Amazon: Achieving Competitive Advantage in E-commerce

This paper explores how Amazon has achieved competitive advantage in the e-commerce industry through customer-centric approach, low cost structure, and effective interlinking of businesses. It also provides a PESTEL analysis of the organization and its global environment.

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Management
Name of the Student
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Author Note

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Introduction:
The modern business world is seen to be notably competitive with the rise of the hew
organizations. With a precise focus on the impact of the globalization, it is visible that a large
number of organizations are entering the industry with an attempt to catch the rapid growth of
their relevant industries (Shengelia and Kh 2013). The consumer electronics, digital
distribution or the e-commerce are observed to be subjected to a significant amount of
competition in the modern business context (Gangeshwer 2013). With the increasing new
entries into the business world, the existing organizations are observed to face the impact of
the enhanced level of competition. As a result, majority of the organizations operating in
those industries are seen to restructure their strategies with a precise focus on the effective
management of the competition. The application of the strategies such as the low pricing of
the products and the services, the efficient management of the supply chain or the
improvement of the quality becomes essential for the organizations. This helps the
organizations in gaining a significant competitive advantage over the competitor
organizations in conducting their business with a precise focus on the sustainable growth.
The paper is focused in the elaboration of one such organization which is able to
achieve significant amount of competitive advantage over the competitor organizations in the
form of Amazon. The paper provides a brief overview of the operations of the mentioned
organization and along with that, it identifies some of the crucial competitive advantages that
the chosen is able to gain over the years. The paper also provides a PESTEL analysis of the
organizations and the global environment if the company.
Overview of the Organization:
Amazon is considered to be one of the renowned names of the e-commerce and the
consumer electronics industry. The chosen organization was established in the year 1994 by

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Jeff Bezos (Amazon.com. 2019). The company is currently headquartered in Seattle,
Washington. The excellence of the senior level management of the organization which
includes the Chairman, President and the Chief Executive Officer of the organization, Jeff
Bezos and the Chief Technology Officer, Werner Vogels is considered to be significant in
spreading the business across the globe (Amazon.com. 2019). Apart from this, service
excellence of 647500 number of employees in the year 2018 played a crucial role in the
growth of the organization and that is pretty evident with the statistics of the revenue and the
operating income of the mentioned organization. The mentioned organization was able to
increase their revenue to 232.887 billion US dollars in the year 2018 and in the same year, the
selected organization increased their operating income to 12.421 billion US dollars
(Amazon.com. 2019). In addition to this, the visionary leadership of the management was
significant for the organization in the achieving an increased product chain which helps the
organization to target the customers in a more efficient manner. The efficient management of
the distribution chain of the organization along with the cost structure, the synergy between
the key services of the selected organization along with the customer centric business
approach were able to produce significant amount of competitive advantage to the mentioned
organization in their business conduction (Haucap and Heimeshoff 2014).
Practice 1:
One of the crucial reason of the significant success of the mentioned organization was
their customer centric approach of business conduction. The chosen is able to involve the
customers in an efficient manner to the business operations. The significant increment in the
involvement of the customers to the business operations of the mentioned organization has
enabled the chosen organization to evaluate the view and the opinions of the customer and
that helped the organization to design the products in accordance to the requirement or the
preferences of the customers.

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The customer centric business approach of the selected organization is observed to be
based on three different aspects which are the customer focus, customer empowerment and
the customer loyalty. During an interview of Jeff Bezos in the year 2013, the Chief Executive
Officer of the organization was seen to comment that the main idea of the business operations
of the selected organization is the customer centricity (Hassan, Sistani and Raju 2014). Along
with this, the CEO of Amazon claimed that each and every business activities of the selected
organization are designed in such a manner where the customers are at the centre of
everything. The organization is able to implement the customer centric business approach
through providing the fast and hassle free ordering and delivery (Kryvinska et al. 2014). In
addition to this, the company is able to improve the customer experience through
personalizing the shopping where the company utilises their data to help the customers in real
time shopping and in the selection of the products with a precise focus on the buying history
of the customers (Hassan, Sistani and Raju 2014). Apart from this, the organization provides
the best deal for the customers in accordance to their cost preferences.
Adding to this, the cost empowerment is one of the important aspect of the business
operations of the mentioned organization. The CEO of the organization claimed that the
business operations of Amazon is determined to enable the customers in making better
purchase decisions. Amazon is one of the few organizations that introduced the online
customer review policy in an efficient manner and that enabled the customers of the
organization to achieve a wider and in depth knowledge regarding the products that they
might buy in future. The concerns of the internet shoppers of purchasing in dark was
significantly addressed through the production of the available knowledge regarding the
products through the customer reviews and that helped in improving the purchase decisions
of the customers (Kryvinska et al. 2014). In addition to this, the process is seen to help the
manufacturers in a notable manner as the customer reviews enable the manufacturers to have

