A company follows various strategies to succeed in the world of business. As the company grows up, a number of issues can come up in its way. In that situation, the Company can change the strategies followed by it, in order to surmount the present issues. Amazon.com is one of the biggest online retailers in the present day. The company enjoys a significant competitive advantage over the nearest opponents. The report will also enable the reader to comprehend the strategy that Amazon follows for the Multi-dimensional business and what can be the potential strategies the company can adapt to tackle the Future Challenges.
In order to achieve higher in the Corporate World, the Companies adopt various combinations of business strategy. They select and implement the strategies according to the requirements of the business. Therefore, the combinations get changed with time. In the following report, the business strategies adopted by Amazon.com will be analyzed in detail. It will highlight the reasons for the continual progress of the company in the various business sectors it had attempted in these years. The report also enables the reader to comprehend the strategies that Amazon follows for the Multi-dimensional business and what can be the potential strategies the company can adapt to tackle the Future Challenges.
Under this section, the report will discuss the background of the Company in brief. It will also analyze the business plan of the company and the strategies applied to it, and whether they are appropriate or not. The central section of the report also aims to highlight the current challenges that the company is facing in its operation and the future challenges that may come in its way, sooner or later.
It becomes very clear from the founding history of the company, that the founder Mr. Jeff Bezos laid greater emphasis on a significant Brand name, as he was well convinced about the role of a strong Brand value in a Business, especially when it is not established in a Normal Brick-and-mortar format. From the very beginning, Mr. Bezos had a clear strategy on his mind as he selected the name Amazon for his Online Store. He wanted to makeAmazon.com the biggest online store in the world, the reputation that it holds today. Amazon.com is a technical giant, Electronic Commerce and Cloud Computing Company which is based in the USA. The current Chairperson and CEO Jeff Bezos founded Amazon as an Online Bookstore in 1994-1995. As per its Market Capitalization and Revenue Generation Capacity, Amazon.com is currently the largest Internet Retailer globally.
Although it started as an online Bookstore, Amazon is currently dealing with almost every Consumer Goods, successfully delivering services in more than 190 countries. The company has also expanded its business in Cloud Computing, streaming entertainment content and innovating Customer oriented Devices.
Amazon can call itself a pioneer in Online Retail Business. Throughout its 23 years operational journey it has maintained a group of strong Business, Operational and Marketing Strategy to reach the place where it is today.
Amazon has followed business strategies keeping in mind its long-term benefits instead of the short-term ones. The Amazon Web Services (AWS) is the perfect example of what it perceived as the essence of its Long-Term Strategy (Stuart, 2018). The services began simply as the group of web developers and potential Start-up, but now it has reached the level of millions of customers.
Amazon has always looked at the positive outcomes and the successes it has achieved as inspiration. The company never let the setbacks sit heavy on its mind. Moving forward for a new Company becomes easier when it follows positivity in the plan (Reynolds and Yetton, 2015, p.101).
Characteristics of Amazon’s Marketing Strategy
A company needs to segment the target market according to the customer types. According to (Ritala et al. 2016, p.2), it becomes very difficult for a company to target the whole of the market as the cost, risk, efforts, and profitability become an issue. Therefore Amazon has clearly segmented the market using Demographic and Psychographic characteristics of the people (Woo et al. 2015, p.176). At the micro level, the company treats the individual customers alike offering those services with a set of standard facilities. After that, they prepare the customer orientation based on their preferences. As per Standing and Mattsson (2016, p.11), in this decision making, the company should take into account the actual purchases made by the customer and not all the things the customer has shown interest in. As part of market segmentation which forms a part of marketing strategy, Amazon has identified the position and the target people who would purchase the products. Geographically, Amazon has extended its boundaries outside the USA to include other countries and have focused on all groups of people instead of focusing on single fixed target. In response to the middle and upper-class people, it has diversified its products to range from clothes to household goods and many more.
