Marketing Strategy Amazon

Marketing Marketing Strategy of Amazon CHAPTER I Amazon.com Overview

Amazon.com was one of the first major companies to sell goods over the Internet and has  become a worldwide established establ ished name. Amazon.com is an American e-commerce company that is based in Washington. It was founded by Jeff Bezos in !!" and began as an online  boo#store but due to its success$ Amazon has diversified into other product lines and services such as groceries$ groceries$ electronics and %erchant &rogram 'see Appendi( Appendi(  for detailed  portfolio). Amazon.com*s stoc# price has fluctuated in recent years from +, in !!! to + in ,, '/auden and 0raver$ ,,,). Amazon.com has developed separate websites for  1ana 1anada$ da$ 23$ 23$ 4erm 4ermany any$$ 5ranc 5rance$ e$ 1hina 1hina and Japan Japan.. Amazon mazon.co .com m visio vision n is to becom becomee 'Amazon.com$ ,,6)7

89arth*s biggest selection and to be 9arth*s most customer centric company Analysis External Analysis

0he e(ternal environment is referred to as the macro-environment macro-environment.. 0his includes the  broad environmental factors which will affect organisations at various levels. It is important to consider the potential impact of the e(ternal factors on the individual organisations 'Johnson et al$ ,,:$ &:).

 PESTEL Analysis

&9;09/ analysis is used to identify how future trends in the political$ economical$ social$ social$ technol technologic ogical$ al$ environm environmenta entall and legal legal environm environments ents might might influenc influencee an organisation. Industry and cometitor analysis

0he analysis on industry and competitor environment is important for organisations$ because it is useful for managers to understand the competitive forces acting on and between the organisations in the same industry 'Johnson et al.$ ,,:$ p66).

Porters !ive !orces in t"e E#Retailin$ Industry

&orter*s 5ive 5orces analysis is used to assess the attractiveness of different industries$ and therefore$ it can help in illustrating the sources of competition in a particular industry Page 1

Marketing Marketing Strategy of Amazon  Cometitor Analysis

4iven 4iven the the scope scope of Am Amazo azon.c n.com om*s *s produc productt range range$$ there there are are hun hundre dreds ds of websi website tess that that Amazon.com competes with. Accessed 6.,.,?@ 0he graph above shows that the global Internet retail sector grew by ".? in ,,: to reach a value of +6"6.: billion.

Rest o- t"e world ./0

(nited States ++.10

 Asia Paci-ic +,.10

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Marketing Strategy of Amazon &E 2atrix A 49 %atri( has been used to identify the attractiveness and competitive position of the mar#ets that Amazon.com operates in$ using the indictors as identified by Johnson et al ',,:$ p,). As previously discussed$ all mar#ets are facing similar conditions$ however  1hina and the 2;A appear the most attractive as they are the largest and most dynamic mar#ets. 1hina and 1anada have the wea#est positions within their mar#ets$ suggesting that investment is reCuired for improvement. 0he other mar#ets have strong positions within the industry.

Internal Analysis

Internal analysis provides a useful method to establish the relationship between Amazon.com*s resources and capabilities 'internal strengths)$ and how this is used to create value for the customer. 0he internal analysis can also help to identify the limitations within Amazon.com*s operations 'Johnson et al$ ,,:).

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Marketing Strategy of Amazon T"e 3alue C"ain

0he value chain analysis underta#en e(amines the operational effectiveness of activities that enable Amazon.com to perform better than its competitorsD i.e. the distinctive value chain activities that are difficult to imitate. 2sing the framewor# proposed by Amit and Eott ',,) this analysis focuses on Fvalue creation* and Ftransaction cost economies*D where Amazon.com configures its value chain activities to create uniCue value for customers$ reduce its costs of carrying out these activities and reduce the cost of its customers* transactions. 0he figure below indicates e(amples of how Amazon.com has created value and reduced costs in its value chain activities.

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Marketing Strategy of Amazon S4OT Analysis =rawing from the internal and e(ternal Analysis$ we can summarise Amazon.com*s strengths$ wea#nesses$ opportunities and threats in the following ;WG0 Analysis. 5or a more detailed ;WG0 see Appendi( ".

