1.Introduction

Innovation is the essence of this competitive world. Now days, it has become important for all companies to strive for creating the disruptive new and innovative models and this is what lies at the heart of successful entrepreneurial start-ups. However, many companies are unable to be categorised as innovative which is important for competitiveness (Ngo and O'Cass, 2013). This report is about the critical analysis of Amazon and it analyses how this company has been judged to be innovative and how its innovativeness has an impact on the competitiveness of this organisation. Amazon is an American electronic commerce and cloud computing company. The headquarters of this company are in Seattle Washington. It started as an online bookstore but it has diversified in many areas including MP3 downloads, video downloads, blu-rays, DVD, CDs, audio book streaming, electronics, food, toys, jewelry, apparel, video games, software and many other product categories.

2.Innovations at Amazon

The first thought about Amazon is about its dominance in the market of e-retailers. However, the further analysis shows that it has much more innovative elements in its business model. From developing drones to new twists on mobility, having the futuristic orientation, it has brought many innovations up till now.  Its CEO Jeff Bezos always looked beyond the logistics of taking orders and ensuring packages such that products reach the destinations. The vision of Bezos is far beyond this and it also has potential to give competition to the companies like UPS and FedEx.  This is not only an e-retailer any longer (Bloomberg, 2008). Its most recent and famous innovations are named as Amazon Destinations, Dash Button, Amazon Home Services, Prime Now, Prime Music Radio App, STEM Toy Store and Elastic File System (Yahoo Finance, 2015).

Indeed, it brought many innovations and used various techniques to become the number one online retailer, it never loosed its focus on customers. Its philosophy is that ‘its all about the customers’ and it analyses their needs critically and introduces those solutions which are not only creative but they create value for its customers. Since 1998, it is serving more 100 million customers and its has more than thirty product categories which are offered at its online retail stores (Amazon, 2010). The product categories range from sportswear and grocery to the health and beauty. This phenomenal growth of Amazon is because of its technological innovation. It introduced 1-Click feature where the order processing process became quite speedy and customers became capable of ordering their products with the one click. It introduced the feature of recommendations where customers can read the reviews of previous customers hence they can analyse their shopping experience and they can check the rating of product before they actually use it (Linden, Smith and York, 2003).

According to the Xavier Garambois who is the Vice President of EU Retail at Amazon, this is in the DNA of Amazon to bring innovation. Using its technologically advanced infrastructure, it is introducing the innovative solutions on a constant basis which improves the experience of customers. It focuses on providing the services such that customers are able to find the right product in an easiest manner and they could also get the delivery of their order in a quick and convenient manner. It has eight fulfilmentcentres which are spread in the U.K. and they are possessing the millions of products which are ready to be delivered to customers using the advanced technology and team of great people (Essig, 2015). Further to this, it is providing the opportunity to other UK business and individual to drive success as it is a platform for doing business for such entities. For example, Amazon Marketplace has provided the facility to businesses of U.K. to sell their products in U.K. and Europe. Likewise, Kindle is allowing individuals to publish their material for millions of readers (Osterwalder, Pigneur, and Tucci, 2005).

3.Business Model Innovation of Amazon

Amazon is judged as the innovative organisation because it did not bring the innovation in any other aspect but it changed and reinvented the business model. It is important for organisations to reinvent their business model, renew the customer value proposition and change the competitive dynamics such that everything becomes favorable for them (Crawford, 2014). As per the report of Economist, there are fifty percent executives that strongly believes that business model innovation is more important than innovations in the products or services. However, as explored by the American Management Association, there are only ten percent of innovation investment undertaken by the global companies which has its focus on the business model innovations. It is basically the innovation business model implemented by the Amazon which helps in judging this company as the innovative one. According to Chesbrough (2007), business model innovation does not only help in incremental growth but it also optimise the current businesses for the transformational growth opportunities where entirely new sources of value creation and revenue are generated through this. It is more beneficial to bring the innovations in the business models as this opens the doors of new opportunities and brings the structural competitive advantages.  This is what Amazon has experienced since its inception.

4.Innovations and Competitiveness of Amazon

It has brought innovation in its business model through the framework of ‘Eliminate-Raise-Create-Reduce’ which has made it the most dominant retail over the internet. The following lines specifically sheds light on these four aspects that how Amazon became the most competitive retail due to its innovation.

