Business is an extremely difficult area for people because it has a lot of subtleties and strategies that cannot be universal. This gives rise to a phenomenon, the essence of which is the success of some organizations and the failure of others. One of the most prominent corporations is the Amazon company, which for a long time has been exclusively a leader in a niche. Amazon began as an online bookseller and has evolved into an internet-based firm focused primarily on e-commerce, cloud services, digital streaming, and AI services. Following an Amazon-to-buyer marketing strategy, the company offers a massive range of products and inventory, allowing customers to purchase various items. The latter include garments, beauty products, gourmet food, journals, films, devices, pet food, soft furnishings, games, and household items. Thus, this makes the examined company an effective subject for conducting an analysis.
However, Amazon has received a lot of controversy in recent years in a variety of places. The tech behemoth is also being blamed for the Amazon effect, which is the development and upheaval of the retail business as a result of the company’s monopolistic activity. Subsequently, in order to analyze the presented corporation in detail, the video, Amazon’s retail revolution business boomers BBC full documentary 2014, Amazon Summary Report, and the article called How Amazon Thinks about the Competition will be used as the main sources of reference. However, articles from the mass media and peer-reviewed sources will be additionally used in order to develop a broader perspective on the company. It is necessary to analyze in detail the activities of the organization and the situation with the economic situation and management and identify the reasons for the success and demand for Amazon. This will be done using different media-sources, the Amazon Summary Report and the article on “How Amazon Thinks about the Competition” as well as other peer-reviewed and non-peer-reviewed sources.
Management of Economic and Socio-Political Changes
First, it is necessary to highlight that Amazon is an enormous retailer. This allows the company to maintain leadership positions in the niche and control any changes. In order to most effectively analyze the organization’s position, it is necessary to apply the five forces model of Porter. The first force is to identify the market power of buyers, which has a wag on the market as a whole (Hinterwimmer, 2018). Amazon has several factors that affect this aspect positively, which means they allow the company to manage the economic situation:
- Product differentiation. On the company’s site, a large number of goods compete with each other. Frameworks of strategy theory by Porter emphasize the importance of differentiation in gaining competitive advantage. This gives rise to a particular advantage for buyers, who, due to the possibility of choice, influence the pricing of certain products (Weihrauch, 2021). Due to the large scale and prevalence of Amazon, pricing on the site is becoming a precedent and a rule for many corporations (Hinterwimmer, 2018). Thus, the company manages prices in various niches and therefore forms the economic situation.
- Availability of information for the buyer. The next aspect the firm excels at is that the Amazon marketplace provides plenty of details about any product. This results in the client being able to quickly find a trade-off between costs and benefits (Virtuoso et al., 2021). The company with the highest marketing spending will impact the customer most (Virtuoso et al., 2021). The aspect mentioned above of Amazon’s activities strengthens the organization’s position as an authority in managing economic change.
- Power distribution channels. Large retailers such as Amazon have tremendous power over their suppliers. This is expressed in the fact that the site’s authority, relevance, and relevance will exert a kind of pressure on entrepreneurs (Virtuoso et al., 2021). Shelf space in these giant retail stores is considered a valuable and scarce resource.
At the same time, it is necessary to consider the management of social and political changes in the Amazon company. Due to its strong leadership position, the firm earns profits above the industry average. This leads to a direct confrontation with competitors who can either imitate or come up with similar proposals (Virtuoso et al., 2021). New entrants will bring new capacities and offerings to the market, driving down prices in the medium term (Virtuoso et al., 2021). In order to protect Amazon from possible risks, the management decided to initiate changes in the socio-political field.
In particular, the company creates artificial barriers to entry, influencing legislation and public attitudes towards competing with Amazon. This category includes the economic costs on the participants’ shoulders. It is an essential concept in economics, strategy, and competition law. The need to circumvent patents or established (exclusive or restrictive) agreements with suppliers or distributors are just a few factors (Virtuoso et al., 2021). Things like a high start-up capital learning curve are not seen as barriers to entry in the theoretical sense of the term. From a practical point of view, they play a role (Capocchi, 2018). It is easy to imagine that those who advance later will find it much more challenging to raise capital when there are already several strong, established players. Michael Porter points out the importance of exit barriers in conjunction with entry barriers (Capocchi, 2018). Thus, Amazon excels at managing change across multiple businesses at once.
