Value Creation of Amazon

Topics:, Electronic commerce, Online shopping Pages: 6 (1794 words) Published: October 15, 2012
Value Creation of Amazon

1 Introduction
With the development of technology and economic globalization, the lives of people have been enriched and online shopping is becoming the first choice of the majority. Amazon Company is an online retailer which has the most varieties of goods in the world. This report would introduce the Amazon’s background first, following with the discussion and analysis of Amazon’s strengths and weaknesses as well as its opportunities and threats. At last, this paper would propose and defend one of the most appropriate strategic directions of Amazon Company in different aspects to take over in the next three to five years.

2 Introduction and analysis of Amazon

2.1 Amazon’s background
Amazon is a Fortune 500 company which was established by Jeff Bezos in 1994 and headquartered in Seattle, Washington, USA. At present, it is the world’s second largest E-business company with the wildest range of consumer products. There are three subsidiary companies under the name of Amazon, which including Alexa Internet, and Internet Movie Database (Brandt, 2011). In the early stage, Amazon was a basic online bookstore named Cadabra (Byers, 2006). However, with a vision of Jeff Bezos saw the potential and characteristics of internet, online bookstore can provide more books than traditional stores for readers to choose, as well as the other products. After realizing this situation, Jeff Bezos restructured the company by increasing the types of merchandise and renamed to Amazon in 1995.

2.2 Amazon’s opportunities and threats
Amazon’s network marketing model is based on the development of internet technology. Therefore, as technology is advancing, Amazon continues to make progress undoubtedly. In addition, since the pace of life is increasing, all other considerations are subordinate to saving time and effort, hence online shopping has become the most popular shopping method for an increasing number of consumers. Moreover, the key to the success of Amazon was that Jeff Bezos originally chose the most appropriate market blank: books, since this market has no competitor on the Internet in the early age. With the expansion of the business, Amazon now is not only an online book retailer but also sell CD, software, home appliances, toys, apparels, food and stuff. These new markets brought new opportunities for Amazon. As we know, the most effective method to expand the scope of the online retail market is the acquisition of other renowned E-business websites. For instance, the acquisition of in 2004 helped Amazon to open the door to huge Chinese market which increased its market scope sharply. Furthermore, while Amazon already has excellent online service system, but the customer’s desire is endless. This is a challenge but also an opportunity. As long as the customers’ satisfaction of services could be achieved, the number of customers would increase significantly. However, because of the low operating costs and other miscellaneous benefits, more enterprises are entering the online retail market. Amazon will have to face the cruel competition of other rivals in this industry. In addition, other traditional physical bookstores are expanding their business as well. For instance, Barnes & Noble is the largest physical bookstore in the United States but used to occupy only 11% of the market (Robinson, 2010). German media giant Bertelsmann which has a great number of publishing companies invested $ 200 million to obtain 50% of the shares of B&N online business. This acquisition made the B&N become the biggest competitor with Amazon. On top of that, Bertelsmann spent $600 million to buy Ingram Book Company which was the book supplier of Amazon (Dougherty, 2009). In consequence, Amazon had to look for new suppliers which would definitely increase the operating cost. Moreover, another kind of terrible power is threatening Amazon’s online retail business. Network always have the risk of suffering...
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