Thursday, May 31, 2012

Amazoncom case analysis

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The first thing to know about Amazon’s business design is that there are no physical stores as opposed to Barnes and Noble that have retail outlets in every state of the U.S. and all around the globe. This poses a problem for Amazon because e-business requires very active customers. The customer has to know what they want and the customer has to know how to use and navigate the Internet. Delivery costs are higher for Amazon when compared to Barnes and Noble because when a customer goes to Barnes and Noble they can buy the product and immediately take it home with them. Amazon has to charge for shipping and there is no immediate consumption of the product. As we studied before about Internet delivery, the customer is not present. The customer needs to feel safe when giving information to Amazon, and Amazon has a secured server that can keep records of credit card numbers and mailing addresses if the customer authorizes Amazon to do so. With Barnes and Noble there is no transfer of sensitive information because the customer can purchase with cash or check, and if using a credit card all that happens is a swipe of the card and a signature from the customer. Amazon needs to exercise good response time on the delivery and inform the customer through email which Amazon already does. The Amazon website recognizes the customer when they log in and displays a page with the name of the customer and recent purchases as well as suggestions for other products based on these purchases. When a customer has not visited the Amazon website in a long period of time, Amazon sends an email encouraging the customer to visit, and gives a list of recommendations on products for the customer to look at on the next visit. This overcomes the problem of having an employee talking to the customer face to face and gives recommendations by keeping track of recent purchases and offering advice for other purchases. Amazon has a simple web page that is easy to understand and Amazon avoids large graphics that can slow down the loading of a page. From a customer’s perspective, the advantages of Amazon’s design are based on technology. There is no face-to-face interaction that may cause a customer to feel uncomfortable or pressured into buying, and for people who know exactly what they want this is a nice feature because it reduces the stress and time of shopping. Customers can shop at anytime on Amazon where Barnes and Noble have daily hours of operation restricting availability. E-commerce offers access from the home or office via a computer, but sometimes this can be bad because computers do not always work and networks can shut down. With Barnes and Noble the customer has to travel to the store, walk around to find what they want, and then pay at the counter which uses a lot of extra time. Amazon has a worldwide market are because it is available on the Internet, where as Barnes and Noble is only available locally. The customers of Amazon are anonymous and can enjoy the convenience of shopping from their home, while Barnes and Noble offers customers a personalized social interaction that some people may prefer. Shopping online is convenient and quick, but it also reduces those impulse buys when a customer sees something they like and end up buying the product for no real purpose. Traditional shopping allows the customer to use all five senses when shopping and allows them to sample the product first hand instead of looking at the product on a screen. The disadvantages of online shopping are less price and selection control, usually there is a delivery fee for the product, and the customer has to rely on a computer that is not always dependable. When traditionally shopping the process is very time consuming and there is the possibility of having to wait in lines and trouble finding a parking spot. has not turned a profit yet because it takes a lot of capital to run an e-business. The main costs are managing the website, and making sure that distribution channels are open and operational. Another reason for the low profits is that Amazon is continually investing in new markets and trying to gain a bigger market share wherever possible. In order to achieve profitability, Amazon needs to specialize in a few markets and limit the amount of money being invested in expansion. The ability of other competitors to become available online was unavoidable due to the availability of technology. Amazon cannot do anything to stop this. This is why Amazon needs to develop some core competences and maximize those. In fact, I am not sure that Amazon will ever turn a profit because all of the money that is made is being reinvested for expansion instead of concentration.

I think that Amazon will be able to stay ahead “click-and-mortar” competitors like Barnes and Noble because Amazon already has a website and network setup with an established position in e-commerce. Amazon is on top, but I think it will experience some declines in business due to the fact that more companies are turning to the Internet to boost sells. This will inevitably draw some customers away from Amazon, but Amazon is helpless against that fact. Amazon already has the knowledge to run an e-business where companies like Barnes and Noble will have to invest time and money before they develop its knowledge of e-commerce. Amazon could profit from this situation by offering some sort of consulting to companies looking to on the Internet.

