Business Development Case Study: Amazon's Competitive Advantage

This case study examines Amazon's evolution from an online bookstore to a major retail and technology company. It analyzes key aspects of Amazon's business strategy, including its early adoption of e-readers like the Kindle, its expansion into cloud services with AWS, and its diversification into digital entertainment and other services. The case study explores Amazon's competitive landscape, including rivals like Apple, Google, and Alibaba, and evaluates Amazon's strengths in online retailing and its challenges in other segments. It also delves into Amazon's initiatives such as Prime Air and 3D printing trucks and discusses Amazon's focus on innovation, customer satisfaction, and its ability to disrupt its own business to maintain its market leadership. The study highlights the importance of adapting to the changing digital landscape, diversifying into key segments, and responding to competitive pressures from both established and emerging rivals, ultimately focusing on how Amazon strives to keep the 'fire on' in a dynamic market.

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Case 3: Amazon.com – Keeping the Fire Hot
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INTRODUCTION
According to the Harvard Business Review Jeff Bezos, the founder and CEO of Amazon, has
emerged as the best performing CEO in the world. He has been able achieve a great success
at Amazon, as he could transform it from a basic online bookstore to a $140 billion retail
empire. The company was launched in 1995 and then within few years reached a sound and
profitable position. Now it has finally earned more than $1 billion in revenue. This slow
growth of Amazon has added up to its success. Amazon has grown accordingly with the
segment of online shopping and has been able to achieve the status of a technology giant. But
in this new digital age, being the leader of online shopping is not sufficient to survive
therefore launching Amazon Fire Tablets series along with rolling out Amazon Prime has
been great business.
DISCUSSION
According to Bezos, moving slowly and steadily helped Amazon survive the late 90’s
falldown. This understanding helped Amazon in introducing one of its kind the Kindle e-
reader (Miller, C.C. and Bosman) and the new AWS cloud service in market(Balduzzi, M.,
Zaddach, J., Balzarotti, D., Kirda, E. and Loureiro, S.)
When questions were raised on the launch and future of the Kindle in the year 2007 ,on its
launch, its cost was $399 at that time and was considered Amazon’s first major consumer
electronics product. Amazon made the device cheaper by introducing Wi-Fi only models and
even models which are supporting ad. When they were launched, Kindle Fire tablets (Weber,
S.) were introduced with technologies that were already available in many tablets present in
the market. Amazon's new products captured market easily because of their low prices,
especially when compared with Apple's iPads. The new version of kindle, the Kindle Fires
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has been priced lower than its counterparts available in the market as it could arrange a
suitable advertising campaign idea for it.
If in future losses occur then the company can recover the money through the sale of its
premium apps and services like its annual Prime fast-shipping membership. The fast-shipping
membership now includes streaming movie content, with other offerings. Therefore, on
whole the Kindle Fire is a great deal for Amazon.
Amazon could sell its products in loss because for Amazon, the kindle Fire is a book store,
and a mini version of movie theatre, and a full fledge record shop. Once a customer walks in
the Amazon's market, there is availability of a variety of ways they can make money. One can
buy the books, movies, music and apps available there.
Use of creativity, flexibility, and spontaneity when making key decisions makes decisions
easier. Bezos in his career has never been uncomfortable with lack of structure and the
attempts which had led to his failure in past. And this has led to positive effects as Amazon
has thousands of repetitive customers. Hence, systematic thinking and informed intuition are
the main weapons of Bezos.
PROBLEM SOLVING
The economic slowdown in the past could not affect the digital home entertainment and thus
it has evolved and will grow magnificently over the coming years. The wide range of
technologies, different trends in changing lifestyles, and technological advancements due to
innovations have all changed the ways in which consumers interact with the digital content. It
is believed that in the near future of digital home entertainment, content could be the, and
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consumers would be able to access the provided content and digital libraries on various
devices connected to it .
The use of digital content of entertainment has been driven by the speedy change in
entertainment regarding online and the mobile platforms, on which consumers
expect the ability to watch the TV which is broadcasted, access the provided on demand
video content any time and at any place, they can even select Internet radio stations of their
choice , can play games, either inside or outside the home.
From 2011 subscribers got access to the video streaming service which was part of its Prime
service.
Amazon will be able to lead the streaming business smoothly when–
Firstly, it will get more content from multiple categories like video games , live sports and
other entertainment induced services.
Secondly, produce high quality tv serials and movies which would attract a whole lot of
youngsters and other likely audience.
Thirdly, make it cheap for developing world by tying up with data providers who make the
easy availability of the services in respective countries.
Fourthly, use its expertise in ad-support to generate revenues from streaming business and
take the edge over other players in the competitive business environment.
Lastly, by developing better predictive models for consumers and even the likely customers
as used in its retail segment, personalize content offered to users who find it rather tough to
choose the best content from such vast variety.
FURTHER RESEARCH
Amazon has introduced new initiatives which are aimed to strengthen its core businesses and
AWS segments. In this regard it has the initiatives are:
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* Prime Air - A R&D project which would deliver packages via drone known as Amazon
Prime Air. This initiative intends to use octocopter drones to deliver orders directly to
customers in just 30 minutes in a safe and secure manner.
* 3D printing trucks - Amazon filed a patent for trucks fitted with 3D printers. It would allow
Amazon to add millions of items to its wide list without having to stock and pile up.
* Amazon Handmade- It allows small merchants and individuals to offer handcrafted goods.
Most of these initiatives and others, are pretty much in line with Amazon’s strengths, i.e.,
online retailing. Bezos once said – ‘Disrupt your business before someone else disrupts it’.
