Amazon's Strategic Positioning in the E-Commerce Segment, Marketing Essay Example

Published: 2022-04-18 18:53:53
Amazon's Strategic Positioning in the E-Commerce Segment, Marketing Essay Example
Type of paper:  Research paper
Categories: Amazon Strategic marketing
Pages: 7
Wordcount: 1797 words
15 min read
143 views

Gaining competitive advantage is very crucial for an online retail store; the competitive advantage is often referred to like a service or product that a company's consumers place worth on more than the same offering by a different competitor (Xu & Quaddus, 2013). Competitive leads are normally impermanent as competitors usually find ways to replace the advantage thus to stay forward of the rivalry a firm needs to frequently advance the strengths using specific strategies such as Porter's five factors, value chains, and three generic strategies. The information revolution makes it difficult for any organization to escape its effects; there has been a dramatic reduction in the cost of obtaining information, transmitting and processing thus changing the way business is done in modern technology. Organizations use the information to gain competitive advantage thus leading to a rapid interest for executives to become directly involved in the management of the new technology and obtain consumer information that will give them a competitive advantage over their rivals. The founder of Amazon, the most prominent online retail store, was intrigued by how the new technology, the web permitted wholesalers to collect massive volumes of personal info on the consumers. This report reviews Amazon's strategic positioning, gaining and maintaining its competitive advantage in the e-commerce segment.

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Overview

The United Kingdom is the leading countries in Western Europe; it is an influential country regarding the economy. Research shows that Amazon has fashioned of how retailers set consumers' expectations in the online market. Almost 40 percent of all online transaction in the UK are made via Amazon, 60 percent of consumers feel that online retailers should follow Amazon's model. Six in ten consumers are more likely to spend on a retail shop that is digitally innovative, and a whopping 53 percent of consumers are more likely to pay on Amazon than other retail stores, they feel that Amazon has led the path of online retail by far (Fletcher, 2017). These statistics are not the only UK based but also over half of the international consumers revealed that they were more likely to shop on Amazon. The online retail store was founded in 1995 a few years after the inception of the internet as an online bookstore, today it is a titan of e-commerce, payments, logistics, data storage, hardware, and media.

A few years when the world web was founded Jeff Bezos staggered upon astonishing statistics that stated the internet was developing at a rate of 2,300 percent per annum. With only 16 million internet users he started Amazon in 1995, today there are 1.7 billion internet users, virtually one out of every four persons are online in the world. Besides the startling growth, the possibility of expelling geography by allowing anybody with a computer and an internet connection to access the internet and buy universal goods limitless in the coziness of their households and the way the web permitted merchants to collect a huge volume of private information from customers motivated him to explore the new market. Since then Amazon has tirelessly and keenly sharpened its competitive advantage by using all means available to stymie, compound and overpower its rivals. The introduction of other services such as Amazon Kindle in 2007 led to an astounding gush in the sales of e-books (Wasserman, 2012).

Amazon's Market Positioning

Amazon has stuck with its original mission of being customer-centric and providing consumers with anything they want to buy online around the globe. The strategic support of the organization, central management, and policymaking method, lays its focus on their customers. Their strategy revolves around customer service, distribution efficiency, and convenience, the founder constructed his multibillion-dollar domain by offering extraordinary service to its clientele, and this is portrayed by the remarkable customer service feedback provided on Amazon's forums. The company has invested heavily in technology to lessen mistakes that disappoint consumers and advance on customer service. The organization has over 10,000 developers who work tirelessly to stay up to date with technology drifts, proprietary warehouse and order software than enable faster orders to be fulfilled promptly.

The founder had a goal of eliminating the intermediary during its inception in the supply chain by discussing contracts with publishers directly, constructing big warehouses and leveraging expertise from its inception. Its supply chain and workflow management that it invested so heavily on has been since the backbone of the store, which is the main reason it has managed to exceptionally efficiently distribute goods across the world. The internet gave Amazon and shoppers advantage of shopping anytime and without worrying about the item being available and get the item within the shortest time possible thanks to the Amazon's one-day shipping strategy. Their products are a multi-sided platform (Harrison, 2012).

Amazon has exploited more than one segment by offering a wide range of products and services. The online store has over 480 million items in the United States alone, therefore, supplying the wants of the broadest consumer segment. They carefully monitor changes in the market accordingly adjusting and addressing incoming expectations of the customer by occasionally repositioning their products and services. Geographically they are available in more than 100 countries, covering both rural and urban areas. Demographically, they serve genders, all life-cycle stage, and occupations ranging from students to professionals. Under the behavioral characteristics, Amazon enjoys loyalty from a hard-core loyalist, softcore and switchers; they have a wide range of products that offer competitive prices and convenience. They serve all social classes from lower social levels to upper class and a variety of lifestyles (Dudovskiy, 2017). Thus, Amazon is an all rounded store that offers almost anything a consumer can purchase online and enjoys a considerable market share across the globe as a world leader in the online retail segment.

