Introduction
In the contemporary economic and social environments, building a strong and sustainable corporation along with keeping it continuously growing is a challenging task. Enough, the vast variety of external factors as well as the significant efforts from the firm itself contribute to the success of the company. It is possible to notice that the Amazon company is one of the examples of such corporations, as the company developed as a small startup, and currently, it represents one of the largest retailers in the whole international market.
To understand the current position which Amazon holds in the retailing industry, it is essential to profoundly analyze the set of factors that led the company since its establishment. Thus, the purpose of this paper is to provide a critical, comprehensive, and inclusive investigation of the principal determinants of the Amazon’s success to develop a strong conclusion as well as to make several recommendations for the company’s further growth.
Background of the Company
As of the present day, it is difficult to imagine the sphere of online retailing without the Amazon website and its numerous services. However, it took the company a considerably long time to achieve its current position. Therefore, it is of high importance to provide the company’s background to give further reasoning in a proper context. As it is stated in the company profile of Amazon on the Reuters website, the corporation was founded on May 28, 1996 (“Amazon.com Inc,” 2018).
Thus, since more than two decades ago, Amazon has been offering a growingly wide range of products and services through its websites (“Amazon.com Inc,” 2018). As the company was founded in the United States, the first and most important sector that it served as North America. Further, as the company grew, it successfully entered the international market, primarily through the segment of Amazon Web Services.
The products and services, which are offered by Amazon, are numerous, and they vary greatly in terms of the original producer of the product. As the company under discussion is the retailer, it is apparent that the vast majority of the products is purchased by Amazon to resale it (“Amazon.com Inc,” 2018). Also, the company offers its merchandise. Another important segment is the production of third-party companies, which is offered through Amazon-related websites on the grounds of mutual agreements (“Amazon.com Inc,” 2018). Additionally, it is essential to mention that Amazon has its line of various electronic devices, which are manufactured by the company itself. Accordingly, an immensely wide range of products and services (some of them are to be discussed in greater details in the following sections) are offered by the company.
Moreover, it is important to separately mention the company’s subsidiary, Whole Foods Market, Inc. Primarily, this subsidiary is focused on providing customers with high-quality healthy and organic foods. The range of products offered by Whole Foods Market, Inc. is significantly extensive, as it includes “whole trade bananas, organic avocados, organic large brown eggs, organic responsibly-farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85% lean ground beef, creamy and crunchy almond butter, organic gala and fuji apples, organic rotisserie chicken” (“Amazon.com Inc,” 2018, para. 1).
It is apparent that shipment services, for which Amazon is largely known for, are also applied to the production of the Whole Foods Market, Inc. subsidiary as every customer can arrange shipment of certain food products to the nearest local Whole Foods Market store.
As it was already mentioned, Amazon started its operations in North America and further expanded in the international market. Currently, the company serves customers from the vast majority of geographical locations. Thus, the company serves North American region through its North America-focused websites (such as www.amazon.com, www.amazon.ca, and www.amazon.com.mx) while the international market is served by other specific websites (such as www.amazon.com.au, www.amazon.com.br, www.amazon.cn, www.amazon.fr, www.amazon.de, to mention a few) (“Amazon.com Inc,” 2018).
Amazon Web Services (AWS) offer computing, storage, database, and other service offerings for “start-ups, enterprises, government agencies, and academic institutions” (“Amazon.com Inc,” 2018, para. 3). Additionally, some other services such as advertising and digital content subscriptions are provided. Therefore, it is possible to observe that as of now Amazon holds the position of a significantly large and diversified retailer.
Internal Analysis Conducted
As the background and general information about the company’s products and services were provided, the next step in analyzing the Amazon’s structure is to investigate internal and external factors that have the most impact on the company’s success. In this section, the author focuses on the internal analysis. To evaluate the significance of the company’s internal determinants of success, it is essential to answer several questions.
First of all, what are the most valuable aspects of the company, with respect primarily to its inside structure? It is possible to state that the strong, reliable, and well-recognized brand image that is detail promoted is one of the most important factors in this area of concern (Etemad, 2017). Secondly, the immensely profound attention that is paid to the customer service is also highly valuable (Etemad, 2017). Additionally, it could be mentioned that over the past two decades, Amazon employed the vast majority of the emerging technologies related to communication and manufacturing. Thus, from a technology standpoint, the company also holds high evaluability.
Further, it is important to ask: what are the most evident advantages of the company’s internal structure? In this context, it could be stated with certainty that a strong supply chain and, speaking in general, the overall network of suppliers and distributors is remarextendedemad, 2017). Moreover, one can note that the success of the company is largely built on its ability to provide the customer with products and services across the globe with strong reliability. Particularly, the shipping system of the company could be referenced as the most evident example of the Amazon’s dedication to excellent customer service, which is achieved through the development of a sustainable supply chain (Etemad, 2017).
