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The Amazon Story

0 September 13 2016, 23:15 in Business Essays

CASE #1: THE AMAZON STORY

Discussion Questions:

17. Amazon story: Identify the business models Amazon used and at which level of e-business commitment each falls.

Based on the success story of Amazon, the company evolved from being an online retailer, to an e-commerce partner, and then to a developer service provider. This only shows that Amazon is very proficient at leveraging its competencies into various e-business models. The first business model used by Amazon, which is also its core business, is online retailing. In fact, Amazon is one of the pioneers of online retailing business model and has proved that is indeed a profitable model. The company sells different merchandises and contents bought from manufacturers and resellers to end-consumers. This business model falls under the both the Activity and Business Process levels. It is under Activity Level E-Business Models because it entails online purchasing, email, order processing, online advertising, pricing strategies, and online sales promotions, among others. However, Amazon’s online retailing business model also falls under Business Process level because it also entails customer relationship management, supply chain management, knowledge management, and database marketing, among others.

After several years, Amazon started to develop e-commerce partnerships with various retailers. By means of offering third-party merchandise on its website, Amazon was able to generate additional revenues through activity fees per unit, sales commissions, and fixed fees. This business model falls under the Enterprise level. Moreover, Amazon also introduced yet another business model – the affiliate program. This affiliate program, which is called Amazon Associates, gives website owners the chance to earn commissions by referring customers to buy at Amazon. As such, this business model falls under the Enterprise level.

18. Amazon story: What performance metrics might Amazon use to measure progress toward its growth and customer service objectives?

Performance metrics refer to the measures used to evaluate the efficiency and effectiveness of a company in achieving its objectives. In the case of Amazon, there are various performance metrics that it can utilize to measure the progress towards the attainment of its growth objectives and customer service goals. First, to measure the company’s progress toward the fulfillment of its growth objectives, the company can track the total number of new service products introduced to the market in a year, the total number of new service features not sold through competitive offers, the number of customer complaints and product fixes, the total percentage of sales generated from new services, the number and type of improvements over the years, the number of conversions from online leads, or the total revenues generated by every sales employee from internet leads. On the other hand, to measure Amazon’s progress towards the attainment of its customer service objectives, it can use any or a combination of the following: track the total number of visits and activity to its website every period, review the content and number of website comments, photos and/or videos uploaded, ask target audiences at the website to participate in surveys, log and review the number of complaints received via phone, or email, and track the percentage of customer retention.

19. Why is it important for an e-business model to create value in a way that is differentiated from the way competitors’ models create value?

An e-business model should create differentiated value for its customers to sustain itself in the long run. More specifically, it is very vital for the success of an organization to establish its own identity and create value for its customers that is distinct from its competitors in the market. In other words, differentiation is one of the major competitive advantages that an organization can develop in order to succeed and achieve its ultimate business goals and objectives. Through differentiation, the company can attract new customers and can command its desired price level for its products and services. This is true, not just for traditional offline business models, but also to e-business models. The vital components of e-business models include sustainability and the creation of customer value that is distinct from the values offered by its competitors in the market. Through this, the company is gradually forming its competitive advantage over time. When a company has already successfully differentiated its products and service offerings in the market, it will not be easy for competitors to imitate it.

20. Based on the opening vignette and your examination of the Amazon.com site (or your experience as a customer) what strategic objectives do you think are appropriate for this e-business? What performance metrics would you use to measure progress toward achieving these objectives—and why?

Based on Amazon’s site and my own experience as a customer, I conclude that the company’s business objective is to increase the value of its customers’ purchases, not particularly to increase its share of the total market. This conclusion is also confirmed by the fact that Amazon has no plan of building brick-and-mortar stores to compete directly to traditional stores. This strategic objective is achieved through diversification. Amazon has diversified into various markets and introduced various new product and service categories. In fact, Amazon has also co-branded with other big companies, such as Target. Moreover, Amazon has also utilized technology to encourage its existing customers to try new products and services. Also, other methods are also used by Amazon to retain and grow the business. Further, customer relationship management (CRM) is also another strategic goal that Amazon should value. The suitable performance metrics for CRM include the rate of customer retention, the average value of customer orders, and the lifetime value of its existing customers, among others. Moreover, Amazon can also measure the total number and value of sales for newly introduced products.


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Last Modified: September 09 2016, 11:21
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