Five Forces Analysis of Amazon Inc.

Amazon has maintained its lead in the online market due to incorporating the concerns recognized by the Five Forces into its strategies. The developer of the approach, Michael Porter, meant for it to be used as a tool for analyzing the external environment of firms. Any organizational strategy developed needs to have a thorough understanding of its external environment it is operating in. The essential issue that the porters model addresses are the organization's competitors and their effects on the organization. The analysis has a perfect technique and ability to define the firms market narrowly and adequately and able to work out whom the competitors are regarding market needs and opportunities (McAfee, 2003). The strengths of external aspects influencing Amazon based on the porters five forces analysis model are the active forces. Which are; competitive rivalry, bargaining power of buyers and consumers, and the threat of substitute, while the suppliers' bargaining power is a moderate force and that new entrant's threat as a weak force (Greenspan, 2017).

The Threat of New Entrants

Several industries that Amazon deals with possesses low obstacles of entry, besides the requirement of a modest capital; no precise expertise is needed to start competing with Amazon. Despite that, Amazon's name ubiquity gives it an advantage over potential entrants. Its ability to create a "one-click" shopping and affordable financing opportunities due to its extended period in the market considering today's capital market that is less friendly to new start-ups makes this a weak force to worry about. The proliferation of digital technology has brought several changes in the industry; growing technology has reduced the difficulties of entry, however, building a brand such Amazon is very difficult due to several expenses such as marketing.

Bargaining Power of Buyers

Amazon's buyers have a bargaining power that is medium to high; they put more focus on customer satisfaction and quality of their products. The number of Amazon competitors has risen steadily over the years, and switching cost for consumers is low due to several alternatives to online stores as well as 'brick and mortar.' Vendors such as Target and Borders rent Amazon to offer a web presence, or distribution service have little holding to Amazon. They can quickly abandon the site and shop elsewhere. This is why consumer retention remains a critical focus in the area of e-retailer. The bargaining power of buyers is high.

Bargaining Power of Amazon's Suppliers

Suppliers have a hand in the accessibility of products and materials that the firms need to conduct its e-commerce maneuvers. Amazon's supplier's bargaining power is low to medium; this is because the firm has the upper hand about supply chain. While they have a vast number of suppliers, these suppliers have to stick to guidelines set by the organization. They have to follow codes set by Amazon that states its relationship with suppliers (Mirow, 2005). Amazon can also switch suppliers without difficulties for any product it sells it has several other options thus giving the suppliers low bargaining power.

Rivalry in The Industry

The firm contests with national stores as well big international chains. Wal-Mart is a feasible player that is emerging. The level of contention is excellent due to the high number of e-retailers growing immensely, and there is also massive rivalry between physical retail brands. The market share has considerable competition from both big brands and small ones, therefore increasing the competitive pressure. Retail firms are very antagonistic and exact a robust competitive strain in contrast to each other. They also face strong force from substitutes due to high availability and the expanding e-commerce websites. Brick-and-mortar bookstores and small retailers also act as competitors to Amazon.

The Threat of Substitutes Products

The risk of substitute products is considerably high; this is because other major brands have also entered the market. The only significant advantage Amazon has it its customer service apart from its brand name. Its customers have other retailing options. Additionally, some products that Amazon sells are available directly from the manufacturers; catalogs also allows consumers to buy products from the convenience of their homes as the internet or Amazon (Pratap, 2017). Just as competition, the rivalry is high so is the substitutes since they are interrelated. Amazon continually addresses substantial forces of substitutions, which threatens the e-commerce organization's performance. The outstanding presence of substitutes and low-cost prices of the products further increase the impact of other options.

Conclusion

Amazon's significant focus mostly lies on the competitive rivalry by emphasizing on its competition benefit and the strengths of the e-commerce organization. For instance, it ought to continually boost its brand appearance, which is the largest in the sector. They can handle the peripheral issues related to the buyers' high bargaining power by focusing more on the service quality, which is the core of e-retailing. Decreasing counterfeit can boost consumer experience in using the e-commerce site; they can also respond the peril of substitute by constructing the service more eye-catching by enhancing the usability of the site for optimal user experience (Loebbecke & Soehnel, 2010).

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