Role of IT in Amazon: Analysis of Competitive Environment, Logistics, and Support Activities

This report discusses the role of IT in Amazon, analysis of competitive environment, inbound and outbound logistics, and support activities in Porter's value chain.

Managing Information
and Technology

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Introduction of company........................................................................................................3
Background information of company.....................................................................................4
Products and services of company.........................................................................................4
Analysis of competitive environment of company.................................................................4
Inbound and outbound logistics and operations.....................................................................7
Analysis of support activities in Porter's value chain.............................................................7
Identification of key value adding activities..........................................................................8
How IT and innovative ideas help to improve business processes........................................8
CONCLUSION..............................................................................................................................10
REFRENCES.................................................................................................................................11

INTRODUCTION
Information technology is being increasingly used in businesses so that competitive
advantage can be gained in market as with the use of IT company's performance increase, it can
save more money and also maximum customer satisfaction can be achieved. With the use of IT
in business, communications have become fast along with increased speed of data processing and
gaining more market knowledge (Rohitratana 2017. IT helps business in using its data and
information efficiently so that effective results can be drawn and business processes can be
improved. In this report Amazon company is taken which is an American multinational
technology company that focuses on e-commerce, cloud computing, digital streaming and
artificial intelligence. The company is based in Seattle and is an IT company which increase the
importance of IT in it. In this report the role of IT in Amazon, analysis of competitive
environment of company, inbound and outbound logistics and operations, Porter's value chain
model etc. will be discussed in detail so that a competitive advantage can be gained by it in
market.
MAIN BODY
Introduction of company
Amazon is an American international technology company which is based in Seattle,
Washington, US and mainly deals in e-commerce, cloud computing, digital streaming and AI.
Amazon is the world's largest online retailer which enables people to shop efficiently through the
website or online app of Amazon. The company provides various services ranging from online
shopping, AI assistant provider and cloud computing platform. It is the largest internet company
in terms of revenue and is the second largest private employer in US. The company is among
top big 4 technical companies which are Apple, Google and Facebook. Amazon.com is well
known for its lightning speed of selling virtually anything online and is also known for its Kindle
book store where book lovers can find a large number of online books. The company purchases
all its inventory from various brands either directly or from traditional wholesalers and factories
so that customers can be provided with branded products. The vision of the company is to
become world's most customer-centric company and also offer them with a variety of thousands
of products while increasing their convenience of online shopping (Liu, Kimree Technology Co
Ltd, 2016).

Background information of company
The company was founded by Jeff Bezos in Bellevue, Washington in the year 1994 in the
garage of their rented home. Bezos' parents invested $250,000 in the start-up. The company was
established in Seattle as Microsoft was also located there which could help it in technical
assistance. The company began its business by selling music and videos in 1998 and it also
began operating at international level by acquisition of book sellers in UK and Germany. The
company then began selling video games, consumer electronics, home renovating items,
software games and toys etc. Amazon name was chosen as Amazon is the largest river in the
world and Bezos planned on making Amazon the biggest book store in the world. When Amazon
was founded first Jeff Bezos had called it his “regret minimization framework” as it was the
effort which helped him in defending against his inability to participate earlier in internet
business boom (Shahar, Satar and Bakar 2019).
Products and services of company
Amazon is the world's largest online retailer and a salient cloud service provider. The
company is an American multinational technology company which mainly focus on various
online services. The products and services of Amazon ranges from several media including
videotapes, software, apparels which are suitable for people of different age and sex, baby
products which are clinically proven, consumer electronic items, beauty products which are
clinically tested against any side effects etc. The company also gives various internet services
that cater to fulfil the requirements of different domains of which some most widely used
domains are computing, storage, database, analytics, networking etc. Thus it can be seen that
Amazon is a big company which offers a wide variety of products and services which are able to
fulfil the requirements of customers as per their needs and wants while increasing their
convenience of online shopping (Xu and et. al. , 2013).
Analysis of competitive environment of company
Porter's five forces is a model which help in determining the competition of business in
market which will help in evaluating the overall attractiveness of industry. The model was first
published in Michael E. Porter's book "Competitive Strategy: Techniques for Analyzing
Industries and Competitors" in 1980. as per this model there are five forces which work on a
company and helps it in analysing its competitiveness in the market. The model thus help in
formulating corporate strategies so that the negative factors which affect the company can be

