Company Swot Analysis Of Amazon Marketing Essay

Published Date: 23 Mar 2015

Amazon being a powerful global brand is recognizable because of two main factors: It is one of the original dotcoms that developed a customer base of over 30 million people in a period of about 10 years, and also known as an initiator for online technologies for e-commerce that made it one of the first online-retailers.

The mission and strategy of the company is very simple as stated by its founder: "Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they may want to buy online, and endeavor to offer customer the lowest possible prices."

Company SWOT Analysis

Strengths

Lower prices: The company operates on considerably lower prices than competitors. This is an advantage that has helped Amazon to be in the market even when others online companies have dropped out of business.

Bigger selections on books: Selling books online provides consumers with a virtually limitless selection of books available for their online glance or purchase. The online bookstore can sell many times more than a regular bookstore with no presence on the internet. Most orders through Amazon.com were placed directly through wholesalers and publishers, so no warehouse was needed. Amazon.com would simply receive the books from the other sources, and then ship them to the customer.

Website differentiation:. The advanced searching capabilities of the internet were exploited in every possible way to enable searches by author, title, subject, publication date and keyword, across the whole website. Also, Amazon.com customer interface can be customized to each customer preferences. Depending on the user profile and purchasing history, each user is offered adittional recommendations based on what other users had purchased. Furthemore, the website foster a community of customers by encouraging readers to submit book reviews and facilitating online discussion about previously read books. In addition, Amazon has developed some e-commerce innovation such as 1-Click technology, friendly user search and browse features, secure payment personalized shopping services and wireless access to their stores.

Customer Service: Since its beginnigs the company understood the importance of customer retention that translate to ensuring customer loyalty and repeat customers. Amazon offers its quality service through reduced prices, wider selection of titles, and dramatically improve purchasing convinience. Amazon.com also focuses on additional elements that customers want, such as concentration of quality, reliability, security and availability of product. Amazon.com's customer loyalty was established from the beginning and continually improves due to the focus and efforts made by Amazon.com in continual customer service improvements.

Weaknesses

Shipping Charges: although the company frequently has specials of free shipping, this does not happen all year. Many emerging companies are gaining customers since they offer free shipping on any items and all year long.

Online-retailers require focus on their technology which is quite important. The system requirement, especially the maintenance of the systems is held to be constant that should be maintained in order to ensure customer satisfaction by providing the level of service the customer is expecting without any delay.

It is dependent on external delivery firms that carry out the delivery function that may lead to uncontainable problems regarding the delivery service and it may potentially increase costs, with the wider transportation industry i-e rising fuel and increased vehicle taxation.

Opportunities

The company may at some point need to reconsider its strategy of offering free shipping to customers. It is a fair strategy since one could visit a more local retailer, and pay no costs. (Va a ser una recommendation too)

There are also opportunities for Amazon to build collaborations with the public sector. The benefit is that customers can search for rare or antique books. The library's catalogue of published works is now on the Amazon website, meaning it has details of more than 2.5m books on the site. ( va a ser una recommendation)

It can invest in maintaining the customer expectation which will promote the customer's loyalty towards the firm.

Threats

Competition will increase due to the low barries to entry in the market since offline companies are coming online. All successful Internet businesses attract competition. Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult to differentiate the brand from its competitors.

International competitors may also intrude upon Amazon as it expands. Those domestic (US-based) rivals unable to compete with Amazon in the US, may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets.

The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures such seasonality may not be enduring

Main Business Strategies

The success of Amazon is linked to the business model and the strategy the firm has employed in order to fulfill its goals and objectives. There are three operational strategies that the company has followed to achieve its success on the market, such strategies include cost-leadership, customer differentiation, and focus strategy (http://wiki.media-culture.org.au/index.php/Amazon_-_Business_Model).

The first strategy, which was mentioned before as a company's strength, is used by differentiating the company on the bases of price. Due to this strategy, Amazon.com always makes sure that it offers the same quality products as other companies for a considerably less price.

Their second strategy is customer diffentiation. Amazon.com provides current and prospective customers with differentiation through design, quality or convenience and Amazon.com always selects a differentiator that is different among the competitor. So, Amazon.com consumers can recognize and differentiate its products from competitors.

The last strategy that it uses is a focus strategy. This strategy takes one of the two earlier strategies and applies it to a niche within the market. Amazon.com fouses on outstanding customer service as a niche but not the whole market because each niche has its own demand and requirement.