Several other aspects should also be mentioned in this section to give the internal analysis a deeper context. In addition to the strong and reliable chain of suppliers and distributors, Amazon was able to develop software technologies that exceed its competitors’ standards. This factor constitutes both significant efforts from the Amazon software development team as well as the budgets for the software development that could not be spent by the majority of companies in the same industry, especially new, small organizations and startups (Etemad, 2017).
Additionally, it is appropriate to mention the company’s user recognition system that is also aimed at providing the most comfortable customer experience. As in the case of software development, the company spends immensely large budgets on maintaining its system of tracking the customer’s previous purchases (Etemad, 2017). Enough, smaller companies cannot allow spending as much as Amazon on this aspect. Thus, the company preserves its competitive advantage in the retailing industry.
External Analysis Conducted
As the internal factors contributing to the success of the company, the next step is to focus on the analysis of the external factors as they play an immensely important role in the achieve ement of success by any company. To perform external analysis, it is appropriate to employ two of the most recognized methods of the external analysis of a business, which are Porter’s Five Forces analysis and the SWOT analysis. Thus, by employing these two methods, a comprehensive and inclusive overview of the external factors related to the company’s success will be developed.
Porter’s Five Forces
Porter’s Five Forces analysis is a well-recognized and largely appraised framework for analyzing factors, which are external to a certain business. Ultimately, this approach focuses mainly on the concept of competition in the industry as the primary driving factor of economic development. The five forces which are considered by Porter’s framework are the following: the threat of new entrants, the threat of substitutes, bargaining power of buyers and suppliers, and the overall intensity of competition in the given industry.
Considering the threat of new entrants, it is possible to state that it is considerably difficult to pose a threat to Amazon in this sphere at this point in the company’s development. As it was already mentioned, Amazon invests significantly large budgets into the development of its software technologies, supply chain sustainability, and the improvement of customer services (“Amazon.com Inc,” 2018). Thus, a new entrant in the same industry who aims at competing with Amazon should be able to invest respectively large sums of money into such research, which is a difficult challenge for a newcomer in the retailing industry.
Accordingly, the threat of substitutes could also be considered as not profoundly substantial. Because Internet communication technologies became more and more spread, competition with physical retail stores could not be viewed as a serious threat. Regarding the substitution by other online stores, it is possible to repeat the same argument: the newcomer in this industry would hardly be able to provide the same range of services and products as Amazon does.
Considering the bargaining power of buyers, it is essential to consider that Amazon has two primary types of buyers. The first group consists of regular customers, who independently purchase products and services through Amazon websites. The second group is the third-party manufacturers and retailer who sign contracts with Amazon to be presented in the market. Thus, the bargaining power of the first group of buyers is insufficient for decreasing the profit of the company. However, the second group of buyers can achieve their presence in the market by using other options. Accordingly, because third-party firms contribute to the overall profit of Amazon to a larger extent, their bargaining power should be considered as moderate.
The next factor, which is largely related to the previous one, is the bargaining factors of suppliers. As it was already mentioned, Amazon has built an immensely successful and sustainable supply chain that allows the company to provide product shipment and other customer services across the world. Overall, it could be mentioned that the bargaining power of suppliers is considerably low due to several factors. First and most evident aspect is that Amazon is one of the largest international retailers, and thus the company can choose from numerous options and sign contracts with suppliers in its terms (“Amazon.com Inc,” 2018).
Secondly, as it is the case with the majority of the company’s spheres of interest, Amazon also largely invests in the research of the supply market. Therefore, the corporation gains an additional competitive advantage by doing so.
Lastly, the intensity of competition in the industry is the final determining factor in Porter’s framework, which is based on the combination of the previously mentioned factors. Enough, the industry of online retailing is rival to an immense extent because it is one of the most important industries in terms of fulfilling customers’ demands. The most evident competitor is eBay, the company which offers relatively the same set of products as Amazon (“Amazon.com Inc,” 2018). Additionally, Google also contributes to competition in the industry. As it was exemplified previously, it is particularly difficult for a newcomer to successfully enter the market of online retailing, and this rivalry between several large corporations is projected to be highly intense.
SWOT Analysis
In addition to the analysis of the competition in the industry of online retailing, the SWOT analysis should also be performed as it is one of the most efficient approaches to developing an overall understanding of the company’s position in the market and its future perspectives. As it is apparent from the discussion that was developed previously, the primary strength of Amazon is it was able to develop a strong brand image of the international provider of products and services. Particularly, the company’s investments in the market and technology research ensure its position as the leading retailer in the industry.