I think that is an insight to the future of the retail business. More customers are shopping online everyday, and new customers will eventually experiment with online shopping and start to like it better for its convenience. As long as technology continues to catch on around the world and people are still reproducing, e-commerce is going to always be there. I think that it is just one step in the evolution of business and I think it will open up new windows of opportunity for customers and businesses.

SWOT Analysis

Amazon’s core strength is that its business is very customer oriented. And all e-businesses need to be. Amazon sought to create a friendly site that would not demand a high level of computer literacy. builds customer relationships by customizing its service, involving its website visitors in the service, and creating a collective spirit. Focus on the customer is key for developing customer loyalty. The customers are included in many ways. One way is that customers can partake in the Discussion Board service. This service presents an opportunity to read comments from readers about books of interest to the customer. The customer can also talk to other Discussion Board participants. Another feature of the Discussion Board is the Author’s Corner, which sometimes allows readers to interact with their favorite writers. The “wish list” is another service that Amazon offers. A customer can enter titles of books or music that he or she would like to have in a personal wish list. Someone who wants to give a friend a book as a gift can make a selection from the friend’s wish list. Amazon also makes personalized recommendations to individual customers. Some of these recommendations are based on the customer’s previous purchases, and other recommendations are based on the behavior of past customers who have made purchases similar to those of the customer. Using “collaborative filtering” Amazon software determines what books are popular among similar customers, and then Amazon creates a list of proposed products for the customer based on this information. Amazon uses this technique to provide the same friendly and personalized purchasing advice that a local store like Barnes and Noble can, but it achieves better accuracy and convenience at a fraction of the cost. When repeat customers log on to the website, a personalized web page appears and greets the customer by name and allows him or her to view the new recommendations made by the collaborative filtering tool. Amazon also allows customers to store information on the company’s secure server. Customers can authorize Amazon to keep a record of their credit cards and mailing information, for example. If a customer does not visit the site for a certain amount of time, Amazon sends and email to the customer encouraging him or her to visit, and gives a list of recommendations on items to look at on their next visit. Amazon also has a powerful search engine that recognizes the spelling mistakes that customers often make and changes the search function to account for these mistakes.

A weakness of Amazon is its want to expand. As I said earlier it takes a lot of investment to expand into other retailing markets. This is a cause of Amazon’s low profitability. This fast expansion has its dangers because if Amazon expands too quickly, it could destroy its brand image. For example, Amazon recently integrated an online auction business, which is risky because there is no way for a customer or Amazon to ensure the quality of sellers and their honesty. Not being able to see the product in person is a weakness that forces Amazon to expend extra energy in assuring the customer of product quality and dependability. There is no personal interaction with the customers in e-business which some people like and do not like. Quality control is another soft spot for Amazon because it cannot be absolutely sure of the sellers that it allows to use their website to sell used items.

I think that Amazon has an opportunity in helping other businesses develop an e-business. Amazon has superior technical and market knowledge that it can sell to interested businesses, even though the might be a competitor. Online auctioning has great potential for Amazon, but the one problem is Ebay. If Amazon can specialize in auctioning just books or music first and then try to expand into auctioning other products like consumer electronics it can benefit. For example, Amazon could sell autographed books and music paraphernalia to customers, whom Ebay does offer, but because Amazon is known for its books and music customers will turn to Amazon for the right item.

The biggest reheat to Amazon is technology. Sure Amazon has a competitive advantage on its competitors right now, but once these competitors figure out how to be successful in e-commerce Amazon is in trouble. Some of Amazon’s customer will inevitably shop somewhere else, unless Amazon can find a way to stay one step ahead of the competition. I do not think that Amazon should open up some retail stores because that is not their strength. Amazon will not be able to compete with stores like Barnes and Noble because Amazon does not have the knowledge to break into that market and profit from doing so. Amazon’s online auction is suspect to failure due to Ebay’s commanding market position in that arena; this poses another threat to Amazon.

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