Management of Amazon Term Paper
- Length: 9 pages
- Sources: 8
- Subject: Business
- Type: Term Paper
- Paper: #36157245
Excerpt from Term Paper :
Amazon is the largest internet-based company in America with headquarters located in Washington and Seattle in the United States. The company was founded in 1995 by Jeffrey Bezos and it started as online bookstores then diversified to selling videos, CDs, MP3 and DVDs. Today, Amazon offers about 4.7 million books, computer games, DVD and a wide variety of items of all kids. Ever since Bezos opened the doors of Amazon, online retailing has been defined and redefined for the rest of the Internet retail worldwide, and today it offers the customers a superior shopping experience through the provision of a high level of customer service. This research paper will discuss the impact of the Amazon's mission, vision and primary stakeholders' overall success, while analyzing different forces of competition and how they impact the business of the company. SWOT analysis will also be performed to determine the strengths, weaknesses, opportunities and threats. In addition, various types of strategies the firm uses to maximize the competitiveness and profitability will also be discussed as well.
The impact of the company's mission, vision and primary stakeholders on overall success
One of the most important steps when beginning an organization is creating a clear and coherent vision and mission statement. This is because the mission and vision are critical elements of the company's organizational strategy. Many companies establish mission and vision statements that serve as a foundational guide in the establishment of the company objectives. For instance, the company's mission statement assist company employees with its navigation, and in relation to the organizations customers, it is an assurance that the company is for sure committed to the clients' purpose. The mission statement also articulates the front line of an organization by reminding the stakeholders of the firm how the business would be seen by the customers.
Amazon has had a solitary mission since it began and apparently the vision and mission statement are the same "Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online" (Amazon.com, 2014). With customer base of not less than 60 million shoppers, research has shown that Amazon has indeed been true to their vision statement.
In 2012, there were about 3,300 shareholders on record of the company's common stock, however it is noted that there are still much larger number of beneficial owners. The primary stakeholders of Amazon are people who have rights of declaring dividends, who own share, as well as people who have right to vote in regards to the matters of the company (Amazon.com, 2014).
Analyze the five forces of competition to determine how they impact Amazon
According to Porter, he refers to the five forces of competition as tools used in organizations to understand where power lies within a business setting. The tools are important in understanding both the strength of the current competitive position as well as, the strength of a position an organization is considering to move into (Porter, 2005). These five forces of competition are noted as the potential of new entrants, the bargaining power of buyers, the bargaining power of suppliers, threat of substitute products, along with the rivalry among competitors.
(a) Threat of new entry
Here, power is affected by the ability of people to enter into the new market; these include capital and economies of scale that may limit the entry of new competitors (Porter, 2005). New entrants in a market pose threats by gaining a large market share of the industry. The possibility of firms to enter into an industry is as a result of factors such as; barriers to entry and reprisal expected from the existing industry participants. It is noted that since Amazon was established, the company has been very successful because its potential competitors come from different industries such as e-commerce services, retailers as well as other web services. In addition, the company's primary source of revenue is by selling quality products and services to customers while focusing on the long-term sustainable growth in free cash flow. Currently, the threat of new entrants is relatively low or does not affect the business of Amazon bearing the stability, familiarity, fame and financial establishment that Amazon has toiled to establish over the years.
(b) Buyer power
Bargaining power of the buyers give customers the ability to either make or break a product. This may happen when the buyers want to buy products at a lower price, while the industry on the other side earning the lowest rate of returns on its invested capital. Amazon has managed to solve this issue by listening carefully when their buyers speak and making sure that the interested buyers find the lowest prices possible on their website. Amazon increases their sales of products and services by improving the customers' experience, improving availability, lowering prices and offering faster performance times. The company also increases its selections, expands product information as well as, improving ease of use. With Amazon model, the merchants have lowered their prices so as to get their merchandise sold.
(c) Supplier power
Here, one determines how easy it is for the suppliers to drive up their prices on the products they sell. It is the concentration of the suppliers and availability of the substitute suppliers which tend to be the most important factor in determining the supplier power (Porter, 2005). For example, Amazon Company offers the third party seller the opportunity of competing with Amazon for sale, whereby, the merchants sell new and used products, while Amazon itself receives the commissions on the products sold through its marketplace. This model has significantly increased the company's selection of the available products. In this case, one can note that the bargaining powers of suppliers are not with Amazon, but it is with the merchants who sell the products on the Amazons website.
(d) Threat of substitution
This refers to the power of substitutes for a company's product which affect the changing cost. For example, if the company supplies a unique product such as software that automates an important process, then the buyers may substitute these products by outsourcing them (Porter, 2005). The substitute goods perform same functions as products produced by that Industry. For example, Amazon started as a bookseller and today its great deal in business comes from the selling of both books and media products offering more than 4.7 million books and videos in stores (Amazon.com, 2014). However, it is evident that with the growth of downloadable electronic books, music, software and other digital products, Amazon is on a high risk of losing business. However, Amazon preempted this and has the option of softbooks in their Kindle application, they also have video hiring services and online buying of videos as well in a bid to lower the threat of substitution in their business.
(e) Competitive rivalry
Competitive rivalry states that the competition among the competitors in the same industry and market is co-dependent upon the actions of the competition (Porter, 2005). Therefore, actions taken by one company may on the other hand create a competitive response from other companies. Buyers generally bargain for lower prices and better services, however, with the third party seller marketplace, Amazon checks the competitive rivalry within the marketplace. The company uses the concept of First in First out (FIFO) allowing the inventories to be sold before the new inventory. Sellers also usually have hopes that their merchandise will be sold despite the reduction in price.
In summary, it can be argued out that, the five forces of competition as discussed above can impact Amazons' competitive environment in many ways, as a result, the company has made sure that it has identified its competitive environment using the Porters tools.
Create a SWOT analysis for Amazon to identify their strengths, weaknesses, opportunities, and threats
In the SWOT analysis of Amazon, identified as well as discussed are the strengths, weaknesses, opportunities and threats for Amazon.
Amazon is a huge profitable company that sells globally as well as shipping internationally (Jurevicius, 2013). In 2007 the company's net sales increased more than three times and in 2011, its net sales were forty eight million dollars (Freisner, 2014) . Amazon Company has innovative ways that involves the use of technologies to attract the consumers. For instance, the use of Information Technology (IT) and Customer Relationship Management (CRM) for many years has been supporting the company's business strategy, whereby the company carefully records its data on customers buying behavior. The innovativeness within the company has seen it set pace in most technological innovations and modes of reaching the customer from the far flung areas across the globe. This has enabled the company to offer bundles of items to individuals based upon preferences demonstrated through purchase (Freisner, 2014).
The company is exposed to a range of inventory risks which may negatively affect the operating results of Amazon. For instance, Amazon is put at risk due to changes in product pricing, launching of new…