• Eliminate: It started with the analysis of elements in the business model which are taken for granted and which could be eliminated from the business model. It found a new channel to access the customers using the technology through elimination of traditional retail distribution channel and it strived to develop the direct relationship with the suppliers. It introduced the feature of ‘1-click check out’ and this further improved the transaction times through the elimination of the requirement for inputting the billing and shipping details manually in every purchase order (Business Insider, 2013).
• Raise: It explored that which element could be raised above the standard of the industry. Though, when Amazon was being started it was not the only online store which was working over the internet market, but this organisation strived to transform the way online shopping was being done. It provided the next level of standard of service by providing the unprecedented choice, value and scope under the one website. Through its business model, it radically reinvented the traditional retail business model and basic aspects of doing shopping (Ettlie, 2000).
• Create: It started to focus on those elements which are never being offered by the industry in past. Using the Amazon Web Service which is based on the core technology infrastructure of Amazon, the cloud computing became more accessible and cheaper. The Amazon Web Service introduced by Amazon was based on a complexly new business model which also provided it with the first mover advantage and it also achieved the high growth in industry due to this Amazon Web Service (Reisinger, 2014).
• Reduce: It analysed that which elements could be reduced below the standard of the industry. It analysed the dynamics of the industry in a careful manner and it decided to ‘reduce its profitability’ below the standards of the industry. It could be analysed that it is not focusing on its short term profitability and it is striving to capture the massive market share and scale such that its costs will further reduce and this will have a significant influence over the future of Amazon’s profitability. Through this innovative concept, it has become able to create high switching costs for its customers as now they are emotionally attached with it. Moreover, it has created extremely high barriers for the future entrants. This shows that through the business innovation model, its competitive rivalry has also improved (Business Insider, 2013).

It is the business model innovation of Amazon which has allowed to offer a diverse portfolio of customer value propositions and this is helping it in gaining the competitive advantage (. As this is said by Chesbrough (2010), a continuous focus on business model innovation enables the organisation to remain connected with its entrepreneurial roots and this is what Amazon has understood and it is not under-focusing on its business model innovation and it is connected to its entrepreneurial roots. Many of the largest companies are unable to do this, but Amazon is successfully doing this and it has become competitive as compared to other web retailers over the internet. Though, it is successfully dealing with the competitors over web, one of the challenges or threats for this company is about its international expansion which must be handled effectively (Hook, 2016).

5.Amazon v/s Physical Retailers

Though it is working over the internet but it has also provided the competition to the physical retailers. This section reviews the competitiveness of Amazon in overall retail industry. It is analysed that now days physical retailers are forced to reduce their inventory due to the pressure to cut cost. Though, as per accounting rules, it is a valid choice to reduce inventory but customers always want choice irrespective of all other circumstances. When physical retailers have become unable to provide the choice to the customers, Amazon provides them with the choice and scope.  The comparison of Amazon and Walmart provides the interesting facts (Lashinsky, 2012). According to Gewirtz(2016), there are about 4.2 million different products which are offered by Walmart. Though, this figure seems quite significant for one retailer. But its comparison with Amazon shows that it offers 250 million different products hence maintaining the ratio of 60 to 1 and this is due to the core competency and innovations of Amazon.

According to Gregersen (2015), its innovations are spread in areas of patent on 1 click ordering, marketplace of individual resellers, warehousing and fulfilment services and accommodating return policy. It has adopted both horizontal and vertical integration and it is introducing innovations not only in its products and business policies but also in its supply chain and distribution. From the critical analysis of this organisation, it becomes observable that it never relied on the strategy of staying in its lane. Though, it started as an online retailer but now it is also working efficiently in powerhouses of cloud computing. Initially, it offered free shipping for books and that seems sensible as books are easier to ship, but now due to its innovation business model, it is also offering the free shipping for giant TVs and heavy construction gears. It always believed on extending itself without spreading itself too thin. The quality of company’s services are never compromised and it never became weak due to its vertical and horizontal expansion (Gewirtz, 2016). The below chart from Statista shows the comparison among 10 largest U.S. online retailers in 2013.

Figure: Amazon’s Online Sales Dwarf the Competition

Source: Gewirtz (2016)

From this, it could be analysed that the competitive position of this business is high even in the physical retail industry and it is also becoming a source of competitive rivalry for other industries.

6.Future of Amazon

Every business needs to manage certain challenges which could question the future success of the business. Though, it is one of the best innovative organisations, however, the judgment about future says that though its business model is innovative it is selling similar products and services and it cannot differentiate its products from others. Therefore, it is important for Amazon to differentiate its products. International competitors can intrude this business. Currently, domestic competitors are unable to compete with it, but the activities like strategic alliances and mergers could prove dangerous for its future. Therefore, it is recommended to Amazon that it should start working on its sustainable competitive advantage.

7.Conclusion

In this globalised world, the level of competition has become so intense that only those companies can become successful which has the spirit of innovation. For many organisations, innovation is the only strategy which is allowing them to remain competitive. In this report, it is analysed that how Amazon is judged as an innovative company. It is concluded that since its inception till now it introduced many such services which has made it an innovative business. Moreover, the innovation business model concept is also implemented by Amazon. Due to successful implementation of this model, the level of innovations at Amazon has enhanced. Further to this, it is analysed that this innovativeness has allowed Amazon to become more competitive in the retail industry. It is not only successfully competing with e-retailers but it has left behind all of the physical retailers as well. The success of Amazon is credited to the innovations at this organisation. For remaining competitive for sustainable period, it should stick to its strategy of innovation.

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