Option 2: Amazon.com (pp. 522–523) 1. With respect to the distribution, why has

Question

Option 2: Amazon.com (pp. 522–523) 1. With respect to the distribution, why has Amazon succeeded when so many other companies have failed? 2. From a theoretical standpoint, what is Amazon’s pricing model? Why is this so effective? How does this compare to their competitors? 3. Discuss how Amazon has used differentiation and positioning as two key components in maintaining a competitive advantage. 4. Thinking about the changes in the macro and micro environment, what is next for Amazon? Where else can it grow?

Explanation / Answer

Amazon was started by Jeffrey.P. Bezos in the year 1994 and has grown into a e-commerce giant through its well thought of strategies and enjoys the top 11th position on website search in this sector.

Probably the reason why it has succeeded so well where other companies have failed is due to its startegy of acquising many small companies into its fold including Pets.com,IMBD.com, CDnow.com etc which shows that it is an organization that welcomes additions of new products where as many other companies would not even venture to do so. Due to these many products under one umbrella and vast outreach, it has a very strong customer base and people think about the site first for all the information that they want when they are trying to decide on buying a product. Many suppliers too tied up with Amazon as it was very easy to integrate into their logistic and suplly chain procedures. Amazon's cheaper price and anywhere shipping service also has helped the organization to stay on top of their game, beating the competitor's along the way.

Amazon prices its products based on customer value-based pricing that is it caters to the price point that customers are willing to pay for the product and also has something called the subscription model ,where the long time customer is hugely rewarded through Low prices and discounts as well as free shipping offers.

Amazon as an organization has several moving parts. Its inventory and products are sold with a mark up directly on the online platform and it also provides third party retailers to sell on this platform but charges a small commission on it. It also provides cloud infrastructure which is an added advantage to sellers as well as buyers. Amazon Logistics is the wing of Amazon that has reduced the dependence on other couriers including UPS and FedEx thus enabling Amazon to strategize real time for its product delivery services and options.

Amazon focuses on a hybrid startegy of both cost leadership and differentiation but cost leadership taking the upper hand. Amazon has established a massive warehousing facilities and processing capabilities to achieve physical economies of scale. This definitely goes a long way in providing cost advantage over competitors but through the services provided by it, Amazon follows a differentiation startegy. The key component that Amazon is always keen on is Customer feedback as delighted customer tend to spread the feedback to their immediate friends and families. This differentiation strategy not only brings loyalty but also encourages customers to buy more from Amazon.

The next move for this e-Commerce Giant is limitless as its cloud computing is considered to be the safest and so it may venture into many areas. This may include insurance, money lending or selling cars and higher valued products on its portal. Along with this, it can venture into telecom services including international calling providing the cheapest rates.

You can use the above information to guide you to outline your answer better in your own words.

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