous business wings like logistics,
retailing, supply chain management, value proposition, unique demand supply chain
management and many others. Hardware, data storage, online payments and many other
miraculous systems make this entire platform a dazzling one. In this assignment, to discuss all
kinds of business activities, environment analysis, issue identification, and recommendations are
provided in a brief mode. This analytical provide a bright idea about global e-commerce business
operation management.
Identification of business with its E-commerce component:
In this assignment, global e-commerce business operational strategy is discussed in relation with
Amazon, where Flywheel philosophy is always followed to make business management and
operation-related decisions. This flywheel philosophy is the fundamental component of this
Amazon where reduction of price is supported by this organization to attract millions of
customers (Dutta, 2017). In this way, Amazon has enhanced its customers base and then generates
its revenue in a higher amount after compensating all kinds of costs to make advantages over
economies of costs over logistic, telecommunication, and technology-based costs. After
completion of a lifecycle when the company reduced its price again the flywheel circulates again
to generate more revenues. In this way, Amazon has created great popularity for low-cost
products with bulk purchasing. Though this way, in 2016 Amazon had created the total turnover
of $137 billion and created a great history in its E-commerce based business platform. Most
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attractive component of this online platform is the logistic materials where Amazon offered
Amazon primes for some selected cities of the world. Customers had got a significant discount
along with free shipment facilities in those days. Logistics, hardware and other components of
Amazon prime have made this platform very lucrative. It has nowadays more popular rather than
UPS or FedEx which are aggressive rivals of Amazon. In the US, Amazon has established near
about 200 warehouses, 60 local packaging centers, along with 70 hubs to continue the fast
shipment program to its customers. For abroad delivery, Amazon has taken the project Dragon
boat also. Through this project, Amazon has delivered its U.S, U.K based deliveries from China-
Japan, and other places. Amazon has another significant component to smoothen these e-
commerce based products. All of these products are delivered in Asia, Africa, Europe and other
continent based countries through Amazon-owned air transportation systems. In this entire
system, Amazon and its management authority have emphasized over the data analysis system,
where data are derived from shipped products. After delivery, the packages are optimized
algorithmically to determine the efficiency and speed of all delivered products and other
resources. Through maintenance of all these systems, Amazon has improvised its revenue
generation to $11.5 Bn which was double of its previous year (Hu, 2017).
Another exciting component of Amazon based e-commerce system is the introduction of robotic
system Kiva to supervise all the activities in their warehouses. Amazon has placed more than
10,000 robots in the U.S to arrange all the fulfillment centers in the U.S. Through such core
components, Amazon has attracted millions of its customers and driven its business in a
successful manner where Amazon prime is mentioned as the heart of the entire business systems.
It is now found to be present that, at present, in the world, 65% Amazon users are now enlisted
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as Amazon prime members, and nowadays, globally half of the entire household products are
retailed by the online retail giant, Amazon.
Critical aspects of E-commerce strategy:
In this assignment, Amazon, the online most popular retail platform is discussed. In this concept
the entire e-commerce marketing strategy of Amazon including its present approach, value
proposition, revenue generation model, target audiences, business models along with e-
commerce based strategies.
The present approach of Amazon:
Innovative inventions, proper analysis of requirement of customers and sometimes the creation
of new demand within millions of customers of Amazon are the basic approaches of Amazon. In
this aspect, C.E.O of Amazon has proposed a great statement that members of Amazon
stakeholders found their approach is not a right one from all perspectives, but the approach of
Amazon is very likely according to their business strategies. Continuous research, development,
innovation of new services and products are the basic approach of Amazon
Value propositions of Amazon:
Value proposition model of Amazon is the super aggregator one. According to this model,
Amazon has provided the umbrella to provide space for millions of vendors and its customers to
provide a one-stop solution for shopping to the world. Amazon provides easy access to all the
global products in a friction-free manner. Amazon has set its value in the logistic world by
reducing product cost. In this way, this online platform attracts millions of people and provides
them with services with the value of their prices. Amazon has created the value proposition
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model where customers can buy the massive amount of products at a reduced price and Amazon
is the company to play their business at a marginal level cost
Revenue models of Amazon:
Amazon has the revenue model to utilize online platforms where they can sell products from
different suppliers. In this aspect, they collect commissions from their considerable number of
suppliers when customers buy those products. Amazon has the abroad delivery facilities also. In
this course, they collect their revenues from Paypal, Payoneer and other sources. Another
significant source of revenue generation of Amazon is the advertisements which are found to be
present in their online shopping pages. These revenue models are very much inventive, and it
provides a unique revenue generation model to attract millions of customers.