eliminated strategically which will help it in maintaining its profits. Amazon competes against a
variety of firms from the small and large online and offline retail stores which means that it has
to continuously determine its competitiveness in market. Following are the five forces that can
affect the business of Amazon in market: Rivalries: Amazon competes in a market where a large number of rivalries are present
both in the e-retail sector and in the form of traditional retail stores. All its competitors
are aggressive in their nature which are trying to capture the attention of customers by
offering discounts and offers on all the products they offer (Schnoll, 2015). The
switching cost of customers is also less which means that they can easily switch to other
e-retailer for purchasing their products. The rivalries give tough competition to Amazon
as they continuously change their strategies so that their sales can increase (Singh and
Teng, 2016). There are many e-retail competitors of Amazon like e-bay, Alibaba, Flipkart
and many others. Also many traditional stores have started selling online which adds to
the competition of Amazon. Thus it can be seen that Amazon face strong competition
from existing rivalries in market which can affect its sales. It is important that Amazon
focus on strengthening its brand imager in the market which is the strongest among all its
rivalries (RODZI 2014). Chain stores, new online book retailers, e-retailing etc. are other
competitors of Amazon who can affect company by offering the same quality products to
customers at competitive prices. Also Walmart's physical stores act as rivalry for
Amazon's online retail service. Customers can easily switch to its customers thereby
influencing its sales. Bargaining power of customers: Amazon's vision focuses on providing customer-centric
products and services so that the needs and wants of customers can be significantly
satisfied while enhancing their convenience of online shopping. Also as the brand image
of Amazon is strong and it is believed on providing products which are of high quality
the customers can be attracted towards company easily (Spraakman and et.al., 2015).
However as there are many other e-retailers present in the market it makes it easier for
customers to switch to them if they offer the same product at a lower cost than Amazon.
Due to the presence of various alternatives in market it becomes easy for customers to
switch to other retailers which affect company sales (Madon and Krishna, 2018). Thus it
can be seen that the bargaining power of customers is high which makes customers strong

in this industry. It becomes important for the company to improve its quality of service so
that the customers can continue shopping from it and do not easily switch to other
company (Hasanagas 2016). This can be done by facilitating easy return service, fast
shipment and delivery of items, providing products to customers which are high on
quality, different modes of payment must be made available etc. For example customers
can easily switch to other retailers like Walmart stores as they offer products to customers
at reasonable prices. Bargaining power of suppliers: Suppliers control the availability of supplies or materials
in the market which can be bought by Amazon to further supply them to customers. The
bargaining power of suppliers in the online retail industry is moderate. There are a large
number of suppliers present in market from where Amazon can purchase its products
(Senft, Gallegos and Davis, 2016). It is important that the suppliers of company follow a
set of rules and regulations that are laid down by Amazon. It is also important that the
suppliers follow ethical working principles so that they offer ethical and legal products
and services to its customers (Blassin and et.al., 2019). The suppliers cannot integrate
with each other to increase the product costs which means that they offer as Amazon has
a large number of suppliers. Also the switching cost of suppliers is low as Amazon is a
large purchaser and no supplier would want to loose Amazon as their main customer
which purchase their products in bulk. Thus it can be seen that suppliers do not possess a
threat for Amazon in the e-retailing industry (Tsohou and et. al., 2015). Threat of substitute: Amazon has a large number of substitutes in the market who
possess a threat to company as they divert the customer traffic of customers leading to
loss of Amazon's customer base. As there are a large number of substitutes present in the
market customers can easily switch to others thus decreasing the company sales (Daly
and Nataraajan, 2015). The company performance is also affected by the presence of
large number of substitutes which means that customers can easily switch to other brand
products. It is important that Amazon closely monitors the activity of number of
substitutes so that their prices can be tracked and competitive prices can be maintained
(Han, 2015). The strategies of company must be thus designed in such a manner that the
competitiveness of company can be maintained which can help it in enhancing its brand
image and also its profits. The company can make its services more efficient by

increasing the usability of its website to optimize their experience and also increase their
convenience of shopping online (Tang and Zimmerman 2013). Flipkart, E-Bay etc.
possess threat to Amazon and the company needs to trace the prices at which these sites
sell their products to customers. This will help Amazon in offering prices at competitive
prices which will help in increasing company sales.
 Threat of new entrant: The entry of new players in market can affect Amazon's market
share in online retailing. The threat of new entrant for Amazon is low as it has a strong
brand image in the world which cannot be matched by any budding e-retailer (Pandey,
Seth and Varshney, 2019). In order to match the level of Amazon a huge amount of
investment, time, efforts, marketing, logistics, distribution etc. will be required. Also as
many retail brands have started their online shopping apps so that customer can directly
purchase branded products from their websites it has become more difficult for online
apps to be able to compete strongly in the market. Thus the threat of new entrants for
Amazon is low (Lee Lanting and Rojdamrongratana 2017).
Illustration 1: About Amazon
Source : About Amazon .2019
From the above graph it can be interpreted that even when there are many threats present
in the market like rising competition from rivalries, threat from substitutes etc., Amazon
continues to increase its sales with an efficient use of IT in company. Also the company is able

