Market Space Amazon sells variety of products
Online/web technologies enable us to host e-commerce business site and run the business succ... [Show More] essfully. In today’s global market, there are many businesses, which utilize the web/internet resources. For example, AMAZON (www.amazon.com) is one such e-commerce website that is very popular for its business model, not only in the United States (US), but across the world. Its popularity can be seen from the number of customers and its business turnover. I chose to review and critique about AMAZON business model (e-commerce). The following sections, describes in details of business model of Amazon (see Figure 1: Organizational Structure and Management Team of AMAZON, page 2).
ORGANIZATIONAL STRUCTURE & MANAGEMENT TEAM
Figure 1: Organization structure and management team at AMAZON
The organizational structure of Amazon.com is a divisional structure. It is due to number of (types of) products it sells on its site. In this structure, there are different departments for diverse products headed by their respective departmental heads. This allows them to focus on their own departments and get expected results by the management. Considering the size and flexibility of Amazon this structure is the best fit for its business. The management team at Amazon Divided in to two categories: First category consists of CEO and founder Mr. Jefferey Bezos and nine board of directors. The next category is looked after by the CEO and board of members. Each head in the second category is given several departments to handle as seen in figure 1 (Board, 2015).
CUSTOMER VALUE PROPOSITION
Customer Value Proposition (CVP) is a statement about the products or services offered by the vendor. Upon review of CVP, it encourages customer to consider to purchase the products from them, instead of choosing other vendor. CVP is used as a part of marketing strategy by the vendor (or company, ex. AMAZON). Value propositions of Amazon are unparalleled selection and convenience to customer. Amazon provides the good customer service than any other company reviewed. Amazon stands at first place in shipping. It ships any products within two days. Amazon spends millions of dollars to develop the website and to maintain the customer value strategy.
The following are the five revenue models that are used by e-commerce businesses:
• Advertising revenue model
• Subscription revenue model
• Transaction fee revenue model
• Sale revenue model and
• Affiliate revenue model
The revenues for amazon are created by sales of products such as books, garments, electronics, and kitchen equipment, not only in the US but also on international websites. The price of products are fixed at Amazon. Amazon is a market place where sellers offers their products/services for sale along with the offerings of an Amazon. Sellers will be charged a percentage of commission by amazon for utilizing its resource’s to sell the products. The commission is charged on basis of sale price, fees for transaction and variable closing fee. This means that Amazon uses both the sales revenue model and the transaction fee revenue model (DuNg, 2008).
Additionally, affiliate revenue model is also used by Amazon to generate revenues. For example, website owners are not allowed to sell their products but they are provided with affiliate products online businesses to set up an affiliate marketing program. A scenario of this is, Astore. Astore is an Amazon affiliate product which website owners can use to create an online store on their site. The store does not allow website owners to sell their own products directly to end users. Website owners select products from Amazon’s store and earn referral fees on the products purchased by their readers. The fee structure is currently the same as for the other affiliate links and ranges from 4% to 10% of the product price.
Amazon sells variety of products, such as: books, garments, kitchen products, electronics, grocery, musical instruments, pets, games and so on. Initially, Amazon.com was started as online book store, at present the scope of business has increased tremendously (Kim, 2004). Amazon is an online retailer that sells so many products including e-book reader and tablets. In addition, amazon provides other businesses with back end Information Technology (IT) services. This means that Amazon is now in a diversified business.
The main competitors of amazon are: EBay, Netflix, TWX also known as time warner cable and Google play store. Considering its varied business/market segments, competitors in electronic segments and general merchandise segment are those in brick and mortar system, such as: Best Buy, RadioShack, Walmart, Big Lots and Target. In online segment, major competitors for electronics and general merchandise are Alibaba, Wayfair Inc., PCM and Vipshop Holdings. In other segments, Amazon competes with CDW, Google, Oracle, Accenture and others.
The comparative advantage of amazon is that it can sell at steep price and still make profits because of its arrangements with vendors and sellers. In addition to this, the usage of amazon is much more than its competitors like Walmart and EBay. Amazon is truly a largest online retailers as it sold $67.8 billion worth of products in year 2013. The second largest online seller was Apple with the figure of $18.3 billion in 2013 (Penhollow, 2015).
Amazon has multiple warehouse locations, which are strategically located across the country. This is the main advantage of cost savings in transportation or in it supply chain model. In addition, Amazon has close relationship with the United States Postal Service (USPS), which enables AMAZON to ship products in timely manner to even a remote location in the country. On top of that, Amazon got reputation for fulfilling the order reliability for its users. Thus the overview of the Amazon which has lots of advantages in cost savings and product pricing over its competitors.
The important market strategy for amazon is one-stop-shop for everything and it has a wide range of products that includes everything for everyone at just in one click of a button (via e-commerce site). In addition, its pricing is also one of the important market strategy. Amazon has become an innovative, disruptive, and diverging powerhouse in technology. Amazon utilized the affiliate’s products and resources very well, and offering customer-friendly services to maintain the stable market strategy.
In summary, I conclude the following points, which are direct result of my review of an e-commerce site (AMAZON.COM):
• The turnover and sales of Amazon is not easy to break and it does not have any big competitor threat in the future.
• However, in the long term that Amazon has to change the strategy and search new ways to tackle competition.
• The organizational structure is a divisional structure, which is needed for a company that has multiple varieties of products.
• There are three revenue models used by amazon: sales revenue model, referral fees and transaction fee revenue model. Although, this company is not dependent on one revenue model which considered as a main advantage for Amazon. [Show Less]