Figure 1: Revenue model of Amazon
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Sources: (Hu, 2017).
The target market of Amazon:
Amazon has the target market for young generations. Its shown from their database that, older
people are their more loyal customers rather than the young generation. In this aspect, Amazon
has opened their Amazon original system to provide more offers and facilities to the young
generation. According to the management department of Amazon, it is assumed that lold people
have more time for online shopping and others, but young generations are too busy.
On the other hand, now Amazon is very cautious to provide cash on the delivery services
international basis. Across the world, there are so many countries where the online transaction is
not so much popular until now. As a result, they are not so much acquainted with the online
payment system. To enhance the offline or cash payment system, Amazon has taken the motto to
improvise their payment mode also. Amazon is now also enthusiastic to enhance their product
supply timing, the quick delivery system in a small or reduced rate (Wu et al., 2017). These
strategies to reach the target market, Amazon have taken numerous steps which had helped them
a lot to achieve competitive advantages also over their competitors.
Business models of Amazon:
Amazon business model is composed of all of its key components, value chain networks, and
numerous stakeholders. Through these model, Amazon has stocked the most significant storage
of products along with a reduced price. Moreover, Amazon provides excellent facilities for free
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shipment where customers can quickly select their required things and complete the payment
through online payment systems (Yim et al., 2017).
Amazon has started a great business model based on membership. This e-commerce based
company provides free shipment or one-day delivery based facilities to its members, in exchange
for small monitory services. In addition to all of these products, Amazon offers numerous
facilities line free streaming, online book reading, kindle version of books, along with other
facilities. For these facilities, a customer bears small expanses annually as the subscription price.
Amazon has created its business model directly based on their entrepreneurship system where
investment, revenue sources, along with cost drivers are created very directly with revenue
generation system of this company. Amazon invests in such a way where the output is measured,
and they know that how to maintain the business sustainably. To cut down the cost driving
amount, Amazon filtrated its database and removed their unproductive products within a
reasonable span. In this way, Amazon innovatively invests in its business expansion and
improvises their revenue generation also.
E-Commerce market strategies of Amazon:
To make the entire system of Amazon based e-commerce platform, a global one Amazon
has taken the differentiation strategy (Cui et al., 2017). In this mode, Amazon has taken the
business strategy where they provided the scopes to a large number of start-ups also like
pet.com and others. It helps them to attract enormous customers through the umbrella term
Amazon. To make innovation in the e-commerce platform, Amazon has analyzed the
buying behavior to detect the trend of customers (Dutta, 2017). This trend and the vast
amount of customers’ behavior helped them to achieve the competitive advantages also.
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Amazon has analyzed that, nowadays, 50% of consumers of Amazon are loyal customers of
Amazon whereas in U.K and U.S.A there is enormous popularity. Such customer popularity
along with market share, equity of brands help the Amazon to make rank at the top in the
aspect of e-commerce business.
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The context of business operations:
In all e-commerce based businesses the operation management sector is very crucial. On
Amazon also the operation management strategy included the goods and products designing,
location strategy, stakeholders’ management policies and others (Loewen, 2018). In this respect,
telecommunication and online payment gateway system management are other things also. After
making all of these things, Amazon has created the overall platform where shopping is effortless.
Environmental analysis of e-commerce business:
SWOT Analysis:
SWOT analysis is a business analytical framework to measure Strength, Weakness,
Opportunities, and Threats of an organization (Vakeel et al., 2017). This tool provides the
microeconomic scenario of an organization which is very helpful to measure the competitive
place among competitors and decides about steps to repair all the gaps of weaknesses. In this
comprehensive discussion, SWOT analysis of Amazon, the leader of e-commerce based business
system is briefed here.
The strength of Amazon:
 Maintenance of Porter's three generic strategies, cost leadership, differentiation of
products along with a focus on the launching of unique products is the underlying
strength of Amazon.
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 This organization has utilized the online platform for the retailing activities provides
excellent stability in the global market with the implementation of information
technology and e-commerce in their business strategy.
 Customer satisfaction rate is very high for Amazon due to their prudent maintenance of
the logistic system and supply distribution system.
Figure 2: SWOT analysis of Amazon
Sources: (Escobar-Rodríguez & Bonsón-Fernández, 2017)
The weakness of Amazon:
 Free shipping system of Amazon creates a danger to achieve profitability.
 Amazon continues its business along with near zero margin-based business where
profitability is observed after a massive sell.