Suggested Strategies

There are five international stores of Amazon.com: Amazon Canada, Amazon France, Amazon UK, Amazon Japan, and Amazon Germany. Someone may argue that why Amazon.com needs international stores when anyone, anywhere can get online and buy stuff from Amazon. However, Amazon.com opened international stores for the following good reasons.

Company SWOT Analysis (http://wiki.media-culture.org.au/index.php/Amazon_-_Customer_Interface)

http://perleybrook.umfk.maine.edu/slides/spring%202006/Bus411/44

Strengths

•    Amazon is the leading online-retailer regarding media-products that educate and entertain.

•    Amazon being a powerful global brand is recognizable because of two main factors: It is one of the original dotcoms that developed a customer base of over 30 million people in a period of about 10 years, and also known as an initiator for online technologies for e-commerce that made it one of the first online-retailers.

•    Customer Relationship Management and Information Technology both work as a driving force for Amazon's business strategy. The firm records user data on buyer behavior, which enables them to offer to an individual any specific item or bundle of items, usually based upon the preferences verified through the purchases or items visited.

•    It has a diversified product portfolio such as books, CD/DVD; it has also gained additional customers in other product areas that indicate the need for the business to grow through new customer bases.

•    User Reviews are used to share information and provide feedback regarding that information that helps in stimulating sales.

•    It has also provided the option of a market place where a seller can sell an unwanted item online and a buyer can buy it from that seller, there is usually a difference regarding the competing retailers as it ensures customer loyalty and trust, which makes the bond with the customer stronger and the loyalty is more durable.

•    It provides a product called "AMAZON MP3", which is an expansion regarding the music download, and it is slightly cheaper than its counterpart iTunes.

•    It has also produced a wireless device that reads electronic books, the product is known as "KINDLE". Electronic books for this device can only be bought from "amazonkindle.com". Being a wireless device, it holds an option to directly download the required e-book using 3G wireless.

•    Purchases that cost more than $25 provide the shipping and on-time delivery free of cost. The customer also holds the option to having a 'Guaranteed Accelerated Delivery' that is the delivery speed for the product to reach the destination.

Weaknesses

•    There is a risk to the brand image regarding the product expansion for different products that are not related to books, Amazon is the number-one online-retailer, and the more product offerings might weaken the brand due to the confusion it embeds on the consumer.

•    Online-retailers require focus on their technology which is quite important. The system requirement, especially the maintenance of the systems is held to be constant that should be maintained in order to ensure customer satisfaction by providing the level of service the customer is expecting without any delay.

•    It is dependent on external delivery firms that carry out the delivery function that may lead to uncontainable problems regarding the delivery service and it may potentially increase costs, with the wider transportation industry i-e rising fuel and increased vehicle taxation.

Opportunities

•    The firm can build partnerships with the public sector, as it will use public libraries to provide a search option and catalogue for potential users which will also cover the antique and rare books.

•    It can develop relationship with the publishers for exclusive offers and launch authors that are exclusively for the firm which would generate growth because consumers have a tendency of reading the author again.

•    It can invest in maintaining the customer expectation which will promote the customer's loyalty towards the firm.

•    The firm can vend its expertise to many store groups.

•    It can partner with many e-com retailing firms.

Threats:

•    Internet businesses attract competitors quickly, and it is quite difficult to maintain their products as differentiated ones, which makes it difficult to differentiate its brand from that of the competitors.

•    Competitors will grow more as expansion occurs.

•    Transportation costs are increasing due to the high fuel price increments, and which will directly impact the charged price on the customers because these charges are paid to a third party and it is assumed that these will be directly passed onto the consumer which may have a negative impact to brand perception from the customer point of view.

•    Good economy circumstances will initiate the price level to go down which in return will hold the customer expectations regarding the promotional deals that will be the main focal point for all product areas but with smaller economies-of-scale, the marketplace will not have the sufficient offers on buying power.

•    The expansion of Amazon will need to consider the facts and the figures regarding the country it is expanding in. It will need to consider the trends and customs in order understand and make potential customers

Statistics:

Public Company

Incorporated:1997

Employees: 7,800

Sales:$3.9 billion (2002)

Stock Exchanges:NASDAQ

Ticker Symbol:AMZN

NAIC:45411 Electronic Shopping and Mail-Order Houses

Company Perspectives:

We seek to offer the Earth's Biggest Selection and to be the Earth's most customer-centric company, where customers can find and discover anything they may want to buy online.

