Business Essentials: Amazon's Competitive Advantage Analysis

This report examines Amazon's competitive advantages within the e-commerce sector, focusing on the importance of pricing, marketing, and supply chain strategies. The analysis begins with an introduction to competition and the role of technology, particularly in the e-commerce industry, highlighting Amazon's rapid growth. The main body delves into Porter's Five Forces to assess the competitive landscape, emphasizing Amazon's strengths in niche markets, unique activities, and its cost leadership pricing strategy. The report then explores Amazon's supply chain, emphasizing its distribution network, third-party sellers, and the use of push-pull strategies. Additionally, it discusses Amazon's marketing strategies, including cross-platform promotions, customer-friendly interfaces, and the use of social media platforms like Facebook, Instagram, and Pinterest. The report concludes by summarizing the vital roles that supply chain and pricing strategies play in helping Amazon maintain its competitive edge and achieve its goals in the intense market.

Business Essentials
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Table of Contents
INTRODUCTION...............................................................................................................3
MAIN BODY.......................................................................................................................3
Competition in IT or E-commerce sector.......................................................................3
CONCLUSION...................................................................................................................6
REFERENCES..................................................................................................................7
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INTRODUCTION
Competition refers an activity and ability of an organization or an individual to win
something by creating superiority over others. This study is based on Amazon which is
an American multinational technology company with having approximate 750,000
employees. It is known as one of the big four tech companies along with Microsoft,
Google and Apple. This present study is going to show importance of using an effective
pricing, marketing and supply chain strategy in order to take competitive advantages.
An effective pricing strategies or strategy of pricing which allows companies to attract
customers effect on their performance and ability to accomplish all pre-determined
goals. Further, it shows benefits of using attracting marketing and supply chain strategy
in order to deliver products, satisfying customers and make them feel valued. Satisfied
and valued customers are more likely to stay with the company for the long run which
enables organization to become the market leader.
MAIN BODY
Competition in IT or E-commerce sector
Competition refers an activity to gain as well as win something by making own
products, services and way of performing in a different manner or by establishing
superiority over others. There are several sectors who are making an effective use of
technology. There are several factors or drivers which are increasing competition in the
market. Technology is one of the main key driver which is increasing competition in all
sectors. E-commerce, where companies buy and sell products and services online are
vital. Amazon is one of the main E-retailer who is making growth rapidly. One of the
main reason as why Amazon has made growth is focus on customers' service. There
are mainly 5 forces which are shaping competition in retail industry. By analysing all
forces of porter's Amazon can know the intensity of the competition. But one of the main
important thing for being in the competition is to identify the main key strength as how
company can being in the competition and make itself able to take all competitive
advantages.
Conclusion of competitive forces
From the porter's 5 forces model it is concluded that existing rivalry is high in this
sector. There are several players who have made growth in this sector such as Walmart
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and other e-retailer giant. They are fighting for shares and creating competitive
pressure. Threats of new entrants is low because new entrants will have to make efforts
to fight against these big players. Threats of substitute products is somehow high
because there are several retailers who have entered in online retail. On the other hand,
bargaining power of buyers is also high because there are several substitute products
which are providing same features and satisfy needs of customers. Customers can
switch their shops so, it can be said that there is a high intensity of this power.
Bargaining power of suppliers is moderate because there are several suppliers and
shops have ability to switch suppliers so, being in a competition and stable, suppliers do
not have power of bargaining. So, it can be said that there are several factors or forces
which have high and moderate power. But Amazon have several strengths and
effectiveness which can help it out in decreasing all these forces.
The most effective aspect of Amazon
It is stated that Amazon focuses on niche market. It makes this company able to
focus and meet customers needs and desire in an efficient manner. One of the main
aim of this company is to become leader in niche market because after becoming
leader, it can spread their footprints in larger markets.
Unique sets of activities
Amazon has been performing several of activities with the main aim to make its
unique position in the market and value proposition to customers. One of the main
aspect and strength of Amazon which makes it able to being in the competition is
pricing strategy
Pricing: In the context of pricing strategy, it is stated that Amazon is focusing
and using cost leadership strategy. In this context, aim of Amazon is to reduce
operational cost. It is also stated that its official website uses advanced computing and
networking technologies which helps it out in maximizing operational efficiency. It also
allows it to make itself beneficial from automation process which is mainly being used in
purchasing process, scheduling as well as other operational process. All these benefits
are making it able to reduce cost of its online retail. Cost leadership strategy is helping
this company in attracting wider range of customers (Amazon Business Strategy, 2018).
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In addition, it is also stated that Amazon has effective and string financial stability
which has made it able to grow its revenue from 2014-2016. In 2014, revenue of this
company was approximate 88.9 Billion dollars which has grown to about 135.9 Billion
dollars in 2016. This string stability, pricing strategy enables it to invest in several areas
which are drivers of competition such as technology and HR. This combination of
financial stability and pricing strategy not only helps it to attract customers and taking
competitive advantages but also allow it to introduce new, unique products and grow
new sales as well as distribution channels. It believes that by selling products at lower
prices and having low profit margin can increase a pool of customers and improve
image of the company.
Supply chain: Supply chain is other main element of Amazon which has made
this retailer able to take competitive advantages and grow business. It is stated that this
e-retailer has the largest supply and distribution channels. There are millions of third
party sellers who sell their products and services from its websites. Through its
distribution network, companies are also allowed to ship products to several nations.
This company has opened several fulfilment centres worldwide which aids shipment of
products which are being bought by customers. So, it can be said that its well-managed
and developed distribution or supplier network is the biggest source of competitive
advantage. This effective supply chains work for this company as like the backbone
(Amazon Sources of Competitive Advantage, 2018). Amazon also provides options to
third party sellers as they are allowed either to let amazon sort, package as well as ship
products via their own fulfilment centres or handle fulfilment at their own.
In addition, it is also stated that for completing demand and supply, it has an
effective communication strategy which helps it out in communicating inventory demand
to vendors. After having all clear information, vendors are forced to make some effective
decision which can impact on stock level of Amazon. Some components of Amazon of
its distribution strategy include: warehousing, delivery, technology and manufacturing. It
also has global supply chain and its prime service strategy proved beneficial for it. As
per this strategy, customers of this retailer need to pay annual membership fee and then
get or receive guaranteed 2 days shipping on thousands of products. This strategy of 2
days delivery become a game changer as it has made this company a strong brand and
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establish the dominance of Amazon in the online retail industry. Its effective supply
chain is one of the most effective among all the major companies in the world.
Push-pull strategy for supply chain: In the context of supply chain strategies, it
is identified that its own warehouses are strategically stocked and placed as well. It
focuses on using push strategy for all those products which it stores in its own
warehouse and forecast demand for specific region. So, it can be said that this push
strategy for warehouse products making its supply chain successful. Whereas, it also
makes an effective use of pull strategy for selling products from third party sellers. So, it
can be said that Amazon uses the best strategy for making its supply chain successful.
Marketing
Marketing is a combination of some activities which are being used by
companies in order to promote as well as sell their products and services, It includes
market research, development, advertising etc. It is one of the main important function
which allows companies to attract customers by making them aware about features of
products and services.
In the context of promotion, Amazon is known or considered the queen of cross-
platform promotions from instagram to Twitter. One of the main strength of Amazon is
promotional ability by which it promotes their all products on platforms in an efficient
manner. It manages to leverage the popularity of other channels. Amazon has also
made an effective partnership with Sanpchat with the main purpose of creating a visual
search tool. With this help, customers are now allowed to use scan an object or
barcode. With only one click, users get connected directly to the Amazon platforms and
can buy scanned products.
Some key points of Amazon, which shows effectiveness of marketing strategy of this
company include:
 Offering the widest range of products and services.
 Using customer-friendly interface.
 Using existing and effective communication systems.
 Utilizing universal behaviours.
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It is also stated that Amazon's annual global marketing expenses have been
consistently increasing from past 7 years. Some areas in which Amazon, invested to the
great extent and heavily are: advertisement and promotion.
