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Amazon.com: The State of Information Technology and Management

Introduction

Since the era of the industrial revolution, technology has been playing an important role in continuous improvement of organizational performance. In the last three decades, information-based technology has become a major point of focus for small, medium and multinational organizations that seek to improve their competitiveness in the market (O’Brien, 2009). Organizations of all sizes and nature are increasingly facing the pressure to turn to technology-based management using IT tools and applications as a way of increasing their competitive edge (Beynon-Davies, 2009). Informational technology era has produced rigorous business pressures that have affected the state of current and future competitiveness in organizations. These business pressures have brought rapid changes to most industries.

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While most of the modern organizations attempt to obtain, implement and use some of the most sophisticated IT tools, the states of these applications differ significantly from one organization to another (McLeod & Schell, 2007). I hypothesize that these differences cause significant disparities in the abilities information systems provide competitive advantage to an organization. In this paper, I describe the state of Information Technology in my organization (Amazon.com) in order to reveal its strengths and weaknesses and highlight areas that need improvement to ensure that the organization uses the system to achieve a competitive advantage. My main focus includes an in-depth analysis of the organization’s information system (IS), information system development, the state of electronic commerce (e-commerce), storing and accessing of information and knowledge, and the process of enhancing IT to gain a competitive advantage.

Located in Seattle, Amazon.com is an international corporation that deals with retail business using electronic commerce. It deals with a large number of products such as books, videos, software, electronics, and household products. Founded in 1994, it is the largest online retailer in the world, having started its business when information technology was a young project. As such, it has been able to manage its information technology successfully, gaining a competitive advantage over its global competitors.

To gain a comprehensive understanding of the state of information technology at Amazon.com, I decided to investigate the situation by interviewing two key persons in the organization (McLeod & Schell, 2007). The aim was to get the desired information from reliable sources. I was lucky to have an opportunity to interview Jeremy Kim, a supervisor in the IT department. I was also lucky to meet Jonathan White, a team leader in Web Services. From the interviews, I realized a number of facts about IT management and its application to achieve a competitive advantage.

Kim (Personal communication, January 8, 2014) stated that the current state of technology at the company was largely information based since the company was purely an e-commerce project. He started with a brief narration of the company’s journey from a simple internet-based project to the current multibillion-dollar organization. In that case, Kim stated that the company was one of the few corporations that used some unique features of IT to achieve their dreams. For instance, IT had deconstructed and reconfigured the traditional system of value chains by disrupting the old boundaries and the emergence of new business models. He wanted to show how the company used dedicated strategies to gain competitive advantage through market leadership within the new business models set by the internet technology.

Value Chains and Major Players within Electronic Commerce

Kim informed me that some of the major aspects of information technology that allowed the company to achieve a competitive advantage over the traditional corporations in the retail market included the deconstruction and reconfiguration of the traditional value and supply chain systems (Personal communication, January 8, 2014). Being a company that depended on a virtual platform for its business transactions, Amazon.com had to exploit information technology in order to maximize profits. The company’s interaction with its customers also depended on information technology.

Under the influence of a rapid and dynamic rate of technological progress and development, electronic commerce (or electronic business) has evolved to include all those technologies that are “internetworked” together (Beynon-Davies, 2009). Kim informed me that the term e-commerce involved the processes of preparing, supporting, processing and maintaining the performance exchange through networked electronics. Kim said that his department made use of e-commerce in order to focus on transaction and distribution processes and all the methods used to support these processes. This definition of e-commerce was similar to the one developed by Wirtz in the 1990s (Blanchard & Fabrycky, 2006). In addition, Kim informed me that electronic-commerce was used to mediate the process of buying and selling information, services and products. This buying and selling was conducted through a system of internetworked computers and their applications. In addition, IT enhanced the exchange of goods and services (Saunders, 2009).

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Within the company, e-commerce has electronically mapped the process of communicating information between the suppliers, marketers and buyers. This process, which is commonly known as mediation in the management information system, allows Amazon.com to coordinate its business interactions between the three types of players in a globalized market. From an analysis of Kim’s response in the interview, it was evident that the players in the globalized and electronic business environment were grouped into three phases of transaction, which are information, negotiation and execution. The three phases formed the entire process of business transaction.

The location of contact between supply and demand in the traditional trade system has been virtualized through electronic commerce (O’Brien, 2009). First, market access is ubiquitous, which removes the restrictions created by geographical space and time. Secondly, the electronic market is highly augmented with transparency that results in a reduction in the cost of doing business. Finally, the process is enhanced with an increased speed of communication between all the players involved. Unlike the traditional supply chain systems, the virtualized supply chain system developed by e-commerce allows the market players to take the role of either the trader or the customer during the business process.

Looking at Amazon.com’s business model, the supply chain system has three important players recognizable in demand and supply sides. These players include consumers, businesses and administrative agencies (O’Brien, 2009). All these players are internetworked in a manner that allows them to carry out business within the context of the traditional way, which includes such features as auction, haggling and discussions on terms of payment. It is also worth noting that while Amazon.com takes the role of the administrator, retailers take the role of businesses. Consumers are the global communities that visit the Amazon.com websites to purchase products and services.

Digitalized Storage and Access of Information and Knowledge: The Main Strength of Amazon.com

Jonathan White stated that Amazon.com had some major areas of strength that provided it with a competitive advantage over its competitors in the retail market (Personal communication, January 6, 2014). Those strengths were entirely achieved through management of information systems where data and knowledge were stored, accessed and used in trading. The company achieved a competitive advantage by managing its information systems such as knowledge, data, transaction as well as the process of logistics in a manner that allowed all the players to interact in a virtual community, which was devoid of temporal and spatial restrictions. Jonathan believed that the creation of value and increase in profitability could be achieved by investing in information systems development and management. The aim was to develop a radical and dynamic business environment that could stand the test of time and the constant changes in the market (Mcdermott, Snyder & Wenger, 2002).

