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Case 12: Amazon.com Inc.: Retailing Giant to High-Tech Player? (Internet Companies)
MG 495
Park University
Synopsis of the Case
Amazon.com Inc. was incorporated in July 1994 in Washington as an option for consumers to purchase books. The founder Jeff Bezos named his company after one of the longest rivers in the world. Amazon quickly grew from an online bookstore into the world’s largest online retail establishment that grew from its many acquisitions, alliances and partnerships. The retail giant wanted to retain long-term sustainability, growth, and profit in the long term by maintaining a lean culture focused on increasing its operating income through continually increasing revenue and efficiently managing its working capital and capital expenditures” (Wheelen, Hunger, Hoffman & Bamford, 2015). As Amazon expanded its operations online to achieve this vision, the company has continuously strived to improve its website to provide a simple system to meet the needs of their consumers. To establish perfection, Amazon used an assortment of sophisticated technology to aggressively analyze customer traffic and adjust its website to provide better service and a superior experience for their customers. As with any retailer and Amazon was no exception, there were a few challenges that would need to be overcome.
Relevant Factual Information about the Problem or Decision the Organization Faced
The company discovered there were a few challenges the company needed to overcome. One issue dealt with the concept of taxes in which many retailers online were not initially held to the same standard as many retailers who had physical stores to make consumers pay taxes on items purchased. States began passing a law to enforce the collection of taxes from organizations who have operations in a given state. This forced some consumers being turned off with buying online and rather circulate their dollars in their neighborhood. Breaches of Amazon’s security which alarmed consumers of their stolen financial information was another issue the company had to grapple with. Amazon’s low cost and efficient warehouses and distribution centers started to not be Amazon’s competitive advantage once media were being changed into less costly digital forms. And at the end of the day Amazon had to accept and absorb some of their unsuccessful ventures and figure out what will be the company’s competitive edge in the future.
Explanation of Relevant Concepts, Theories, and Applications Derived from Course Materials
In any market, the threat of inception and competition are two major things that can affect a business success. The success of Amazon primarily is the fact they have their hand in everything. The company was able to find a niche in many different sectors and do it very well. But some of the competitors that Amazon must contend with are another e-commerce type retails, such as eBay, Apple, Overstock and others alike. Amazon has decided to provide its competitive advantage they felt the need to have their hand in their operations by achieving synergy. In other words, by allowing Amazon to combine or acquire ownership of parts of their operation and other companies this would prove beneficial for the company. Whether synergy is achieved through existing functions/business units, or through acquisitions and alliances, this concept will always be a part of a successful modern business model for Amazon or any other business who may follow this model. They have clearly taken advantage of alliances through their marketplace and ensured that synergy can be achieved. Amazon must also consider the development of infrastructure to offer same-day delivery that will help the company compete with local retailers that are not part of the Amazon Marketplace.
Recommendations
Amazon should make sure their tax collection is uniform across the board. With some state laws being created to force retails online to collect taxes with operations residing in the state of a purchasing consumer, the retail giant should collect taxes from those states. Although Amazon is losing one of their competitive advantages, it is quite ethical for the company to ensure an equal shopping experience across the board. Also, this would give the company a step foot ahead before being enforced to accept taxes in all states.
Considering some of the alliances Amazon has played a part in that has resembled marketplaces found on other e-commerce sites they should accommodate local retail. They should allow other retailers to sell their merchandise alongside what is being offered through Amazon. Amazon could even go to the extent of offering to store products from different local retailers that will also help to promote consumers ideals of buying local and promoting businesses in their neighborhood. This also would help to combat the cost high cost of shipping by allowing an efficient way to get the products purchased by the consumers.
Alternative Recommendations
Amazon should continue to focus on providing quality products that allows the consumer to review those products or services. Amazon should incorporate Total Quality Management (TQM) in their approach to satisfy the customer. TQM is designed to as an organization-wide setup to install and create a climate in which an organization continues to improve their ability to provide quality products and services. One-way Amazon can achieve TQM is by providing technology that allows the customer to voice their concerns about products so that Amazon can evaluate what is being offered and tailor those offerings to accommodate their customer. By allowing this setup it will ensure that Amazon is continuously improving their business.
Conclusion
Amazon a major online retailer that has redefined how consumers shop and are often viewed by its competitors as the major threat to all retailers. Amazon has taken great advantage of their niche, but they must continuously try to improve their standings in the market to remain a force to be reckoned with. This has allowed the company to expand their original business format by providing affordable books online to offering almost any product a consumer may demand. Although the company has enjoyed a highly successful business, challenges must be contended such as increased competition, finding new competitive advantages and ensuring their tax initiatives are acceptable in all states. If Amazon can reinforce and enact any initiatives in their recommendation, the retail giant will be able to find their competitive advantage and continue to dominate the retail sector.
Reference:
Wheelen, T. L., Hunger, D. J., Hoffman, A. N., & Bamford, C. E. (2018). Strategic Management and Business Policy. Upper Saddle River, NJ: Pearson.
