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Amazon.com was one of the well-know companies to sell goods over the Internet. Amazon.com, Inc. initially began as an online bookstore which offer the fastest, easiest, and most enjoyable shopping experience on the internet. With the success of the online bookstore, the company has diversified into wide range product lines and services of general merchandise, groceries, electronic product and more. Amazon.com is formal American e-commerce company by Jeffrey P. Bezos in 1994 and it goes online in July 1995. The Headquartered is currently located in Seattle, Washington and operate worldwide. Amazon.com, Inc. has a total 33700 employees and established separate websites in Canada, the United Kingdom, Germany, France, Italy, Japan, and China. It also provides international shipping to certain countries for some of its products. In May 1997 the company fulfilled initial public offering and common stock under the symbol "AMZN" is listed on the Nasdaq Global Select Market. According to official annual report acknowledged the company had generated USD$ 34.204 billion of revenue and USD$ 1.152 billion total net income in year 2010. Amazon.com has achieved a huge success over the years and it claimed one of the most successful online stores in the history. In 1999, the famed Time magazine is named the company founder Jeff Bezos be the Person of the Year, and recognizing the company's success in popularizing online shopping. Recently Amazon.com has expanded into digital distribution of selling downloadable music and electronic books. The company pioneer to introduce Amazon Kindle in lately 2007. The e-book reader represented the first movement into hardware that allows user to read books and newspaper in the devices.
THE MACRO ENVIROMENT ANALYSIS
In this part is to provide the external environment analysis of Amazon.com in United States America. Typically includes the extensive environmental factors which will influence organizations at various levels. It is important to consider the potential impact of the external factors on the individual organizations (Johnson et al, 2006, P65).
PESTEL analysis is concerned with the external environment aspect that will influences on a business. Normally it used to identify the current trends in the political, economical, social,
technological, environmental and legal environments.
In the Political aspect,
THE INTERNATIONAL CONSIDERATION
Amazon.com Inc. global headquarters are located on Seattle, Washington. In additional the company has offices across other places in Seattle, which including Union Station at the PacMed building in Beacon Hill, and the Columbia Center. At most recent, Amazon is plans to move its headquarters to the South Lake Union commencement in mid-2010 and expected with full occupancy by 2011. Essentially Amazon has various offices in North America, Europe and Asia market. The international activities is to provide warehousing and order-fulfillment for third-party seller across the world.
PRODUCT COMPETITIVE ANALYSIS
The SWOT analysis of Amazon.com will base on their core business which is online store.
Brand Recognition: A positive brand image offer competitive advantage to the company helps to generates trust and reputation to attract customers. According to Brandz Top 100 Brand Ranking by Millward Brown, Amazon.com Inc. is ranked number 15 out of 100 in list are the world's most trusted brands in 2010.
The Business Model: with the integrated of information technology into business model has the advantage to minimize the cost. Amazon's business model provides a competitive advantage since there is no physical store. This allows keeping costs low and sells with lower prices than competitors. Although the company offer below market price, but they are able to generate profits from the high volume of goods sold.
High Variety of Goods & Product Diversification: Amazon.com sells a large variety of products include DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. Amazon.com has constantly reinvented their product and services and increasing their value. The company's is focus on research and development of new products and enhancements to existing products maintain a strong market share. For example Amazon Kindle has change the ways people to read books and newspaper on new electronics devices.
Ease of Use, Secure & Trusted Online Retail Platform: Amazon.com provides a feature-rich content, a secure and trusted transaction environment and easy-to-use functionality for customers. Besides that it is able to personalize web pages to individual customer preferences, typically included product
recommendations generator. This technology promote related goods base on customer purchase.
Low Profit Margins - The gross profit margin which measures the relationship between revenue to cost of sales has decreased by 1.1 %. Decreasing margins indicate increasing cost pressures and continued decrease in margins would affect the profitability of the company
(Marketline Business Information Center, 2007).
Cost of Free Delivering: Amazon.com has offered free delivering in order to attract customers in US. Nevertheless this strategy is expensive and increases the expenses to the company.
Inventory: in order to meet delivering times, amazon.com has to maintain an important inventory; this could be risky due to the fact that demand of products is constantly changing.
International Markets: the rapidly growth of use of internet throughout the world would allow Amazon.com to expand the brand to more markets.
The Growth of Digital Media: Digital media begin popularizing over the past few years. According to Emarketer Online (2008) predicts that US customer spending on movie downloads will more than double from 2007 to 2008, from USD$114 million to UDS$245 million. It seems to an opportunity for Amazon.com to continually expand on digital downloadable content business.
Plentiful Suppliers: strong relationship to largest supplier includes Toy R Us, Circuit City, Office Depot, WHSmith and more. This allows Amazon.com to sell more goods to improve services and the image of the brand.
Business Competition: Online retail is highly competitive and business rivalry to Amazon.com such as eBay and Wal-Mart. The more products and services the company offers the more competitors exist.
Price Competitiveness: Amazon.com had a low profit margin and one of the best attractions is base on low prices strategies which attracted most of the shopper. At this point price is high elasticity where majority consumer will pressure by the price. Consequently other competitor such as eBay and Wal-Mart may offer even low price and better deals to consumer.
Difficulty on Distribution: increase the variety of products and geographical position may present numerous difficulties in the distribution.
Over Dependency on Supplier:
THE GROWTH OF THE BUSINESS
The Ansoff Matrix
Ansoff's Product Matrix to identify directions for our strategic development
AMAZON.COM ANALYSIS: PORTER'S FIVE FORCES MODEL
The Porter's five forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful because it helps understanding both the strength of the current competitive position and factors affecting the strategy development. Subsequently, amazon.com will be analyzed under this model:
On the one hand amazon.com has marked advantages with most of their providers (books, audio, technology) for the reason that these companies do not charge their products until the moment that amazon.com sell them (frequent strategy from big companies). On top of that, amazon.com pays suppliers for those products only 35 days after that the item has been sold, nevertheless companies are prepared and ready to provide services and products to amazon.com. On the other hand, amazon.com has switched its primary operational system (Windows XP) to Linux (for more details see appendix E), this movement is estimated to save more than 15 millions of dollars to the company.
For small companies and publishers, amazon.com keeps a maximum of five items in their stock in order to reduce costs.
Suppliers consider amazon.com as an important and prestigious company hence, their commitment with amazon.com is clearly noticeable and essential.
Once, Bill Gates (Microsoft's owner) said, "I buy my books in amazon.com because I do not have time to go to the book store" (thetimes.com). Initially consumers that buy goods in amazon.com tend to become regular clients due to the low prices that amazon.com can offer. In addition these prices can be hard to reach by the competence.
Low prices is the principal attraction that amazon.com offers to each individual buyer. Moreover the low average of clients switching from amazon.com products and services to those of the competence is satisfactory.
Amazon.com is one of the first companies into the e-commerce field. This gives to amazon.com a certain level of tranquillity into the market. Nevertheless amazon.com has innovated along the years reaching highest levels of customer's satisfaction which can assure their position into the market for future years.
Threat of Substitution
As this paper mentioned before, amazon.com has innovated their services and products along the years and the name of amazon.com is well recognized and trusted into the field hence, amazon.com does not present threats of substitution at least in the short time.
Threat of New Entry
Internet has shown to us that a simple idea well developed can offer extraordinary results, examples such as Facebook.com, Plentyoffish.com, Youtube.com and so forth, these companies have developed their web sites in a short period of time with incredible final results. This can be the proof that a threat of new entries into the market is possible.