Analysis of Amazon's Management and Business Model

This analysis explores Amazon's management and business model, including its current position, analysis of its process flow model, possibilities and recommendations for improvement.

Running head: MANAGEMENT
Management
Name of Student
Name of University
Author Note

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Table of Contents
Current position..........................................................................................................................2
Analysis......................................................................................................................................3
Possibilities................................................................................................................................6
Recommendations......................................................................................................................7
Further opportunities..................................................................................................................8
Bibliography.............................................................................................................................10

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High quality
Low quality
Low price High price
Amazon
Apple
Wayfair
eBay
Costco
Walmart
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Current position
Figure 1: Positioning map of Amazon
(Source: Created by author)
The positioning map of Amazon shows that the company provides high quality
products at a low price. In comparison to the competitors, Amazon possesses a competitive
advantage mainly because the company is one of the most reputed product selling companies.
The process flow followed by Amazon provides an understanding of the type of quality that
is expected (Amazon.com 2019). It has been stated that Amazon analyses the best dealers and
suppliers so that the quality of the products sold by the company can be maintained. The
current position shows that the competitors such as Walmart, Apple, Wayfair and Costco do
not come near Amazon in terms of quality and price.
However, as observed by Sikorski et al. (2015) the closest competitor of Amazon can
be considered eBay mainly because it deals with similar supply chain like Amazon. Hence,

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the top positioning of Amazon in the retail stores can be threatened by eBay. Despite its huge
reputation in the market, Apple fails to meet the competitiveness of Amazon because of the
high prices of the products.
Analysis
Figure 2: Process flow model of Amazon
(Source: Created by author)
The analysis of the process flow model depicts that Amazon follows a good yet
simple business model for trying to satisfy the customers by purchasing quality products
(Amazon.com 2019). The process flow model of Amazon begins with the company making a
purchase order from the vendors that are responsible for providing the company with quality
products (Amazon.com 2019). Prices are set by offering discounts to the sellers so that
effective supply of materials can be made. However, after the purchase, the quality of the

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products provided is checked. According to Sikorski et al. (2016), this can be considered as
an important part for Amazon mainly because these products are sold to the customers.
Hence, the quality of purchase of the products provides Amazon with the identity in
the business market (Schilling and Neubauer 2017). The quality is compared with the existing
quality that is usually sold by Amazon. With the current application of the business model,
Amazon can change the reject the products purchased if the quality perceived is not
satisfactory for the company (Amazon.com 2019). After being satisfied with the quality, the
prices of the products are determined. The price of the products is determined based on
certain criteria such as the manufacturing costs and the cost at which the product is obtained
from the suppliers.
The business model indicates that the prices set by Amazon meet certain criteria and
ethics set by Amazon. One such criterion includes meeting the demand of the customers. The
need of every customer need to be analysed by the company and based on the needs, Amazon
can purchase the orders from the suppliers (Amazon.com 2019). It is necessary that the
demands of the customers be coupled with the prices set by the company as customers
depend upon the quality as well as the prices required for purchasing a product. In the case of
Amazon, the analysis of the positioning map indicates that the company is known for both the
prices as well as the quality of the products. Therefore, the prices set are an important factor
for Amazon (Amazon.com 2019).
At the same time, Amazon needs to set its prices by taking into account the packaging
of the product and shipment of the product. These are important mainly because the
packaging usually attracts the customers. However, as pointed out by Taylor (2018) the
packaging of the products needs to be kept simple so that the customers can find it convenient
to unwrap the products in an effortless manner. At the same time, shipment of the products is

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important as Amazon need to deliver the products on time (Amazon.com 2019). It has been
seen that most customers prefer the products to be delivered on an urgent basis. For such
customers, extra delivery cost is applicable that may tend to shift the mentality of the
customers from purchasing the products (Richards 2017). The conclusion of the business
model is made by gathering feedback from the customers (Amazon.com 2019).
However, despite the perfection of the simple model, certain limitations exist that
need to be taken into account so that the process can go about smoothly. One such limitation
that can be seen from the analysis is the fact that Amazon does not have a backup process
flow that can be used by the company in terms of crisis (Amazon.com 2019). It is necessary
that an alternate business flow model be used so that Amazon can continue with the proper
and effective purchase and supply of materials to the customers (Amazon.com 2019). At the
same time, process of rejecting a product provided by the suppliers is not stated clearly in the
business model followed by Amazon (Amazon.com 2019).
This can be a huge factor for Amazon, as the company need to ensure that a proper
flow of output of the products need to be maintained so that it can provide ideas of
improvement to the suppliers. For example, reason for rejecting a particular process need to
be taken into account so that the suppliers can improve on the product. At the same time,
Mitra (2016) is of the opinion that rejection process of the customers also needs to be part of
the business model flow so that customer demands can be met with minimum effort.
Hence, it can be said that for Amazon to continue with the growth of its business,
rectification of the issues need to be done (Amazon.com 2019). These issues can play a
negative role in the business model development of Amazon and prevent the company from
trying to secure its position in the market. Along with the limitations, possibilities of risks
within the business model also exists that may hamper the growth of the company.