The Impact of the Corporation on Economic Development
It should be emphasized that the company’s economic development is non-standard, but management has a positive effect on this area. Amazon’s business is now highly diversified, with more than 40 subsidiaries behind the brand, dealing in everything from diaper sales to intelligent home technology and cloud computing. First of all, Amazon is known as a retail super empire that has gone beyond online and is already opening its own offline Amazon Go stores and Amazon Fresh grocery supermarkets (Hinterwimmer, 2018). In addition, over the years, Bezos launched the advertising giant Amazon Advertising, the third-largest digital advertising platform, behind only Google and Facebook.
Since the early 2000s, Amazon has been successfully and productively developing its Amazon Web Service (AWS) project, a commercial, public cloud that provides infrastructure and platform-level services. In addition, the company develops devices, including the Alexa intelligent assistant, and works in the media and entertainment industries. Furthermore, Amazon managed to build such a diversified and successful business thanks to the approach of Jeff Bezos to work.
From the beginning, he did not consider the company as just an online store – his goal was always to simplify the online shopping process for the consumer as much as possible, to provide good service and a low price. “While you’re chasing profits, I’m taking advantage of opportunities,” Bezos explained the difference between Amazon’s pricing approach and its competitors (Hinterwimmer, 2018, p. 73). The retailer’s strategy has fully justified itself: over 26 years of work, he opened more and more new businesses that satisfied the growing needs of customers, and for 26 years, he “locked” into the system (Sangwa, 2021, p. 55) For example, back in the 1990s, Amazon abandoned the idea of selling one type of product (Sangwa, 2021). Currently, the marketplace offers products from Amazon as well as products from nine million other sellers. However, there is a negative impact of the company on economic development, expressed in jobs and working conditions for employees.
The world-famous Amazon company has been seriously influencing the labor market in America for several years. Amazon is one of the largest employers: at the beginning of 2017, the total number of employees of the American online retailer was 341,000 (Hinterwimmer, 2018, p. 56). That is more than twice as many as Microsoft and Google combined. The latest data suggests that the number of Amazon employees has exceeded 1.2 million people (Sangwa, 2021, p. 51). Amazon has created a strict system for monitoring employees, according to a study by a non-profit human rights organization – the Open Market Institute (BBCdocumentaries2014, 2014). The company’s warehouses have a video surveillance system that should prevent theft. Each employee has a device to which the task comes, and all the points of its implementation are monitored: scanning the order, collecting and packing the goods (Virtuoso et al., 2021). If the employee’s actions are performed at a slower speed than the one set automatically, then the system makes a “reprimand” (BBCdocumentaries2014, 2014). Working conditions are highly unfavorable, which creates a severe negative impact on economic development.
Global Strategies for Long-Term Success
Amazon.com firmly holds the position of the world’s main marketplace. Buyers want low prices, fast delivery, and a huge selection – this has become the basis of the company’s strategy. According to Bezos, this approach will remain unchanged in the future. In 2004, one of the young employees of the company made a mistake in logistics: goods that needed to be urgently sent to customers ended up on the top shelves of warehouses, and at the right time, there were not enough staff to send them on time (Virtuoso et al., 2021). “We at Amazon follow three rules that make us successful: put the customer first, invent, and be patient,” Bezos says (Sangwa, 2021, p. 121). VUCA theory underlines that organizations need to avoid traditional approaches to management and leadership, which helped to overcome complications connected with COVID-19 (Fig. 1). The main one was the reduction of salles due to the high unemployment rates.
Sources identify many advantages that gave Amazon its popularity and helps it to gain global reputation. They came up with the automatic filling of the order form and the purchase in one click (Sangwa, 2021). Furthermore, the video supports the argument of following the three rules which Amazon utilizes when developing its strategies (BBCdocumentaries2014, 2014). They allowed customers to leave comments under the products – both positive and negative. The option of personalized recommendations based on previous purchases or views is the brainchild of Amazon.
The next strategy, which provides long-term positive prospects for the company, is the creation of “long” investments. From its founding in 1994 until 2002, despite fantastic growth, the company did not generate any profit for the owner or shareholders (Sangwa, 2021). All funds were invested in business development and the improvement of customer service. Investors did not approve of the company’s policy until 2000 when the infamous dot-com crash came (Weihrauch, 2021). While most online stores went bankrupt, Amazon not only survived but managed to buy several competitors, who later became part of the corporation.
Finally, the most significant strategy for developing the company’s long-term prospects was the idea of creating an ecosystem. Lafley sand Martin (2013) in “Plying to win” note that the company’s strategy should always be aimed at defeating competitors and considering core capabilities and management systems. An Amazon customer can get everything they need without logging out, and all the brand’s products are linked. The first experience was a Kindle with the functionality of an e-book store. Now Amazon is making Echo series devices with Alexa voice assistant (Sangwa, 2021). The Echo Look smart camera allows the customer to evaluate his appearance, choose the right set of clothes, and order goods on Amazon.