Stren$t"s 4lobal brand 5ocus on research and development ;trategic location 1ustomer-centric vision =iverse products Applied advanced technology Amazon.com*s %erchant &rogram ;#illed wor#force ;trong logistics

        

       

Oortunities 4rowth in movie downloads ;ocial networ#ing 4rowth of online shopping in 1hina Beijing Glympics ,,? 9(pansion through acCuisitions 4rowing e-commerce sales 4rowth in digital media Increased consumer spending in India

4ea5nesses   Ho physical presence  /ow profit margins  /ow cash flows Wea# performance in 1hina 

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T"reats =ependent on vendors ;trong competition &atent infringement

Strate$ic Otions Strate$ic Otion % 2ar5et 6eveloment - AcCuire a growing$ profitable e-retailing

company in India to ta#e advantage of the growing mar#et. Suita'ility

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0he &9;09/ analysis reveals consumer spending is rising in India '0imes Gnline$

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Marketing Strategy of Amazon ,,6) 

5rom the analysis of global internet trends India ran#ed as the fifth highest in Internet usage 'Internet World ;tats$ ,,6)

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4overnment policy has targeted three million broadband users$ therefore increasing consumers* li#eliness to shop online '9uromonitor$ ,,6)

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5rom the strategic group*s analysis competitors such as Wal-%art and 0esco aim to increase their geographic scope and thus may enter the Indian mar#et 'esearch and %ar#ets$ ,,). 0herefore it is vital for Amazon.com to gain from first mover  advantage to establish its presence

!easi'ility

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0he ;WG0 'Appendi( ") reveals that one of the strengths of Amazon.com is the e(perience and #nowledge in successful acCuisition and integration such as boo#surge.com and dpreview.com and Brilliance Audio

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Amazon.com need to borrow to finance the acCuisition$ which may be  problematic as they are already highly geared at :?

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By acCuiring an Indian e-commerce company they will also be acCuiring the local #nowledge

Acceta'ility 

Internet users are forecasted to increase " from ,,: to ,$ presenting a growing mar#et and$ therefore reducing ris# and increasing the potential of high returns '9uromonitor$ ,,6).

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;hareholders are more favourable towards long- term investments$ such as this strategy therefore there is a higher chance of acceptability '19G /etter to ;hareholders$ Amazon.com ,,: Annual eport$ see Appendi( )

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By acCuiring a company there is the ris# of cultural conflict

Strate$ic Otion +% Service 6eveloment # &roviding a Fgreener* delivery option.

1onsumers will be given the choice of selecting the standard delivery option or the Fgreener* delivery option. 0he Fgreen* option means that the items will be delivered in a  biodegradable plastic container. 0he consumer will be encouraged to return the bo( after  Page 8

Marketing Strategy of Amazon use in return for a Fgreen point*. After collecting a certain amount of points$ the consumer  will be sent an e-voucher to be spent at Amazon.com. Bo(es will be re-used by Amazon.com in future deliveries$ which in the long-term will reduce cost of pac#aging and ensure less wastage.

Suita'ility 

0his strategy will address the issue of increased environmental awareness$ as highlighted in the &9;0/9 analysis.

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0his is an important issue for the e-retailing industry as all products need to  be sent to customers.

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0his

strategy builds on Amazon.com*s past efforts

to maintain

environmental awareness as highlighted in the esource Based iew analysis.

!easi'ility

Biodegradable plastic containers$ whilst currently available$ will reCuire e(tensive research by Amazon.com to ensure that all products can be transferred safely to consumers. Amazon.com has an active research and development department which can  be utilised for this purpose. Amazon.com has highly e(perienced wor#ers 'as shown in the alue 1hain) who should be able to create and manage the new Fgreen points* system and e-vouchers.

Acceta'ility

0here is a ris# that the consumers will not return the bo(es for re-use. 0he cost-benefit mentioned above will therefore not be obtained. As society becomes more socially aware$ consumers will want to ma#e a difference through their pac#aging choice. 4overnments may ta#e an interest in the greener initiative and may support Amazon.com in some capacity. alue creation and the possibility of reduced costs should lead to increased returns for shareholders.