Amazon’s rivals in terms of revenues (Apple, Google) are not its direct competitors in this
segment. In other segments- say, tablets – Amazon has not been able to dislodge Apple and
has clearly failed to wage a price war. In fact, late entrant Google is making greater noises
with Pixel, and similarly Microsoft with Surface. The reason is possibly that its competitors
have an edge in making devices with better technology while Amazon is mostly a leader in
services. Another segment where Amazon faces direct competition and is fairing much better
is AWS. Its competitors in that segment include Google Cloud Services. To its benefit, most
of upcoming research and innovation in Artificial Intelligence, Virtual Reality, Augmented
Reality and Deep Learning are easier for it to integrate into its established workflow and
hence, it must continue investing in these spheres.
Major Competitors (Moser, D.J. and Gassmann)
Amazon has been operating in three general segments, which are: media, electronics and
other merchandise.
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In the media segment, Amazon’s competitors are auction site eBay ; Netflix ; Time Warner
Cable ; Apple due to its iTunes segment; and Google due to its Play Store.
Amazon’s competitors in the electronics and general merchandise segment are Best Buy,
Staples, Walmart, Radio Shack, Family Dollar, Target, Sears, Big Lots, Delia and Systemacs.
Many of these are brick and mortar rivals.
In the electronics and general merchandise segment its competitors are Alibaba Group, Light
in the Box Holding Co., PCM, Vipshop Holdings, JD.com, Wayfair Inc. , Overstock.com and
Zulily.
In the other operating segment, Amazon’s competitors are some of the world's largest
companies like CDW, PC Connection, Google, Oracle; salesforce.com, Insight enterprises,
Accenture and Citrix Systems, etc.
Kiva and Zappos (Lang, S., Tinder, L., Zimmerman, J. and Harrison )
Kiva has basically three components, they are:
1. Small and wheeled retrieval robots
2. tall upright racks - which are known as “pods” and
3. human workers - They are designed to have warehouse stock mobility, which will
help humans to interact with the stock.
Zappos was acquired to provide its customers fast and hassle free services. Zappos is
basically to to reassure, surprise, and engage the customers.
For example, the company’s facility of free-delivery policy guarantees that orders could now
arrive within four or five business days — which is a perfect time ro wait for the customers
other than during emergency. These facilities will help Amazon to a great extent.
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Alibaba and Amazon (Jung, J.C., Ugboma, M.A. and Liow, A.K.)
As Amazon and Alibaba are quite similar in capital inducements, that is , $168 Billion and
$153 Billion respectively, therefore Alibaba could give an equal weight in portfolios required
to have exposure to the Internet Retail Sub Industry and General Retail Industry effectively
and gradually in the future which could be a big threat to Amazon. Not only real earnings,
Alibaba also have a good figure of real earnings growth stats. Amazon till recently is not able
to match upto the level of Alibaba's earnings growth rate. Hence, it is fair to say that Alibaba
at the present is the most potential challenger to Amazon in its core segment, i.e., online
retail.
Amazon offers a multitude of services in various segments. In stark contrast, its competitors
Apple, Facebook, Google offer relatively less diverse services. It is debatable if that is one of
the reasons that Amazon has been unable to dislodge its competitors from their core services.
Bezos has proved over the years how his emphasis on experimenting is a successful strategy.
And it does not look Amazon will stop and will keep rolling out new services. Yet, as its
competitors gain further control of their respective segments, Amazon must choose whom to
rival and where. Taking example of Apple- which was considered the most innovative
company, it has declined into obscurity in recent years in terms of innovation with Microsoft
and Google being more aggressive in innovation and have now directly begun to challenge
Apple in its core businesses – Mac, IPhone, IPad. Similarly, Amazon will face similar
challenges if it chooses to diversify more and not innovate where it leads. Bezos definitely
knows that and he can be trusted to make right decisions.
CONCLUSION
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Amazon under Bezos does not seem one bit like a company without a plan. First they into the
leading online retailer. Then they came up with AWS which is a remarkable product in itself.
Now, they have targeted the digital entertainment industry and already look like potential
winner. Experimenting, relying on data, innovating and customer satisfaction has been their
mantras. Yet, ups and downs in global economy affects retail consumption and stocks. Hence
diversifying into a few key segments and becoming leaders in them is essential for it to retain
the value it represents now in the online world. Retaining the appeal to customers it has
presently, requires disruption which it must continue pursuing else someone else would.
Apart from that, expanding in the developing world, dealing with competition from firms like
Alibaba, Flipkart and others, where pricing and logistics leave much to be desired has to be
high on the agenda of Bezos and co. All of this to Keep the Fire on.
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REFERENCES
1. Miller, C.C. and Bosman, J., 2011. E-books outsell print books at Amazon. New York
Times, 19.
2. Balduzzi, M., Zaddach, J., Balzarotti, D., Kirda, E. and Loureiro, S., 2012, March. A
security analysis of amazon's elastic compute cloud service. In Proceedings of the
27th Annual ACM Symposium on Applied Computing (pp. 1427-1434). ACM.
3. Weber, S., 2014. Kindle Fire HDX Users Manual: The Ultimate Kindle Fire Guide to
Getting Started, Advanced Tips, and Finding Unlimited Free Books, Videos and Apps
on Amazon and Beyond. Weber Systems Inc..
4. Moser, D.J. and Gassmann, O., 2016, June. Innovating Platform Business Models:
Insights from Major Tech-Companies. In ISPIM Innovation Symposium (p. 1). The
International Society for Professional Innovation Management (ISPIM).
5. Lang, S., Tinder, L., Zimmerman, J. and Harrison, J.S., 2012. Amazon. com: Offering
Everything from A to Z.
6. Jung, J.C., Ugboma, M.A. and Liow, A.K., 2015. Does Alibaba's Magic Work
Outside China?. Thunderbird International Business Review, 57(6), pp.505-518.
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