The intent of this analysis is to evaluate the history and core business of Amazon.com and Border's Books, comparing and contrasting their respective management approaches related to Internet marketing include fulfillment, which each does significantly different from the other. Three factors that contributed to the success of Amazon are provided in addition to three factors that led to Border's eventually going bankrupt despite having a flourishing and profitable retail business. In analyzing each of these businesses, the innate ability of each management team to anticipate and react successfully to changing market conditions is also assessed. Finally, three recommendations are made for how each company could build greater flexibility into its decision making process to stay more agile and able to adapt to changing market conditions.
Comparing the History of Amazon and Borders
Both Amazon and Borders began with the goal of being a global leader in book selling and content distribution, with each defining their value chain completely different. Amazon began with the goal of being the world's largest online bookstore and after years of work on its distributed order management and fulfillment systems, launched its first website in 1995. During this time the company also became the exclusive book retailer for America Online, Netscape and other websites that were just starting to get involved in e-commerce. Amazon's focus on supply chain management, logistics, distributed order management, and later investments in recommendation engines that would automatically choose books that a customer might find interesting became a strong differentiator throughout the latter 1990s and into the 21st century. Amazon also nurtured and developed a strong skill at alliances and partnerships, in addition to developing innovative technologies based on their rapidly expanding technology platform. Amazon also learned early how to harness the commitment and support of its customers to gain greater insights, and a type of volunteerism around the brand was created as a result (Cook, 2008). The Amazon Web Services (AWS) business unit originated from the core set of technologies used for managing the massive bookstore online and multi-country language localization requirements (DataMonitor, 2010). Amazon was listed on the NASDAQ stock exchange in 1997 and is today one of the most profitable e-commerce stocks there are for investors. The Amazon value chain is fueled by high margin opportunities that are best capitalized on using innovative technologies and supply chain systems and processes that minimize costs and maximize inventory turns.
Contrasting the Amazon business model and value chain is Border's Books. Border's began in 1971, founded by Louis and Tom Borders, in Ann Arbor, Michigan. The company was initially formed to sell used books, and over time began to take on new titles. Through the first two decades of its existence, the company continued focusing on the service and distribution aspects of its business, strengthening its channel partnerships and alliances with large bookstores. Increasingly it looked as if the larger independent bookstores had become saturated with suppliers, and Border's management chose to open its second store in Birmingham, Michigan. Border's successfully made the transition into the retailing business and continued to build its chain to a total of 516 stores at their peak, with 385 Waldenbooks specialty locations nationwide as well. February, 2011 was a very difficult time for Border's, as they were forced into filing a petition for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. As part of the petition, Borders partners with liquidators who closed 200 the lowest performing stores in the company. That same month, the company was delisted from the New York Stock Exchange. From that point to the time of this writing (October, 2011) the company has liquidated, selling off its assets to smaller local and regional chains over time. The value chain Borders had was entirely focused on the classical value chain of retailing, and often failed to respond quickly enough to price and demand shifts in the market. The greatest challenge Borders had was in staying relevant and needed as Amazon could offer a larger selection and a much greater level of responsiveness and delivery for hard-to-find books. Borders supply chain would take up to 72 hours or longer for a hard-to-find book to just reach the store. Amazon could find it and have the book in the customers' hands in 48 hours or less. The specialty nature of Borders was quickly eroded as the logistics and supply chain strengths of Amazon began to gain momentum.
Comparing and Contrasting Approaches to Internet Marketing & Sales
Amazon's management team realized early that the value chain was the most critical aspect of their business model, and a smoothly functioning logistics and supply chain management system would be essential. The investments in these back office systems allowed Amazon marketing to make commitments to customers on shipments and meet or exceed them, which was a brilliant strategy for gaining customer satisfaction and loyalty. Amazon also invested heavily in reputation and referral systems that would quickly interpret the purchasing history of a customer and make recommendations of potential other products (Wang, Doong, Foxall, 2010). In this way, Amazon pioneered the use of data mining for upsell and cross-sell support (Saranowm 2003). In short, Amazon was able to transform their business using technology while staying focused on customer satisfaction and exceeding their expectations.
Borders chose to continue with their traditional retail operations model, seeking out cost and time efficiencies that were decades old. There weren't that many new innovations in how Borders addresses their business model and backoffice systems, therefore there wasn't that much innovation on the marketing side. The business operated as many other bookstores do, yet lacked the backoffice efficiencies and innovations that Amazon had which gave the online retailer an advantage in differentiating the customer experience it delivered (Crosby, Masland, 2009). Borders also lacked the ability to manage the increasingly complexity of e-commerce, even after the company entered Internet-based selling. The lack of back office data and information synchronization left Borders competing online, using its website as a proxy for a physical store. There was no significant differentiated value from the online experience with Borders, with critics calling their site a static storefront. As a result of not being able to deliver a strong online experience, Borders ceded that channel eventually to Amazon entirely. Borders marketing never did recover from that and the company continued to spiral downward.
Analyzing Amazon's Critical Success Factors
First, Amazon's founders and senior management had the foresight to invest heavily in the backoffice systems that would ensure scalability and reliability of their operations as the business grew. Second, Amazon concentrated on a unified multichannel experience for customers; no matter where they entered the site or exited, the ability to move through each channel was consistent an easy to understand. Amazon is passionate about making a unified customer experience throughout their site (Hausman, Siekpe, 2009). Third, Amazon quickly realized that their logistics, supply chain management and distributed order management systems could make it possible to deliver even the most hard-to-find book in days, not weeks, like its competitors (Feigenbaum, Parkes, Pennock, 2009). All these of these factors combined to redefine the unique value proposition of the company. It also led to the development of a more effective globalized strategy as regional and national stores were open over time. Amazon spent heavily on these areas and as a result had a net loss during the early days of their life as a corporation. These investments however have continually gained to make Amazon a multi-billion dollar company.
Borders Key Success Factors and their demise as a Corporation
One of the most significant accomplishments the company initially had was the development of a scalable, profitable franchise model. This development gave the company the ability to quickly ramp up new stores and bring existing stores into new initiatives and programs quickly (Hall, Gupta, 2010). A second factor was the ability of Borders to quickly create multichannel programs. This allowed Borders to move quickly into new products and services, stabilizing their existing revenue stream sin the process. The third major success factor was the ability to launch subsidiary stores in a fraction of the amount of time it took competitors. Borders in short had the logistics down to a science of how to launch new stores and keep the franchise model running well. It lacked the ability to bring new books and unique customer experiences into their stores however, and this factor eventually led to their downfall. The focus on growth for growth's sake eventually led to the company going bankrupt because there was not enough of a focus on value delivery.
Amazon and Border's Management's Ability To Adapt
The Amazon management team perceives change as the catalyst of growth while Borders management viewed it as a potential cost and disruptive force on their retailing operations. Amazon's management team also concentrated more on how to use technologies to translate the risk and uncertainty of change in markets into a competitive advantage. The rapid development of the recommendation technologies Amazon uses is a…