Key Dates:

1995: Amazon.com debuts on the Web.

1997: The company goes public; Amazon.com becomes the first Internet retailer to secure one million customers.

1998: Amazon.com enters the online music and video business; companies are acquired in the United Kingdom and Germany.

1999: The firm expands into selling toys, electronics, tools, and hardware; Bezos is named Time Magazine's "Person of the Year."

2001: Amazon.com reports its first net profit during the fourth quarter.

Company History:

Considered a pioneer in online retailing, Amazon.com, Inc. expanded during the late 1990s to offer the "Earth's Biggest Selection" of books, CDs, videos, DVDs, electronics, toys, tools, home furnishings and housewares, apparel, and kitchen gadgets. Through third-party agreements, Amazon.com also sells products from well-known retailers including Toysrus.com Inc., Target Corporation, Circuit City Stores Inc., the Borders Group, Waterstones, Expedia Inc., Hotwire, National Leisure Group Inc., and Virgin Wines. Sometimes criticized for its focus on market share over profits, Amazon.com put investor fears to rest when it secured its first net profit during the fourth quarter of 2001.

The Early 1990s: Beginnings

Throughout the 1990s, the popularity of the Internet and World Wide Web swept across the world, and personal computers in most businesses and households got hooked up in some form or another to Internet providers and Web browser software. As use of the Internet became more prevalent in society, companies began looking to the Web as a new avenue for commerce. Selling products over the Internet offered a variety of choices and opportunities. One of the pioneers of e-commerce was Jeff Bezos, founder of Amazon.com.

In 1994, Bezos left his job as vice-president of the Wall Street firm D.E. Shaw, moved to Seattle, and began to work out a business plan for what would become Amazon.com. After reading a report that projected annual Web growth at 2,300 percent, Bezos drew up a list of 20 products that could be sold on the Internet. He narrowed the list to what he felt were the five most promising: compact discs, computer hardware, computer software, videos, and books. Bezos eventually decided that his venture would sell books over the Web, due to the large worldwide market for literature, the low price that could be offered for books, and the tremendous selection of titles that were available in print. He chose Seattle as the company headquarters due to its large high-tech work force and its proximity to a large book distribution center in Oregon. Bezos then worked to raise funds for the company while also working with software developers to build the company's web site. The web site debuted in July 1995 and quickly became the number one book-related site on the Web.

In just four months of operation, Amazon.com became a very popular site on the Web, making high marks on several Internet rankings. It generated recognition as the sixth best site on Point Communications' "top ten" list, and was almost immediately placed on Yahoo's "what's cool list" and Netscape's "what's new list." The site opened with a searchable database of over one million titles. Customers could enter search information, prompting the system to sift through the company database and find the desired titles. The program then displayed information about the selection on a customer's computer screen, and gave the customer the option to order the books with a credit card and have the books shipped in a just a few days.

Unlike its large competitors, such as Barnes & Noble and Borders, Amazon.com carried only about 2,000 titles in stock in its Seattle warehouse. Most orders through Amazon.com were placed directly through wholesalers and publishers, so no warehouse was needed. Amazon.com would simply receive the books from the other sources, then ship them to the customer. At first, the company operated out of Bezos' garage, until it was clear that it was going to be a success, necessitating a move to a Seattle office, which served as the customer support, shipping, and receiving area. It was interesting that, because of the Internet, such a small venture could realize such a broad scope so quickly; within a month of launching the web site, Bezos and Amazon.com had filled orders from all 50 states and 45 other countries.

As a pioneer in the world of Internet commerce, Amazon.com strived to set the standard for web businesses. With that goal in mind, Bezos went to work on making the web site as customer friendly as possible and relating the site to all types of customers. For those people who knew what book they were looking for and just wanted quick performance and low cost, Amazon.com offered powerful search capabilities of its expanded 1.5 million-title database. The company also began offering 10 to 30 percent discounts on most titles, making the prices extremely affordable. For other customers who were just looking for something to read in a general area of interest, Amazon.com offered topic areas to browse, as well as lists of bestsellers, award winners, and titles that were recently featured in the media. Finally, for people who could not decide, Amazon.com offered a recommendation center. There a customer could find books based on his or her mood, reading habits, or preferences. The recommendation center also offered titles based on records of books the customer had purchased in the past, if they were return customers to the site.