Corporate Global Value Chains
Based on the issue being solved, the supply chain can be depicted with varying degrees of detail. It is vital to understand Amazon’s unique position in the retail supply chain in order to meet consumer demand. Amazon has developed an alternative method for satisfying retail demand:
- Amazon purchases its goods at wholesale pricing from various suppliers worldwide.
- Amazon serves goods on its online marketplace (this is not depicted on Ben Thompson’s graphic, although Sangwa mentions it). “I believe that such a connection between Supply and Amazon.com should be added” (Sangwa, 2021, p. 60).
- Satisfaction of final demand occurs through the interaction of users with the Amazon.com online storefront, where they order the necessary goods with delivery.
- In turn, on-time delivery involves the coordinated efforts of distribution centers, stock duplication, fulfillment, and the involvement of third-party logistics providers. Amazon is a great example of a corporation actively expanding into adjacent dependent supply crosslinks.
A few years ago, Amazon began building its own complete logistics solution. Amazon now operates 20,000 trucks and 60 cargo planes (Weihrauch, 2021, p. 78). Amazon operations have become the primary shipping route for their own purchases over the past year, accounting for nearly half of all Amazon shipments (Sangwa, 2021, p. 66). Amazon already controls 18 percent of the market for all online retail delivery in the United States, mostly for its own requirements (Sangwa, 2021, p. 66). The next natural step is to provide a shipping service for other businesses, most probably at a cost below the marketplace, as Amazon does not have to profit immediately from the new path. In this case, it is more efficient to win back the market and then switch to the mode of making money (Virtuoso et al., 2021). Amazon’s introduction of its own trademarks in a number of areas that were previously occupied by third-party sellers is another instance of a similar technique. Amazon identifies a lucrative and engaging business category for which the firm’s existing market position gives advantageous opportunities.
In addition, it should be noted that Amazon is an effective example of a dependent player who has achieved independence in the company’s value chain. Amazon is currently the main entry point for product searches in the US. Amazon accounts for 45% of such requests, and Google is one and a half times less – only 33% (Virtuoso et al., 2021, p. 100). Ten years ago, the situation was radically different: Google was in a dominant position relative to Amazon (Virtuoso et al., 2021). Thus, the activities of a corporation in the value chain can only be assessed as effective and positive.
Amazon Partnership Benefits and Sustainability
Amazon is extremely interested in partnering with both individual entrepreneurs and third-party businesses. This is expressed primarily in the development and permanent improvement of the partnership program. The company provides an opportunity to earn on partnership in two ways. Firstly, by adding links to goods or services that can be found on the website of the global giant, on the pages of the site/blog/pages on the social network (Amazon Business, 2022). Secondly, there is the opportunity to create content and consciously promote a site specifically created for the purpose of making a profit on Amazon (Virtuoso et al., 2021). With the first option, everything is more or less clear, and after registering with the Amazon Associates program, a partner can start advertising the selected products (BBCdocumentaries2014, n.d.). In this case, it will be possible to save time and money because it will not be necessary to invest in the creation of a fundamentally new project, but there are disadvantages to this option (Amazon Business, 2022). For example, it is necessary to select products that are most suitable for the topic of an existing site or blog, and only a project with a large number of live visitors will bring significant profit.
It should be noted that in order to choose the theme of the site for Amazon, partners should carefully study the detailed information about the reward. A company can get it by redirecting the buyer from the project to the online store (Sangwa, 2021). At the same time, it is worth paying attention to 2 important points:
- Different products offer different reward percentages.
- When choosing a topic, industries should carefully study the demand for various groups of goods and evaluate competition in each specific area. For example, the remuneration for luxury cosmetics is 10%, but even despite the relatively low competition in this niche, there are a limited number of buyers for such a product (Amazon Business, 2022). At the same time, for the category “Shoes” or “Accessories,” they give a 4% reward (Amazon Business, 2022). Thus, the firm distributes priority among different groups of goods, eliminating the possibility of shortages.
The retailer offers rewards not only for physical goods but for selling access to various subscriptions, video games, music, and audiobooks. In addition, a commission is offered for participation in the Trade-In program, that is, for the delivery of a certain product to the store in exchange for another (Amazon Business, 2022). The sustainability of the partnership is manifested in the fact that the company’s policy is aimed at the most active promotion of cooperating companies. This is done using several of the most effective tools:
- Market analysis of competitors. This is expressed in the fact that Amazon’s SEO department carefully studies all supply and demand, making up the expected picture of promotion. Since the company employs highly qualified specialists, this leads to a great return to partners who receive advertising and a flow of regular customers (Amazon Business, 2022). In addition, they gain an advantage over competitors who do not have an Amazon partnership.