The main weakness of the company that is essential to mention is that Amazon is forced to outsource some of its processes, primarily related to the supply chain management and distribution of products to third parties due to the company’s size and global presence in numerous markets. Thus, the company becomes largely dependent on other firms and organizations in terms of providing its services globally. Additionally, Amazon, as it is an integral part of the international economy, is subject to economic crises and uncertainties that can arise.
The primary opportunity for the company is the growing number of Internet users across the world. Thus, the demand for online services provided by Amazon is also growing. Expansion in growing markets, such as China and India, could be considered as the opportunity that the company is taking. Another direction in which the company is also heading in the development of its products. By investing in the development of its manufacturing processes, Amazon ensures that a lesser amount of products and services will be substituted by third parties shortly (Irani, 2015).
As it was evident from Porter’s Five Forces analysis, the threat of newcomers, as well as the bargaining power of buyers and suppliers, are not highly important for the company. However, one of the evident threats that can emerge in near future is the development of legal regulatory processes in the sphere of online retailing that could be initiated by the local government of countries in which Amazon operates.
Other Aspects Related to the Company
Three Main Strategies Followed by the Company
The majority of strategic approaches of Amazon were discussed in previous sections. However, it is possible to directly quote three strategies that the company follows. According to the article by Field (2018), Jeff Bezos, founder, and CEO of Amazon states that his company is built based on the following premises: (1) standards are contagious, (2) clear and realistic expectations should be set, and (3) it is essential to stay involved with the people the company serves.
The Company’s International Influence in Foreign Markets
It should be stated with certainty that, due to the magnitude of Amazon as one of the largest providers of online retailing services, its impact on foreign markets is evident. In general, the development of the company marked the global changes in the retailing industry and the use of the Internet communication technologies (Irani, 2015). Also, the presence of Amazon in foreign markets has a vast influence on the economic development of the countries in which the company operates because Amazon cooperates with numerous local suppliers and other third-party organizations.
Comparison and Contrast of the Company’s Diversification Strategies
According to the article by Mazzei and Noble (2017), Amazon is one of the best examples of a company implementing the diversification strategy. The authors indicate that the use of big data, which was already mentioned in the paper (namely, in the form of the international market research), allows Amazon to diversify its business processes and ensure sustainable growth. In particular, Mazzei and Noble (2017) mention Amazon Web Services as an efficient instrument of diversification.
Ethical Concerns that Affected Stakeholders in the Past 20 Years
The improvement of the ethical standards of the company became an important issue in recent years. Since the establishment of the company, Amazon gained the reputation of the corporation that values its customers the most. However, recent insights into the company’s employment and worth ethic indicate that it is essential to improve this aspect of Amazon’s corporate culture (Kantor & Streitfeld, 2015). One of the most important problems mentioned by Kantor and Streitfeld (2015) is that the company sets unreasonable high standards for their workers without properly appraising them.
Substantiating Findings from Financial Statements and Further Recommendations
According to the financial statements provided on the Reuters website, since 2016, the company’s earnings per share grew from 1.538 to 5.068 (“Amazon.com Inc,” 2018). The company’s and industry’s growth rates also show a generally positive tendency (“Amazon.com Inc,” 2018). Return on assets and return on investment grew from 2016 significantly. Therefore, it is possible to recommend that the company would continue to expand to growing markets to ensure its leading position in the industry.
Conclusion
One should state that the analysis, which was conducted in this paper, exemplifies the vast variety of factors that contribute to the overall success of the company. In the case of Amazon, it is possible to observe that the company has achieved immense success by entering the emerging market of online retailing with the appropriate timing. Further, as this market has been constantly growing, Amazon ensured its position by investing in market research, supply chain management, distribution, and customer service.
Therefore, in the contemporary international market, the company represents one of the leading corporations that have a critical impact on the overall development of the global economy. Accordingly, it could be concluded that Amazon is an excellent example of how an international business should be built.
References
Amazon.com Inc (AMZN.O). (2018).
Etemad, H. (2017). The emergence of online global market place and the multilayered view of international entrepreneurship. Journal of International Entrepreneurship, 15(4), 353-365.
Field, H. (2018). Jeff Bezos reveals 3 strategies for Amazon’s success. Entrepreneur. Web.
Irani, L. (2015). Difference and dependence among digital workers: The case of Amazon Mechanical Turk. South Atlantic Quarterly, 114(1), 225-234.
Kantor, J., & Streitfeld, D. (2015). Inside Amazon: Wrestling big ideas in a bruising workplace. The New York Times.
Mazzei, M. J., & Noble, D. (2017). Big data dreams: A framework for corporate strategy. Business Horizons, 60(3), 405-414.