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Possibilities
The possibilities denote the risk involved as well as the success that Amazon may
gain with the proper implementation process. It is seen that the company can be at a huge risk
mainly because it follows a particular business model type. The risk involved in this case is
the fact that with the failure of the particular business model, Amazon can suffer loss due to
the failure to provide an alternate business model (Amazon.com 2019). Hence, the risk
involved can be considered as severe mainly because the company cannot meet the quality of
the products and satisfy the demand of the customers. This can hamper the reputation of the
company as Amazon can fail to implement the required strategies that ensure quality check
and customer feedback (Anđelković and Radosavljević 2018).
At the same time, another risk factor that can be inherited from the business model is
the fact that Amazon does not have a clear communication plan with the customers. As seen
from the analysis of the business model, Amazon has the opportunity to reject any products
that does not meet its quality or can accept any products rejected by the customers for failure
to meet the quality (Amazon.com 2019). However, a clear process is not provided that can
help in the flow of communication.
The possible risk factor associated with such a problem is that Amazon cannot
understand the exact demand of the customers and convey the similar message to its
suppliers. As observed by Atieh et al. (2016) clarity of communication in the business model
can help Amazon to provide the customers with the exact requirements. Hence, it is necessary
that Amazon implement the required changes that can help in improving the business process
and mitigate it from the risks (Amazon.com 2019).
The analysis of the business model also suggests that risk can be involved in the
shipment of the products. It has been observed by Chen et al. (2016) that customers usually

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demand products to be provided on an urgent basis. In order to do so, it is necessary that
Amazon analyse the necessary factors to be considered for the effective shipment
(Amazon.com 2019). However, the business model does not provide ways to communicate
with the customers regarding the details required for the delivery of the products.
Hence, as stated by Jurisch, Rosenberg and Krcmar 2016) risk exists in providing the
delivery on time for the customers to gain satisfaction. The mitigation of the risk can be done
by making effective communication with the customers. Amazon can make personal contact
with the customers via email or phone in order to gain an idea about the urgency of the
shipments of the products (Amazon.com 2019). However, despite the risks the possibilities of
success of the business model is also high mainly because of the simple manner in which
Amazon attempts to satisfy the customers (Amazon.com 2019). It has been seen that Amazon
implements a systematic flow of the steps so that the company can cope up with purchase and
sale of quality products.
This can be considered as an effective way by which a balance between the suppliers
and the purchasers are made in the market. At the same time, success can be determined by
the prices set for the products. It is seen from the business flow model that Amazon sets its
prices by considering the shipment charges as well as the packaging charges (Amazon.com
2019). This can help Amazon to determine the exact price that is to be marked for each
product. Therefore, it can be said that despite its success, Amazon need to make rectifications
so that the business model can improve (Amazon.com 2019).
Recommendations
Based on the analysis of the success and risk that may arise due to the implementation
of the business model, recommendations can be provided that can help in improving the
process. One such recommendation that can be provided is the manner in which

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communication with the customers and the suppliers can improve. Amazon can develop
direct communication channel between the purchasers and the suppliers so that the feedback
can be received and provided on a spontaneous manner. It is necessary that such a method
help in the analysis of the feedback and ensure that the satisfaction of the customers be met.
At the same time, another recommendation that can be provided is on the development of an
alternative business model that can help in providing support to the existing business model.
It is necessary that Amazon understand the importance of the business model and develop a
separate business model that addresses the needs of the customers. This can help in
maintaining a separate analysis of the customers and the suppliers so that the company can
continue to maintain its position in the market. The application of the recommendations can
help Amazon to develop possible future scope of success.
Further opportunities
Further opportunities that can be developed from the analysis are to identify the
manner in which Amazon derives the feedback from the customers and the manner in which
the products are shipped. It has been seen that Amazon provides high quality service to the
customers while maintaining the quality of the products (Amazon.com 2019). Therefore,
opportunities for analysing the supply chain process followed by Amazon can be created.
This can help in understanding the importance of supply chain and the way in which Amazon
uses it for enhancing its business opportunities.
Along with this, the bargaining power of the suppliers associated with Amazon can be
taken into account so that the prices at which Amazon sells its products be estimated. As
stated by Schilling and Neubauer (2017) the opportunities can help in developing knowledge
and skill about the processes followed by an organisation while trying to reach the customers.
The process flow indicates the steps required before satisfying the needs of the customers

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while the process of supply chain management can help in identifying the efforts made by an
organisation to sell its products to the customers. The capability of Amazon can be
understood as a future prospect.

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Bibliography
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