Amazon.com uses a mainframe based on Service-Oriented Architecture (SOA). This architecture allows the company’s management system to gain a level of scalability, performance, availability of growth, and enhancement of a wide range of fast and effective software. In this way, the system development process allows the company to perform an end-to-end data in order to store information about a large number of items, consumers and orders. The online sites are thereby reinforced with a large volume of information, data and knowledge. SOA makes the sites for Amazon.com appear more attractive because it allows one to reuse the information in terms of partial work. It also allows one to use more than one context instead of a large process. White also informed me that they preferred SOA at the company because it was highly comprehensive, decentralized as well as fully distributed enabling it to serve a large number of applications at the same time (Personal communication, January 6, 2014). This meant that the company could have widely varied its business model at any time of its operation.

Secondly, the company’s strength is achieved within the context of the company’s transaction processing system. The system supports all the business transactions. The transaction processing system creates convenience for all users whether they are traders or customers. A globalized client community creates an opportunity to obtain free personal accounts that allow customers to visit the company website by simply providing their login details. These accounts have unique and personalized features such as a wish list, a shopping cart and shopping baskets. In addition, there is a unique feature known as One Click, which allows customers to skip some steps involved in the checkout process because they can submit their billing addresses or credit/debit cards.

Moreover, the interview with White provided information about the company’s development of an online payment system as opposed to the dependency on the existing ones such as PayPal.com and Skrill.com (Personal communication, January 6, 2014). The online payment system, known as The Honor System, was designed and developed to provide customers with an easy and instant method of payment for their Amazon.com accounts, but in a controlled process. The method is attractive to customers because they are asked to provide their details such as billing addresses and credit card information for confirmation, but payment is made later. In addition, the amounts to be paid by customers are automatically debited from the cards after the customers have received their goods or services.

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Thirdly, Amazon.com has developed the recommender system that provides its customers with the right and relevant information critical to their needs. This system is based on the past information about the transactions made previously by a returning customer (Sinclair, 2008). It takes into account the customer’s past behavior, the behavior of other customers with similar needs, the items browsed and purchased, similarity of each client and other such combinations. When a returning customer is browsing the company’s website to search for information about products and services, these factors as well as their combinations are used to make recommendations to the customer in order to make purchasing easy and attractive (Saunders, 2009). For instance, books, magazines or journals by the same author, similar authors, similar subjects or similar backgrounds are displayed and recommended by the recommender system. In this way, it makes access to information fast and effective.

Weaknesses and Challenges

Information system development and application including electronic commerce, storing and accessing information using IS and the achievement of a competitive advantage are all affected by a number of issues in the modern context. In fact, Amazon.com deals with a number of problems associated with the development and use of information system in the modern world. For instance, laws and regulations in various countries are sometimes prohibitive to online business. While the company enjoys the dynamism of the law in the western world, penetrating foreign markets in other countries sometimes proves to be a difficult task. For example, countries have differing laws controlling e-business, communication standards, security systems and practices. A good example is the case of Amazon.com in China. In China, the company uses an official website called Joyo.com to fit into the Chinese e-business system because the regulations in China are different from the systems in America and the western world (Spector, 2010). It is necessary for the company to adopt a different business approach when entering the Chinese market.

In addition, culture and language differences affect Amazon.com’s business in some countries because the website must be configured to fit into the local culture. Moreover, it is worth noting that Amazon.com, like any other online-based organization, is faced with technical and security challenges. For instance, security threats such as hacking, eavesdropping, siphoning and tapping of information are real threats posed by improving technologies. In addition, malicious programs used by attackers and hackers pose a major threat to the company, which is likely to cause major losses.

Recommendations

To cope with legal, cultural and language differences, the company should consider configuring its website in order to “think globally but act locally”. This means that even though the information accessible to remote users is globally available, local aspects such as language and culture should be seen on the user-end. Secondly, the system development cycle used by the company should move fast to cope with the dynamic technologies used by online hackers and other malicious web users.

Conclusion

At Amazon.com, the state of information system reveals that the company has gained a competitive advantage as the largest online retailer by simply using e-commerce mode of business. Although the company is faced with a number of problems, the business is modern, globalized and acceptable in various parts of the world, which makes the company‘s performance and growth increase every year. As long as Amazon.com maintains flexible and sustainable information systems its position as a leading e-commerce business is safe.

References

Beynon-Davies, P. (2009). Business information systems. Basingstoke: Palgrave-Macmillan.

Blanchard, B. S. & Fabrycky, W. J. (2006). Systems engineering and analysis. New Jersey: Prentice Hall.

Mcdermott, R., Snyder, W. M. & Wenger, E. (2002). Cultivating communities of practice: A guide to managing knowledge. Cambridge, MA: Harvard Business School Press.

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McLeod, R. & Schell, G. P. (2007). Management information systems. New York, NY: Pearson Education.

O’Brien, J. A. (2009). Management information systems- managing information technology in the internetworked enterprise. New York, NY: Irwin McGraw-Hill.

Saunders, R. (2009). Business the Amazon.com way: Secrets of the world’s most astonishing web business. New York, NY: John Willey and Sons.

Sinclair, J. T. (2008). E-Bay, the smart way. New York: Amacom.

Spector, R. (2010). Amazon.com business: Get big fast. Cambridge, MA: Harper Business.

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