Following the 7 Ps of Marketing by Philip Kotler
The seven Ps of marketing includes Price, Promotion, Product, Place, People, Process and Physical Environment. As per Aversa et al. (2015, p.175), a company should give utmost priority to construct the Marketing Mix of the company using these 7 particles. Amazon has given strict priority to the element of Product. Amazon has paid due attention to promoting the brand and the Company also.
Figure 1: 7Ps of Marketing
(Source: Belk, 2014, p.1595)
The Company offers the widest variety of products to the customers. The offered products range from groceries to Consumer durables and Garments.
The company always matches with the other retail stores in terms of product Pricing. Amazon offers discounted product with a conditional option for free delivery.
Amazon spends a major chunk of the revenue in promoting of its brand, Logo, and Company. In this process, it takes help of all the media.
The people who are working at Amazon provide their full effort in the actualization of the Customer Satisfaction.
The Company has been able in choosing appropriate Places for setting up the logistics support center. It has made its presence felt in most of the countries of the world.
The Process of delivering goods by Amazon gives the utmost priority to the consumer. Being a Customer obsessed company, Customer is the king of Amazon. It relies on the strong Supply Chain Management system it has.
In the website, the customer can get the comfort of choosing the desired product among the millions of options. It offers various facilities like Cash on Delivery, free delivery, and same day delivery all thanks to its strong supply chain management.
Strategy of Adopting Strong and Glocal Logistics Support
According to Belk (2014, p.1598), the strength of the supply chain management is the base of a multi-product online retailer. In this respect, Amazon can boast of the supports it has for the business throughout the world. The supply-chain management at Amazon is Technology driven. As per (Amazon may soon offer transportation facilities and logistics supports to the other businesses as it has built up a robust network of transport system in a large area of the world. In this direction, Amazon has already included the expenses for the logistics under the section of Cost of Sales.
Marketing Using the Social Media Platforms
Amazon has a strong media presence. The marketing department of Amazon carries out various campaigns in order to promote the business not only in the Print and Electronics Medias such as Newspapers and Televisions, but also in digital media such as websites, and social media platforms, for example, Facebook, Twitter, and Google. These media help a company a lot in promoting its services to its targeted customers (Holsapple et al. 2014, p.12). The company has customized its own style of advertising according to the country. It also has separate websites for at least 15 countries. It offers a number of promotional gifts for the users all over the world on special occasions. In order to gain popularity, the company associates itself with many social events so that it can gain the Customer Confidence. Such efforts eventually paid off in strengthening the Brand value of the Company in the long run of the business (Keskin and Kennedy, 2015, p. 1449).
The company enjoys a significant competitive advantage over the nearest opponents. Talking about the retail sector, Amazon is clearly a winner in respect of sales and revenue generation. In spite of being an online shop, Amazon has been able to surpass the largest retail brands in the world that set up physical stores. The company has been able There are a number of reasons why Amazon has his advantages over others. Unlike the other retailers, Amazon does not need to bear the operational costs such as electricity bills and maintenance for all the stores. In this way, the company saves a lot in the operational cost. Amazon offers the option for online payment apart from Cash on Delivery (COD), hence the customer can shop without carrying the physical money. Such facility is not always available with the brick and mortar stores. Amazon has recently introduced the option of Same Day Delivery in case the order has been placed within a specific time of the day. Product occupies another important place in Kotler’s 7 Psof Marketing. At present Amazon offers the widest range of products than any other retailer. The company has reached this vast variety by forming business strategies with the local third-party manufacturers of the respective countries.
Possible Future Challenges [Refer to Appendix 2]
Any successful company has to face challenges in order to rise further in the market. Amazon.com is not an exception. Being an Internet Retailer it faces many challenges in retail, logistics, and services. Currently, the Company is facing several issues internally and externally that have the potentials of creating disruptions in the smooth functioning of the Company. Amazon is famously referred as the Company that has sacrificed profit for its continuous Growth. But such rapid growth has its negative sides too.