Strate$ic Otion 7% Product 6eveloment 0his option recommends the addition of 

 prescriptive contact lenses to Amazon.com*s product range.

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Marketing Strategy of Amazon Suita'ility 

1ompetitor analysis has identified that Wal-%art.com and 0esco.com offer this service$ so by choosing this strategy Amazon.com will be able to be competitive.

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0he 2; mar#et for eyeglasses and contact lenses has grown by .? since ,, to reach a value of 2;+!. billion in ,," 'see 5igure ")

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An estimated :, of the 2; population reCuires vision correction. 0his number is e(pected to grow as more consumers spend more time wor#ing with computers '9uromonitor$ ,,?).

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0he graph below shows the increase in contact lenses in the geographic regions where Amazon.com has a presence.

!easi'ility

Amazon.com*s value activities 'as e(plained in alue 1hain Analysis) include successful cooperation and joint ventures with other companies. In the case of contact lenses a partnership with healthcare professionals is important.

Acceta'ility

;ales of optometric products will increase customer choice in healthcare goods. 0he initial investment for this option will be high$ however$ long-term profitability reduces the overall financial ris# associated.

Strate$ic Otion 8% 2ar5et Penetration in C"ina

Amazon.com entered the 1hinese e-commerce mar#et in ,," by ta#ing over Joyo.com '1hina I0 K 0elecom eport$ ,,6). >  some 2; + billion offline orders were influenced

 by the Internet and this influence on consumer in-store spending was eCuivalent to seven times the value of purchases paid for online. ;o$ the good news for retailers with virtual stores$ and those contemplating the step$ is that consumer spending online is e(pected to increase by ?, yearly between now and ,,.

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!orrester Researc" =>>?  consumers and businesses will funnel total of +? billion

through e-commerce sites this year. And in an Gctober !!: report$ they predicted that by year ,,,$ more than +": billion will be spent online--and the organization.

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I6E Canada =>>? $ the bad news for the 1anadian retail industry is that more than

:, of online dollars are being spent outside the country$ with the 2.;. being the Page 21

Marketing Strategy of Amazon  primary beneficiary. Gne of the main reasons for this is that only a Cuarter of top retailers in 1anada are telling online$ compared to , of 2.; retailers$ leaving a gaping void in the mar#et. When 1anadian consumers cannot find the product or  service they want on a 1anadian web site$ they turn to the better selection offered south of the border$ despite the unfavorable currency e(change rate and e(tra shipping time involved. It is interesting to note that Amazon. 1om is already the third most  popular boo#seller in 1anada$ a testament to the growing popularity of online shopping.

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InternationalB 6ata cororation* =>>? $ 0he Internet K

9mployment$ shows

online shopping growing at e(ponential rates in America with sales in the last si( months of !!? increasing by some ,,. In the 2.;. consumers purchased 2;+. "  billion worth goods on the Internet in !!?$ as compared to 2;+". billion the year   before. In 1anada$ e-shopping appears to be catching up$ with half a million 1anadian households shopping online in !!?. $ . ;ales reached + :!, million$ up from +6, million in !!6 a: increase. &rojections of future Internet commerce vary according to the source$ with the I=1 1anada estimating sales of +.? billion by ,,$ some ".: of total retail spending in 1anada. Grganization for 9conomic 1ooperation and =evelopment 'G91=)? '!!?) predicts that$ within the ne(t five years$ as much as  of retail sales in the world*s industrialized countries will be conducted over the Internet. According to them online presence offers some less obvious opportunities for growing business. 5or e(ample$ research indicates than the Internet is powerful driver of in-store sales$ as many customers browse online to access product information before committing themselves.

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Pivec =>>? concluded in his study that the emergence of internet brings changes into

social$ cultural and moral e(perience of people. 0his applies especially to teenagers who are attracted to internet much more intensively than any other section of   population. 1yber cafes are fast becoming the favored meeting places and net surfing the favorite past time. 0he study also brought out the internet use pattern among the  primary and secondary school students. It also indicates various purposes for which the younger generation is using the internet.

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Marketing Strategy of Amazon •

6utta =>>>? $ In the India 5%14 business margins are as low as ,.