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the knowledge regarding the quality preferences or the requirements of the customers of the
organization.
The above mentioned strategies from the part of the mentioned organization plays a
crucial role in the improvement of the customer experiences and with the effective
implementation of the customer centric business approach, the organization is able to
generate significant amount of customer satisfaction amongst the customers of the
organization. This helps the organization in increasing the loyalty level of the customers
which triggers the intention of repetitive purchases of the customers.
Practice 2:
The success of the selected organization is notably dependent on the low cost
structure of the organizations and along with that, the significantly wide merchandise section
of the company in addition to a huge number of third party sellers proved to be crucial in the
global success of the organization. The organization is the largest online retailer in the world
that is pretty evident with the earning of US$140.235 billion in the year 2017 from online
sales of the organization (Amazon.com. 2019). The increased online business conduction of
the mentioned organization plays a crucial role in enabling the organization to overlook the
significant cost associated with the physical retail outlets. The online platforms has the scope
of offering sales of larger units without a significant increase in the marginal cost (Rifkin
2014). Apart from this, the organization is observed to invest in a significant manner to the
additional fulfilment centres and the existing centres in order to effectively reduce the
fulfilment times and the shopping costs. The activities play a crucial role for the organization
in reducing the cost and the time of the shopping and that notably increases the value of the
organization for the existing and the probable customers of the organization. On the other
hand, the selected organization is seen to sell more than 562 million different products from

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its marketplace whereas, one of fiercest rival of the selected organization, Walmart is seen to
offer 38 million different products which is nearly 7% of the number of products sold by
Amazon (Walmart.com. 2019). Hence it is pretty evident that the vast difference in the range
of the products sold the organizations helps the selected organization to meet the varying
requirements of a larger number of customers. The achievement of a larger customer base
enables the organization to increase the generation of the revenue which improves the
financial stability of the selected organization.
Apart from this, the increased number of third party sellers with which the company is
associated, increases the effectiveness of the organization. The business model of the selected
organization provides accommodation to the third party seller organizations with the
capability of offering their merchandises on the Amazon’s website. The inclusion of the
merchandises of the third party sellers helps the organization to meet the diverse needs of the
customers and in addition to this, it plays a key role in the effective management of the high
volume of the traffic on the Amazon websites (Zhu and Liu 2018). The organization is
observed to put strong emphasis on business conduction with the third party sellers and that is
significantly visible from the fact that the Fulfilment by Amazon service shipped more than 2
billion third party seller items in the year 2016.
Practice 3:
The chosen organization is involved in three key businesses in a significant manner
which includes Amazon Marketplace, Amazon Web Services and Amazon Prime. The
effective interlinking between all these businesses creates significant benefits for the selected
organization which Amazon would not have achieved through operating independently.

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(Image Courtesy: Amazon.com. 2019)
One of the important aspect of the online sustainable business conduction is the
achievement of the improved infrastructure. In the year 2006, the senior level management of
Amazon felt the need of investing in the improvement of their server infrastructure
(Amazon.com. 2019). The improvement of the server capacity helped the chosen
organization to grow their AWS system and that enabled the selected organization to increase
the speed and the capacity of their business conduction. As the centre of attention for
Amazon is their online business, the page load speed is significantly crucial part of
infrastructure for the selected organization. However, the selected organization was able to
calculate the fact that the slowdown of 100ms in the page load has the potential to cost 1% of
the sales of the organization (Aws.amazon.com 2019). In addition to this, the company
calculated that the issue of the page load can cost the organization at least US$18 billion in
the year 2017 (Aws.amazon.com 2019). AWS played a crucial role in the improvement of the
speed of the website’s load time and that enabled the selected organization to increase their
efficiency.

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Apart from this, the selected organization is observed to experience a significant rush
during the peak times that includes the Cyber Monday or the Monday after the thanksgiving
holiday in US, Black Friday or the Friday after the thanksgiving holiday along with the
several weeks before the Christmas. The significant capacity of AWS becomes much needed
in those days for the selected organization in making sure that the company be able to
effectively manage the increased number of visitors in the peak times (Aws.amazon.com
2019).
In addition to this, the chosen organization is able to minimize the packaging and the
shipping costs in case of two or more items getting shipped. Hence, the Amazon Prime
becomes profitable for the organization and the desired increment in the level of satisfaction
of the customers can be notably achieved.
Hence it is pretty that the Amazon marketplace provides growth and investment to the
AWS and on the other hand the AWS contributes with the increment in the speed and
capacity. Apart from this, the Prime has the potential to provide a loyal customer base for the
organization and contributes in the increment of the sales of the marketplace.
Conclusion:
On a concluding note, Amazon has the potential of improving their business
conduction with a precise focus on the effective management of the customer relationship.
Apart from this, it is visible that the mentioned organization has gained significant amount of
competitive advantage owing to the excellence of the online infrastructure. Apart from this,
the efficient management of the cost structure of the organization through conducting their
business via online platforms provides a significant advantage to the selected organization in
increasing their margin of profit which enables the selected organization in introducing
products at cheaper rates.

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Appendix: