Analyzing Amazon's Marketing Mix and Competitive Advantage

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HI5004 MARKETING MANAGEMENT
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Executive summary
One of the biggest brand names in the world, namely Aamazon.com is a success
story unparalleled. It is the world’s most valuable brand name and a dream place to
work for every career aspirant across the globe. It is the largest internet company in
the world synonymous with the name of e-commerce. The organization has products
like Kindle, Fire TV and video content subscription site of Amazon prime and
personal assistant “Alexa". The company through its subsidiary technology division
Amazon Web Service offers cloud computing and other high-end solutions.
Throughout its history, it has known for its high-end strategic acquisitions of many
other corporations. This success saga is the result of a clear cut and defined mission
as well and a proactive leadership which was looked ahead of its time for the growth
of the brand. The one single biggest factor was its marketing approach which put the
brand marketing over and above everything else and the single track mind of
establishing this brand in the customer mind set on a permanent basis. It is
necessary to understand all aspects of the company, market, and product and
growth strategy.
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Contents
Introduction -...............................................................................................................4
Issue 1 – A brief about the organization......................................................................5
Issue 2 – Analysing the 5 C’s of the organization.......................................................6
Issue 3 – Market information gathering and Research................................................8
Issue 4 – Developing market strategy.......................................................................10
Issue 5 – Developing marketing tactics.....................................................................12
Conclusion................................................................................................................ 14
References................................................................................................................15
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Introduction -
The world's most highly valued brand name today is Amazon. From individual
customers, aspiring career youngsters, employees, partners, competitors, enterprise,
partners and suppliers either quote or use Amazon or follow its strategy. Simply put,
it has permeated slowly many aspects of everyday life with online buying as the most
important. With every passing day, there would be at least 5 new customers who
take a visit to Amazon either to buy or to get details or just to compare. In short, it is
a brand which all the five continents are lined to in some way or the other.
The success of the company can be attributed to its single track focus on consumer-
oriented marketing through automated and personalized emails, product rating
system on its portal, absolutely focused customer service and loyalty orientation and
a brand campaign covering across print, electronic along with signage and billboard
campaigns. Brand marketing has been the cornerstone of the company since its
days of inception (Ritala, et. al., 2014).
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Issue 1 – A brief about the organization
Amazon is a global technology company which into the business of e-commerce
online retail buying and selling, internet cloud solutions, artificial intelligence &
machine learning technologies, products which include e-kindle, echo devices, Fire
TV and tablets. Subsidiary divisions included the Amazon web service which owns
the cloud infrastructure solution and physical data centres in many parts of the world,
Amazon Prime video, Washington post and many more (Smith & Linden, 2017).
The company started its operations in the year 1994 and as of today is one of the
largest market capitalization companies in the USA and world. It has about 6, 50,000
employees working for it globally with a presence across almost all continents. As of
2018 end figures, the total revenues are in the $ 232 billion from all its products and
services. It is the highest valued brand name in the world today in terms of its
customer, employee and equity base. The headquarters in Seattle, Washington and
the CEO of the company is Jeff Bezos who is among the ten richest people of the
world.
The flagship division is e-commerce and the Amazon.com online market place is the
largest in the world. In many countries it exists through its subsidiary web sites like
Souq in the Middle East region.
The vision statement of the company is –
“Our vision is to be earth's most customer-centric company; to build a place where
people can come to find and discover anything they might want to buy online.”
The company slogan to its employees is –
Work Hard. Have Fun. Make History.”
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Issue 2 – Analysing the 5 C’s of the organization
Company
The Strengths of the company is its customer-centric focus through a persuasive
system of automated and conscious follow up through the best of the CRM
processes. Almost 58% of customers are repeat ones. Thereby cost of acquisition is
low (5 Key Strengths in 2019).
Since the early days of operations in the mid-'90s, the company had taken the way
forward of going in a big way into the online space. This coupled with its strong
financial strength till date remains a key strength to date. An early on" Go global and
act local gave it worldwide brand image. This image was founded on a strong base
of efficient logistics and delivery (Blockeel, et. al., 2016).
The weaknesses of Amazon is its large operational cost which is shrinking profits as
well as some unexpected product flops like Kindle fire and fire phone.
Threats include the increasing competition which is intensifying price wars in e-
commerce and increasing government regulation policies of many countries.
Opportunities include backward integration through the launch of its own products.
Amazon.com can also acquire local smaller e-commerce portals to reduce
competition (Zakharova, 2013).
Customers
Amazon is a mass market online retail platform where anyone and everyone can
step in and buy. It has about 14 million different products for all age groups and
genders and virtually for all purposes. The only exception may be perhaps
automobiles. The large penetration of the smartphones among all sections of the
populations and the shopping apps of Amazon has made it easy for many customers
to buy online (Ramaseshan, et. al., 2013). The location and place is not a constraint.
As of today everyone is a potential customer for a brand like Amazon and anyone
who goes to a retail store or another e-commerce portal without referring to Amazon
is an “unbelievable” brand loss to the organization. The “typical “behaviour is price
benefit and ease of delivery without too many hassles (Zhu and Liu, 2018).
Collaboration
The success of Amazon is its collaborations and partnerships and the long list of
suppliers who have tied up with the company. Almost 60% of its e-commerce market
place sales happen through third-party sellers. There are about a million plus third-
party new and used merchandise sellers across its 12 major global market place.
Further the company has special tie-ups with third-party logistics providers for many
of its subsidiaries sites. This is in addition to the in-house division, Amazon logistics.
On the technology front, Amazon Web Services has partnered with the Salesforce to
deliver key solutions. . Other reputed agreements are in place with reputed
institutions like US Postal service and companies like Nike and Apple Inc. For
Amazon, collaboration is the best form of brand management (Hamilton and Price,
2019).
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Competitors
Amazon has an unending list of competitors. At the top level is brands like Ali Baba,
E-bay, Wal-Mart, Otto, JD, Jumia, Linea, Jumia, Princeline.com At the offline retail
level are retail stores like Kroger, Costco, Walgreens, Home depot. Again there are
many smaller e-commerce portals in the USA and across the globe who are giving
stiff competition to Amazon. On the technology front AWS faces stiff competition
from the major tech giants like Google, Microsoft, IBM, HP etc. for cloud and data
centre solutions. Apart from this every retail outlet big or small is completed for the
company and every based portal site which is specific to an industry like travel bags
and specific to a country is a competitor as well (Smith & Linden, 2017).
Context
The other factors which will have an impact on Amazon growth and standing include
FDI retail country specific retail policies, the legal and political developments in a
particular country. To take an example, events in Venezuela might have forced the
company to shelve its plans if any. The company itself was embroiled in tax
avoidance issues in USA and UK, it is home markets; this gave a lot of negative
publicity. The company has been criticized by President Donald Trump on its
payment record to US Postal service and Senator Bernie Sanders has been
stringent on remarks about poor conditions in Amazons. Although these did not
create major issues, it still caused dents in the brand image of the company (Yoon,
et.al., 2016).
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Issue 3 – Market information gathering and Research
What do the customers want?
Amazon is the forerunner in technology and data assimilation, It used various tools
for prompt follow up on customer requirements and much higher end tools on
keeping track of customer behaviour. The company has high-end CRM for customer
track management and sales figures records. Every purchase is followed up with
vigorous efficiency until the product is delivered. Once sales are completed, then the
customer is pushed with new offers, discounts and new product launches. This is to
understand what the customer wants and tempt them to continue with Amazon. On
the other hand tools like big data are used to understand the buying tendencies of a
pattern of those who have been one time customers. Once a fairly clear pattern
comes into the picture, the company starts it’s what CEO Jeff Bezos calls, its
“obsessive” customer service once more (Sellics, 2019).
Which competitors pose a threat?
In the video and content streaming market, Netflix is way ahead of Amazon with a
subscription base of almost 130 million. Amazon subscription comes to about 100
million. Netflix had an inherent advantage in the market of being an early bird and
the fact that most of the TV platforms supported it. The price war as of now between
the two is very stiff. As a brand name and in terms of turnover Amazon was ahead of
Wal-Mart. But some strategic acquisitions like Indian’s biggest e-commerce platform
Flipkart has given Wal-Mart an edge in some cases. The other major portal giants
which are giving direct threat to Amazon includes, E-Bay, Microsoft and Google and
cloud computing and FedEx and UPS to Amazon Logistics (Muhammad, et. al.,
2013).
How the context of business is changing, if at all?
The business of e-commerce had limited competition about a decade back. But
today there are many companies which have sprung up either because of easing of
government regulatory norms or due to the fact that venture capital funding has
increased for mass market online sales (Klaus, 2013). Many Chinese smaller e-
commerce portals have made a worldwide presence to sell their low cost
manufactured goods in mobile phones, electronics, apparels, toys textiles etc. Then
again, in many countries like Indian traditional brick and mortar retailers have
collective organized voices who demand government intervention to put restrictions
on e-commerce business. Although e-commerce is the flagship division for Amazon,
the profitability is more through technological services from AWS like cloud
computing. The Jumia e-commerce platform in Africa and Linea in South America
has captured the market big time through investment PE based funding (Visnjic, et.
al., 2018).
What role do collaborators play in the process?
The brand value of Amazon is such that virtually everyone has rushed to get a share
of this pie. At every stage Amazon has made it a point to give collaboration as much
importance as marketing (Weinstein 2016). Major sellers sometimes have shared
their products between Amazon and other e-commerce platforms especially when
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prices offered by Amazon are lower (Castelli, et. al., 2017). The Amazon Kindle
content can be used in other platforms i-pad. The Amazon Kindle app is on Apple
store and apple products sell on Amazon e-commerce. This compatibility is
collaboration at its best.. Another example is that of Amazon and Netflix. .The
streaming video content of both companies can run on the Amazon cloud (Lorphelin
and DVDPERPLAY, 2017).
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Issue 4 – Developing a market strategy
Choosing the target market
The product range of Amazon E-commerce marketplace is targeted towards a vast
range of audience and the company aims to increase its product purchase
capabilities among all segments of society. The purchase patterns vary according to
the country specifics (Lapian and Tumbel 2019). While developed countries like USA
and Canada and members of G-8 had a high degree of e-commerce usage, many
developing countries took a lot of time to come around to online buying. In countries
like India and Nigeria which has a huge consumer base, low level of Internet
penetration has restricted Amazons reach. The high degree of success that Amazon
experienced in the USA, Canada and UK was due to the fact that it virtually targeted
all consumers in the market.
With daily life products to the tune of almost 14 million and more, every age group,
gender and economic segment showed interest in buying the same. Furthermore
there were prices for all the category of people (Yaghoubian, et. al., 2018). Thus
parents who wanted to buy a particular brand of shoes for their children could
compare the prices of different sellers and make the purchase according to their
incomes. Families could buy the desired speaker systems of Bosch and at the same
time compare it with the less branded products but offering the same features. In
short, having an unrestricted target market helped Amazon in North America and
Europe (Gupta, et. al., 2015)
In Asian countries like India, internet purchase till sometime back was more of
middle and upper-class habit and a lot of consumers were not aware of the dynamics
of online portal based purchase. In such countries Amazon focussed more on these
segments but now slowly with more and more people across different income groups
coming into an online purchase, the company is trying to capture a large market
base (Bafna, & Toshniwal, 2013).
The value proposition for Market
While the e-commerce marketplace of Amazon, is targeted towards a large
consumer audience of all age groups, the company has at the same time created a
value proposition which gives it the desired competitive edge. The focus on special
technologies and special products is what gave Amazon, the decisive brand image
and the tag of being the "most valuable company" on earth. This ranged from "easy
to ride, on the go" for its Kindle to "sell better and sell more" for the plethora of its
marketplace collaborators. This value has changed according to market needs and
dynamics. When it started off, the company was known as the most comprehensive
bookseller and this market hold gave it the value proposition to launch Kindle which
has captivated if not all, the reader market by and large. The Amazon prime has
today made the one day fast delivery as the main value proposition for online ease of
video content buying. This is a privilege for the customer. Similar is the Amazon
Echo personal assistant brand “Alexa”. It aims to give a special value to the tech-
savvy householder (Mallik and Farhan, 2018).
Target Market positing
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The posting of Amazon is for that group of people who are exhibiting regular loyalty
trends of the company products or those who are showing slight interest as well. It
has multi-segment positioning for mass products like the e-commerce marketplace
and the adaptive positioning is implemented by monitoring market purchase changes
and understanding customer expectations through repositioning of products and
services. The company also has anticipatory positioning for products which have low
demand value for example, the Amazon sage maker. The company in the course of
its growth has done demographic, Psychographic, Geographic and behavioural
positioning for the market segments that it has addressed.
It targeted the college students, research group and more of the regular reading
crowd. The AWS cloud services are targeted both towards the individual retail users
for domain space while the high-end services are for the enterprise customers. The
product positioning of Amazons Prime video services has positioned itself towards all
groups but a little more tilted towards the college crowd. The market in Asian
countries like India is more positioned towards the middle and upper class (Luo and
Bu, 2018).
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Issue 5 – Developing marketing tactics
Product – The products of Amazon can be divided into 4 categories Constant
innovation has to part of the product range. The e-commerce portal already one of
the biggest in the world needs to have a more interesting price and discount offers
along with product features. The electronic devices like Kindle, Fire TV and Echo can
control many different brands in the home. The Amazon web services high-end
solutions will benefit a range of enterprise verticals. Finally media content for product
and services including cloud-based.
Place – The e-marketing tactic has to change according to the location the tactic that
works in the USA may not work in Malaysia or Pakistan or India. The Amazon prime
is common across USA households but the video content and video streaming
services have restricted market in many developing countries. Amazon needs to
focus more on such countries. It has recently launched local language movies and
serials in India which have given it good subscriber base.
Price – Amazon pricing strategy is generally cost leadership based. It can be noticed
that Amazon revenue is generated during the fourth quarter of the last several years.
This is due to the competitive pricing strategy of the company. At the same time,
premium pricing is always charged on those products where the company enjoys a
good market share. The Kindle product is one of the best examples. It resorts to
special product pricing, skimming and penetration pricing in rare cases. At this stage
any major price tactic change would not be advisable to Amazon and may disturb its
customer model (Mallik and Farhan, 2018).
Promotion –There is not a single promotional method which the company does not
adapt to create the unending brand recall for the consumer. The most important is
advertising through electronic and print media, social media and web-based
marketing. If a new customer and that category are rare, goes to an Amazon web
site visit, then for the next one month his or her different websites will have flash ads
of Amazon along with details and any new offers of that product. A single purchase
even of low-value products accompanied by a flurry of emails and mobile SMS and
this continues till the product arrives at the doorstep. In most of the countries where it
has a strong customer base, Amazon Ad boards and hoardings are common.
Process – The way Amazon sends its products to its customers makes it visually
attractive. The product is of the third party but every product is packaged and
camouflaged in such a way that the first visual look makes the customer long term
repeat buyer of Amazon online products. The famous Amazon cardboard packaging
box and other designs like labels, pastels and gradients have created a special
space in the mind of the customer (Nagaraj, 2019).
Physical evidence – Amazon has focussed on positioning the right product at the
right audience at all times. Through its online SEO and internet streaming it appeals
home products to the parents, gadgets to all age groups, books to readers,
electronics for different ages, toys and video games for children. The positioning is
endless. The mass access of internet means even small children are aware of what
is there on Amazon and what they want. Furthermore, the Amazon app is
downloaded by every second person on their smartphones making shopping while
on the move easier.
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