Pros and Cons of Amazon's Diversification

Topics: Leadership, Sales, Electronic commerce Pages: 7 (1918 words) Published: October 21, 2011’s E-Business Model
Professor Dr. Gary Shelton
BUS 508
July 23, 2011

Pros and Cons of Amazon's Diversification

There are both pros and cons to this growth and diversification of Amazon. Since Amazon's growth and diversification was done gradually, there was little chance for it to backfire on Amazon. Giving them the time needed to work out the problems. “The design of the marketplace can help to influence success by improving the flow of information, thereby reducing stress and enabling buyers and sellers to function more effectively”. (McMillan, 2002) By setting the main page to show consumers favorites based on prior purchases, Amazon was able to build a loyal customer base from which they could try different marketing and selling strategies. The company uses this customer base in their to expansion and diversification, based on their needs and wants. Amazon have also allowed many small businesses to partner with them to provide services, Expanding their business even more. By expanding and diversifying their business amazon has helped to pioneer the Business to Consumer e-business during a time when many dot coms were falling short.

“The cons of diversification include a lack of basic knowledge of a new industry, having double the sales team, and may be incompatible businesses”. (Diversification in Business, 2011) Amazon had their start with just selling books. However once they expanded into selling items such as clothing, grocery, and music, they had to contend with themselves and outside selling forces. When selling different items there is different product related jargon that the sales team would have to learn. Another thing that can be seen as a con is when a product doesn't sell well due to bad reviews. “Posting feedback for a product may be counterproductive in the grand scheme of things. For one thing, it doesn't ensure honest feedback”. (David and Pinch, 2006) since its very easy to change your online identity. Users could also abuse the feedback system by posting distorted or false data about either the product or the buyer or seller. For example is I was a seller and I had competitors I could register several times and post negative comments about them. Then post positive ones about myself. “Also, if a user with a negative reputation registers with a different screen name, they can effectively erase a previous rating”. (Resnick et al. 2000). “Unfortunately, recommendation consumers, those who buy products based on how highly recommended it may be, don't know if the reputation is based on feedback from low-value transactions. They also don't know who the raters are and what their experiences with the product are”. (Standing, 2009)

Impact of becoming a family of brands

Amazon was first known for its dealing in books, however now Amazon has my different brand lines that they carry. If Amazon had split up to become a family of brands sort of company, I don't believe Amazon would have succeeded for as long as it has. To be serviced it would have required yo use several different lines of communication. For example you call in to talk to someone about several different items such as a book, a toy, and a new pair of shoes, and the person who answers the phone may only be able to help with one item, if at all. You would be transferred between “departments” and by the time you hang up, or you lose the call, you would be so confused and angry from being sent from department to department that you may not deal with Amazon again. Based on your negative feedback, it might just turn the tide against the company if other people have the same complaints. Not to mention that if they had broke it to different brands that you would have to use several different site to complete your shopping. This would also leave the company dealing with advertising for several sites.

Is it possible for Barnes and Noble or Borders to extend their markets

As rivals in the book selling...

References: McMillan, J. (2002) Reinventing the Bazaar. New York: Norton and Co. Ltd.
Resnick, P., Zeckhauser, R., Friedman, E. And Kuwabara, K (2000) Reputation systems. Communications of the ACM, 43 (12), 45-48.
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