Other hits with customers were the little touches, such as optional gift wrapping of packages, and the "eye" notification service, which sent customers e-mails alerting them when a new book in their favorite subject or by their favorite author came into stock. The site also offered the ability for customers not only to write their comments about different books and have them published on the site, but to read other customers' comments about books they were interested in buying.

Going Public in 1997

After less than two years of operation, Amazon.com became a public company in May 1997 with an initial public offering (IPO) of three million shares of common stock. With the proceeds from the IPO, Bezos went to work on improving the already productive web site and on bettering the company's distribution capabilities.

To help broaden the company's distribution capabilities, and to ease the strain on the existing distribution center that came from such a high volume of orders, in September 1997 Bezos announced that Amazon.com would be opening an East Coast distribution center in New Castle, Delaware. There was also a 70 percent expansion of the company's Seattle center. The improvements increased the company's stocking and shipping capabilities and reduced the time it took to fill customers' orders. The Delaware site not only got Amazon.com closer to East Coast customers, but also to East Coast publishers, which decreased Amazon.com's receiving time. With the new centers in place, Bezos set a goal for the company of 95 percent same-day shipping of in-stock orders, getting orders to the customers much faster than before.

Another growth area for Amazon.com was the success of its "Associate' program. Established in July 1996, the program allowed individuals with their own web sites to choose books of interest and place ads for them on their own sites, allowing visitors to purchase those books. The customer was linked to Amazon.com, which took care of all the orders. Associates were sent reports on their sales and made a 3 to 8 percent commission from books sold on their sites. The Associates program really began to take off in mid-1997, when Amazon.com formed partnerships with Yahoo, Inc. and America Online, Inc. Both companies agreed to give Amazon.com broad promotional capabilities on their sites, two of the most visited sites on the Web. As the success continued, Amazon also struck deals with many other popular sites, including Netscape, GeoCities, Excite, and AltaVista.

As the company continued to grow in 1997, Bezos announced in October that Amazon.com would be the first Internet retailer to reach the milestone of one million customers. With customers in all 50 states and now 160 countries worldwide, what had started in a Seattle garage was now a company with $147.8 million in yearly sales.

Further Expansion in 1998

As Amazon.com ventured into 1998, the company continued to grow. By February, the Associates program had reached 30,000 members, who now earned up to 15 percent for recommending and selling books from their web sites. Four months later, the number of Associates had doubled to 60,000.

The company's customer database continued to grow as well, with cumulative customer accounts reaching 2.26 million in March, an increase of 50 percent in just three months, and of 564 percent over the previous year. In other words, it took Amazon.com 27 months to serve its first million customers and only six months to serve the second million. This feat made Amazon.com the third largest bookseller in the United States.

Financed by a $75 million credit facility secured in late 1997, Amazon.com continued to reshape its services in 1998. To its catalog of over 2.5 million titles, the company added Amazon.com Advantage, a program to help the sales of independent authors and publishers, and Amazon.com Kids, a service providing over 100,000 titles for younger children and teenagers.

Amazon.com also expanded its business through a trio of acquisitions in early 1998. Two of the companies were acquired to further expand Amazon.com's business into Europe. Bookpages, one of the largest online booksellers in the United Kingdom, gave Amazon.com access to the U.K. market. Telebook, the largest online bookseller in Germany, added its German titles to the mix. Both companies not only gave Amazon .com access to new customers in Europe, but it also gave existing Amazon.com customers access to more books from around the world. The Internet Movie Database (IMD), the third acquisition, was used to support plans for its move into online video sales. The tremendous resources and information of the IMD served as a valuable asset in the construction of a customer-friendly and informative web site for video sales.

Another big change in 1998 was the announcement of the company's decision to enter into the online music business. Bezos again wanted to make the site as useful as possible for his customers, so he appealed to them for help. Several months before officially opening its music site, Amazon.com asked its bookstore customers and members of the music profession to help design the new web site.

The music store opened in June 1998, with over 125,000 music titles available. The new site, which began operations at the same time that Amazon.com debuted a redesigned book site, offered many of the same helpful services available at the company's book site. The database was searchable by artist, song title, or label, and customers were able to listen to more than 225,000 sound clips before making their selection.