Launching of New Products within a Short period
According to Oredo and Njihia (2014, p.43), it sometimes it becomes risky when a new entrant jumps into launching several new products to the market for the customer within a short duration. Although these products are doing well, Amazon can face a severe blow to revenue loss if any of the products do not go well with the users. Amazon Developers has launched Amazon Dash Button, Amazon fire Phones, Amazon Fire TV within the period of 2014-2015. Amazon needs to keep a reality check on this issue.
Amazon has reputation for a strong online Marketplace where it offers various products according to the preferences of the users. However, for the recent few years, the quality of Amazon's Marketplace is gradually degrading. As more and more third-party vendors and manufacturers are getting connected to the portal, the quality of products overall is deteriorating for the customers (Stern, 2018). It may be beneficial for both the parties initially since it reduces the cost of a single product and also enlarges the Product Catalogue for the company. However, the problem is that the third party sellers might be privately selling their junk products through the brand name of Amazon. This can lead to a huge loss of Goodwill for a reputed company such as Amazon.
One of the most important and reassuring facilities that Amazon offers is the honest reviews by the verified customers (Hammond, 2018). Sometimes people who are not trying out a product can buy it after going through the good reviews provided by the customers who have already bought it. However, recently few sellers are allegedly buying "honest reviews" from the customers in exchange for a bunch of free products. This can really harm the trustworthiness of the brand which is really tough to get back once lost.
Increasing Shipping Cost
So far Amazon has done a really good job in providing shipping to the customers for a minimal cost. This facility has been one of the key attraction points for the users all over the years. However, at the current scenario, the ability to provide services to the customer at minimal shipping cost is being heavy on Amazon. A sudden imposition of high charges for shipping can really hurt the process of Customer retention for Amazon.
The Fear of Security Breaches
Amazon has stored a large amount of Data on the server that includes Personal data and security information. A sudden theft of such huge data can cause heavy harm to the Company. Even there is no company that can guarantee its users fully secured data retention. A single or a group of hackers can drop down the system at any time. This is the biggest challenge in front of Amazon, as it runs all the business online.
The Unavailability of Sufficient Warehouses
The shortage of space for warehouses is the biggest reason to worry about Amazon. There are still many Countries where Amazon provides their services but do not own a single warehouse. This can really be a bigger problem in near future for the Biggest Online Retailer of the world. Amazon really needs to take care of this as its Customer Base is rapidly increasing.
It is very common for a technical giant like Amazon to have some problems in the operational and marketing segment after operating for more than two decades on such a humongous scale. The company was able to establish itself as a large company through the right kind of Market Segmentation. However, with age, it has developed several flaws in its Marketing Mix. It has seriously compromised on the Quality section to run for the Quantity. In order to drive away all the flaws, it needs to follow some recommendations that carry the potentials to prevent these impending risks for the online retailer. Amazon rose as the biggest disrupter of the retail world and it should continue to maintain this reputation.
Amazon has been a great online retail service provider for decades. The few challenges that it is currently facing can be taken care by the Company easily, as it has experienced for more than 23 years in the retail sector. In this way, the company has also earned the trust of the Customer.
In order to retain the trust the customer has in the Company, Amazon needs to recheck the Quality of the products it is offering in the catalogue instead of the Quantity. Amazon should understand the value of the confidence and the loyalty that the customers show on the brand. The company should pre-check the quality of the products that the third party vendors are selling through Amazon.com, before displaying them on the website.
At the background of increasing Cyber Attacks by the hackers, Amazon can make the data storing system of the website and server more secure for the sake of the Customer security. This could be done by creating or installing new data protection software that would protect both customer and company information from third-party agencies. According to Prpić et al. (2015, p.81), a Company should never indulge in selling or exchanging of the personal data of the customers with any third-party organization for some temporary profit.
Apart from this, the company also requires maintaining the reasonability of Price at the advent of steep Competition from the opponents. The company has to strike a right balance in between the Cost and expenses. Otherwise, it would not be possible for the reputed Company to offer products at a reasonable price.
Another important task of the Company is to restore the seriousness of the Review Section. It is already a reputed company in its own right. Therefore, the company does not need to win the War for Feedback, in exchange for cheap loyalty of some non-existing customers.
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