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The opportunity for Amazon:
 Amazon has the encrypted safe online payment system which helps them to attract more
customers.
 This organization has the scope to invite large brands to be sold under their umbrella and
generate revenues.
Threats of Amazon:
 Nowadays, cyber hacking is a significant threat for Amazon where most of the
customers are avoiding online payment procedure.
 Amazon sells its books at such a low rate which causes legal challenges for this
organization by numerous publishers.
 At present many local companies are providing online payment and doorstep supply
system in a quick time span. Local companies can do it in a small investment, but it
causes depreciation of popularities of Amazon, the global online retailer.
Porter’s five forces of Amazon:
Porter’s five forces analysis is very crucial for Amzon.com.Inc because it is the analytical
framework to find out all the external parameters which are influential in the aspect of this e-
commerce based businesses (Gordini & Veglio, 2017).
Competitive rivalry is stable in the aspect of e-commerce based businesses because nowadays,
there is numerous e-commerce based such platforms are available.
Bargaining power of customers is extreme because customers are now getting a vast range of
products from Amazon at a reduced cost.
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Bargaining power of suppliers is also a potent force for Amazon whereas at present all the
suppliers and product manufacturers are eager to sell their products at Amazon. In this course,
Amazon also gets the scope to generate more revenues.
The threat of substitutes is a potent force for Amazon because Amazon has opened the
platform for e-commerce in such a successful manner. Due to their experiences, Amazon has no
such threat because already they had built their market shares, customer base and popularity
across the world.
The threat of new entrants is a week force for Amazon because nowadays numerous
companies are establishing their online platforms. On the other hand, there are the local market
proprietors who are opening their online platforms along with a quick delivery assurance.
Issues of e-commerce based business:
In an e-commerce based business of Amazon, there are two types of issues. Primarily, the online
mode of transaction is nowadays very dangerous due to the sudden attack of hackers. Amazon
also customers have to continue their shipping by putting their credentials on credit card and
others. So, it makes people far from Amazon based on online shopping.
In Amazon, the social lives of employees are very pathetic. During the office hours, they have no
scope to go for a toilet break also. As a result, employee agitation is created within the
organization. It can hamper the reputation of Amazon also (Agarwal & Wu, 2018).
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Recommendations:
Amazon has to initiate the encrypted mode of payment also to provide a safe and secure
transaction experience towards its customers. As a result, more new customers also will be
interested in shopping with Amazon. On the other hand, seniors of the management committee of
Amazon have to meet with its employees in an average time span to hear all about their problems
and to mitigate it. It will help the organization for better production along with enhancement of
production also (Rezaei et al., 2017).
Conclusion:
It can be concluded from the above assignment that, E-commerce based platforms has changed
the paradigm of shopping globally. People of the entire earth are nowadays experiencing hassle-
free shopping experiences and after payment receives their delivery at the doorstep only with the
help of such platforms. In this assignment, all the discussions are made in relation with Amazon.
Some issues are also detected as the aftermath of discussion. Proper steps will help Amazon-like
e-commerce based platforms to enhance more. It will help the world for socio-economic
development along with the betterment of human being's lifestyle pattern.
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Transactions in Real-Time (pp. 141-158). IGI Global, Pennsylvania
Agarwal, J., & Wu, T. (2018). E-Commerce in Emerging Economies: A Multi-theoretical and Multilevel
Framework and Global Firm Strategies. In Emerging Issues in Global Marketing (pp. 231-253). Springer,
Cham.
Gordini, N., & Veglio, V. (2017). Customers churn prediction and marketing retention strategies. An
application of support vector machines based on the AUC parameter-selection technique in B2B e-
commerce industry. Industrial Marketing Management, 62, 100-107, Elsevier, Amsterdam.
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Escobar-Rodríguez, T., & Bonsón-Fernández, R. (2017). Analysing online purchase intention in Spain:
fashion e-commerce. Information Systems and e-Business Management, 15(3), 599-622, Springer,
Cham.
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dissertation, Indian Institute of Management, Bangalore).
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enabled social innovation in Rural China. The Journal of Strategic Information Systems, 26(1), 3-21,
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commerce? An interactivity and vividness perspective. Journal of Interactive Marketing, 39, 89-103,
Elesevier, Amstardum.
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knowledge. Telematics and Informatics, 35(1), 237-244, Elesevier, Amstardum.
Hu, J. (2017). Research on Security Issues and Strategies of E-commerce. DEStech Transactions on
Engineering and Technology Research, (mcee), Lancster.
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