Amazon.com ended the second quarter of 1998 as strong as ever. Cumulative customer accounts broke the three million mark, and as sales figures for Amazon.com continued to rise, and more products and titles were added, the future looked bright for this pioneer in the Internet commerce marketplace. With music as a part of the company mix, and video sales on the horizon, Bezos seemed to have accomplished his goal of gathering a strong market share in the online sales arena. As Bezos told Fortune magazine in December 1996: "By the year 2000, there could be two or three big online bookstores. We need to be one of them."

Growth Continues: 1999 and Beyond

As such, the company's focus on growth continued. In 1999, it launched an online auction service entitled Amazon Auctions. It also began offering toys and electronics and then divided its product offerings into individual stores on its site to make it easier for customers to shop for certain items. During the holiday season that year, the firm ordered 181 acres of holiday wrapping paper and 2,494 miles of red ribbon, a sign that Bezos expected holiday shoppers to flock to his site as they had in the two past years. Sure enough, sales climbed to $1.6 billion proving that the founder's efforts to create an online powerhouse had indeed paid off. In 1999, Bezos reached the upper echelon of the corporate world when Time magazine honored him with its prestigious "Person of the Year" award.

While Amazon.com's growth story was remarkable, Bezos' focus on market share over profits had made Wall Street uneasy and left analysts speculating whether the company would ever be able to turn a profit. Sales continued to grow as the company added new products to its site--including lawn and patio furniture and kitchen wares. The company however, continued to post net losses. To top it off, the "dot-com boom" of the late 1990s came to a crashing halt in the early years of the new millenium as many startups declared bankruptcy amid intense competition and weakening economies.

Bezos remained optimistic, even as Amazon.com's share price faltered. During 2001, the company focused on cutting costs. It laid off 1,300 employees and closed a distribution facility. The company also added price reduction to its business strategy, which had traditionally been centered on vast selection and convenience. Amazon.com inked lucrative third-party deals with such well-known retailers as Target Corporation and America Online, Inc. By now, products from Toysrus.com Inc., Circuit City Stores Inc., the Borders Group, and a host of other retailers were available on the Amazon.com site.

Amazon.com's strategy worked. In 2001, sales grew to $3.12 billion, an increase of 13 percent over the previous year. During the fourth quarter, Amazon.com reached a milestone that many had regarded as unlikely; it secured a net profit of $5 million. In 2002, the company launched its apparel store, which included clothing from retailers The Gap and Lands' End. Overall, the company reported a net loss of $149 million for the year, an improvement from the $567 million loss reported in 2001. In the fourth quarter of 2002 however, the firm secured a quarterly net profit of $3 million--the second net profit in its history.

While securing quarterly net profits was a major turning point for the young company, a July 2002 Business Week article warned, "after seven years and more than $1 billion in losses, Amazon is still a work in process." Indeed, the company's foray into providing the "Earth's Biggest Selection" had yet to prove it could provide profits on a long-term basis. Nevertheless, Bezos and his Amazon team remained confident that the firm was on the right track. With $3.9 billion in annual sales, Amazon.com had without a doubt come a long way from its start as an online book seller.

Principal Subsidiaries: Amazon Global Resources, Inc.; Amazon.com.dedc, LLC; Fulfillco.ksdc, Inc.; Amazon.com.kydc, Inc.; Amazon.com Commerce Services, Inc.; Amazon.com Holdings, Inc.; Amazon.com International Sales, Inc.; Amazon.com LLC; Amazon.com Payments, Inc.; NV Services, Inc.; Amazon Fulfillment Services, Inc.; [email protected], Inc.

Principal Competitors: Barnes & Noble Inc.; CDNow Inc.; eBay Inc.

At the end of 1999, Amazon had raked in over a billion dollars in sales. It seemed as though the profit would never cease. However, in 2001, Amazon reported a fiscal loss of $1.4 billion, and had laid off over 200 workers in the last year. The beginning of 2001 found Amazon laying off even more workers, totaling over 1000. Instead of giving up, Bezos had an idea: recruit other companies to sell their products online through Amazon as well. The idea worked. Companies such as Target, Toys R Us, Old Navy, and many others have agreed to sell their items through Amazon. Although Amazon is not directly responsible for inventory through these companies, they do get part of the sales, creating a profit for all involved. Since the inception of the idea, Amazon is now back on its feet and remains one of the most popular online vendors in the world today.