In addition, it is also stated that Amazon has given several options and features
to its customers. On One of main social media platform Instagram, users can add a link
on their story in order to lead back to an Amazon product page. It is being taken by this
company as an influencer page. It makes an effective use of all social media platforms
which include:
Facebook: On Facebook, it has approximate 28.3 Million followers and this platform is
being mainly used for new updates and products promotion. For promotion of products,
it makes an effective use of video strategy. It official Facebook page seems to be a
customer touch point as it publishes thousands of external posts every month.
Instagram: On Instagram it has approximate 1.7 million followers as it has its official
page @amazon. One of the main reason of using this platform is to conduct interviews
with artists and products probationers via video content. Its instagram strategy is similar
to Facebook strategy. It has ability of making creative use of Instagram stories for
conducting and promoting interviews with artists and influencers.
Pinterest: On Pinterest it is known as its official and main name Amazon. It has
approximate 79,686 followers on this social media platform and this platform is being
mainly used for product promotion via thematic mood boards. On this social media
platform, it groups a selection of its best products in different thematic lifestyle buckets
such as: wedding registry finds, back to collage etc.
Twitter: It is known as @amazon on this platform where it has around 3 million
followers. One of the main purpose of using this platform by Amazon is to engage
themselves with customers. It is stated that Amazon love Twitter. Its E-commerce
platforms has around dozens of official accounts for different purposes.
So, from the above discussed strategies of supply chain, marketing and pricing of
Amazon, it can be said that all these are helping out it in taking competitive advantages.
It is also can be said that marketing and supply chain strategy of Amazon is different
and unique from others and it is one of the main key of the success. Supply chain
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among all is considered one of the main strategy which has made this company able to
make a strong position.
CONCLUSION
From the above study, it has been summarized that supply chain and pricing
strategies played a vital role in taking competitive advantages. There are several
elements and strategies which makes an organization able to being in the competition
and take all competitive advantages. Making a strong and effective position in the
intense competitive market, is one of the main task which can allow companies to
accomplish their goals. Further, it has also shown importance of using marketing
strategy which is also playing one of the main important role in making companies able
to become the market leader. An effective marketing strategy in which companies make
use of technology and web based business activities allowed them to achieve goals.
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REFERENCES
Books and journals
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JAYANTI, A.D., 2018. COVER PAGE Rice Miller’s Competitive Strategy Choice in
Response to Porter’s 5 Forces Analysis (Empirical Study at Johar Central Market
in Karawang.
Monden, Y., 2019. Pricing Strategy and Cost Compensation of the Platforms of a Two-
sided Market—With a Case Study of Amazon Online Shopping. Sustainability
Management And Business Strategy In Asia. 16. p.189.
Onyango, J.J., 2017. Influence of Cost Leadership, Differentiation and Focus Strategies
on Firm Competiveness: The Case of BOC Kenya Limited (Doctoral dissertation,
United States International University-Africa).
Perez-Franco, R. and et.al., 2016. Rethinking supply chain strategy as a conceptual
system. International Journal of Production Economics. 182. pp.384-396.
Soegoto, A.S., Worang, F.G. and Saerang, R., 2017. The Analysis of Green Marketing
Strategy and Product Atributes on Purchase Decision of Green Products.
Supriaddin, N. and et.al., 2018. Marketing Strategy Of Micro Small And Medium
Enterprises (MSME) In The Framework Of Public Welfare Improvement In
Southeast Sulawesi Province. International Journal of Scientific & Engineering
Research. 9(1). pp.933-937.
Tarafdar, M. and Qrunfleh, S., 2017. Agile supply chain strategy and supply chain
performance: complementary roles of supply chain practices and information
systems capability for agility. International Journal of Production Research. 55(4).
pp.925-938.
Online
Amazon Business Strategy. 2018. [Online] Available through: <https://research-
methodology.net/amazon-business-strategy-competitive-advantage-benefiting-
cost-leadership-diversification/>
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Amazon Sources of Competitive Advantage. 2018. [Online] Available through:
<https://notesmatic.com/Amazon-Sources-of-Competitive-Advantage>
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