- Selection of semantic cores. In order to correctly form the structure of the future site and plan the content for the pages in advance, Amazon selects the semantic core (Weihrauch, 2021). This is a list of relevant keywords and expressions for which the project will be promoted in the search results (Amazon Business, 2022). The task of selecting the SA is divided into several subtasks:
- Analysis of the search results of competitors.
- Selection of the maximum possible number of keywords that will describe the selected topic of the site.
- The distribution of keywords on narrow topics and the creation of sections, subsections, and separate pages for each of the groups (Amazon Business, 2022).
- Optimizing pages based on selected keywords.
Business Strategies in the Context of Internationalization
Amazon’s business strategy places significant emphasis on expanding and sustaining a global presence. Amazon’s online store is faced with significant competition worldwide. The leading competitor that is of interest to this study is American international Internet retailer eBay (Escoda, 2018). According to the 5ps of Business Strategy, the position is one of the main aspects of the company’s strategy. Amazon has been successful in keeping its position with the help of localization and internationalization-based strategies (WenJun, 2019). However, the company failed to enter the Southeast Asian market, as it was unable to contend against Alibaba Group and other local e-commerce firms.
It has translated its marketplace by purchasing top-level domain names. Moreover, it maintains multilanguage editions of sites in a variety of countries (Escoda, 2018). To make up for its lack of involvement in other market segments, the corporation provides global shipments of certain products to nations outside of its reach (Dicken, 2014). Due to its online-enabled activities, Amazon Web Services’ cloud services have a world market presence. Amazon has created operations in essential countries, for example South and North America. This was done to ensure global coverage and reduce the probability of outages (Escoda, 2018). In turn, it includes Europe and the Middle East, Asia, and the Pacific. Given this spread, CAGE (culture, administrative, geographical, economic) theory is precious, emphasizing the need to consider cultural, geographical and economic differences (Tokas, 2020). Thus, this theory shows the need to consider these indicators in developing an international strategy. It is also imperative when developing and understanding the structure of international trade, capital and people.
The Role of International Organizations in Combating the Consequences of COVID-19
The consequences of the global coronavirus pandemic have significantly affected the development and productivity of many businesses. The role of international organizations in ensuring international trade amidst the devastation of COVID-19 was vital. At the same time, it is worth noting that Amazon’s international trade was able to integrate and adjust its strategies to the new conditions quite smoothly. It is worth noting that according to the trade theory developed by Adam Smith, international trade becomes an advantage for companies (Raekstad, 2021). This is due to providing benefits from specialization and acquiring new resources. Thus, based on this theory, we can say that despite the negative impact of COVID-19, the company should not suspend international trade to continue growth.
Moreover, other theories focus on the fact that foreign direct investment assists organizations and helps maintain a competitive place. Hence, the FDI Eclectic Paradigm and OLI ownership theories by John Dunning can help understand what assisted Amazon in avoiding significant losses (Pathan, 2017). In addition, the ownership of unique and valuable resources and products is particularly important. For example, Amazon was helped to cope with smooth international trade with the help of foreign direct investment from countries such as China and India.
In conclusion, it should be noted that Amazon has an extremely efficient economic model. As a result of the analysis of the main features and areas of business, it was revealed that the company succeeds in an overwhelming number of aspects. For example, Amazon not only qualitatively adapts to any changes but independently initiates them in order to ensure comfort in the market and among competitors.
Additionally, Amazon believes that its most successful marketing interactions are a result of its commitment to consistently enhancing the customer experience. This subsequently generates word-of-mouth advertising that is effective for obtaining new customers and may stimulate repeat visits. Paid search engine marketing, interactive adverts on portals, e-mail campaigns, and search engine optimization are examples of online advertising tactics. As detailed earlier in the study case, these are mechanized as much as possible. As discussed previously, the affiliate program is very vital for attracting traffic to Amazon, and Amazon offers a variety of connecting options to increase conversion. The above-described characteristics of modern marketing models are merely a few examples of this company’s complete investment in the modern field of marketplaces, making it a key commercial milestone for future years.
Among other things, the company has a positive impact on economic development, which is manifested in the permanent development of new projects, increasing profits, and growing influence. However, at the same time, it is worth noting the negative trends in the activities of the corporation, which are observed in the implementation of working conditions for employees. Finally, the company is interested in partnership; therefore, it is developing a broad program that provides a lot of benefits and reliability.
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