to provide its customers value for money which help in increasing company's loyal customer
base and increase its sales over the years.
Inbound and outbound logistics and operations
Logistics are all the processes which help a business in coordinating its supply chain
operations so that the monitoring of how raw materials or inputs are acquired and transported to
business, their storage and further transportation within business and beyond can be well
managed. Inbound logistics refers to sourcing and storage coming into a business whereas
outbound logistics is the warehousing, packaging and transportation of goods going out of the
business. It is important that the management of company manages efficiently the inbound and
outbound logistics so that efficiency of distribution networks can be maximized. It also help in
minimizing the transport and storage costs of the goods that are ordered by company. Amazon
has a very efficient supply chain management which helps it in managing its inbound and
outbound logistics so that customers can be provided with their orders on time. Managing of the
company logistics is important so that strong brand image of company can be built by acquiring
qualitative products so that high quality of goods can be made available to its customers on time.
In Amazon both the inbound and outbound logistics are carefully managed so that high
quality and speed can be maintained which help it in acquiring the ordered products in its
warehouses on time which it thereafter transport to customers(Rauscher 2017).
Analysis of support activities in Porter's value chain
There are various activities that are carried out in an organisation so that functions like
designing, production, marketing, delivery etc. can be efficiently done. Value chain analysis help
businesses in examining activities so that competitive opportunities can be gained in the market
by focusing on these activities. According to this model there are two kind of activities which are
primary activities : inbound logistics, operations, outbound logistics, marketing and sales and
service; support activities : which help in running the business smoothly but are not actually
related with company products. Following are the support activities of Amazon which help the
company in running its business smoothly: Firm infrastructure: Amazon is one of the largest e-retailer in the world with about 43%
share of online retail market. The company sell different kinds of products to a range of
customers which help it in increasing its sales and also the customer base is increased.
Amazon operates in 16 countries in the world and provide its services to customers,

sellers and developers through its retail website. The company is able to increase its
revenue over $23,288.7 crore by offering a large variety of services to its customers
which helped in building its strong brand image in the market (Shetty and Naik, 2016).
The company's infrastructure makes it easy for customers to place their orders which help
them in gaining high quality products from the website and at a high speed (Marbury
2014).
 Human resource management: The company has over 798,000 full time and part time
employees who work in the company and helps Amazon in becoming leading online
retail brand in market. The HRM of company helps in managing the employees of
company in such a manner that their potential, skills and talents can be efficiently used
which help the company in improving customer satisfaction (Iqbal and et.al., 2019). Also
the managerial policies adopted by the company helps in smooth and effective working
of employees of company which help in their new and innovative thinking which is
important to bring continuous innovation in its services. The HRM activities and
functions of company help in integrating and coordinating their work so that effective
results can be drawn. These HRM practices help in boosting the confidence of workers so
that strong brand image of company can be developed and company services can be
improved (Karthikayini and Srinath, 2017).
Identification of key value adding activities
Value adding activities are those which help in improving the customer satisfaction and
enhancing their experience so that strong brand image of company can be developed. With these
activities the raw materials are converted into final products with which the customer needs and
wants can be satisfied and also value can be added to them. High quality of services provided by
Amazon help in adding great value to its customers and increasing their satisfaction. Operational
efficiency help it in gaining a competitive benefit in the market and also in improving its
performance (Thamhain 2013).
How IT and innovative ideas help to improve business processes
IT plays an important role in businesses in improving its processes through automation
which improves the accuracy and efficiency with which company related data and information is
stored and processed. IT also help in making the process speedy and help in reducing the cost of
errors for business which is important so as to achieve a competitive advantage in the market. It

is important to integrate IT in business operations and functions so that work can be done in real
time and with accuracy which help in circulating correct information in business so that all the
departments can work closely and efficiently. With the use of IT innovations in business also
increase as IT can be integrated with human knowledge to develop innovative ideas which can
be converted into products and services which can fulfil customer demands. Thus IT help in
achieving higher customer satisfaction by creating more value for them (Cuganesan Hart and
Steele 2017).
IT has also helped businesses to expand and grow in the market through the use of online
applications which helps customers to purchase company’s products and services as per their
convenience irrespective of their global presence. Businesses can achieve a competitive edge in
the market by using IT and gaining better information about the market and customer needs and
wants so that they can be provided with such products that can help in increasing their
satisfaction. Amazon has increasingly used IT in improving its brand image and gaining the
highest customer base in online retail market. With the use of IT Amazon is able to handle a
large database of customers belonging to different nations, cultures, religion etc. so that their
likes and dislikes can be traced which help in positioning company’s products. Thus IT is an
essential tool which is increasingly used by businesses so that the technological advancements
can be used to their full potential which can help business in growing and expanding in market
(Kim 2018).

CONCLUSION
From the above report it can be concluded that IT play an important role in growth and
development of business in the competitive market. Companies can simplify their processes and
use the information in an efficient manner so that such products and services can be developed
which help in satisfying customers. Logistics of company can also be efficiently managed which
help in improving the supply chain of company so that the procurement and delivery of items
can be done on time. IT thus needs to be integrated in contemporary businesses so that a
competitive advantage can be gained which can also help in building strong brand image and
thereby increasing company profits.

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Online
About Amazon .2019. [Online]. Available
through:<http://www.psggear.com/index.php/amazon>