Amazon as a Model for a Business Plan
Marketing Plan: Amazon.com
‘Obsession’ is the term that perhaps best describes Amazon’s fervor to serve its shareholders and customers to utmost fulfillment. Growing from a flourishing dot-com enterprise in the 1990s into a 21st century multinational giant, a king in every sense – in the internet retail area, Amazon provides an exemplary marketing model for budding businesses. Its marketing manual is near legendary, pegged on the fundamental ‘customers first’ foundation, and a bizarre business philosophy to listen to the customer and not only work, but also invent towards their comfort, and on their behalf.
The company was founded under the tagline ‘Earth’s Biggest Bookstore’, but as it turns out, books were only the starting point for Jeff Bezos, founder and CEO. It went online in 1995, a year after its inception, expanding into other media including MP3s, CDs, VHS, and DVDs; and an even wider range of products including apparel, furniture, electronics, and toys over the subsequent years, in a revolution that necessitated a change of label from the ‘Earth’s Biggest Bookstore’ to the ‘Earth’s Largest Selection’.
Uniquely, Amazon reported no profits until 2001, when it posted a net at a dismal 1% per share; but it still managed to claim over 1.3 million customers within only two years of online business. Today, the company boasts of a mind-boggling 45 million customers, shopping at the company for literally everything – from books to toys, fine jewelry, and fashion apparel. It, currently, is one of the most reputable brand names in the buyer market, garnering almost half of its total sales revenue from overseas markets. It managed to weather the e-storms of the late 19th century dot-com bubble and is now a burgeoning figure in the retail market, posing a substantial threat to such vending monsters as Target and Wal-Mart, with a profit in one hand and capacity to ball the same over in the other.
Amazon.com faces intense competition in its attempt to delve into new areas of the online market. Its top competitors include EBay, Netflix, Apple, Barnes and Noble, and Wal-Mart. EBay is a direct competitor of Amazon’s, targeting, by way of advertising, anyone who does online shopping and wishes to take advantage of the competition by making comparisons and obtaining the best price deals. Both Netflix and Barnes & Noble have a much smaller market share of the eBook market. Amazon rides on economies of scale, and enjoys significant advantage with its rock bottom prices, particularly effective in the student target market, constantly looking for the best prices on text books. Wal-Mart goes after the same market in online retail sales, posing fierce competition with a powerful reputation, a one-stop shopping environment, and low-priced commodities. In the wake of the intra-industry competition, Amazon relies highly on incentives to lure new customers and maintain existing ones. Among the key incentive programs is the free shipping program for goods purchased beyond a certain dollar threshold. The program has been boosted by the strategic location of Amazon distribution hubs all over the United States. Amazon’s recently-released Prime service competes directly with Netflix’s Hulu, but Amazon manages to enjoy a greater share of the user market, thanks to its quick shipping program and on-show discount offers. Recently, Amazon released the Kindle tablet, which competes directly with Apple’s tablet device and Barnes & Noble’s e-reader. EBay’s online auctioning community, used to build brand awareness and showcase the company’s offerings, is at the top of Amazon’s headaches at the moment, although Wal-Mart and Netflix are also posing substantial threat; the latter in its eased access to inexpensive movie streaming, and the former, in its added incentive of price-matching with competitors.
Strengths (adopted from Strategic Management Insight):
Strategic Acquisitions: the company has successfully acquired new firms, bringing into the business new skills, assets, capabilities, services, and products. Its acquisitions of Kiva Systems, a robot-making company whose technology could be used to bring products directly to employees for picking, packing, and stowing, in 2012; and Goodreads in 2013 were both seen as logical steps in the company’s quest to cement its place at the top. Thanks to such strategic acquisitions, Amazon has been able to develop its customer relationship and information management skills, as well as offer cloud computing and book publishing services.
Cost-Leadership: cost leadership aims at producing products at lower costs than competitors do. Amazon’s cost leadership strategy has been favored by the huge scale economies the company enjoys. For it to succeed in the strategy of cost-leadership, it has had to offer a wide product range and consequently take advantage of the low displaying costs, so as to offer prices lower than those offered by competitors.
Superior Service and Product Quality: apart from being reliable, Amazon offers one of the fastest and cheapest shipping facilities, thanks to its efficient distribution and logistics systems. The free shipping incentive program, for instance, is facilitated by the strategic location of the company’s distribution hubs across the country. Thanks to such facilities and enhanced efficiency, Amazon has built a global brand reputation for exquisite customer service.
Economies of Scope: these are the cost savings that result from producing a wide range of
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