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Within four years it is anticipated at Amazon.com will, by capitalizing on their extensive it infrastructure, be able to manage the development of entirely new DRM approaches to profitably selling many forms of digital content from their many sites. Finally, with the extensive it infrastructure the company has today, the natural extension of their business model is into the area of Web Services. This projection of the Amazon.com business model is entirely consistent with the theories of how knowledge can change an organizations' structure as defined by Grant (1996, pgs. 110-121) in addition the creation of competitive advantage through the use of better system and information integration (De Wit & Meyer, 2005, pgs,. 120-140). The concept of distributed order management Web Services, in conjunction with their approach to managing and propagating selling sites globally through their Merchant Services that is being tested today will lead Amazon.com to be one of the leading enterprise services providers for mass merchandising on the Internet. Web Services to the level of complexity and scalability to manage distributed order management over many sites would give Amazon.com a commanding advantage in the e-commerce services marketplace globally. The move by Amazon.com into the area of Web Services will have major implications for the use of it services throughout enterprises that rely on online retailing as well, transforming the role of the CIO. In fact the role of the CIO is already changing to be more process-centric, less technologically-based, and this move by Amazon.com compliments that change (Earl & Scott, 1999, pgs. 30-38).
Within five years Amazon.com, following the progression of these developments, could feasibly become the leading provider of hosted distributed order management Web Services for online retailers globally. The business model for Web Services would resemble the Software-as-a-Service (SaaS) business model being used by salesforce.com today. From this annuity-based revenue stream, Amazon.com could feasibly grow into a leading e-commerce services provider in addition to be one of the world's most dominant online retailers today. The build-out of this strategy over time would give Amazon.com an opportunity to capitalize on the unique and increasingly powerful capabilities derived from their extensive experience and investments in their it infrastructure.
Discuss the question: Can Amazon.com become the Wal-Mart of the Internet?
Having invested heavily in their supply chain, distributed order management, fulfillment and services operations since their launch as a business in 1995, Amazon.com has concentrated more on creating a scalable e-commerce and services architecture vs. concentrating only on promotion and advertising. This latter strategy was a major mistake its early competitors, no many of them gone from the e-business landscape, made. Concentrating on the core business process areas and systems that need to work in conjunction with each other to fulfill customer requirements was where Amazon.com invested the majority of its initial venture capital investment funds. The result today is that the e-commerce and services architecture has been able to successfully scale across online sales of dozens of product categories in addition to offering services both to cross-channel intermediaries in addition to consumers. The extensive use of knowledge repositories by Amazon.com to further differentiate itself has lead to a lasting competitive advantage through the company's ability to learn (Brown, J.S. And Duguid, P., 1998, pg. 91).
In responding to the question of whether Amazon.com can become the Wal-Mart of the Internet it's important to look at the commonalities each company has in the development of systems first, the integration of those systems to respond to customer demand efficiently second, and the proven synchronization of those systems over time and volume fluctuations, third. The framework of these three attributes of systems definition, systems integration, and the proven synchronization in responding to customers' requirements encompasses the use of it systems to support key businesses processes in each company. This framework is also supported by the insights gained from Johnson & Scholes (2005, pgs, 50-77) and Thompson (2001, pgs. 45-75) where change is discussed as a function of knowledge management and knowledge transfer.
Starting with systems definition, both Amazon.com and Wal-Mart initially developed their supply chain and order management systems to support their highly unique business models' requirements for being able to source products from multiple vendors. For Amazon.com the use of Ingram Book Distribution Company as the main supplier was fraught with challenges, as the online retailer had to work with Ingram to create specific order quantities small enough to be managed at the online retailers' initially small warehouses yet large enough to be economically viable for both Ingram and Amazon.com. Supply chain management and optimization was the most critical business process for Amazon.com's business model to become initially viable. Order management and the ability to quickly fulfill orders from the first Amazon.com warehouse, to later fulfilling orders from multiple Amazon.com locations, was another critical process that Amazon.com had to successfully master, using it strategies to accomplish this. Similarly, Wal-Mart's mastery of their supply chain is well-known, and it was also one of the first business processes the company targeted for excelling at. For Wal-Mart the much wider breath of suppliers that comprises their supply chain forced a much greater level of functionality into their initial systems. The depth of the Wal-Marts' supply chain expertise was in large part due to the company's quickness at understanding how the specific aspects of supply chain transactions worked. When comparing Amazon.com as the next Wal-Mart, this distinction must be kept in mind; the supply chain of the former is still not as complex or intricate in both processes and systems as the latter. Wal-Mart in fact has established best practices in supply chain management, planning and optimization at the systems and process level that Amazon.com is learning from. Wal-Mart's ability to propagate its standards for supply chain management has in fact lead to RFID and other technology-related initiatives becoming more commonplace in adoption. This "stickiness" factor is well defined by Szulanski (1996, pgs. 28-42). For Amazon.com to become the Wal-Mart of their Internet their supply chain processes and systems would have to significantly improve over their current level of performance. The approaches that Amazon.com and Wal-Mart have taken with regard to their design and implementation of their order management systems are very comparable as well. Both of these systems require multi-location capability, including the ability to synchronize across multiple distribution centers and packing locations. Both organizations have refined their order management systems to ensure the highest level of order accuracy fulfillment rates, a critical measure each organization evaluates itself on. Industry analysts refer to this measure of performance[continue]
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